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Secretarial Standard on Dividend (SS-3) – A Summary

Secretarial Standard on Dividend (SS-3) – A Summary

After Implementation of Secretarial Standard on Meeting of Board of Directors (SS-1) and Secretarial Standard on General Meeting (SS-2), ICSI released the Secretarial Standard on Dividend (SS-3). The SS-3 is effective from 1st Day of January, 2018 for voluntary adoption by Companies.

FROM WHERE TO PAY

  1. Dividend shall be paid out of-
  • the profits of the financial year for which such Dividend is sought to be declared or/and
  • the profits for any previous financial year(s) which remains undistributed after providing for depreciation in accordance with the provisions of the Act, or/and
  • From the money provided by the Central Government or a State Government in pursuance of a guarantee given by such Government for this purpose.

2. A company shall also not declare any Dividend,

  • unless carried over previous losses and depreciation not provided in the previous year(s) are set off against the profit of the company for the current year. Or/and if it has defaulted in-
  • Redemption of debentures or payment of interest thereon or creation of debenture redemption reserve,
  • Redemption of preference shares or creation of capital redemption reserve,
  • Payment of Dividend declared in the current or previous financial year(s), or
  • Repayment of any term loan to a bank or financial institution or interest thereon, till such time the default is subsisting.

3. Dividend shall not be declared out of-

  • the Securities Premium Account or
  • the Capital Redemption Reserve Account or
  • the Revaluation Reserve Account or
  • the Amalgamation Reserve Account or
  • the profits on re-issue of forfeited shares, or
  • the profits earned prior to incorporation of the company.

4. Where profits are inadequate or there are no profits then Dividend may be paid from free reserves subject to the fulfillment of following conditions-

  • The rate of Dividend declared by the company shall not exceed the average of the rates at which Dividend was declared by it in the three financial years immediately preceding the financial year of declaration of Dividend. This shall not be applicable where a company has not declared any Dividend in each of the three preceding financial years.
  • Total withdrawal from the accumulated profits shall not exceed one tenth of the sum of the paid up share capital and free reserves of the company as per the latest audited financial statements.
  • The amount so withdrawn shall first be utilised to set off the losses, if any, incurred in the financial year in which Dividend in respect of equity shares is proposed to be declared.
  • The balance of Free Reserves after such withdrawal shall not fall below 15% of the paid up share capital of the company as per the latest audited financial statements.

APPROVING AUTHORITY TO PAY

5. Dividend shall be declared only at Annual General Meeting subject to the recommendation of the Board, made at a meeting of the Board.Members may declare a lower rate of Dividend than the rate recommended by the Board or may decide not to declare but have no power to increase the amount or rate of Dividend recommended by the Board

6. No Dividend shall be declared on equity shares for previous years in respect of which annual financial statements have already been adopted at the respective Annual General Meetings.

7. A company is prohibited to issue Bonus shares in lieu of Dividend.

WHOM TO PAY

8. Dividend shall be paid-

  • in respect of shares held in electronic form, to those Members whose names appear as beneficial owners in the statement of beneficial ownership furnished by the Depository(ies) as on the record date fixed by the company for this purpose;
  • in respect of shares held in physical form, to those Members whose names appear in the company’s Register of Members after giving effect to all valid share transfers in physical form lodged with the company before the date of book closure or as on the record date, as the case may be.

9. Preference Shareholders shall be paid Dividend before Dividend is paid to the equity Shareholders of the company.

10. Arrears of Dividend on cumulative preference shares shall be paid before payment of any Dividend on equity shares. It is not applicable in case of non-cumulative preference shares

11. Dividend on equity shares shall be paid in accordance with the rights of the respective classes, if any, of such shares.

12. The amount of Dividend in respect of shares for which an instrument of transfer has been delivered to the company but which have not been registered for a valid reason shall be transferred to the Unpaid Dividend Account.

Members may authorize the company in writing to pay the Dividend to the transferee specified in the instrument of transfer and the company shall act upon such authorization. However, where such instrument is not valid for any reason, the company shall not act upon such authorization and intimate the concerned Member accordingly.

