+91-9312608426 info@mlgassociates.org

Alert on MSME payments 43B(h) -Income Tax – last few days left

Monthly Archives: April 2024

Alert on MSME payments 43B(h) -Income Tax – last few days left

Last few days left.. Be Alert … Some ideas and Tips in MSME 43B(h) -Income Tax

Alert dated 20th April-2024 at — 4 pm

  1. Hope you have paid  all MSME vendors bills of 29-2-2024, by 15th April 2024…..

  2. Hope your MSME vendors Bills upto 15th March 2024 are also paid between 20th and 30th April 2024.. 

  3. Hope your planning includes MSME vendors Bills upto 31st March 2024 are also paid between  30th April and 10th May 2024. (Just to be safe)…

  4. See this yourself.
  5. Also remember to clear all the MSME dues…
  6. Short cut :Vigilance point
  7. 5th March by 5th April ( start the process by 30th day.. so that you are safe bye 45th day )
    10th March by 10 April
    15th March by 15th April
    20th Mar. by 20th April
    25th Mar by 25th April
    31st March… by 30th April( I have kept a Buffer )
  9. If you are an MSME … you might have been benefited from this in the March payment wave
  10. So, similarly, the WAVE continues

  11. Nobody can save your company from accidental tax later .. 

  12. This is a benefit Govt is giving to MSME’s and if you are a MSME take this benefit from your customers….
  13. Almost 4 Crores MSME are already registered and are claiming this benefit… are you taking this Benefit ???
  14. Have you made your Financial Budget to pay all eligible MSME vendor’s : Arrange Funds as soon as possible. Keep Buffer for new creditors, new invoices of this period.

  16. Sent letters to all creditors ? Kept evidence ? Two rounds of emails is a must evidence.

  17. Do you have letters or MOU with each MSME vendor, … with overriding clause for 45 days, irrespective of the PO’s and Invoices. ( get the format in the Google drive link below )
  18. Reduce your advance tax ? Pay MSME in Advance. …. yes possible ( most likely.) But conditions apply. Risk involved. But likely due to a past Supreme Court Judgement
  19. Section 43B(h)  turnover sales

  20. Sales Idea.. if you have power to do more sales, and have sufficient funds : Deregister in MSMED Act…. give affidavit to your Potential Customers… “Get More Sales” and “Get more Margin”

  21. Non Registered MSME Vendors ….? The Udhyam Adhar is compulsory. No need to see the Balance Sheet, or take a CA Certificate. Not relevant and not required.
  22. Past or Future ? Future bills only ( old bills prior to 1-4-2023 are not in problem in this section.. they are problem in section 41 .. with bigger consequences …… Since they are like … why unpaid… why are you not paying… are they not a liability at all ?????

  23. Three year MSME category Rule notification dt 18-10-2022.. Change of category upwards… you can take the benefit of previous classification for three long years. Yes you can. ( see notification in the Google drive link below )

  1. Cheque Hand over   ( Cheque in Transit ?)……….? This idea can work only if you have 100% clear balance in your bank account… Else… It will not be acceptable. 

  2. Money is coming automatically to most MSME’s .. every day… Congratulations, if you are the beneficiary too.

  3. Hope the PSU’s also start paying in the same way. The PSU chief will be shocked with huge tax if he does not organise the payments to all the MSME vendors in time… this will create a new culture.

 

Ideas, Tips, things to take care of… MSME act related 43B(h) income tax topic . Good ideas you can work around with and make more money.

Google Drive link for the Powerpoint presentation , Copies of Letters, Emails, MOU.. as discussed in the Session by Mr Sangeet Kr Gupta. in the last Zoom seminar

MOU copy inside

 

43B(h) benefit ? 43B(h) action ? 43B(h) what to do ? 43B(h) safety ? 43B(h) annexure ? 43B(h) when to follow ? 43B(h)penalty? 43B(h)areyousafe?

How to do this in Finsys ? Very simple… Just ask the accounts to take out the Vendor Outstanding report.. in Future date… say 1st May 2024… and see what will come as overdue on that date… all those invoices are fit to start processing.. so that you are safe.. by 1st May and so on….

Team at your service.. Contact us page

Ideas MOU format letter format … uploaded on the google drive link above

TRC – Tax Residency Certificate – What ? Why ? Validity ? 10F

Tax Residency Certificate or TRC is a important document in International Taxation

Many times when an Indian Business makes payments to Non Residents, the Rate of TDS are different if they produce TRC.

So, What is this TRC ?

