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InCorp has a dedicated team of company secretarial services, legal professionals and chartered accountants having extensive experience across various sectors in numerous corporate laws and commercial/legal documentation. Our team understands the increasingly complex corporate and regulatory laws for all corporate secretarial matters ranging from incorporation of an entity to winding up.

#corporate secretarial services #documentation assistance #financial advisory services #business consulting services

E-Invoicing under GST

Introduction

E-Invoicing under GST is an authentication mechanism just like the E-way Bill system. However, the mechanism is different, wherein it involves submitting already generated invoices on the common e-invoice platform before issuing the same to the customer.

It is a system in which Business to Business (B2B) invoices are authenticated electronically by GSTN. All the invoices uploaded on the e-invoice platform will be automatically transferred to the GSTN portal and E-way bill portal in real-time, so there will be no need for manual entry to file GSTR-1 return as well as for generation for E-Way bills. Invoice Registration Portal (IRP) will issue a QR code and unique document identification number for every invoice generated which will be called Invoice Reference Number (IRN). IRN is 64 digit character created by combination of GSTIN, Financial Year and Invoice Number It is mandatory to print QR Code on Invoice. Even, a dedicated mobile app to scan and verify validity of e-invoice QR Code is provided on portal

What is the applicability under E-Invoicing?

E-invoicing has been made applicable from 1st October 2020, for registered persons exceeding aggregate turnover of Rs. 500 crore limit in any preceding financial years from 2017-18 to 2019-20.

From 1st January 2020 onwards, e-Invoicing has been made applicable to businesses exceeding the Rs. 100 crore aggregate turnover limit in any of the financial years between 2017-18 to 2019-20.

When will E-Invoicing be non-applicable?

E-invoicing will not apply to the following categories of the registered persons even if the aggregate turnover exceeds the specified limits:

What are the benefits of E-Invoicing?

Businesses will have the following benefits:

Faster availability of ITC

Real-time tracking of invoices

No need to separately upload invoices on GSTN portal and E-Way bill portal

Faster data reconciliation which will lead to a reduction of mismatches

Invoices generated in multiple software can be integrated on GSTN

Faster return filing process as invoices are already auto-populated

Process flow for E-Invoice generation

What are the contents of the E-Invoice?

E-Invoice will mandatorily contain the following fields:

Why was E-Invoice introduced?

Tax authorities will have access to transactions as they occur in real-time since the e-invoice will have to be compulsorily generated through the E-Invoice portal.

Less scope for the manipulation of invoices since the invoice gets generated before carrying out a transaction.

It will reduce the chances of fake GST invoices and the only genuine input tax credit can be claimed. Since the input credit can be matched with output tax details, it becomes easier for GSTN to track fake tax credit claims.

This mechanism will help in overall reduction of tax evasion.

Buyer’s perspective on E-Invoice

In order to claim ITC, it is mandatory that the buyer must be having a valid tax invoice.

In terms of Rule 48(5) of the CGST Rules, if the invoice is generated without complying with the E-Invoicing requirement, it shall not be treated as invoice for GST purposes.

The buyers must ensure that their vendors are compliant with this new requirement if it applies to them. Otherwise, there would be issues on claiming ITC.

In this regard, the buyers must take confirmation from their suppliers regarding the applicability of E-Invoicing and agree on the implications in case of non-compliance

How can Incorp Advisory help?

We provide comprehensive advice and assistance on various indirect tax levies including Goods and Services Tax (GST) and Customs Duty. Our experts can help you with the following:

Assisting entities to understand the impact on business operations due to the implementation of E-invoicing

Assisting to configure the existing accounting ERP for compliance

Assist in solving any problems faced by the entities in the E-Invoice environment.

#gst e-invoice #applicability under E-Invoicing #e-Invoice generation process #benefits of e-Invoicing #e invoicing software

TCS On Sale Of Goods

The government of India has introduced Section 206C(1H) of the Income Tax Act, 1961 with regards to Tax Collection at Source on sale of any other goods. Applicable to all sellers of goods whose turnover for the preceding Financial Year exceeds INR 10 crores w.e.f. 01.10.2020. This provision is not applicable where other TCS & TDS provisions is applicable.

Key points to be noted:

Every seller who has received any amount as consideration on sale of any other goods above INR 50 lakhs are liable to collect an additional 0.1% of the bill amount, collect PAN and pay/deposit such amount as TCS every month.

Even though the TCS amount is debited to the buyer, the liability does not arise until the time the amount is collected/received.

TCS returns have to be filed like TDS returns and compliances like issuance of certificate etc. are to be followed.

Action point:

We advise all assessees to complete accounting for half-year till 30.09.2020 and separate parties with whom sale of INR 50 lakhs are made.

From every sale after 01.10.2020 to such parties, the assessee would be liable to levy 0.1% TCS in every bill and keep record of the same, as tax is payable at the time of receipt from such sale.

Accordingly, sellers will need to add 0.1% to the bill value and deposit with the government on receipt of the payment from buyers.

Read More on InCorp Advisory India

Foreign Portfolio Investment (FPI)

India has experienced a significant outflow of funds in recent times coupled with a weakening currency. However, given its strong fundamentals and growth forecasts, the country continues to remain an attractive destination for foreign investors in the medium to long term. Indian regulations currently allow global investors to invest in India via a number of different routes namely Foreign Direct Investment, Foreign Portfolio Investment, Foreign Venture Capital Investment, and Alternative Investment Fund, etc. Depending upon the modalities of investment and other factors, one of the most preferred routes is Foreign Portfolio Investment (FPI).

Q1. What is Foreign Portfolio Investment?

Ans: FPI is an investment by non-residents in Indian securities including shares, government bonds, corporate bonds, convertible securities, units of business trusts, etc. The class of investors who make an investment in these securities is known as Foreign Portfolio Investors.

Q2. What are the major laws/regulations applicable to an FPI in India?

Ans: FPIs are primarily governed by The Securities and Exchange Board of India (SEBI). SEBI has recently introduced the SEBI (Foreign Portfolio Investors) Regulations, 2019, repealing the erstwhile 2014 Regulations. Further, FPIs are also required to comply with the Foreign Exchange Management Act, 1999 and the Income-tax Act, 1961.

Q3. What are the types/categories of FPI?

Ans: An applicant can obtain FPI license under SEBI regulations, in one of the two categories mentioned below:

(a) “Category I FPI” which mainly include:

Government and Government related investors;

Pension funds and university funds;

Appropriately regulated entities such as asset management companies, banks, investment managers, investment advisors, portfolio managers;

Eligible entities from the Financial Action Task Force (FATF) member countries;

(b) “Category II FPI” which include all investors not eligible under Category I such as:

appropriately regulated funds not eligible as Category-I foreign portfolio investor;

endowments and foundations;

charitable organizations;

corporate bodies;

family offices;

Individuals;

Unregulated funds in the form of limited partnership and trusts.