In case of shares which have not been transferred because the ownership thereof is in dispute, or where specific prohibitory orders have been passed by a court or statutory authority, Dividend should be kept in abeyance and be transferred to the Unpaid Dividend Account, as and when it becomes due.

HOW TO PAY

13. Dividend shall be deposited in a separate bank account within five days from the date of declaration and shall be paid within thirty days of declaration. The intervening holidays, if any, falling during such period shall be included.

The amount deposited in such bank account shall be utilized only for the payment of Dividend or for transfer to Unpaid Dividend Account/Investor Education and Protection Fund and for no other purpose.

14. Dividend shall be paid in cash/cheque/dividend warrant and not in kind.

15. Initial validity of the Dividend cheque or warrant shall be for three months.

16. A duplicate Dividend cheque or warrant shall be issued only after obtaining requisite indemnity/ declaration from the concerned Member and after ascertaining the encashment status of the original Dividend cheque or warrant.

17. The Dividend cheque or warrant shall be accompanied by a statement in writing showing the amount of Dividend paid, Folio no./DP ID and Client ID nos., number of shares held by the concerned Member as on the record date, amount paid up on each share and the financial year to which the Dividend pertains.

18. Unless the Articles provide otherwise, Dividend shall be paid proportionately on the paid-up value of shares.

TREATMENT OF UNPAID OR UNCLAIMED DIVIDEND

19. The amount of Dividend which remains unpaid or unclaimed after thirty days from the date of its declaration shall be transferred to a special bank account titled as ‘Unpaid Dividend Account’ to be opened by the company in that behalf with any scheduled bank. Such transfer shall be made within seven days from the date of expiry of the thirty days period from the date of declaration of Dividend.

20. Any amount in the Unpaid Dividend Account of the company which remains unpaid or unclaimed for a period of seven years from the date of transfer of such amount to the Unpaid Dividend Account, along with interest accrued, if any, shall be transferred to the Investor Education and Protection Fund.

21. Before transferring any unclaimed or unpaid Dividend to the Investor Education and Protection Fund, the company shall give an individual intimation to the Members in respect of whom such unclaimed Dividend is being transferred, at least three months before the due date of such transfer.

22. Any interest earned on the Unpaid Dividend Account shall also be transferred to the Investor Education and Protection Fund.

INTERIM DIVIDEND

23. Interim Dividend, if declared, shall be paid out of-

  • The surplus in the profit & loss account and/or
  • The profits of the financial year in which such Dividend is sought to be declared.

The Board of Directors of a company may declare InterimDividend during any financial year or at any time duringthe period from closure of financial year till holding ofthe Annual General Meeting.

No Interim dividend shall be declared/paid out where profits are inadequate or no profits

24. Interim Dividend shall be declared at a meeting of the Board. Approval of Members is notrequired for declaration of Interim Dividend

All the provision which are applicable to dividend (which is declared by Shareholders) shall mutatis mutandis apply to Interim Dividend.

DIVIDEND IS A DEBT..!!

25. Dividend, once declared, becomes a debt and shall not be revoked.

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(This article is authored by Swati Sharma exclusively for publication at StartUp Movers. No content of this article can be published elsewhere without prior permission of StartUp Movers.The entire contents of this article are solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. It doesn’t constitute professional advice or a formal recommendation.)

StartUpIndia Scheme: Definition, Tax Benefits and Incentives

StartUpIndia Scheme: Definition, Tax Benefits and Incentives

Startup India campaign is based on an action plan aimed at promoting bank financing for start-up ventures to boost entrepreneurship and encourage start-ups with jobs creation. The campaign was first announced by Prime Minister Narendra Modi in his 15 August 2015 address from the Red Fort.

Definition As per DIPP:

Startup means an entity, incorporated or registered in India:

  • Not prior to seven years, however for Biotechnology Startups not prior to ten years,
  • With annual turnover not exceeding INR 25 crore in any preceding financial year, and
  • Working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation

Provided that such entity is not formed by splitting up, or reconstruction, of a business already in existence. Provided also that an entity shall cease to be a Startup if its turnover for the previous financial years has exceeded INR 25 crore or it has completed 7 years and for biotechnology startups 10 years from the date of incorporation/ registration. Provided further that a Startup shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose.