We all know that TRC are valid for only 1 year in India
Even internationally, usually for 1 year at a time
Pls note that Tax identification number is like PAN … and usually is with life of the person
but the TRC is year to year
Source : https://tax2win.in/guide/tax-residency-certificate-trc-indian

Q– How long is a Tax Residency Certificate valid for?

The validity period of a TRC varies depending on the country issuing it and the specific terms of the certificate. Some TRCs are valid for one year, while others may have longer validity periods.

Q– Can a Tax Residency Certificate be renewed?

Yes, in most cases, TRCs can be renewed by submitting updated documentation and meeting the renewal requirements set by the tax authorities.

Q– Can I use a Tax Residency Certificate in all countries?

TRCs are specific to the country that issues them and are generally used to claim tax treaty benefits between that country and other countries with which it has a tax treaty.
What is the validity of the TRC certificate in India?

 

In India, TRC certificates are valid till the end of the financial year from its date of issue.
source :

Is TRC mandatory for claiming DTAA benefit ?

As per Section 90(4), taxpayers must furnish their tax residency certificates along with the relevant information in Form 10F in order to claim DTAA benefits.
See first source : https://arlettipartners.com/tax-residency-certificate-italy/ … its extract as under

Question : How long does the tax residence certificate last?

The tax residence certificate can be obtained upon request and usually relates only to the relevant tax year shown on the certificate itself.

and also, ……When the tax residence certificate must be presented to a foreign authority, it may be needed to legalize it for use in that country. …….. this is similar to the electronic self declaration, Form 10F in India
====================

Is TRC Compulsory ?

============
As per FAQ and Tutorials on Income Tax Department, Govt of India, site : https://incometaxindia.gov.in/Tutorials/64.Double-Taxation-Relief.pdf  See Question number 4

 

Q4. A non-resident, to whom a DTAA applies, shall be entitled to claim any relief under such DTAA only if he obtains a ____?______ of his being a resident of any foreign country from the government of such country.

(a) Tax Residency Certificate (TRC)

(b) Taxpayer Identification Number (TIN)

(c) Both (a) and (b)

(d) None of the above

Correct answer: (a)

Explanation : A non-resident, to whom a DTAA applies, shall be entitled to claim any relief under such DTAA only if he obtains a Tax Residency Certificate (TRC) of his being a resident of any foreign country from the government of such country. Further, he shall be required to furnish some additional information in Form No. 10F electronically.

The above is the Official Explanation to this Question by the Government

This proves beyond doubt that the valid TRC is compulsory
10F is apart from and additional to the TRC
Other related Points

The Tax Residency Certificate (TRC) is a critical document for Non-Resident Indians (NRIs) as well as Other Non Residents, aiming to handle their tax duties efficiently. Understanding its ins and outs and how to obtain it is crucial for NRIs navigating the complex world of international taxation. In this article, we’ll delve into the intricacies of TRC, its significance for NRIs, and the steps to obtain it.

Purpose of Tax Residency Certificate

The primary aim of a Tax Residency Certificate is to prevent double taxation for individuals living in one country but earning income in another. It serves as proof of tax residency status and allows NRIs to claim tax benefits under Double Taxation Avoidance Agreements (DTAA) between countries.

Eligibility Criteria for NRIs

To qualify for a TRC, individuals must meet the criteria of being Non-Resident Indians (NRIs). An NRI is someone who is an Indian citizen or of Indian origin residing outside India for employment, business, or other purposes, or staying abroad with uncertain duration of stay.

Application Process for TRC

The application process involves submitting specific documents and forms to designated authorities. These documents typically include proof of identity, address, and tax payments. NRIs can apply for a TRC at designated offices or through online portals, depending on country regulations.

Timeline for TRC Issuance

The duration to obtain a Tax Residency Certificate varies based on the country and the efficiency of issuing authorities. Factors like application volume and documentation completeness can affect processing time. NRIs should consider enough time for the application process when planning their tax affairs.

Importance of TRC for Non Residents

TRC is crucial for Non Residents as it validates their residency status in a particular country. It allows them to take advantage of tax benefits, prevent double taxation, and ensure compliance with tax regulations in their country of residence and in India.

Many times when an Indian Business makes payments to Non Residents. The Rate of TDS are different if they produce TRC. What is this ?

in the service of the MSME’s In India. Contact us page click here

Vigil Mechanism – Private Limited companies – Over Rs 50 Crores

Does this Vigilance Mechanism apply to the Private Limited companies ?

