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Welcome to Our Modern Workplace: A Tour of Our Brand-New Office!

From July 2015 to this incredible moment, our journey has been one of dedication and perseverance. Today, we proudly unveil our new office at Dwarka Sector 8, filled with positivity and hope. Join us for an exciting tour as we showcase the result of our hard work and the beginning of a new chapter!"

New Beginning starts with:📍D21 Corporate Park, Sector-21 Dwarka, Near Dwarka Sector-8 Metro Station, Delhi-110077

Your belief on us is really important to embark on this journey, Keep supporting!

"We eagerly anticipate receiving the same love and support in the years ahead!"

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Permanent Establishment in International Taxation

Permanent Establishment (PE) is a crucial concept in international taxation, determining when a foreign company becomes liable to pay taxes in a host country.

In India, the concept of PE holds significant importance, given its thriving economy and attraction as a business destination. Understanding the rules and implications of PE is vital for multinational corporations operating in India.

This article provides an overview of Permanent Establishment in India, including its definition, its types, and the impact of setting up PE in India.

Concept of Permanent Establishment

In India, a company incorporated within its borders is subject to taxation on its global income based on the "residential base" taxation principle.

Moreover, India has the authority to tax the income of foreign companies to the extent that the source of that income lies within India.

According to the Indian Income Tax Act, if a foreign company's income is received, accrued, or arises in India, India can tax such income under the "source base" taxation principle.

When a foreign company sets up a long-term business presence in India, the income from that presence is taxed in India. This is where the term "Permanent Establishment" (PE) comes from.

Types of Permanent Establishments

In India, there are several types of Permanent Establishments recognised under the tax laws. These types of PEs determine when a foreign company becomes subject to taxation in India. Here are some common types of PEs in India:

1. Fixed Location PE

This refers to a physical location, such as an office, branch, factory, workshop, or other fixed premises, where the foreign company carries out its business activities in India.

Criteria for fixed place PE in India: Fixed and consistent location, availability to foreign entities, and conducting proper commercial activity.

* Fixed and consistent location: For a foreign enterprise to have a fixed place PE in India, the business location must be stable and consistent over a reasonable period, excluding passing or casual activities. Consistency and regularity are essential factors.

* Availability to foreign entities: The foreign entity must have access to the location, even if it is within another company's premises, provided the access is regular. In such cases, the premises may be deemed as a PE in India.

* Conducting proper commercial activity: A proper commercial activity must be conducted from the designated location.

2. Construction PE

When a foreign company engages in construction, installation, or assembly projects in India for a specified duration, it establishes a Construction PE. If the project exceeds a prescribed threshold period, the company becomes liable for taxation in India.

This type of PE is applicable to foreign companies involved in significant construction activities within the country, ensuring their income generated from such projects is subject to Indian taxation.

3. Service PE

A Service PE is established when a foreign company provides services within India through its employees or personnel for a specific period. This can include activities such as consultancy, technical assistance, or other services rendered within India.

The presence of a Service PE in India may subject the foreign company to taxation on the income attributable to the services provided in accordance with India's tax laws and relevant double taxation treaties.

4. Dependent Agent PE

Dependent Agent PE refers to a situation where a foreign company conducts business in India through an agent who negotiates contracts and has the authority to secure orders on behalf of the company regularly.

The agent must be legally dependent on the company and act exclusively or almost exclusively for the company, leading to the establishment of a taxable presence for the company in India.

5. Subsidiary PE

The presence of a subsidiary company in India does not automatically constitute a Permanent Establishment (PE) for the parent company.

The subsidiary becomes a PE only if the parent company's operations are conducted through the subsidiary, meeting the criteria outlined in the PE provisions.

The Impact of Setting Up PE in India

Once a foreign firm is deemed to have a PE in India, the profits associated with its activities in the country will be subject to taxation as "Business Income" as per the provisions of Article 7 in tax treaties.

* Profits Attribution: The profits attributable to the PE are calculated based on what the PE would have earned if it operated independently under similar conditions as the rest of the company.

* Maintenance of Books of Accounts: Companies with a PE in India are required to maintain books of accounts in compliance with Indian accounting standards.

* Registration and Compliance: Foreign companies with a PE in India must apply for Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN). They should also register under the regulations of indirect taxes such as Goods and Services Tax (GST).

* Tax-Deductible Expenses: Expenses incurred for the business purposes of the PE, whether in India or elsewhere, are allowed as tax-deductible expenses for determining the PE's earnings.

* Taxation of Net Profits: The net profits of the PE, after deducting allowable expenses, will be subject to taxation as per the applicable tax rates and laws in India.

* Withholding Tax (WHT) Compliance: Foreign companies with a PE in India must comply with the mandatory withholding tax requirements on payments made to non-residents, such as royalties, interest, dividends, or fees for technical services.

Conclusion:

Permanent Establishment (PE) is a crucial concept in international taxation, particularly in India, a thriving economy and attractive business destination. Various types of PEs, such as Fixed Location PE, Construction PE, Service PE, Dependent Agent PE, and Subsidiary PE, determine when a foreign company becomes liable to pay taxes in India.

Setting up a PE in India has implications such as taxation of profits, maintenance of books of accounts, registration and compliance requirements, tax-deductible expenses, taxation of net profits, and withholding tax compliance.

Understanding the rules and implications of PE is essential for multinational corporations operating in India to ensure compliance with Indian tax laws.

Don't let PE complexities boggle your global expansion plans - contact your financial advisor or tax advisor today, and get expert guidance tailored to your unique business needs.

Source: https://www.linkedin.com/pulse/permanent-establishment-international-taxation-ca-manish-gupta/

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Understanding the Importance of FAR Analysis in Transfer Pricing Compliance

Imagine, for a moment, you're at the helm of a multinational enterprise, steering the ship through the tumultuous waters of global business.