Q4. What are the advantages of being registered as a Category I FPI as opposed to Category II?

Ans: The main advantages of category I am as under:

(a) eligibility to issue Offshore Derivative Instruments (ODIs);

(b) ease of compliance of certain know your client (KYC) norms as compared to Category II FPIs; and

Apart from the above, Category I FPIs are exempted from the applicability of “Indirect Transfer” provisions under the Indian Income-tax Act, which are otherwise applicable to an overseas investor upon transfer of shares/interest in an overseas entity with assets in India.

Q5. What are the relevant operational aspects of an FPI?

Ans: The following are the relevant operational aspects:

1. Appoint a legal representative:

Appoint a legal representative in India to assist in obtaining an FPI license under SEBI regulations which includes making an application in the prescribed format and complete necessary documentation. The role of legal representative can be played by any financial institution authorized by the Reserve Bank of India. Even reputed law firms can assist in the process.

2. Appoint a Tax advisor:

A tax advisor will help comply with all tax obligations that will arise from the activities of an FPI in India. This will include maintaining records, issuance of certificates for repatriation of funds out of India, annual tax compliances, and representation before tax authorities.

3. Appoint a Domestic Custodian

Appoint a domestic custodian (before making any investments in India) for custodial services (including banking & Demat operations) in respect of securities. Domestic Custodian means any entity registered with SEBI to carry on the activity of providing custodial services in respect of securities.

Q6. What are the compliances applicable to an FPI under the Income Tax Act, 1961?

Ans: Since FPIs invest in securities such as shares, bonds, debentures, units of business trust, etc., they earn income in the nature of dividend, interest, and capital gains. FPIs would also need to remit such incomes (along with capital investment) out of India at regular intervals.

As a pre-condition to remittance of funds, the applicable income tax on such income needs to be deposited with the government treasury. The taxes are deposited either in the form of withholding taxes or payment of taxes in a self-assess mode or a combination of both depending upon the nature of income. The custodian/banker would also require a certificate from a professional tax advisor prior to remitting the funds.

Moreover, after the end of the financial year (April 1st to March 31st in India), the FPI is required to file an annual tax return (in electronic mode). If the tax authorities wish to scrutinize the tax return in detail, it would require representation before them.

Burning Issues faced by FPIs under the present tax regime

FPIs structured as non-corporates are subject to a higher rate of a surcharge prescribed on income from capital gains. This has led to many FPIs considering a conversion from a non-corporate to a corporate structure. This conversion could potentially attract General Anti Avoidance Rules (GAAR) under the Indian tax laws.

FPIs having fund managers located in India having potential exposure to establishing a business connection in India, upon not satisfying certain prescribed conditions.

Areas where InCorp can assist FPIs in meeting taxation and other obligations:

Incorp has a dedicated team of professionals with expertise in catering to FPIs. Incorp can assist by providing the following services:

Assistance in advising and structuring under the FPI route.

Assistance in Setting up the structure under the FPI route.

Coordination with the custodian for obtaining information on periodic transactions and maintaining necessary records of the same.

Computation of tax liability in respect of income earned on securities considering provisions of the Indian Income Tax Act and the Treaty (i.e. Double Taxation Avoidance Agreement) along with the applicability of Multi-Lateral Instrument.

Issuance of certificate for repatriation of funds out of India as per the requirements of the Income-tax Act and RBI guidelines.

Preparing and filing of Annual Income Tax Return.

Replying and attending to notices/letters issued by the tax authorities and advising thereon.

Appearing before the tax authorities in the course of any proceedings and reviewing assessment orders passed by them.

General correspondence with the tax authorities.

Note On One-Time Restructuring

The economic impact of the COVID-19 pandemic has created significant stress on the liquidity and overall financial position of business especially those which have a borrowing from banks, NBFCs and other financial institutions. The cashflow mismatches created to the subdued business activity over the last six months and the possibility of the same not recovering in the immediate future would lead to the increasing rate of defaults by even otherwise viable and sustainable businesses. The moratorium provided over the last six months, viz the period covering the lockdown phase in the country comes to an end in the current month and there was a need for addressing the issue of cash flow mismatch by a more sustainable and long term solution. There was a long-standing demand from the industry for RBI to announce a One-Time Restructuring of the loans to give much-needed relief, clarity and long-term sustainable support to the businesses. The RBI announced a framework to permit restructuring of the stressed accounts of ‘eligible borrowers’ without the account being classified as a Non-Performing Asset (NPA)

What does restructuring essentially mean for any loan?

Restructuring of the loan could mean any or all or any combination of the following:

Extension in the repayment tenure of the loan (by not more than two years)

Granting initial moratorium

Further additional funding

Conversion of debt into equity or any other form of security

Who is an eligible borrower for restructuring under this framework?

The following conditions must be satisfied to be an eligible borrower for restructuring under this framework:

The borrower is under stress on account of COVID-19

The borrower account is classified as ‘Standard’, but not in default for more than 30 days with any lending institution as on 1st March 2020. Further, the accounts should continue to remain standard till the date of invocation

Further,

In case of a single lender:

The borrower and lending institution has agreed to proceed with a resolution plan under this framework not later than December 31, 2020

In case of multiple lenders having exposure to the borrower:

Lending institutions representing 75% by value of the total outstanding credit facilities (fund based as well non-fund based), and not less than 60% by number agree to invoke the resolution under this framework

Resolution under this framework may be invoked on or before 31st December 2020 and must be implemented within 180 days from the date of invocation

The resolution process is implemented when an ICA is signed by all lending institutions within 30 days from the date of invocation

In case lending institutions representing not less than 75% by value of the total outstanding credit facilities (fund based as well non-fund based) and not less than 60% by number, do not sign the ICA within 30 days from the invocation, the invocation will be treated as lapsed. In respect of such borrowers, the resolution process cannot be invoked again under this framework.

Who are specifically excluded (not eligible borrowers) from this framework?

The following borrowers/loans are specifically excluded from this framework:

MSME borrowers whose aggregate exposure to lending institutions cumulatively does not exceed Rs. 25 Crore as on 1st March 2020

Farm Loans

Loans to NBFCs, HFCs, Insurers and other financial service providers

Loans to Primary Agricultural Credit Societies (PACS), Farmers’ Service Societies (FSS) and Large-sized Adivasi Multi-Purpose Societies (LAMPS) for on-lending to agriculture

Loans to Central and State Governments; Local Government bodies

Exposures of Housing Finance Companies

What about stressed MSME accounts having borrowings up to Rs. 25 Crore?