Answer is Yes, it does apply in some cases

There is another compliance that is required
Yes, it is applicable on Private Limited companies also.. if the Borrowings are more than Rs 50 Crores
Yes, this is mandatory and non compliance might lead to Penalty
Files attached
Vigil Mechanism – Writeup from MLG Associates ( including links on various websites )
Vigil Mechanism — webwerks — Policy writeup example
Vigil Mechanism — Policy—-BLR—elevated Tollplaza example
ACTION REQUIRED
1. Make the policy document properly formatted etc
2. MLG team can help you in the documentation
3. Adopt and sign by Directors in the BOD meeting
4. Publish the same in your website

Section 177 of the Companies Act 2013

(9) Every listed company or such class or classes of companies, as may be prescribed, shall establish a vigil mechanism for directors and employees to report genuine concerns in such manner as may be prescribed

(10) The vigil mechanism under sub-section (9) shall provide for adequate safeguards against victimisation of persons who use such mechanism and make provision for direct access to the chairperson of the Audit Committee in appropriate or exceptional cases:

Provided that the details of establishment of such mechanism shall be disclosed by the company on its website, if any, and in the Board’s report.

Section 178 of the Companies Act 2013

Section 178 (8) In case of any contravention of the provisions of section 177 and this section, the company shall be liable to a penalty of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of one lakh rupees.

Rule 7 of the Companies (Meetings of Board and its Powers) Rules,2014

Under Companies Act

  1. Establishment of vigil mechanism.-

(1) Every listed company and the companies belonging to the following class or classes shall establish a vigil mechanism for their directors and employees to report their genuine concerns or grievances-

(a) the Companies which accept deposits from the public;

(b) the Companies which have borrowed money from banks and public financial institutions in excess of fifty crore rupees.

(2) The companies which are required to constitute an audit committee shall oversee the vigil mechanism through the committee and if any of the members of the committee have a conflict of interest in a given case, they should recuse themselves and the others on the committee would deal with the matter on hand.

(3) In case of other companies, the Board of directors shall nominate a director to play the role of audit committee for the purpose of vigil mechanism to whom other directors and employees may report their concerns.
(4) The vigil mechanism shall provide for adequate safeguards against victimisation of employees and directors who avail of the vigil mechanism and also provide for direct access to the Chairperson of the Audit Committee or the director nominated to play the role of Audit Committee, as the case may be, in exceptional cases.

(5) In case of repeated frivolous complaints being filed by a director or an employee, the audit committee or the director nominated to play the role of audit committee may take suitable action against the concerned director or employee including reprimand.

Source 1 for law : https://ca2013.com/177-audit-committee/

Source 2 for Penalty : https://ca2013.com/178-nomination-and-remuneration-committee-and-stakeholders-relationship-committee/

Source 3 : Model on the website : http://www.blrelevated.co.in/pdf/Vigil%20Mechanism.pdf

Source 4 : Model Two on the website : Webwerks : https://www.webwerks.in/sites/default/files/WW_Vigil_Mechanism_Policy.pdf

Source 5 : Rule 7 extracts at https://ca2013.com/rule-7-companies-meetings-of-board-and-its-powers-rules2014/

Issued in Public interest. Your company might have a different situation. And you might need expert advise of your friendly CA team. Please do feel free to connect to them. In case of any additional guidance , you might take appointment from our consultants, and seek appropriate support.
Vigil Mechanism – Does it affect Private Limited companies when how what and why ? Simple steps, for your additional safety.

How to Account for Petty Expenses in the Company Pantry Washroom Repairs

Want to be systematic ? Want to reduce Wastages ? Want to prevent Leakages ?

Want to do Preventive Action plan

How to Account for Petty Expenses in the Company Pantry Washroom Repairs

[Academic discussion only]

These are the Steps recommended for

Method 1 : / Part 1 : Very small purchases, with following trigger points

Category 1

No minimum stock required,

infact no stock to be kept. either fully consumed, or purchased only exact qty, or left over is disposed off, like paint for your office /factory . The balance wet paint is discarded . Stock kept might be nil usually.

No Rate history required

No accountability required

Example

  1. Staff car accidental repair.. spare parts
  2. Office washroom taps repairs ( plumber )
  3. Garden maintenance
  4. Carpenter repair
  5. Building repair – civil – Bricks, stone dust etc
  6. Building whitewash. / paint
  7. Office snacks, samosa, sweets, perishable ( Note Kitchen and pantry items = regular is excluded,.. it should be controlled if desired )

Ideal solution is

If expense is made before the rate is finalised

And po is only a formality

Then the solution is

Get proper invoice, if available ,if possible

Pass the accounts voucher in books via a special route. “ 5A”

Do TDS, as per rules =OK

Take ITC of GST as per rules, if available. = OK

No PR required = ok

No PR Approval required = ok

No PO required = ok

No PO Approval required = ok

No Gate Entry

No MRR required = Ok

No QC required= OK

Put all the items , even if 100 items in that invoice.. into single HS code,

Since not material for the company as a whole

TDS will be automatic, in Finsys based on the TDS section/Rate to the vendor master

