Accounting and tax

Direct Taxes in India

Tax rate in India

  1. In India, domestic companies for FY 2018-19 are taxed based at tax rate 25% if the gross turnover is up to Rs.250 Crores and at 30% in other cases. Additionally, surcharge is charged at 7% up to total income of 10 crores and 12% if it exceeds 10 crores, and Health & Education Cess of tax at 4% (inclusive of surcharge, if any);
  2. Foreign companies are taxable at 40%. Additionally, surcharge is charged at 2% up to total income of 10 crores and 5% if it exceeds 10 crores, and Health & Education Cess of tax at 4% (inclusive of surcharge, if any);
  3. Dividends paid by a domestic company are subject to Dividend Distribution Tax (DDT) which is 15% on grossed up amount of dividend plus surcharge and cess. Effective rate of DDT would be 20.56%;
  4. Interest payments and royalty payments to non-resident entities will be subject to a withholding tax of 20% and 25% respectively;
  5. Companies including foreign companies will be subject to pay Minimum Alternate Tax (MAT) at the rate of 18.5% on book profits, if the tax calculated as per rates are less than 18.5% of book profits;
  6. Income tax act requires a class of companies to get their accounts and tax audited which is called “Tax Audit”, and submit a tax audit report to Income Tax Department along with income tax return;
  7. The capital gain tax and securities transaction tax are applicable.

Indirect Tax in India

  1. To avoid hassles in compliance, the Indian Government merged many indirect taxes and with effect from 1st July 2017, introduced a comprehensive “Goods and Service Tax” (GST) which is applicable to both central and state level;
  2. GST is indirect tax that is being levied on the supply of goods and services in India. Average GST rate in India is now 18% with the rates varying between 0% and 28%.

Tax reporting, audit and other considerations

  1. Companies including foreign companies must file their income tax return on or before 30th September every year;
  2. Due dates for filing GST return by GST registered entities are tabled below:
    Form No.ParticularsFrequencyDue Date
    GSTR-1Details of outward supplies of taxable goods and/or services affectedMonthly
    Taxpayers having Annual Turnover up to Rs.1.5Crore (US$ 214,286)
    11th of the following month
    31st of the following month
    GSTR-3BReturn for a summary of outward supplies along with Input Tax Credit is declared and payment of tax is affected by taxpayerMonthly20th of the following month
    GSTR-4Return for a taxpayer registered under the composition levyQuarterly18th of the month succeeding quarter
    GSTR-5Return for a Non-Resident foreign taxable personMonthly20th of the following month
    GSTR-6Return for an Input Service DistributorMonthly13th of the following month
    GSTR-7Return for authorities deducting tax at source.Monthly10th of the following month
    GSTR-8Details of supplies effected through e-commerce operator and the amount of tax collectedMonthly10th of the following month
    GSTR-9Annual Return for a Normal TaxpayerAnnually31st December of next financial year
    GSTR-9AAnnual Return a taxpayer registered under the composition levy anytime during the yearAnnually31st December of next financial year
    GSTR-10Final ReturnOnce, when GST Registration is cancelled or surrenderedWithin three months of the date of cancellation or date of cancellation order, whichever is later.
    GSTR-11Details of inward supplies to be furnished by a person having UIN and claiming a refundMonthly28th of the month following the month for which statement is filed.
  3. Within 30 days from Indian company registration, our clients will be required to appoint Chartered Accountants as Statutory Auditors of the company;
  4. India has signed Double Taxation Agreements (DTA) with 90 countries like Australia, China, Japan, Malaysia, Singapore and USA to reduce withholding tax on payments abroad;
  5. It is important our Clients are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfill those obligations annually. Let us know if you need Healy Consultants’ help to assist you in submitting your annual reporting obligations.

Legal and compliance

  1. An Indian business set up must have minimum 2 directors and 2 shareholders except for one person company. Both the directors and shareholders can be same persons. Minimum one director out of two should be resident in India;
  2. There is no minimum paid up share capital criteria under India company formation;
  3. If paid up share capital of the company exceeds US$694,445 (INR 50,000,000), a resident company secretary is compulsorily required to be appointed;
  4. Every applicant whether proposed director and proposed subscriber must have valid Digital Signature Certificate (DSC). Professionals such as chartered accountants, company secretaries and cost accountants are also required to obtain DSC for online certification of documents;
  5. Before incorporating a branch office or a liaison office, prior approval from the Reserve Bank of India (RBI) is mandatory. Furthermore, parent companies will need to submit their latest audited balance sheets showing assets worth at least US$100,000 (in case of branch office) and at least US$50,000 (in case of liaison office);
  6. Every listed company in India must have at least 1/3rd of its directors as independent directors;
  7. For every business, it is voluntary to protect their brand name through trademark registration in India. We, at Healy Consultants will help you secure your trademark before someone else takes opportunity away from you.

Reporting and other compliances

  1. All resident companies must file audited annual financial statements with the Registrar of Companies (ROC). Listed companies will, additionally, submit their unaudited quarterly financial results to the Securities and Exchange Board of India (SEBI) and the Stock Exchange;
  2. Companies are also required to file their withholding tax returns quarterly (only applicable for service providers);
  3. Branch offices and liaison offices are required to file an Annual Activity Certificate every year with the RBI;
  4. Every Indian company must hold at least 1 board meeting every quarter i.e. at least 4 board meetings in one calendar year. It is also mandatory to hold an Annual General Meeting (AGM) within 6 months of the close of the accounting year i.e. before the 30th of September;
  5. All corporate entities must obtain prior approval from the ROC, the RBI and the Income tax authorities before they can wind up their operations.

Labor Regulations

  1. In order to facilitate the ease of doing business in India, the Ministry of Labour and Employment has notified the “Ease of Compliance rules” to maintain registers under various labour laws, which have been in effect since February 2017. Now, the combined registers may be maintained either electronically or otherwise, without obtaining any prior permission;
  2. The maximum weekly working hours are fixed at 48 hours with a maximum of 9 hours a day. If employees work overtime, then they must be paid twice their current wage;
  3. Women workers can only be employed between 6AM and 7PM. Companies can request the respective state governments for exemptions but women still cannot be employed between 10PM and 5AM;
  4. Workers are entitled to 1 day of paid leave for every 20 days worked, provided they have worked for at least 240 days in the previous year;
  5. All companies with at least 20 employees must pay bonuses to employees earning a monthly wage up to US$160. The bonus paid will between 8% and 20% of the annual salary of the employee;
  6. All employers must contribute 12% of their employee’s wages to the latter’s pension fund and provident fund. Factories which employ at least 10 workers must also contribute an amount equivalent to 5% of their employee’s wage for the latter’s health insurance.

Contact us

For additional information on our accounting and legal services in India, please contact our in-house country expert, Mr. Simon Guidecoq, directly:
client relationship officer - Simon