These MSMEs (whose cumulative exposure to banks & NBFCs including fund base and Non-Fund Based does not exceed Rs. 25 Crore as o 31st March 2020) were already covered under an earlier announced scheme of restructuring vide circular dated 11th February 2020. In view of the continued need to support the viable MSME entities on account of the fallout of Covid19, the RBI has been decided to extend the scheme under the aforementioned circular whereby restructuring of the borrower account may now have to be implemented by 31st March 2021. However, the following conditions should be met:

The MSME should have been classified as ‘standard asset’ as on 1st March 2020 and

It should have obtained GST registration unless it is exempt from obtaining the GST registration

All other conditions under circular dated 11th February 2020 would be applicable

Are there any other requirements/compliances/approvals required?

In addition to the conditions set out to be an eligible borrower the following additional conditions are to be met in case of exposures above specific thresholds:

In respect of accounts where the aggregate exposure at the time of invocation of the resolution process is Rs. 100 Crore and above, an independent credit evaluation (ICE) by anyone credit rating agency (CRA) authorized by the Reserve Bank needs to be obtained

In respect of accounts where the aggregate exposure of the lending institutions at the time of invocation of the resolution process is Rs. 1,500 Crore and above, an Expert Committee shall vet the resolution plans to be implemented under this window

Further, each lending institution shall frame its own Board approved policies pertaining to the implementation of viable resolution plans for eligible borrowers under this framework

Will the account be treated as NPA due to the restructuring?

The account will continue to be classified as standard and will not be downgraded to NPA so long as the conditions and repayments as outlined in the resolution plan approved under the framework are complied with. Hence there is no classification of NPA just because of the restructuring. This is a key relief provided under this framework.

How does the restructuring impact Financial Institutions?

The restructuring of the loans impacts the profitability, & thereby the capital adequacy ratios leading to reducing capacity to raise further funds, of the Financial Institutions since they are required to create a provision for the restructured loans. The provision required as follows:

In case of personal loans — 10% of the residual loan or provisions held as per the extant IRAC norms immediately before implementation, whichever is higher

For other loans where the lending institution has signed ICA within 30 days of invocation — 10% of the total debt or provisions held as per the extant IRAC norms immediately before implementation, whichever is higher

For other loans where the lending institution has not signed ICA within 30 days of invocation — 20% of the debt on their books as on this date (carrying debt), or the provisions required as per extant IRAC norms, whichever is higher

When can this provision be reversed?

The financial institution may reverse the provisions as follows:

For the Institutions who have signed the ICA within 30 days of invocation:

One half of the provision upon the borrower paying at least 20% of the residual debt without slipping into NPA post-implementation of the plan

Balance upon the borrower paying another 10% of the residual debt without slipping into NPA subsequently

For the Institutions who did not sign the ICA within 30 days of invocation:

One half of the provision upon the borrower paying at least 20% of the carrying debt

Balance upon the borrower paying another 10% of the carrying debt

What happens in case of default by the borrower post the restructuring?

All loans other than the personal loans which are restructured under this framework shall be subject to a monitoring period viz the period starting from the date of implementation of the resolution plan till the borrower pays 10% of the residual debt, subject to a minimum of one year from the commencement of the first payment of interest or principal (whichever is later) on the credit facility with the longest period of moratorium. During the continuance of the monitoring period if there is any default by the borrower with any of the signatories to the ICA, a review period of 30 days will be triggered. If the borrower is in default with any of the signatories to the ICA at the end of the Review Period, the asset classification of the borrower with all lending institutions, including those who did not sign the ICA, shall be downgraded to NPA from the date of implementation of the resolution plan or the date from which the borrower had been classified as NPA before the implementation of the plan, whichever is earlier.

How can InCorp help you?

Our debt advisory team can help you in understanding the key nuances of debt restructuring and understanding of the scheme. They can help you in exploring different options available to resolve the financial position of your business, evaluating the best course of action for your debt and can also help in planning and executing the entire process end to end.

Everything you need to know about Form 15CA and 15CB

Remittance to Non-Resident

Any payment made to a non-resident or a foreign company is subject to various rules and regulations. As per provisions of Section 195 of Income tax Act,1961 any person responsible for paying money to a non-resident including foreign company shall deduct income tax for payment made to non-resident.

The remitter making payment to non-resident should furnish an undertaking in Form 15CA containing the information relating to payment of such sum along with certificate attested by Chartered Accountant in Form 15CB. Various aspects of the above compliance are covered as under-:

Part 1: Applicability

Form 15CA is a declaration by any person intending to make remittance:

to non-resident or to foreign company (irrespective of whether remittance is subject to tax)

by remitter who can be resident /non-resident/ domestic company/foreign company

when income accrues/ arises/ received or deemed to accrue/ arise/ received in India (Section 5 of Income Tax Act).

Form 15CB is a certificate required to be filed by the Chartered Accountant when remittance is made

to non-resident or foreign company is taxable and

the payment exceeds Rs. 5,00,000/-; and

when order/ certificate has not been received from Assessing Officer (AO).

Part 2: Non-Applicability

1. When is Form 15CA not required?

When the remitter makes remittance as per the specified list of payments in Rule 37BB of Income Tax Rules. (Refer: Income Tax Rules)

Not applicable to an individual who does not require RBI approval as per Section 5 of the Foreign Exchange Management Act, 1999. Example: Mr. A remitted USD 1,25,000 to his son who went to Germany for higher educations. The amount remitted does not exceed the threshold limit of USD 2,50,000 therefore no RBI approval is required for such remittance and Mr. A is not required to file Form 15CA.

2. When is Form 15CB not required?

When the remittance is not taxable.

If the income is taxable in the country of residence of the remittee.

When the aggregate of remittances during the financial year does not exceed Rs. 5,00,000.

