Mandatory conduct of an Internal Audit

Internal audit is an evaluation process for companies or organization that is performed by internal auditors. It is a tool that is used to examine the company’s financial as well as non-financial activities and operations. Through the internal audit process, a company is made aware about the prospective risk, compliance status, and operative loopholes and also recommended about the measures and steps that it can take to improve efficiency and effectiveness. The internal audit in India is governed by the Companies Act, 2013, just like cost audit, tax audit, secretarial audit and transfer pricing audit.

Who must have Internal Audit?

The Companies Act, 2013 mandates all the listed companies and certain unlisted public companies to have the internal audit conducted. The following classes of unlisted companies are required to have internal audit:

·         Having paid-up capital exceeding Rs. 500 million in the previous financial year.

·         Having turnover of Rs.2 billion or above in the previous financial year.

·         Having outstanding loans and liabilities exceeding Rs.1 billion

·         Having outstanding deposits for Rs. 250 million

Also, the following classes of Private Companies are required to conduct internal audit-

·         Having turnover of Rs.2 billion or above in the previous financial year.

·         Having outstanding loans and liabilities exceeding Rs.1 billion in the previous financial year.

Who should conduct an internal audit?

For the purpose of conducting Internal Audit in a company, it is recommended to appoint a chartered accountant or a cost accountant as internal auditor to perform the audit.

Related Articles: Major Challenges of Internal Auditing in Future

Is there a penalty for non-compliance of Internal Audit?

There are no specific penal provisions that have been specified by the Companies Act, 2013 for the non-compliance of internal audits in a company or organization. Any sort of non-compliance is prosecuted as per Section 450 of the act, as there is no punishment specified for not conducting an internal audit. In case there is any non-compliance by the auditor or the company, both are liable to pay a fine of Rs.10000.

Are there any key guidelines for conducting an internal audit?

The Securities and Exchange Board of India (SEBI) through Clause 49 of the Listing Agreement has introduced mandatory corporate regulatory governance that is applicable to the listed companies only. As per the clause an audit committee of the company is required to review the following while internal audit:

·         Internal audit report that relates to the internal control weaknesses.

·         Whether the internal audit has been made functional in a proper order after thoroughly reviewing the internal audit department’s structure, frequency of audits, seniority of the officer heading the department, recruitment of the personnel and the remuneration terms of the chief internal auditor.

·         The suspicion of the fraud or forgery or internal control system failure that have been found in the investigation in the internal audit service provided by the internal auditor.

·         The acceptance of responsibility for internal controls effectiveness, disclosure made to the auditor, any deficiencies in the operations and its rectification by the board of directors is to be certified by the Chief Executive Officer (CEO) or the Chief Financial Officer (CFO).

Want to do remittance of Income- Must know about Form 15CA and 15CB

In recent years, remittances of funds between the Indian Residents and Non-Resident Indians have become a common thing. It becomes difficult to collect taxes and track cases on later stages from NRIs, therefore for the same Form 15CA and 15CB are widely used. It is a tool for collecting taxes and keeping a proper track of the remittance of funds done outside India.

Form 15CA:

It is used a measure or tool for gathering and collecting information about all the payments and remittance of funds that are chargeable with taxes in the hands of the Non-Resident Indian. The remitter uses this form as a declaration regarding the tax liabilities that have arisen during the made payments.

Through Form 15CA the Income Tax Department can easily keep a check on the all the remittance of funds made to foreign and can determine the nature of the payments to calculate the tax liability on the income.

Is Form 15CA compulsory?

It is compulsory for the NRIs to file Form 15CA for all the remittance of funds and payments that exceed Rs.5 Lakh in a financial year.

The taxation authorities have made it very clear that this form is not required in cases where the amount of the remittance is not chargeable with taxes. Rule 37BB gives a detailed list of all the income accrued from various sources for which no Form 15CA and 15CB is required to be filed.

Form 15CB:

Form 15CB is used in the remittance of funds and payments where double taxes have to be avoided under the Double Tax Avoidance Agreement (DTAA). It is also used to determine any tax deductions provided by the Income Tax Rules. Form 15CB can be said as a certificate issued by a Chartered Accountant after thorough examination of such payments. It includes the details of the remitter, remit tee, nature of the remittance of funds and other necessary details.

Related Articles- Does Form 15CB is required for payment for purchases?

Procedure for Filling Form 15CA and 15CB:

The Form 15CA has to be filed through online mode on the official website of the income tax authority. It is necessary to furnish all the details of the remitter and the remit tee in the form. Also, to file the form a person must have a valid PAN or Tan Number. Form 15CA has four parts that must be duly filled. These four parts areas follows-

·         PART A: This is filled in when the aggregate of the remittance of funds does not exceed Rs.5 Lakh in a particular financial year either taxable or not.

·         PART B: This filed when a nil rate or lower rate certificate in order as per section 195(2), section 195(3) and section 197 of the Income Tax Act, 1961, has been issued by the Assessing Officer.

·         PART C: It is filed when the remittance of funds or its aggregate exceeds Rs.5 Lakh in a particular financial year.

·         PART D: This is to be filled in where the remittance is not chargeable with domestic law taxes.

