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Monthly Archives: February 2016

Uploading Audit Report Online for all Society is Compulsory

The Government of Maharashtra, Cooperation Department has introduced compulsion on uploading the Audit Report for all types of society on the website commencing from F.Y. 2012-2013.

The department sends login id & password to each panel auditors and informs them to upload the Audit report of all society for the audit they have done for F.Y. 2012-2013.

Henceforth auditors have to upload all audit reports on the website for individuals to track.

The below website link guides you on the following queries :

https://mahasahakar.maharashtra.gov.in/forms/AuditTrackingReport.aspx

It helps us to know the following details:

  • Whether the report is uploaded or not?
  • Who is auditor and so on

Below are the systematic steps for uploading the Audit Report.

1)  Select your District followed by your Taluka and then clicking on the Auditor wise button followed by Auditor’s Name , Society Name , Society registration No., Appointment of Auditor etc.

Online Mandatory Returns Management Module :-

Department plans to automate the submission of Mandatory Returns.Registered Cooperative Society need to submit the mandatory returns online every year.

The key returns are as follows :

A) Annual Activity Summary: Society needs to submit the data online inprescribed format from its online account.

B) Date of Holding AGM and Elections:Society needs to submit the dataonline in prescribed format from its online account.

C) Balance Sheet and Profit and LossStatement: Cooperative Societyneeds to upload the audited balance sheet and Profit/Loss documentthrough its account.

D) Distribution of Surplus: Society needs to submit the data online inprescribed format from its online account.

E) Name of Auditor and Return Consent: Society needs to submit thedata online in prescribed format from its online account.

F) List of Amendments of Bye Law: Society needs to submit the dataonline in prescribed format from its online account

OR

(See Section 79, Rule 67)

Following is the checklist for submission of returns by the society to the registrar

The Registrar/ special/ ADL./DJR/ DDR/ Dy. R/ ARCs

As provided under Rule 67 of the M.C.S. Rules, 1961, following returns are enclosed herewith:

  • Annual Report of activities of the Society for the year
  • Audited statements of accounts of the society for the year-
  • Balance Sheet
  • Profit and Loss Accounts; or
  • Income and Expenditure Statement.
  • A Statement of disposal of surplus assets as approved by General Body Meeting date ……………….for the year ……………….
  • A copy of the amendments to the bye-laws made by the society or proposed amendments to the bye-laws duly approved by the General Body Meeting.
  • Declaration regarding date of conduct of election of the society, due in the year ……………
  • Declaration regarding date of holding of General Body Meeting of the Society for the year……………………
  • Statement regarding appointment of auditor, his consent, letter & remuneration fixed, for year……………………
  • Statement of rectification of audit for the year ……………
  • Statement regarding co-operative education & training of the members, officers & employees of the society organized by the society during the year……………
  • Contribution made to the co-operative education and training fund made by society for the year…………………..
  • Statement regarding of Provisions made for contribution to be made to the election fund for the year …………………..
  • Statement showing status of preparation of list of Active and Non- active members of the society.

All the members are hereby requested to verify whether the auditor has uploaded the audit report online or Not, before making any payments. Since if you change the Auditor in F.Y. 2013-2014 then it is difficult for new auditor to upload your old Audit report for which you need to visit the Registrar of Society Office which results into delaying of work.

The online computerized process by the Co-operation department is an honest initiative of being transparent.

Feel free to write to [email protected] for any further queries or issues in this regard.

 

ELIGIBILITY CRITERIA FOR THE STARTUPS UNDER ‘STARTUP INDIA STANDUP INDIA’ INITIATIVE

Prime Minister Narendra Modiji on 16th January, 2016 announced a plethora of incentives and exemptions for Startups in India. The flagship Startup India initiative announced by the Prime Minister is aimed at creating a strong and vibrant startup eco-system in India and to create a culture of Entrepreneurship.

We have several new companies being setup in the name of startups in the country. Are all those startups eligible for the benefits that were announced?