 

Tax Benefit & Incentives:

  • 3-year tax holiday in a block of seven years: Under Section 80-IAC, the Startup incorporated after April 1, 2016 is eligible for getting 100% tax rebate on profit for a period of three years. Also, the annual turnover must not exceed Rs. 25 crores in any financial year up to 31 March 2021
  • Exemption from tax on Long-term capital gains: Apart from Minimum Alternate Tax (MAT), Startups are also exempt from paying the capital gains tax that is currently pegged at 20% for other businesses.
  • Tax exemption on investments above the fair market value: The government has exempted the tax being levied on investments above the fair market value in eligible start-ups. Such investments include investments made by resident angel investors, family or funds which are not registered as venture capital funds.
  • Set off of carry forward losses and capital gains allowed in case of a change in Shareholding pattern: The carry forward of losses in respect of eligible start-ups is allowed if all the shareholders of such company who held shares carrying voting power on the last day of the year in which the loss was incurred continue to hold shares on the last day of previous year in which such loss is to be carry forward.
  • Tax exemption to Individual/HUF on investment of long-term capital gain in equity shares of Eligible Start-ups u/s 54GB: The existing provisions u/s 54GB allows the exemption from tax on long-term capital gains on the sale of a residential property if such gains are invested in the small or medium enterprises as defined under the Micro, Small and Medium Enterprises Act, 2006. Now same section has been amended to include exemption on capital gains invested in eligible start-ups also.

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(This article is authored by Dhananjay Dubey exclusively for publication at StartUp Movers. No content of this article can be published elsewhere without prior permission of StartUp Movers.The entire contents of this article are solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. It doesn’t constitute professional advice or a formal recommendation.)

Restriction on Input Tax Credit under GST

Restriction on Input Tax Credit under GSTGST Registration Online

Uninterrupted and seamless chain of input tax credit is one of the key features of Goods and Services Tax. “Input Tax” means the Central tax, State tax, Integrated tax or Union territory tax paid on any services or goods or both which are used or intended to be used in the furtherance of business.

However, No Input Tax Credit is available in below cases:

  • Motor Vehicles and other conveyance except when they are used for the following:
    • Further supply of such vehicles or conveyances; or
    • Transportation of passengers; or
    • Imparting training on driving, flying, navigating such vehicles or conveyances
    • For transportation of goods
  • Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, but if the goods and/or services are taken to deliver the same category of services or as a part of a taxable composite or mixed supply, credit will be available.
  • Membership of a club, health and fitness center.
  • Rent-a-cab, life insurance and health insurance except where
    • Government makes it obligatory for employers to provide it to its employees; or
    • goods and/or services are taken to deliver the same category of services or as a part of a composite supply, credit will be available.
  • Travel benefits extended to employees on vacation such as leave or home travel concession.
  • Works contract service for construction of immovable property except for plant & machinery or for providing further supply of works service
  • Goods and/or services for construction of an immovable property except for plant & machinery whether to be used for personal or business use.

Note:Construction includes reconstruction, renovation, additions or alterations or repairs to the extent of capitalization, to the said immovable property.

  • Goods and/or services or both where tax has been paid under composition scheme.
  • Goods or services or both received by a non-resident taxable person except on goods imported by him.
  • Goods or services or both used for personal consumption.
  • Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
  • ITC will not be available in the case of any tax paid due to non-payment or short tax payment, excessive refund or ITC utilized or availed by the reason of fraud or willful misstatements or suppression of facts or confiscation and seizure of goods.

Also, there is a time limit for utilizing the Input tax credit. A registered person shall not be entitled to take input tax credit in respect of any supply of goods or services or both to him after the expiry of one year from the date of issue of tax invoice relating to such supply.

 

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(This article is authored by Waquar Ansari exclusively for publication at StartUp Movers. No content of this article can be published elsewhere without prior permission of StartUp Movers.The entire contents of this article are solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. It doesn’t constitute professional advice or a formal recommendation.)

Procedure for Registration u/s 12A

Procedure for Registration u/s 12A

 

NGO’s can seek registration u/s 12A to claim exemption under Income Tax Act’ 1961, if certain conditions are satisfied. Thus, NGO’s shall get themselves registered for claiming exemptions under the Income Tax Act.

