Private Limited Company is one of the most popular entities to start a business. Although now it is simple to have registered Private Company, one must keep a tab on the compliance related to Private Limited Company. There are certain mandatory compliances which need to be complied by the private Limited company. They are highlighted as follows;
Share Certificate and Statutory Register: Company must make sure that the share certificate has been issued within 60 days from the date of incorporation. Before issuing share certificate, stamp duty shall be paid on the value of shares. A Private Limited Company has to maintain various statutory registers and records as required by the Company law such as Register of shares, Register of Members, Register of Directors etc. Besides, Incorporation documents of the company, Resolutions of the meetings of the Board of Directors, Minutes of the Board Meetings and Annual General Meeting etc are also required to be preserved by the Company.
Board Meetings: It is mandatory to hold 4 (four) Board Meetings in a year for a Company and the gap between two Board Meeting shall note more than 120 days. There are exception to certain category of the Company, such as One Person Company (OPC) and Small Company. They can hold 2 Board Meeting in a financial year and gap between two board meetings shall not be less than 90 days.
Annual General Meeting: Every private limited company shall hold its first Annual General Meeting (AGM) within 9 months from the financial year end. In case of Subsequent AGM it shall be held within 6 months from the end of financial year. Normally, adoption of financial statements such as Balance Sheet, Profit and Loss statements, Cash flow statement, appointment/reappointment/ratification etc will take place.
Annual RoC Filings: Private Limited Companies are required to file its Annual Accounts and Returns disclosing details of its shareholders, directors etc to the Registrar of Companies every year. As a part of Annual Filing, the following forms are to be filed with the ROC:
Form MGT-7 (Annual Return): Every Private Limited Company is required to file its Annual Return which contains the details of shareholding pattern, directors details, capital structure of the Company, number of meetings held during the year etc. within 60 days of holding of Annual General Meeting. Annual Return will be for the period 1st April to 31st March.
Form AOC-4 (Financial Statements): Every Private Limited Company is required to file its Balance Sheet along with statement of Profit and Loss statement and Director Report in this form within 30 days of holding of Annual General Meeting.
TDS Deductions (Tax Deducted at source)
TDS means tax deducted at source. Tax is to be deducted when payment is due or actual payment is made, whichever is earlier. If a person who is responsible for deducting TDS fails to do so, then the Assessing Officer has powers to disallow whole of such expenditure for ascertaining taxable profits. TDS payments to the income tax departments need to be paid before the 7th of the next month to which the payment corresponds. Let us understand this with scenarios.
TDS on Rent:
TDS of 10% is to be deducted in case the rent payable is more than Rs 1.8 lakh in a financials year. Let’s say the rent payable is Rs 20,000 per month, the person paying rent must deduct 10% (Rs 2,000) must be deducted from the rent and it should be paid to the income tax department as TDS before the 7th of the next month.
TDS on Technical Payment:
Let’s say you make a payment of Rs 40,000 to a website developer as technical payment. TDS of 10% must be deducted at the time of payment. So Rs 36,000 will be paid to the website developer and Rs 4000 will be paid to the income tax department as TDS.
TDS on Salary to Employee:
The person responsible for paying salary is liable to deduct TDS and pay the same to the income tax department. The TDS to be deducted depends on the salary, allowable allowances, taxable perquisites and deductions under chapter VI-A. Only if TDS return is filed, form 16 can be issued to the employees.
Every company which is engaged in any trade or professional should obtain a Certificate of Enrolment from the Profession Tax Officer of jurisdiction as per Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976. All companies with Enrolment Certificate shall pay tax every year before 30th of April.
In case of employees (salary or wage earners) whose salary for a month is not less than Rs. 15,000/-, the employer is liable to deduct Profession Tax and pay the same to the department.
It is the responsibility of the Company/employer to deduct tax and pay on behalf of all such employees within 20 days of expiry of the month.
Penalty for non-payment of tax by enrolled person and registered employer with interest at rate of 1.25% per month and Penalty not exceeding 50% of the tax amount due.
Here is an example:
Salary payable to employee is Rs 16,000. The company will pay is Rs 15,800 (16,000 minus 200) to the employee and professional tax of Rs 200 to be paid to govt before the 20th of Feb.
Shops and Commercial Establishment
Karnataka Shops and Commercial Establishment license is issued from the department of labour and is mandatory for all businesses registered in Karnataka.
Shop shall mean any premises where any trade or business is carried on or where services are rendered to customers, and includes offices, storerooms, go-downs, or warehouses, whether in the same premises or otherwise, used in connection with such trade or business.
Commercial Establishment shall mean a commercial or trading or banking or insurance establishment, an establishment or administrative service in which person employed are mainly engaged in office work, a hotel, or restaurant, boarding eating house, a café or any other refreshment house, a theatre or any other place of public amusement or entertainment.