Category 2 items

Here the trigger points are

Stock required = yes

Rate history required = yes

Consumption Accountability required

But they are not the production items

Example

  1. All production C class items
  2. All electrical repair
  3. All machine repair
  4. If material + can be standardised
    1. Tube light
    2. LED lights
    3. Machine oils
    4. QC lab items
    5. Kitchen regular items
  1. Full year long term contract, organised super market. Dept store… with proper PO, proper credit terms, free office delivery, weekly or monthly schedule
  2. So benefit
    1. Proper Po, Proper all things like a normal raw material
    2. Proper po vs actual MRR
    3. Price control
    4. Consumption control

====

Materiality for bill :

    1. Above Rs 5000, bill is highly recommended
    2. 1000 to 5000 ok
    3. Below 1000 = you decide, ideally required, but can allow in case it is practically not possible. Even a paper slip can be approved by the sanctioning authority if situation so demands example autorickshaw charge of Rs 200, or Metro coupon of Rs 24, or a Water bottle of Rs 20, or a Tea of Rs 10

Contact us

So, this was the academic discussion and suggested SOP’s for a Small / Medium Pvt Ltd company, especially in the home grown MSME sector.

EPS in AS-20, how to implement in MSME balance sheets

EPS in AS-20, how to implement in MSME balance sheets

Practical aspect in case of Bonus Shares

Since in

Reference : MCA website :  https://www.mca.gov.in/Ministry/notification/pdf/AS_20.pdf

Para 24 of the AS-20 clearly says

In case of a bonus issue or a share split, equity shares are issued to existing shareholders for no additional consideration. Therefore, the number of equity shares outstanding is increased without an increase in resources. The number of equity shares outstanding before the event is adjusted for the proportionate change in the number of equity shares outstanding as if the event had occurred at the beginning of the earliest period reported.

For example, upon a two-for-one bonus issue, the number of shares outstanding prior to the issue is multiplied by a factor of three to obtain the new total number of shares, or by a factor of two to obtain the number of additional shares.

means

Last year also, you have to take the bigger denominator.

Old existing shares ; 1 lakh

bonus issue : 9:1

total 10 lakh shares

now

for EPS, you have to take 10 lakh shares as denominator in both years FY 22-23 and FY 23-24

AS 20Earnings Per Shares183 AS 20 Earnings per Share Comprehensive Discussion on Issues Contained In AS – 20 1. AS-20 is mandatory in naturefor all those enterprises which fall under purview of Level-I enterprises. 2.
Objective and scope Of this standard is to prescribe principles for determination and presentation of earnings per share [EPS] which will improve comparison of performances among different enterprises and among different accounting periods.
The focus of AS-20 is on the denominator of the earnings per share. Following terms are used in the standard as defined— An equity share is a share other than a preference share A preference share is a share carrying preferential right to dividends and repayment of capital A financial instrument gives rise to both a financial asset of one enterprise and financial liability or equity shares of another enterprise Fair value is the amount for which an asset could be exchanged between knowledgeable parties dealing in arm’s length transaction 3.
A potential equity share Is a financial instrument that entitles, or may entitle its holders to equity shares. Potential equity shares may arise in different cases as follows:
Debt instruments or preference shares , that are convertible into equity shares
Share warrants
Employees stock option plans under which employees of an enterprise are entitled to receive equity shares
Shares which would be issued in a situation such as the acquisition of business or other assets or shares issuable under a loan contract upon default of payment of principal or interest
184Earnings Per SharesAS 20 As a rule there are two types of earnings per share– Basic earnings per share and diluted earnings per share Basic earnings per share [BPS]– Should be computed by dividing thenet profits or loss for the period attributable to equity shareholders bythe weighted average numberof equity shares outstanding during the period.
Net profit for this purpose means profit available after tax and preference dividend. The amount of preference dividend to be deducted is as follows-
The full amount of preference dividend in case of cumulative preference shares, whether or not the preference dividend has been proposed for the period.

A company set up with global perspective in mind. Started by entrepreneurs with a vision to excel beyond horizons of the virtual information technology world, MLG is a young and ambitious team.

READ MORE

Quicks Links

OUR SERVICES

GET IN TOUCH

  • TB-11, Crown Plaza Mall, Sector
    15A Mathura Road,
    Faridabad, Haryana 121007
    Ph: +91-9312608426 OR 9311278884
  • +91-9312608426 OR 9311278884
  • info@mlgassociates.org

© MLG Associates . All Rights Reserved.

WordPress Image Lightbox