In this column we shall have a glance at the startup eligibility criteria for the Startup India program which are as follows:

  • The firm incorporated should be less than five years’ old.
  • The Annual Revenue should be of less than Rs. 25 crores.
  • They should get approval from inter-ministerial board to be eligible for tax benefits and also get recommendation from an Incubator recognized by government, domestic venture fund or have an Indian patent
  • The Startup India Action Plan has literally mentioned that only Private Limited Companies, Limited Liability Partnership and Registered Partnerships are eligible for the Government schemes. This means the Proprietorships concerns, Cooperative societies and so on are NOT eligible for the same.

Whether the Companies registered prior to the announcement of the Startup India Action Plan can be eligible for the benefits of the plan?

In our understanding the answer is YES provided they fulfill all the conditions as described. For better clarity on taxation part, one needs to wait for the Union Budget 2016.

Do all the companies fulfilling the conditions, become eligible to obtain the approval from the inter-ministerial board?

NO, a business is considered to be a startup under the Startup India Action Plan if it aims to develop and commercialize:

  • New product or service or process;
  • Significantly improved existing product or service or process, that will create or add value for customers or workflow.

Further, in order for a “Startup” to be considered eligible, the Startup should:

  • Be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator established in a post-graduate college in India; or
  • Be supported by an incubator which is funded (in relation to the project) from GoI as part of any specified scheme to promote innovation; or
  • Be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator recognized by GoI; or
  • Be funded by an Incubation Fund/Angel Fund/ Private Equity Fund/ Accelerator/Angel Network duly registered with SEBI that endorses innovative nature of the business;
  • Be funded by GoI as part of any specified scheme to promote innovation;
  • Have a patent granted by the Indian Patent and Trademark Office in areas affiliated with the nature of business being promoted.

 Startups NOT Eligible for Startup India Action Plan

The mere act of developing of products or services of the following nature DO NOT make an entity eligible for incentives:

  • Products or services or processes which do not have potential for commercialization; or
  • Undifferentiated products or services or processes; or
  • Products or services or processes with no or limited incremental value for customers or workflow.

 This is a good start of a dialogue between the upcoming startup communityand the Government of India. This has given the startups which can create great value and jobs for the country, a platform and weightage. The above gives a fare idea as to the fitting into eligibility has got a lot of “ifs” and “buts” though. One needs to be really doing something unique to pass through the needle hole of the regulations. Even after entering, the things like “three years of Income Tax Exemptions” are limiting and would really NOT be able to help the startups in real sense.

For any further queries you can reach me at  [email protected]

Discontinuation of Physical Filing from February 8, 2016 – RBI

Advance Remittance Form (ARF) is used by companies to report FDI inflows to RBI while a company submits Foreign Collaboration General Permission Route(FCGPR) Form for reporting issue of eligible instruments to overseas investor against the FDI inflow.

The Reserve Bank of India (RBI) on  01st February announced the banks to file forms related to Foreign Direct Investment (FDI) only online on the e-Biz portal from February 8. With a view to “promoting ease of reporting” of such transactions, RBI, under the e-Biz project of the government, has enabled online filing of three returns with RBI viz:

  •  ARF,
  • FCGPR 
  • FC-TRS 

Advance Remittance Form (ARF) is used by companies to report FDI inflows to RBI while a company submits Foreign Collaboration General Permission Route(FCGPR) Form for reporting issue of eligible instruments to overseas investor against the FDI inflow.

Foreign Collaboration Transfer of Shares (FC-TRS) Form relates to transfer of securities between a resident and a person outside India. “Based on the experience, it has been decided that beginning February 8, 2016, the physical filing of forms ARF, FCGPR and FC-TRS will be discontinued and forms submitted in online mode only through e-Biz portal will be accepted as per RBI notification.

At present, both the options (online and physical) for filing of the forms are available to users.

Based on the experience it has been decided that beginning February 8, 2016 the physical filing of forms ARF, FCGPR and FC-TRS will be discontinued and forms submitted in online mode only through e-Biz portal will be accepted.

Please find below herewith link of the notification for your ready reference.

RBI Notification

The decision to completely switch over to online filing of forms has been taken after assessing the readiness of banks to file these forms online as per notified by the Reserve Bank of India.

Please feel free to reach me at [email protected] for any further queries

 

 

 

Startup India Action Plan

In a landmark event on 16th January 2016, PM Modi announced Startup India Action Plan. This is seen as the starting point of dialogue between the Startup Ecosystem and policy makers. This kind of high profile event has not even been witnessed even in the most startup friendly nations like Israil or Silicon Valley.