3. Which are the specified payments where Form 15CA/15CB is not required?

The following are the specified payments where Form 15CA/15CB is not required:

• Indian investment abroad

• Loans extended to Non-Residents

• Advance payment against imports

• Imports by diplomatic missions

• Intermediary trade

• Imports below Rs. 5,00,000

• Payment for operating expenses of Indian shipping companies operating abroad

• Construction of projects by Indian companies including import of goods at project site

• Freight insurance

• Operating expenses of Indian Airlines companies

• Travel under basic travel quota (BTQ)/ business travel/ pilgrimage/ medical treatment/ education

• Payments for maintenance of offices abroad

• Remittances by foreign embassies in India

• Remittance by non-residents towards family maintenance and savings

• Remittance towards personal gifts and donations

• Remittance towards donations to religious and charitable institutions abroad

• Remittance towards grants and donations to other Governments and charitable institutions established by the Governments

• Contributions or donations by the Government to international institutions

• Remittance towards payment or refund of taxes

• Refunds or rebates or reduction in invoice value on account of exports

• Payments by residents for international bidding

Part 3: Taxability

1. What is the tax treatment of the remittances?

*In case if no PAN is furnished then TDS will be deducted at 20% (if details of remittee is not furnished as per Rule 37BC of Income Tax Rules) or relevant TDS rate whichever is higher.# Person can opt for Exemption method or Tax credit method whichever is beneficial.

2. What are TDS rates applicable?

Nature of PaymentForeign CompanyOther than Foreign Company

Long Term Capital Gains u/s 115E, 112, 112A10%10%

Other Long-Term Capital Gains

(excluding u/s 10(33) & 10(36))

20%20%

Short Term Capital Gains u/s. 111A15%15%

Interest payable on moneys borrowed or debt incurred in Foreign Currency20%20%

Royalty & Fees for technical services u/s. 115A10%10%

Winnings from Lotteries, Crossword Puzzles and Horse Races30%30%

Income by way of dividend20%20%

Any Other Income40%30%

3. What are the rates of surcharge and education cess?

Type of PaymentIncome/PaymentSurchargeHealth and Education Cess

Payments to Foreign Co.Up to 1 croreNil4%

1 crore > 10 crores2%

> 10 crore5%

Payments to Non-Residents

(Other than Foreign Company)

Up to 50 lakh10%4%

1 crore > 2 crores15%

2 crore > 5 crores25%

> 5 crores37%

Part 4: Compliance

1. What are the various parts of Form 15CA?

2. What is the procedure for filing Form 15CA and 15CB?

3. What are the Details required to file the forms?

Part 5: Frequently Asked Questions (FAQs)1. If A Ltd, Indian Company is making remittance to Mr. B, who is a resident of Australia of Rs. 3,80,000 /- then which form is applicable?

2. If X Ltd, Indian Company remits money to Y Ltd, Foreign Company of Rs. 10,00,000/-, then what compliance is required to follow by X Ltd?

3. Mr A resident of Bhutan earned agriculture income of Rs. 60,000/- (land situated in Punjab). Mr A’s assistant (resident of India) remits agriculture income to Bhutan. Which form does Mr. A’s assistant need to file?

4. An Indian PSU, B Ltd is liable to pay fees for technical services to X Ltd., foreign company in USA. The fees payable is 4.5 million USD. Rate of exchange is Rs/ USD = 70. At which rate TDS should be deducted and what is the procedure for remittance? Can the form be cancelled and what is the period for cancellation?

5. An Indian Company, R Ltd has imported electronics from foreign supplier. The goods are shipped to India and payment is required to be made to this supplier. What compliances are required by the Indian company?

6. If Mr. Sunil is remitting Rs. 3,00,000/- from India on account of medical treatment of his wife in Canada on 3rd May, 2020. What compliance is required?

7. What is the penalty for failure to furnish information or inaccurate information in Form 15CA/ 15CB?

At InCorp, our Team provides seamless support with advisory services and assist you in complying with all the applicable laws and framework thereafter. Explore all our tax services and feel free to get in touch with our experts today.

Start-up listing – Opportunity to Organic Growth

Bombay Stock Exchange Limited (herein referred to as “BSE”) has set up the BSE Start-up Platform as per rules and regulations laid down by the Securities and Exchange Board of India (herein referred to as “SEBI”). BSE Start-up Platform offers an entrepreneur and investor friendly environment, which enables the listing of Small and Medium Enterprises (herein referred to as “SMEs”) from the unorganized sector scattered throughout India into a regulated and organized sector.

The Company registered under Companies Act,2013 should have been in existence for at-least a period of two years on date of filing the draft prospectus with BSE. and The “Startup Companies” seeking to be listed on the BSE Start-up Platform should be in the sector of IT, ITeS, Bio-Technology and Life Science, 3D Painting, Space Technology, E-Commerce, Hi-tech Defence, Drones, Nano Technologies, Artificial Intelligence, Big Data, Augmented/Virtual Reality, E-gaming, Exoskeleton, Robotics, Holographic Technology, Genetic Engineering, Variable Computer Inside Body Computer Technology and other High-tech Industries. and The Company should be registered as a Start-up with MSME/DIPP Or If not registered as such, the Company’s paid-up capital shall be a minimum of INR 1 Crore.

Read More at InCorp Advisory.

COVID-19: Implications for Indian Businesses

The world is grappling with the spread of coronavirus (COVID-19). The World Health Organisation (WHO) has declared COVID-19 impact as an international emergency on 30th January 2020.

While the future is uncertain, countries facing the risk will likely see continued case growth; new complexes may also emerge.

Though China will recover first, the impact globally will be much longer. COVID-19 according to WHO, has spread to 83 more countries apart from China alarming public health authorities across the world.

Globally 105,586 cases are confirmed as of 9th March 2020.

As COVID-19 is turning from an epidemic to a pandemic, India needs to brace itself for the economic impact and recovery. In what follows we provide insights and best practices on how business leaders can traverse this uncertain and fast-changing situation.

As per McKinsey’s report, “Lower demand could slow growth of the global economy between 1.8 per cent and 2.2 per cent instead of the 2.5 per cent envisioned at the start of the year.”

What Coronavirus Could Mean for the Indian Economy:

COVID-19 impact on business growth

The world is far more dependent on China with 16% of world GDP coming from there. OECD said China plays a greater role in global output, trade, tourism, and commodity markets thus magnifying the economic spillovers to other countries. Moody slashed its global growth projection to 2.4% for 2020 and projected India’s growth rate at 5.4% compared to an earlier estimate of 6.6%.

COVID-19 impact on the supply chain

India depends on China for its pharma, tourism, electronics, and furniture. COVID-19 has disrupted the supply chain and it is difficult to shift to other countries quickly.

COVID-19 impact on the fiscal deficit

Awareness of COVID-19, plus additional time to prepare, may help India manage its growth. However, India lacks a robust health system. India currently spends less than 1.4% of GDP on healthcare compared to the global average of 4%. The rise in public health expenditure would also put pressure on the fiscal deficit

Focus areas for Indian businesses

Following are the key action points that can assist businesses in India-

Use of Simulations to ensure Business continuity

Companies can use tabletop simulations to define and verify their activation protocols for different phases of response (contingency planning only, full-scale response, other). Planning along with investment will help sustain the impact. InCorp’s risk assurance team helps companies in BCP/DR planning.