Below is step by step procedure for registration u/s 12A:

  1. An application for 12A registration is made in Form 10A along with some prescribed documents (Annexure:1)
  2. The commissioner on receipt an application for registration of a trust shall call for the documents and information as he thinks necessary to satisfy about the genuineness of the activities of trust.
  3. He shall pass an order in writing after satisfying himself about the objects & genuineness of the of the activities of the trust.
  4. If he is not satisfied, he shall pass an order in writing refusing to register the trust.Applicant shall be given opportunity of being heard before passing order of refusal.
  5. The order of grant or refusal shall be passed before the expiry of 6 months from the end of the month in which application for registration was made.

Deemed Registration: 

In case the order of grant or refusal not passed within the expiry of 6 months from the end of the month in which application for registration was made, it will be deemed that the concerned Trust has been registered. 

Cancellation of Registration:

Registration granted u/s 12A can be cancelled in the below circumstances:

  1. The activities of the trust or institution are not genuine.
  2. The activities of the trust are not being carried out in accordance with the objects of the Trust.
  3. Trust’s income doesn’t endure the benefit of general public.
  4. It is for the benefit of any particular religious community or caste.
  5. Its funds are invested in prohibited manner.
  6. Any income or property of trust is applied for the benefit of specified persons like author of trusts or trustees, etc.

Annexure:1 – Prescribed documents for 12A registration:

  1. An application in form 10A with Basic details such as:
  • Name of the Trust (in block letters)
  • PAN Number of the Trust
  • Address of the Trust
  • Details of the Authors & Founders
  • Date of creation of the trusts
  • Details of Trustees/managers

2. Original/Certified copy of document evidencing the creation of Trust/Institution together with a copy thereof

3. Copies of the accounts of the trust/institution for the last 3 years or since the date of its Inception together with a copy thereof

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(This article is authored by Deepika Kumari exclusively for publication at StartUp Movers. No content of this article can be published elsewhere without prior permission of StartUp Movers.The entire contents of this article are solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. It doesn’t constitute professional advice or a formal recommendation.)

Step by Step Procedure for Registration under GST

Step by Step Procedure for Registration under GST

GST Registration

Registrations for GST can be done online through a portal (https://www.gst.gov.in/) maintained by the Central Government or State Government.The applicant will have to submit an online application for GST registration along with requisite documents.

Below is the step by step procedure to register under GST:

  1. Go to GST portal. Click on Register Now under Taxpayers.
  2. Enter the following details-
  • Select New Registration
  • In the drop down under I am a- select Taxpayer
  • Enter the Name of Business and PAN of the business
  • Enter the Email Address and Mobile Number. The Applicant will receive the OTPs
  • Then click on Proceed
  1. Enter the OTP received on the email and mobile. Click on continue. (In case you have not received the OTP, click on Resend OTP)
  2. You will receive the Temporary Reference Number (TRN). This will also be sent to your email and mobile. Note down the TRN.
  3. Now Select Temporary Reference Number (TRN). Enter the TRN and the Captcha code, then click on Proceed.
  4. You will receive an OTP on the registered mobile number and email. Enter the OTP and click on Proceed.
  5. You will see that the status of the application is shown as drafts. Click on Edit Icon.
  6. Now we will come to the further part of Registration has 10 sections where we have to fill all the details as required and submit requisite documents.

List of Documents required to be submitted –

  • Photographs of all the promoters/partners
  • Certificate of Constitution (not required in case of proprietorship)
  • Proof for the place of business
  • Bank Details (for e.g. Latest Bank Statement, front page of pass book)
  • Proof of appointment of authorized signatory
  1. Once all the details are filled in go to the Verification page. Tick on the declaration and submit the application using any of the followings-
  • Companies must submit application using DSC
  • Using EVC – OTP will be sent to the registered mobile number
  1. Then, Success message is displayed after verification and Application Reference Number (ARN) is sent to registered email and mobile.
  2. Now you can check the ARN status for your registration by entering the ARN in GST portal.