Perhaps this is the most exciting time for the Indian #Startups with government announcing compliance simplification + mentoring + fund allocation of Rs.10,000 crores dedicated for the Startup Ecosystem. PM Modi said “I see startups, technology and innovation as exciting and effective instruments for India’s transformation.”

As tax consultants and practitioners, we need to be sensitized and updated about this wave called startups which is fast changing the scenario around the country. It’s uprooting not even the established concepts but bringing the traditional businesses out of comfort zone. Look at OYO Rooms whose name PM Modi referred in his speech. Ritesh, a 21 years old boy could make an inventory of 14,000 rooms in 80 cities of India. While his closest competitor, which is surprisingly Taj Hotels set up by iconic conglomerate, is having inventory of 9,000 rooms!!

Let us look at the broad guidelines of “ #Startup India Action Plan”

Objective

Startups are seen as great means towards sustainable economic growth and large scale employment generation.

The objective of Action Plan is to:

  • Spread startup system from technology sector to other wide array of sectors
  • From big cities to semi urban and rural areas

The Plan seeks to remove the difficulties faced by startups such as:

  • Time consuming and difficult regulatory compliances
  • Long drawn closure in case of failure
  • Lack of credit and funding

The Plan also seeks to provide impetus to startups by:

  • Promoting awareness and adoption of IPR
  • Tax exemptions
  • Encouraging innovation through incubation and mentoring

The Action Plan

The Action Plan is divided across the following areas:

  • Simplification and handholding
  • Funding support and incentives
  • Industry-Academia partnership and incubation

Simplification:

  • A non-intrusive model shall be brought in place which will be “self certification” driven for 9 labour and environment laws. There will be no inspection for three years under labour laws. The self-certification will be thru Startup mobile app. Pollution control shall also be driven by self-certification in case of “white category” businesses.
  • A Mobile App will be made available from 1st of April 2016 :
    • To register a startup
    • For compliances via self certification
    • For collaborating with startup ecosystem partners
    • For applying for various eligible schemes
  • The Insolvency and Bankruptcy Code 2015 will make it faster and easier for startups to wind up. The bill is currently under the scrutiny of the joint committee of the parliament. The bill provides for permission for startups to wind up within 90 days of application. On receiving such permission, an insolvency professional will be appointed to liquidate assets and pay off creditors within 6 months

Hand Holding:

  • Startup India Hub will be set up to create a single point of contact for startups. The hub will collaborate with central and state government, VCs, angel networks, banks, incubators etc. The hub will assist startups through advisory and mentorship programs.
  • To promote awareness and adoption of IPRs, the government will facilitate legal support and fast-track patent examination. For effective implementation of the scheme, the Controller General of Patents, Designs and Trademarks (CGPDTM) shall empanel a panel of “facilitators”. Entire fee of facilitators will be borne by Govt.
  • From 1st of April 2015, PSUs are mandated to procure at least 20% of their requirements from the MSMEs (Micro Small and Medium Enterprises).To ensure level-playing field for the Startups in manufacturing space, government shall exempt them from “prior experience / turnover” criterion. However, there will be no compromise on the quality and other allied conditions.

Funding:

  • Government will set up a fund with an initial corpus of INR 2,500 crore and will make it INR 10,000 crore over a period 4 years. The fund will be in the nature of fund of funds. It will not invest directly into startups, but shall participate in the capital of SEBI registered venture funds. The maximum investment in a fund by this FOF is capped at 50% of its size. This fund shall be professional managed and LIC will be a co-investor.
  • Credit guarantee mechanism through National Credit Guarantee Trust Company (NCGTC)/ SIDBI is being envisaged with a budgetary corpus of INR 500 crore per year for the next four years. This will help startups get debt funding.

