Company Formation in India During Covid 19

The economic impact of Covid-19 pandemic has been felt across the globe in terms of disruption of businesses, job loss, reduced production, reduced sales, and increase in credit terms and so on and so forth.

Further, the nature of doing work has also changed in terms of work from home has become the new norms, more and more virtual meetings happening quite frequently, cloud based systems and software have come into operation. However, despite the pandemic, entrepreneur spirit has not dampened across the globe. Although business sales and revenue has decreased but more and more new businesses were also set up.

India has also seen a surprising trend in terms of increase in entrepreneur spirits amongst the Indian youth across the country during these difficult times. More and more companies have been registered in India during time of pandemic. 

Different types of company formation in India has been witnessed during pandemic like

•  Private Limited Company Registration;
•  Public Limited Company Registration.
• Limited Liability Partnership Registration.
  

Company formation in India has increased by 25% during first five months of FY 2021-22. Also, there has been an increase in Limited Liability Partnership registration by approx. 45% during same period.

When COVID has started in India during March 2020, inspite of initial disruptions, total number of company formation in India during period April 2020 to August 2020 was 51,784 as reported by the Ministry of Corporate Affairs (MCA). It may be noted that this was peak period of COVID-19 in India and even the pandemic was unable to hamper or stop the spirit of company formation in India.

 

Further, during entire FY 2020-21, total 1.55 lac Indian company formation took place in India. 

If we look at monthly increase, in April 2021, total 12,554 companies incorporated in India which is 3.9 times of companies incorporated during April 2020 i.e 3209 companies.

Similarly, in May 2021 total 10,915 companies incorporated which is 2.3 times of number of companies incorporated during May 2020 i.e 4835 companies.

Also, in case of Limited Liability Partnerships, between April 2021 to August 2021, total 18,390 LLPs were registered which is approx. 44.5 percent increase from last year. During last year, total 12,724 LLPs were registered in India.

It may be noted that there has been a percentage increase in Private limited company registration in India in the field of finance and construction industry. During April 2020 to August 2020, total 90 finance companies and 726 construction based companies were registered where as in FY 2021, Total 354 finance companies and 1545 construction based companies were registered which is approx.. 293 percent and 112 percent increase respectively.

Thus, all the aforesaid trends in increase in company formation in India are indicative of the facts that by and large, the effect of pandemic has been overcome by Indian entrepreneurs. Further, FY 2021 has proven to be fastest growing year in terms of new company formation in India despite COVID-19 pandemic.

Also, this trend has raised high hopes for FY 2022 and expectation is that more and more new company registration will take place in India in coming years.

One can just hope and pray that no new variants of pandemic are effective in near future and this trend of growth in new businesses continues which will really help in contributing to national economy in long run.

Extension of Various Due Dates for Tax Return Filing, Audit and other transactions in India for FY 2020-21

Since the outbreak of COVID-19 pandemic in India, there has been relief granted by Central Board of Direct Taxes (CBDT) in terms of relaxation of compliance, reduction in tax rates as well as extension of various due dates relating to Income Tax Return filing in India as well as uploading of various audit reports on the tax department portal. 

In continuation of same, CBDT has extended various compliance dates for FY 2020-21 as well. Same has been mentioned as under:

1)      Due date for issuance of Form 16 by Companies has been extended from 15^th June 2021 to 15^th July 2021.

 2)      Due date for ITR filing in case of individual and HUF taxpayers have been extended from 31^st July to 30^th September 2021 and again to 31^st December 2021.

 3)      Due date for furnishing tax audit report by those assessees on which transfer pricing provisions are not applicable has been extended from 30^th September 2021 to 31^st October 2021 and now again extended up to 31^st January 2022.

 4)      Due date for filing Income Tax Return by companies not having any transfer pricing transaction has been extended from 31^st October 2021 to 30^th November 2021 and now again to 15^th February 2022.

 5)      Due date for filing Transfer Pricing Audit report for FY 2020-21 has been extended from 31^st October 2021 to 30^th November 2021 and now again to 15^th February 2022.

 6)      Due date for tax return filing for assesses subject to audit but on which no transfer pricing provisions are applicable has been extended from October 2021 to December 2021.

 7)      Due date for filing ITR for assessees subject to audit as well as on which transfer pricing provisions are applicable has been extended from 30^th November 2021 to

 8)      Due date for filing belated Income Tax return and revised return for FY 2020-21 has been extended from 31^st December 2021 to 31^st March 2022.

 9)      Due date for ITR filing in case of assessee on whom transfer pricing provisions are applicable has been extended from 31^st December 2021 to 28^th February 2022.

 10)  Due date for completion of penalty proceedings under the Income Tax Act has been extended from 30^th September 2021 to 31^st March 2022.

 11)  Due date for manual filing of form 15CA and 15CB has been extended from 15^th July 2021 to 15^th August 2021. Authorized dealers haven been instructed to accept the manual form 15CA and 15CB till 15^th August 2021.

 12)  Last date for linking of Aadhar with PAN has been extended from 30^th June 2021 to 30^th September 2021 and now to 31^st March 2022.