Common Myths Regarding Loan against Property

Loan against Property or LAP has always been a popular way of getting extra funds for so many purposes such as for financial crunch or business or any other reason. But there are so many myths that revolve around the concept of Loan against property. In this article, we will burst these myths or some common misconceptions about loans against Property for better understanding related to LAP.

·         Myth 1: Taking loan at higher rates is better than pledging property or home as security

In case the loan the applicant has a very good credit score and history and has the property of worth the value then the Loan against Property can be a really good deal. It offers the person to avail larger amount of funds or loan amount at lower and better rate of interest that the person can easily pay in the form of monthly installments or EMIs. Compared to other loans LAP is more beneficial and have a lower rate of interests proving it the most valuable financial tool.

·         Myth 2: One cannot use the property pledged

It is one of the most common beliefs that once a property has been pledged by the loan applicant to the bank or financial institutions for availing loan, it cannot be used till the amount is repaid. This is not true because till the time of the tenure of the repayment of loan against property is not completed the property is the sole property of the person and the bank. In case the person fails to repay the loan, then the bank or the financial institution can undertake the property and sell it to recover the debt.

·         Myth 3: One can borrow the full value of the property as loan amount

It is a myth that a person can avail the full value of the property as the loan amount, but this is incorrect. The banks or financial institutions provide only 70 to 90% of the total of the property. Therefore, it is advisable to the applicant to always estimate the value of the property before applying for the loan against property.

·         Myth 4: One can only pledge residential property

This is a myth and not a fact. All the lenders provide loan against property to the applicant based on the property that is residential or commercial. Some banks or NBFCs also provide Flexi Loans on the pledged property.

Also read: Which is better Loan against Property or Gold Loan

·         Myth 5: A high-income level or bracket is required for the loan application

While applying for the Loan against Property, income brackets or levels of the applicant is not usually determined by the lenders and neither this affects the loan application. The value of the property is what is determined in the loan application.

·         Myth 6: High rates of interest

It is usually considered by loan applicants, availing a Loan against property that the rate of interest on such loan is quite high, which is far away from the truth. Since LAP is a secured loan, therefore, the lenders provide this loan on lower rates of interest.

 

ROC Compliance- An Introduction

Meaning of ROC Compliance:

In the Ministry of Corporate Affairs (MCA), there is an office called as the Registrar of Companies (ROC) that is empowered to administrate and regulate the provisions of the Companies Act, 2013. An ROC is appointed as per the Section 609 of the Companies Act in various states and Union Territories in India. it has been vested with the role and responsibility to ensure that different company registrations in the country are fulfilling the statutory requirements on annual basis or not.

Every year most of the companies are required to fulfill certain compliances to be compliant with the mandated rules and regulations. For this purpose, they are mandated to file certain forms and along with relevant documents with the ROC. This is called as ROC Compliance process.

Related Articles: ROC Compliance Checklist for Small Companies in India

Items included in ROC Compliance:

The following points or items are included in the ROC Compliance checklist for most of the company registrations in India-

·         Board Report

·         Compliance by Director

·         Annual Report

·         Updated Statutory Registers maintained by the company

·         Drafting of Notices to be issued

·         Annual Filing and related documentation

Procedure to file ROC Compliances

The procedure to file is quite easy and can be done by the company or applicant on the MCA portal itself or with the Registrar of Companies (ROC). It includes the following steps-

1.       Fill in the form: The applicant is required to fill in their complete details and personal information on the portal.

2.       Submission of documents: The person is required to submit along all the necessary documents and proof to support the information and data provided by them during ROC Filing.

3.       Document Verification: All the required documents, forms and prepared returns are verified for its authenticity and correctness.

4.       Filing the forms: The forms are required to be filled in along with the updated records and returns with the ROC.

5.       Submitting the form: Once the return is filed, the applicant is required to attach their Digital Signature Certificate (DSC) and submit the same.

Documents required for ROC Compliance:

1.       Memorandum of Association (MOA) of company

2.       Articles of Association (AOA) of the company

3.       Certificate of Incorporation or Registration Certificate of the company

Documents required to be filed for ROC Compliance annually:

The forms and documents below are to be furnished to the Registrar of Companies for ROC filing and fulfilling the ROC Compliance requirements-

1.       Form MGT-7 to be filed for furnishing Annual Return to complete ROC Compliance. The following details are to be provided in this form-

·         Details of registered office or place of business of the company.

·         Particulars related to holdings of the company.

·         Details of Associate companies.

·         Information about principal business and activities of the company.

·         Debentures and shares.

·         Securities and pattern of shareholdings in the company.

·         List of debenture holders and members with any recent changes.

·         Indebtedness

·         Details of members meetings

·         List of promoters, key managerial personnel, and directors.

·         Remuneration details of the directors and the key managerial personnel.

·         Compliance matter related certifications

·         Other relevant information as required in the form.

2.       Form AOC-4 to be filed for furnishing the Financial Statements & Other Documents for ROC Compliance. Most of the company registration in India has to file in their financial statements and related documents through the Form AOC-4 on an annual basis. These financial statements to be filed for annual ROC Compliance are to be adopted in the Annual General Meeting (AGM) of the company. In case it wasn’t adopted in the meeting then a un-adopted statement of financials has to be filed with the ROC within 30 days of the date of conclusion of the AGM.

If the financial statements of the company are not adopted in an Annual General Meeting then un-adopted financial statements should be filed within 30 days of the date of AGM.