Incentives:

  • Income tax exemption on capital gains shall be given to persons who invest such capital gains in the fund of funds recognized by the Government. At present capital gain exemption is available for investment in manufacturing MSMEs. This exemption will be extended to startups.
  • With a view to stimulate the development of Startups in India and provide them a competitive platform, profits of Startup will be exempted from income-tax for a period of 3 years. This fiscal exemption shall facilitate growth of business and meet the working capital requirements during the initial years of operations. The exemption shall be available subject to non-distribution of dividend by the Startup.
  • Currently, investment by venture capital funds in Startups is exempted from operations of the provisions of Sec 56 (2) (viib). This section taxes excess of share issue amount in excess of its fair market value. The exemption shall be extended to investment made by incubators in the Startups. This shall encourage seed level investments in the Startups.
  • Rebate up to 80% on patent filing fees.

Mentoring:

  • To bolster the Startup ecosystem in India, the Government is proposing to introduce Startup fests at national and international levels. These fests would provide a platform to Startups in India to showcase their ideas and work with a larger audience comprising of potential investors, mentors and fellow Startups.
  • Launch of Atal Innovation Mission (AIM) with Self-Employment and Talent Utilization (SETU) Program. The idea behind this program is innovation promotion and entrepreneurship promotion. This envisages starting of specialized incubators, tinkering labs, strengthening the exiting incubation facilities, organizing the state and national award.
  • To encourage innovation by young students in science and technology, interesting schemes like “Innovation Core” for schools, “NIDHI” for running competitions in innovation and Ucchatar Avishkar Yojana for R & D, especially for students of IITs, have been proposed.
  • To help set up incubation facilities with public private partnership. The plan is to set up 35 new incubators in existing institutions and 35 new private sector incubators. Govt. will provide funding support to these incubators.
  • To set up 7 new Research Parks for joint R&D efforts with academia and industry partnership
  • To promote bio-entrepreneurship. This will be achieved by setting up bio-incubators and bio-tech equity fund
  • To launch Incubator Grand Challenge to create world class incubators.

Reaction to the Action Plan

While in general, startups have welcomed the action plan as a good beginning, some criticism has followed.

The excitement of several startups was contained once they knew of the definition of startups in order to claim tax exemption. A startup must satisfy the following 6 conditions

  1. It must be a private limited company, LLP or Partnership firm
  2. It should not be more than 5 years old
  3. Turnover below 25 Crore
  4. Should develop an innovative commercial product
  5. Should obtain certification from inter-ministerial Board set up by DIPP to validate innovative nature of business
  6. Should fulfill one of the six conditions of recommendation or funding

The tax exemption for 3 years during first 5 years of operations is also seen generally meaningless as most of the startups do not make any profit during initial years.

According to iSPIRIT  34 items were listed as key irritants. Out of these 34 items, only eight have been resolved , while action has been promised on 15 of them and 11 of them have been left high and dry.

The plan to invest 10,000 crore in fund of funds has received criticism mainly on these two counts :

  • Tax payers money will be invested in very high risk enterprises
  • The size of fund is too small to be of any significance in promoting local venture capital industry

It must be noted that at present,  venture funds in India are either foreign firms (Sequoia Capital, Accel Partners and Matrix Partners ) or local firms (Kalaari Capital, Nexus Venture Partners and Helion Venture Partners) who raise over 90% of their capital from foreign institutional investors

Opportunities for tax professionals

The effort to launch a Startup Action Plan is a laudable piece of work by the Government. There may be several lacunae or lack of clarity at this stage, with time more clarity and amendments are sure to follow.

With this, there will be several new opportunities for the tax professionals in the time of looming startup ecosystem. Some of these are :

  1. Registration and approval of the Startups and Funds under various laws
  2. Transaction advisory to handle various tax laws, under new innovative models.
  3. Structuring and modeling of entities for the incubators and funds
  4. Claiming of tax exemptions for Startups
  5. Claiming of tax exemption from Capital Gains for the Funds
  6. Advisory on the funding and Investor Relationship Management

Finally some interesting tweets

Rajan Anandan ‏

Best Start-up event I have ever attended. Thank you #StartupIndia. Congrats @amitabhk87 for a truly amazing launch!

Mahesh Murthy 

#StartupIndia Zero tax on startup profits in 1st 3 years. Could see @Flipkart in audience wasn’t unduly excited with that.

Dr. Subhash Chandra

To transform India to a nation of job creators we must make our startup system strong. Great #StartupIndia initiative by @narendramodi.

Editor : CA Dinesh Tejwani

Please feel free to reach me at [email protected] for further queries if any.