Protect your employees

COVID-19 has been emotionally challenging for people. It is imperative for the leaders to recognize an action plan given its intensity and communicate to their peers about its frequency and specificity. Benchmarking of efforts is essential like curbing unnecessary travel, following frequent hand hygiene and respiratory hygiene, ensure the use of environmentally friendly disposable material to lower the transmission of the virus. In addition, minimize social and economic impact through multisectoral partnerships.

Ensure sufficient liquidity

Businesses should model their financials and maintain enough liquidity to weather the storm. Businesses should optimize their receivables and payables and make moves to stabilize the organization. Given the impact of the COVID-19 across the globe, our valuation service team provides what-if scenarios with a financial impact report, discusses the suitability of potential deals, fundraising and more.

Manage supply chain

Businesses should ensure resilience in their supply chain. The disruption in supply will likely see an unusual spike in demand due to hoarding. Businesses should optimize their network and also work on new suppliers for medium and long term stabilization. Our debt syndication service will help in minimizing the cost and achieve core competency in your business and provides recommendations in aligning the capacity to generate revenue.

The COVID-19 has not yet impacted India as adversely, but Indian companies need to protect its employees, work on the challenges and business risks and work towards containing the outbreak in whatever ways they can and simultaneously work on protecting the business.

Indian Budget 2020 – Shifting Tax Paradigm for NRIs

The Union Budget 2020 has proposed to introduce a stringent ‘Anti-abuse’ provision that every Indian citizen who is not liable to tax in any other country, by virtue of his domicile or residence, shall be deemed as a resident of India for tax purpose.

Consequently, his global income would be taxable in India. Further, tightening the residency provisions, the Budget 2020 also proposed to reduce the cap on period of stay in India to 120 days from present 182 days for Indian Citizens/Persons of Indian Origin (PIOs) to be categorized as NRI.

Let’s evaluate these proposals in detail.

The rationale behind the proposal's tax on NRIs:

As per memorandum to the Budget 2020, “Tax laws should not encourage a situation where a person is not liable to tax in any country particularly in the light of current development in the global tax environment where avenues for double non-taxation are being systematically closed.” However, the Government later on clarified that the proposed tax on NRIs will not apply on bonfire Indians working in tax-free foreign countries and is intended to tax only those seeking to escape tax by exploiting their non-resident status. In one of the interviews with PTI, Revenue Secretary Ajay Bhushan Pandey said the new rule was “an anti-abuse provision planned to plug loopholes in the system and not intended to tax income earned by those working overseas. Somebody who is a citizen of India and sitting in a tax haven and not paying taxes, then he has to pay tax”.

As regards residency rule for Non-Resident status in India, the Memorandum states “…Individuals, who are carrying out substantial economic activities from India, manage their period of stay in India, to remain a non-resident in perpetuity and not be required to declare their global income in India,” In the current scenario, if an Indian or a person of Indian origin managed his stay in India such that he remained a non-resident in perpetuity, he was not liable to pay tax on his global income in India. Reproducing quote of Revenue Secretary Ajay Bhushan Pandey in one of the interviews “…In many cases we have found that some people are residents of no country in the world, they may be staying a certain number of days in different parts of the world. So, any Indian citizen – if he is not a resident of any country in the world – would be deemed to be resident in India, and then his worldwide income will be taxed in India.”

Impact of the Proposal:

Budget 2020 has proposed to tax NRIs who do not pay taxes in any foreign country and tightened the screws on those seeking to escape tax by exploiting their non-resident status. Indian citizen shall be deemed to be resident in India if he is not liable to be taxed in any country or jurisdiction. This is an anti-abuse provision since it is noticed that some Indian citizens shift their stay in low or no tax jurisdictions to avoid payment of tax in India. However, it is worth noting here that non-resident Indians living in the US, Canada, Singapore and Hong Kong already have worldwide tax in place or have taxation treaties in place with India.

However, to avoid confusion and fear amongst genuine NRIs earning abroad in no tax jurisdiction, the Government has later issued clarification relaxing genuine NRIs stating “No tax implication proposed for those Indians who are bonafide workers in other countries, including in the Middle East, and who are not liable to tax in these countries on the income that they have earned there.” This means the tax incidence in a foreign country coupled with circumstances of the person living there need more focus than the tax rate in such a country.

Regarding Residency provisions, while as of today, it is possible to be classified as a non-resident by staying out of the country for at least 183 days, this has now been, in effect, proposed to be enhanced to 245 days. Therefore, with the proposed amendment in reducing the cap on a stay in India, the Non-Resident must remain substantially out of India during a financial year for considering him for Non-resident status under Income Tax Act, 1961.

However, to avoid hardship to genuine Non-Resident visitors, the Government has later clarified that “In case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession. Necessary clarification, if required, shall be incorporated in the relevant provision of the law.” This would benefit NRI visiting India for some emergency such as medical treatment or legal clearance about succession on account of the death of any parent or guardian if his stay in India exceeds 120 days in a particular year. The idea of curbing the cap on the stay in India is to discourage NRI to play with the loophole of 181 days stay in India (substantial stay of appx. 6 months), managing all his global affairs from India for substantial time and still not being liable to the Tax jurisdiction of India.

Tax implication from Budget 2020 proposals:

NRIs however, saw a welcome announcement in terms of interest payment made to them on investments in bonds including Municipal Bonds, which would be offered at a concessional withholding rate of 5 per cent until June 30, 2023.

Non-resident Indians were even exempted from filing income tax returns in India if their total income consisted of dividend or interest income, royalty or fees for technical service and certain TDS income.

Deeming some NRIs who aren’t liable to tax in any other country and considering them as a deemed resident in India based on Indian Citizenship would mean that they would have to pay a tax ranging from 5.20% to 42.74% per cent on their global income in excess of INR 2,50,000/- on slab rate basis, even though they do not enjoy any benefits in the country nor earn any income from India.

The anti-abuse measure of taxing citizens who are not residents of any country may affect genuine cases like seafarers who are on International waters for the most part of the year but now will be subject to tax in India.

InCorp Advisory view on Shifting Tax Paradigm for NRIs

As of now, taxation of resident Indians and NRIs goes something like this. If one’s status is ‘resident Indian,’ then his global income is taxable in India, wherever earned or received. However, one needs to pay tax only on his Indian income if he is an NRI. The Indian income can be salary received in India, payment for services provided in India, rent from a house property situated in India, capital gains on transfer of asset situated in India, dividend from shares, interest earned from fixed deposits, bonds with Financial Institutions or savings bank account in India, etc.