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(This article is authored by Anamika Tyagi exclusively for publication at StartUp Movers. No content of this article can be published elsewhere without prior permission of StartUp Movers.The entire contents of this article are solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. It doesn’t constitute professional advice or a formal recommendation.)

 

Benefits of Income Tax Return

BENEFIT OF FILING THE INCOME TAX RETURN 

Income Tax Return

Income Tax Return is kind of declaration made by the assessee to the government in which an assessee declares the income earned by him from the various sources such as Income from salary, Income from house property, Income from business and profession, Income capital gain and Income from other sources.

Many people consider it as unnecessary burden. So, we have here listed down various benefits why you should file your Income Tax Return:

  • Income becomes white money once you declare the same in the Income Tax Return. Thus, you should file the ITR being responsible citizen and contributing in nation building.
  • Foreign travel to those countries in which VISA is require and VISA is possible only through submission of Income Tax returns as one of the documents.
  • In case you incurred losses in business income, capital gains, income from other sources, etc., then these can be carried forward to the next financial year and provide tax relief in the subsequent year only when filing the Income Tax returns. Unfortunately, such losses cannot be carried forward in case the ITR is filed after the due date.
  • A tax assessment order can be used as a proof of residence for applying for Aadhaar or passport.
  • Copies of tax returns are also required as proof for processing credit card applications.
  • TDS is deducted from your income, and then the filing of income tax return is required to claim TDS.
  • A salaried person has filed income tax return, and then he can claim additional deductions which are not considered by his employer while deducting tax deduction at source or not provide the original proof to the employer at the time of deduction of tax at source.
  • From FY 2017-18 5,000 would be charged for non-filing of income tax return, a person who requires filing Income Tax Return as per section 139(1) of Income Tax Act.
  • Life is uncertain; this is one of the rare benefit of filing the ITR every year. If you keep filing ITR of yourself or other, it can help you in future in case of accidental death of any one member during roadside accident, because during court trial insurance company need the proofs of income to arrive at the amount of accidental claim, if any return is missing, mainly last 2 to 3years, this could lower the claim amount or even no claim because court take ITR as evidence.
  • For obtaining government tenders, registration on panels, etc. income tax returns are checked by the tender committee and ITRs are considered to see whether the applicant (contractor) has done the work of that much amount earlier or not.
  • The return is a declaration of your income and it will be extremely helpful when you are applying for a loan from bank.

Still Confused? 🤔
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Call: +91-94- 6565-3535

(This article is authored by Dhananjay Dubey exclusively for publication at StartUp Movers. No content of this article can be published elsewhere without prior permission of StartUp Movers.The entire contents of this article are solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. It doesn’t constitute professional advice or a formal recommendation.)

 

 

GST Registration

 

GST Registration

 Who is liable for GST Registration?

India is still facing early days challenges of GST. Many taxpayers are still confused with GST registration requirement. Here, we have covered who is liable for GST.

  • Aggregate Turnover Criteria

Any supplier of goods and/or services who makes a taxable supply with an aggregate turnover of over Rs.20 lakhs in a financial year is required to obtain GST registration. In special category states, the aggregate turnover criteria set at Rs.10 lakhs.

Thus, if your turnover exceeds specified limit you are required to get yourself registered under GST.

  • Mandatory GST Registration Criteria

Below persons are required to get themselves registered irrespective of threshold limit prescribed above.

  • Persons making any inter-state taxable supply of Goods.
  • Casual Taxable persons making taxable supply.
  • Person who are required to pay tax under reverse charge.
  • Non- resident taxable persons making taxable supply.
  • Input Service Distributor.
  • Electronic commerce operator.
  • Person supplying online information and database access or retrieval services(OIDAR) from a place outside India to a person in India, other than a registered taxable person.
  • Persons who are required to deduct tax under GST.
  • Person who supply goods and/or services on behalf of another registered taxable person whether as an agent or otherwise.
  • Any person who is a transferee or a successor of a business, that was carried on by a person registered under GST is required to be registered under GST with effect from the date of such transfer or succession.

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(This article is authored by Waquar Ansari exclusively for publication at StartUp Movers. No content of this article can be published elsewhere without prior permission of StartUp Movers.The entire contents of this article are solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. It doesn’t constitute professional advice or a formal recommendation.)