 13)  Other Extensions in Due Dates are as under:

 a)      Due date for Income TaxFiling in response to notice issued u/s 148 has been extended from 1^st April 2021 to time allowed under the notice or 31^st May 2021whichever is later.

 b)      Due date of filing belated return u/s 139(4) and revised return u/s 139 (5) for FY 2019-20 has been extended from 31^st March 2021 to 31^st May 2021.

 c)      Appeal to first appellate authority ie CIT-A for which the due date of filing under that Section is April 1, 2021 or thereafter, may be filed within the time provided under that Section or by May 31, 2021, whichever is later.

 d)     Due date of submission of Statement in Form No. 61 has been extended from 30^th April 2021 to 31^st May 2021.

 e)      Due date for filing objections to DRP u/s 144C of the Act, for which the due date was 1^st April, 2021 or thereafter, may be filed within the time provided under that Section or by 31^st May, 2021, whichever is later.

 

Registration of Foreign Companies in India Step by Step Guide

Owing to its huge middle-class consumer base with good purchasing power, fastest-growing economy, democratic governmental setup, government's initiative of ease of doing business in India, and schemes like Make in India are attracting more and more foreign companies and people in business for setting up their businesses in India.

 

Any company can do business and invest in India through various routes and conduct business operations. However, first, they need to decide whether they will be engaged in commercial activity or a non-commercial activity in India since that will be deciding factor to make a further decision about the type of entity to be set up in India.

In this write-up, we will discuss various options available for foreign company registration in India and its procedure.

What is a foreign company in India?

As per the Companies Act, 2013, a foreign company is a company or body that has been incorporated outside India and whose place of business in this country is through an agent or by itself. Accordingly, foreign companies are not Indian companies.

What are the various options available for foreign company registration in India?

Various options available for foreign company registration in India are as follows:

1.    In case the foreign company wants to do only water testing in India. The best option is to register a liaison office in India. It is a representative office that cannot do any commercial activities and only acts as a communication channel between the foreign parent company and other Indian customers. RBI approves the liaison office. For the same, an application needs to be filed to RBI through AD Banker, and once approval is granted, ROC needs to be intimated about the registered office of the LO. RBI permits only limited activities in which LO can be engaged. Approval for liaison office registration is given only for three years, after which an application needs to be made for an extension. Wholly Owned subsidiary Company in India

2.    Another option available to a foreign company is establishing a branch office of the parent company in India. However, a branch office is always considered a permanent establishment of a parent company in India. Accordingly, all transactions between the Indian branch and the parent company shall be at arm's length. The branch office can also be engaged in only those activities which are permissible by RBI. They cannot apply to any manufacturing activities of their own. RBI approves Branch office registration. For the same, the application needs to be filed to RBI through AD Banker, and once approval is granted, ROC needs to be intimated about the registered office of the BO.

3.    Suppose a foreign company has obtained any project for execution in India and the duration for short terms, say six months to 2-3 years. In that case, the Foreign Company can establish a project office in India. RBI approves the project office. For the same, the application needs to be filed to RBI through AD Banker.

4.    When a foreign company intends to have full-scale business operations in India and with a long-term vision of business operations, it can opt for subsidiary company registration in India or LLP registration. A subsidiary company would be considered an Indian company and would have a separate legal entity compared to a foreign parent company. Here, a foreign parent company would hold almost all or majority shareholding in the Indian company. One of the advantages of a subsidiary company is that an Indian company can retain the parent company's brand name.

5.    ROC/MCA grants approval for both subsidiary companies as well as Limited Liability Partnership. The subsidiary company can be set up as a private limited company or a public limited company.

Following steps are involved in private limited company registration in India:

1.    Obtaining a Digital Signature Certificate (DSC).

2.    Apply for name availability through the Reserve Unique Name (RUN) form.

3.    E-Form SPICe INC 32

4.    Drafting and printing the Memorandum of Association (MOA) and Articles of Association (AOA). In the Indian subsidiary registration process, physical copies of both are required.

5.    Application for Permanent Account Number (PAN) and Tax Account Number (TAN).

6.    Provident Fund (PF) and Employee State Insurance (ESI) Registration.

7.    Once the procedure is completed, the Registrar of Companies (ROC) issues an Incorporation Certificate as proof of the company being registered.

What additional things need to be done once the foreign company is registered in India?

1.    If business activities fall under the government approval route, prior approval of FIFP needs to be taken before doing any business activities in India.

2.    Suppose the foreign company has been registered as a subsidiary company in India immediately upon incorporation. In that case, it needs to open a current account in Bank, and shareholders need to contribute share subscription money in a said bank account.

3.    After receipt of share subscription money, RBI compliance needs to be done to intimate them about the receipt of FDI by filing necessary forms.

4.    Share allotment needs to be done, and share certificates need to be issued.

5.    GST registration need to be applied for selling goods or providing services in India

6.    Import Export Code (IEC) needs to be applied in the import of goods or export of goods from India.

7.    Any other sector-specific registration needs to be taken, as applicable.