With more and more Indians trying to hide their taxable income by diverting their money abroad in no tax jurisdiction, the Finance Minister has taken several steps in this Budget 2020 to put an end to this mode of tax evasion. With this proposal, tax incidence on some non-resident Indians (NRI) would shift to taxation based on “Citizenship of India”. The measures are bound to impact NRIs negatively. It is expected that such changes in the definition may deter NRIs from coming to India and some can even think of giving up Indian citizenship. However, relaxing provisions make the Government’s intention clear not to harass genuine NRIs and considering the speed at which clarifications were given on the next day of the budget being Sunday, it also shows their determination to respond to public sentiments in a positive manner.

Determining the applicability of the proposed NRI tax law to your specific situation?

Determining whether you are required to file your income tax return in India as an NRI and how?

At In.Corp, we are committed to delivering quality in assurance, advisory and tax services. Our dedicated team of tax experts can help you solve problems on the following matters:

Determination of residential status for the upcoming year.

Tax implication on foreign income.

Disclosure and other necessary compliance of foreign income.

Tax implication on foreign assets.

Disclosure & other necessary compliance of foreign assets.

For any additional information, please reach out to us at [email protected].

Measures by RBI to boost Liquidity and Lending

LIQUIDITY

1. Repo rate reduced by 75 basis points to 4.40%. What does that mean and how does it impact banks/borrowers?

Repo Rate refers to the rate at which commercial banks borrow money by selling their securities to the central bank of our country i.e. Reserve Bank of India (RBI) to maintain liquidity, in case of shortage of funds or due to some statutory measures. Reduction in Repo Rate is a measure by RBI to boost liquidity and lending that will allow the commercial banks to borrow funds from RBI for meeting its shortage of funds for at a reduced rate. It will lead to a reduction in the benchmark rate of interest of all banks i.e. MCLR.

Many home loans by few banks in recent times (w.e.f. October 2019) were benchmarked directly to the Repo rates. Interest on such loans will now be at a reduced rate.

2. Reverse Repo reduced by 90 basis points to 4.00%. What does that mean and how does it impact banks/borrowers?

Reverse Repo rate is the rate at which the RBI borrows money from commercial banks. It is an instrument that can be used to control the money supply in the country.

By reducing this rate, RBI is dis-incentivizing the commercial banks to lend to RBI and rather lend to the general public. In other words, if commercial banks lend to RBI, they will earn 4.00% on it. This leaves no incentive for the banks to lend to RBI.

3. CRR reduced by 100 basis points to 3.00%. What does that mean and how does it impact banks/borrowers?

Cash Reserve Ratio (CRR) is the minimum amount of deposit that the commercial banks must hold as reserves with the central bank. Its purpose is to safeguard the interest of depositors because the banks cannot lend this money to others. Hence, it ensures that banks do not run out of cash to meet the payment demands of their depositors.

By reducing the CRR the liquidity of the commercial banks will increase by 1% of their entire deposits. The impact of this is that the RBI will immediately release funds of Rs. 1.37 lakh crores in the commercial banks. This will enhance the liquidity of the banks.

4. What is the impact on the overall liquidity of all the above measures?

Rs. 3.74 lakh crore of liquidity is injected into the banking system to incentivize lending to the General Public, SMEs and Corporates.

TERM LOANS

1. A three-month moratorium on payment of instalments of Term Loan outstanding. Who can give a moratorium? Is the moratorium in respect of all term loans?

All lending institutions including commercial banks including regional rural banks, small finance banks and local area banks, co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) are being permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020.

Kindly note there is no waiver on the repayments of term loan. In our opinion, the word ‘instalment’ should be interpreted to include interest as well as principal. Therefore, interest will accrue and the payment of the same will be deferred.

2. How does this moratorium take an effect on the tenure of the term loan?

As per RBI guidance to banks, the repayment schedule and all subsequent due dates will get extended by three months. Hence, the tenor for such term loans may be shifted across the board by three months.

It may be noted that the moratorium granted is effectively forward looking for a period of three months starting 1st March 2020 and the account will be continued to be classified as standard.

3. What happens to EMIs debited by banks after 1st March 2020?

Since the measure is retrospective from 1st March 2020, in case of the EMI has already been debited to your account during the intervening period from 1st March 2020 till date, one may approach the lending institution to grant relief under these announcements.

4. What happens to overdue EMIs?

Already overdue EMIs i.e. those EMIs due prior to 1st March 2020 will not be covered in the relief granted by RBI. In other words, the account will be classified as an NPA for the non-payment of EMIs due prior to 1st March 2020 if they become overdue for more than 90 days.

However, on 17th April 2020, the RBI has clarified that the lockdown period would be excluded from calculating the 90-day default period for classification of the loan account as an NPA. Hence for EMIs due, the counter of a number of days of default will stop on 25th March 2020 (first day of lockdown) and restart on the end of lockdown (4th May 2020 or any later date, as decided by the government).

5. How will I know if my EMI has been suspended?

The RBI has not yet issued detailed guidelines on this. Once guidelines are issued, there will be more clarity on this.

6. How will the process work at the bank level?

All banks will have to discuss the moratorium and get a decision approved at their board level. Once approved, they may reach out to customers informing them of the moratorium.

7. Is this a waiver of EMIs or a deferment of EMIs?

This is not a waiver, but a deferment. You will have to pay the EMIs at a later date as decided by the bank. The RBI has informed banks to have board-approved policies in place on moratorium/deferment.

8. Does the moratorium cover both principal and interest?

Yes. It does. If announced by your bank, you can forego payment of your entire EMI, including payment and interest.

9. What kind of loans does the moratorium cover?

The RBI policy statement explicitly mentions term loans, which includes home loans, personal loans, education loans, auto and any other loans which have a fixed tenure. They also include consumer durable loans, such as EMIs on mobiles, fridge, TV, etc.

10. Does the moratorium cover credit card payments?

Yes. Credit card payments will be covered under the moratorium.

WORKING CAPITAL LOANS

1. Interest on working capital facilities to be deferred by 3 months. How will it be paid?

In respect of working capital facilities sanctioned in the form of cash credit/overdraft, lending institutions are being permitted to allow a deferment of three months on payment of interest in respect of all such facilities outstanding as on March 1, 2020. The accumulated interest for the period will be paid after the expiry of the deferment period.

Practically, March month’s interest on outstanding CC will be debited by the banks, say on 31st March 2020. Under normal circumstances, this interest must be serviced by the first week of April. However, because of the lockdown and social distancing, etc, there may be no inflows into the CC account, the CC account could become illiquid and the interest may not be served. RBI has permitted that the servicing of interest can be deferred for 3 months. The accumulated interest (i.e. for the month of March, April and May 2020) for the three months period will be paid after the expiry of the deferment period.

2. What happens to non-fund-based limits like LCs, etc?

We expect some clarity to come from RBI on this. RBI’s circular is silent on this. The LCs on due dates will hit the CC account and the CC account may be overdrawn. We believe that many banks have/will come up with additional special lines of credit of 10% of their existing working capital limits for their existing clients. Banks will use this as a tool to liquidate the LC liabilities that are due. This will ensure that no accounts are shown overdrawn.

3. What happens to export credit lines/bill discounting?

We expect some clarity to come from RBI on this. We believe this will get covered under the working capital facilities like a CC/Overdraft and a 3-month deferment on the same will be allowed.

4. What happens to forex loans?

We expect some clarity to come from RBI on this. As of now, the RBI release is silent on this matter.

5. Revised DP calculations by reassessing the WC cycle. How does this impact a borrower?

In respect of working capital facilities sanctioned in the form of cash credit/overdraft, lending institutions may recalculate drawing power by reducing margins and/or by reassessing the working capital cycle for the borrowers.

GENERAL

1. Will such deferment / re-scheduling / revision not to be considered as default for classification as NPA? Will it affect the credit history of the borrowers?

All the aforementioned measures are being provided specifically to enable the borrowers to tide over the economic fallout from COVID-19. Hence, the same will not be treated as a change in terms and conditions of loan agreements due to the financial difficulty of the borrowers will not result in asset classification downgrade or classification as NPA. The lending institutions may accordingly put in place a Board approved policy in this regard.

All the above including the rescheduling of payments will not qualify as a default for the purposes of supervisory reporting and reporting to credit information companies (CICs) like CIBIL, etc. by the lending institutions. CICs shall ensure that the actions taken by lending institutions pursuant to the above announcements do not adversely impact the credit history of the beneficiaries.

2. What is the impact of the above measures on businesses?

These measures are a much-needed breather to all the business houses given by RBI. This along with the special line of credit granted by several banks will help many businesses and individuals to tide over the current scenario and streamline their finances over the next few months.

In this lockdown period as well, our team at In.Corp will always be available to assist you in any banking or financial guidance you may need for your businesses. For assistance, do get in touch with us at [email protected].

New GST Return System

In the 31st GST council meeting in December 2018, it was decided that a new return system under GST will be introduced. This system is applicable from 1st April 2020. However, in the in the 39th GST council meeting held on 14th March 2020, the new return system was deferred from 1st April 2020 to 1st October 2020. Read more about the new GST Return System here.

Current Scenario of the Real Estate Sector: A Perspective

The real estate sector in India has been facing a tough time from quite a few years. The situation has become tougher due to the current Covid-19 situation across the globe. The uncertainty holds the world to a standstill and India is not an exception to it

The global economic slowdown is likely to negatively impact real estate demand in the country this year. Almost all sectors have started the first month of their financial year 20-21 with minimal or negligible sales.

It is currently too early to provide a detailed, quantitative assessment of the COVID-19 impact on economic activity, industries, and the real estate market. The effects of the outbreak will inevitably vary from market-to-market, and the true impact and recovery will manifest in forthcoming quarters.

We at Incorp received a lot of queries coming in the past few weeks from our contact sphere to help them understand the impact on Real Estate; thereby our team has tried to address some of the top points impacting the Industry and the ways to mitigate it.

We have often heard of the statement – “Communication is the key to success”. In this pandemic situation, the word communication gets replaced with Compromise. “Compromise is the key to success” – Developers will have to follow only one strategy “Compromise”. Compromise in their lifestyle, spending, sales price expectations, holding unsold inventories, and all those things coming their way. The interest meter keeps running even when one is sleeping. Line of credit sanctioned by banks, financial institutions, NBFC’s, etc. before lockdown will no longer stay in the same state of condition. Every loan sanctioned will be reviewed and valuation will be challenged post lockdown. Mr Deepak Parekh, HDFC warned developers against high leverage and said it is going to work as a double-edged sword. “In good times, it amplifies your profit. In bad times, it destroys you. Be careful of the perils of leverage,” he further added.

Holding on readily available inventory by the developers will no longer be in the interest of the developer. Developers may have to take a haircut on their sale price expectation up to 20%. This will help to generate liquidity and to sustain in this market in the long run. Also, the launching of new real estate projects is not feasible. Smaller the house, easier to sell. Demand for affordable housing and homes with the ticket size of up to Rs. 2 Crores will still exist, but the high-end segment already has saturation. Maintaining liquidity in the current situation will be a challenge due to the ongoing outflows and commitments but once life comes to normalcy, one should start maintaining liquidity.

Equity partners shall be welcomed with open arms. This includes working in Joint Venture Model, Development Manager Model, strategic partnerships and financial partnerships. Instead of further borrowing, the developer shall explore PE funds, HNIs, strategic partner who has a strong face value in the market. Being partnered with the strong face or goodwill may, in turn, help the developer to sail through from this situation. Even partnering in with well-esteemed contractors will be equally useful.

Our Debt syndication experience tells us that developer has a tendency to switch the banks quite often. This is mainly because of two reasons; a. An existing bank may not extend the support in the aggressive expansion of the developer/borrower & b. Competency in the commercials offered compared to existing banks.

Though the former reason is explicitly the call of the bank depending on their appetite and risks involved but later are in hands of the developer. In either case, the developer shall stick to its existing bankers and encash their long-lasting relationships with the banks. Banks are to be treated as co-owners in the project. A borrower should not switch the banks for 50 to 100 bps point difference.

Major projects in the real estate market fail due to the wrong estimation of the project life cycle. Life of the project must be estimated from the first rupee infused and till the last rupee recovered. Also, the borrowing estimation (tenure) must be calculated accordingly. Tenure of the loan should be equal to the life cycle of the project; any shorter tenure loan will not work. If the tenure projected is less than project’s life, the project will face a cash crunch and if the tenure projected is more than project’s life, it may lead to a diversion of excess funds generated during its life.

In any real estate project in India currently, the cost of premiums payable to government is equivalent to the cost of construction. It means there is no longer a story of doubling your money in 3 years in real estate. In fact, developers are finding it difficult to achieve even single-digit margins if the project is not executed as scheduled. Developers may have to joint their hands and contest with authorities to stagger the premium payments. In Maharashtra, for the acquisition of the project, huge premiums are to be paid to CIDCO, MHADA even before the inception of the construction of the project. If these premiums are not staggered under the measures channelized by the government to revive the industry post lockdown, developers may not be able to sustain. No bank will fund at this stage and even if funding is available, no developer will be in a position to borrow such a huge sum of money.

Few questions in the mind of developers?

How long would be the impact of Covid-19 situation on our industry?

Real Estate in India will pass through tough times for a minimum of 6 months from now. This is mainly due to their monthly fixed overheads backed by zero sales and tiny recovery from the sold inventory. People, in general, will start holding money and keep it for securing themselves from any uncertainty coming their way in the near future.

How to generate liquidity & commence ongoing projects immediately post lockdown?

Each industry will face the problem of generating liquidity. Real Estate being the second most job-generating industry, will be at the peak of its liquidity issues. One should try to generate liquidity by selling “Lock and Key” unsold stock which will help to commence ongoing projects and keep them running post lockdown.

Should we approach banks to restructure our existing loans?

Yes. RBI is already discouraging banks to keep money in RBI accounts and thereby encouraging banks to infuse more money into the system. Hence you should apply for restructuring your existing loans before they turn NPA. Even a one-time restructuring of NPA accounts may be allowed in the near future.

I have got an opportunity to merge with another developer and this will help me to complete my project in time. What should be my response?

Completing the project on time and delivering the units to the customers will enhance your goodwill in the market. “Alone we can do little; together we can do so much”. Focus on partnerships, you may partially lose control, but it is a need of the hour.

In our industry, there are always long due payments to be made to suppliers and contractors. Will the supplier continue its support after the lockdown?

The relation between developers, suppliers and contractors goes hand in hand. All are dependent on each other in some or the other form. Be in touch with your suppliers, contractors, maintain long-lasting relations, and leverage them at the right time. Relook at your existing dues and schedule a payment plan for suppliers/contracts so that required support from them stands uninterrupted

What is the strategy to be adopted to reduce the impact of the Covid-19 situation?

Relook at the project estimation right from its configuration, life cycle, funding requirements, feasibility, etc. Remember, smaller the house, easier to sell. Other than various points suggested above, “Compromise” is the only key to success to overcome the situation.

What can be demanded from the government by the developers?

Being the second-largest job-generating industry after agriculture, the government should help the real estate industry by incentivizing migrant labourers return to their jobs as it is difficult for them to even understand the situation of lockdown. This incentive can be in the form of travel cost for coming back to the workplace and insurance, employer’s contribution towards provident fund can be exempted and the same to be provided by the government.

Ready Reckoner value to be relooked by the state government as Land revenues come under the state government. At many places in Tier 1 cities, the ready reckoner value is higher than the actual deal value which makes the project unviable for even lenders to support the developers. Though the government has reduced the stamp duty in some states like Maharashtra with effect from 01st April 2020, there should be thought for a complete waiver of stamp duty for a smaller period post lockdown to boost the Real estate industry. The state government may not be able to do this for a longer period as huge revenue comes from this segment.

Staggered payment schedule for all premiums can play a vital role in managing cash flows for any developer and thereby the industry as a whole.

What’s the say of Developers on the above?

When we gave a thought of writing something on Real Estate, we thought taking their views is also most important in the current situation. Here goes their say:-

“Compromise is not about losing. It is about deciding that the other person had just as much right to be happy with the end result as you do,” said author Donna Martini. A known developer said Compromise has to be from all sides i.e. from government, banks, RBI, and a developer. What has and will hit us badly is the demand. Unless the Rate of Interest (ROI), Fixed Obligation to Income Ratio (FOIR), and Loan to Value (LTV) are not revisited by banks, the demand will continue to be price-sensitive and we will be continued to be advised by Bankers to reduce prices by 20%.

“Reducing sale prices of flats while prices for Raw material, cost of production and other incidental costs keep increasing will not be a solution. This will lead to an even more negative outlook towards Real Estate and will spark the sentiment of distress sale on lowering prices. Such events will dishearten buyers and existing investors too”, said another developer from Tier 1 city.

One of the top builders in Mumbai also quoted “The business of real estate is very different from money lending and other commodity trading. To remain in business and to keep moving if we are paying high interest on our borrowings doesn’t mean we are making profits of more than the interest paid by us. The lenders feel that because a developer pays much higher interest, a developer may also have an appetite to reduce the sale price by 20%. The lenders should reduce the rate of interest which will certainly improve profitability and the need for the developer is for better cash flow to complete ongoing projects”.

How can InCorp India help you?

At InCorp India, we are committed to delivering quality in Transaction and Risk advisory services. Our dedicated team of transaction advisors can assist you in any real estate related issues and provide ease for operations.

LLP Settlement Scheme – 2020

1. What is the LLP Settlement Scheme, 2020?

LLP Settlement Scheme, 2020 is a scheme to give a One Time Relaxation in Additional Fees to the defaulting LLPs to make good their default by filing pending documents and to serve as a compliant LLP in future.

2. How is the Scheme Beneficial for the Existing LLP?

Under this scheme, LLP who has made default in filing of forms or documents can avail this scheme and enjoy immunity from any prosecution under the LLP Act and can also make good such default by filing any belated returns as applicable under LLP ACT, 2008 by payment of normal fees without any additional fees.

3. What is the Time frame of the Scheme?

The Scheme shall remain effective up to 30th September 2020.

4. What shall be the filing fees and additional fees for filing documents under the Scheme?

The defaulting LLPs may themselves avail the scheme for filing documents that may not have been filed earlier under the LLP Act,2008 on payment of normal fees as payable for filing of such return or document and no additional fees shall be payable for filing any belated returns or documents under the scheme.

5. Which forms are covered under this Scheme?

All the forms and documents as required under the LLP ACT, 2008 are covered in the Scheme.

6. What will be the Penalty and Prosecution Provision post the expiry of this Scheme?

Post the expiry of this scheme, the regular late filing penalty of Rs.100 perform per day as prescribed under the LLP Act, 2008 will persist – leading to higher penalty and prosecution by the Registrar.

How can InCorp Advisory assist you in this Scheme?

Our specialized legal team at InCorp makes a detailed study of all the non-compliances attracted under the LLP Act, 2008 for the LLP. Based on the study, abiding by the provisions of the scheme, our team assists the LLP with the list of compliances to be completed with the procedure for the same under this Scheme. Therefore, InCorp shall guide you end to end through the process of making a compliant LLP under the LLP Act, 2008

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