As a business leader, you must ensure that your enterprise navigates these waters successfully and complies with the myriad of international tax regulations. One such critical regulation is Transfer Pricing, a concept that often proves to be as complex as it is crucial.

This article simplifies this concept and highlights the importance of Function, Asset, and Risk (FAR) Analysis in maintaining Transfer Pricing compliance, particularly within the Indian context.

Now, let's delve into the world of Transfer Pricing and FAR Analysis, where understanding and adhering to these rules could mean the difference between smooth sailing and rough seas.

Neglecting a robust FAR Analysis could lead to severe consequences, such as hefty penalties and a tarnished reputation.

Understanding Transfer Pricing

Transfer pricing refers to the pricing of transactions between associated enterprises. It is a regular part of the operations of a multinational company but needs careful attention due to varying tax laws across countries.

The arm's length principle, which suggests that transactions between related parties should be conducted as if they were unrelated, forms the basis of most countries' transfer pricing rules, including India's.

The Concept of FAR Analysis

At the heart of transfer pricing is the concept of FAR analysis - Functions performed, Assets used, and Risks assumed.

It is a vital tool used in transfer pricing studies to compare the functions performed, assets employed, and risks the tested party assumes with those of independent enterprises engaging in comparable uncontrolled transactions.

Detailed Explanation of FAR Analysis

In simpler terms, the functions refer to each entity's activities in the transaction, the assets to the resources they employ, and the risks to the uncertainties they assume. Understanding the FAR profile helps identify comparable uncontrolled transactions, which are then used to determine the arm's length price.

Rule 10B and the Necessity of FAR Analysis

Rule 10B of the Income Tax Rules underscores the importance of FAR Analysis in determining whether a transaction is at arm's length. This rule mandates the use of FAR Analysis in the process of identifying comparable uncontrolled transactions.

Case Studies Illustrating the Importance of FAR Analysis

Understanding the theoretical concept of FAR analysis is one thing, but witnessing its application in real-world scenarios truly underscores its importance.

The Supreme Court Case of Morgan Stanley and Company Inc.

Let's consider the Supreme Court case of Morgan Stanley and Company Inc., a U.S. investment bank, which entered into an agreement with its group company in India for certain support services.

The question was whether Morgan Stanley had a permanent establishment in India, and if so, what income was attributable to it.

The Supreme Court held that the employees sent on deputation constituted a service PE of the assessee, and the income of the non-resident assessee was taxable in India to the extent of income attributable to the activities carried on by the non-resident through its permanent establishment in India.

This case illustrates the importance of a detailed FAR analysis in determining an international transaction's arm's length price​.

The Case of Hoganas India (P.) Ltd. V. Dy. CIT and Wrigley India (P.) Ltd. V. Addl. CIT

Further, the cases of Hoganas India and Wrigley India showcase the application of FAR Analysis in real-life scenarios. These cases underscore how an in-depth FAR Analysis can help businesses avoid disputes and achieve compliance with transfer pricing regulations.

A thorough FAR analysis played a crucial role in determining the correct transfer pricing in these cases.

Key Takeaways from FAR Analysis

Transitioning from the intricacies of Transfer Pricing and FAR Analysis, here are the key takeaways from the article:

* Transfer pricing refers to pricing transactions between related business entities, a critical aspect of international tax compliance.

* Function, Asset, and Risk (FAR) Analysis is central to transfer pricing.

* FAR Analysis is not merely a compliance requirement; it's a tool that helps businesses navigate the complex waters of international transactions, ensuring fair pricing and avoiding penalties.

* FAR Analysis is mandated by Rule 10B of the Income Tax Rules to ensure transactions are at arm's length.

* FAR Analysis should be integrated into the transfer pricing strategy of multinational businesses operating in India.

Furthermore, a robust FAR Analysis maintains the company's reputation and promotes good corporate governance.

Conclusion:

FAR analysis is not just a compliance requirement. It is a powerful tool that can help businesses to set prices that reflect the economic reality of their transactions, thereby reducing the risk of double taxation and potential penalties.

It helps companies to identify the most suitable comparables for their transactions, allowing them to benchmark their prices against the market and ensuring that they comply with the arm's length principle.

As such, it should be seen as an integral part of the transfer pricing strategy of any multinational business operating in India.

Source: https://www.manishanilgupta.com/blog-details/understanding-the-importance-of-far-analysis-in-transfer-pricing-compliance

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Top Mistakes to Avoid while Incorporating a Company in India

Starting a business can be an exciting adventure full of hopes for success and wealth. Aspiring entrepreneurs across the globe are increasingly drawn to the diverse and vibrant market of India, which offers tremendous opportunities for growth and expansion. However, navigating the complex landscape of incorporating a company in India can be a hectic task, riddled with potential pitfalls.

 In this article, we will shed light on the top mistakes that aspiring entrepreneurs often make while incorporating a company in India. By addressing these pain points, we aim to provide valuable insights and practical guidance to help you navigate the incorporation process smoothly.

Common Mistakes to Avoid During Company Registration

Registering your corporation with the government is the final step. It's a crucial step that can help you gain credibility, access funding, and start doing business legally. But, to ensure that your company registration is successful, you must follow every step precisely. Any mistake could lead to serious consequences and even cause your business to fail. Here are some mistakes that most people often make while incorporating a company in India.

Inadequate Research and Planning

One of the top mistakes to avoid while incorporating a company in India is inadequate research and planning. Insufficient understanding of the legal, regulatory, and business landscape can lead to costly consequences.

 Entrepreneurs should thoroughly research and familiarize themselves with the necessary procedures, compliance requirements, and tax obligations. Without proper planning, companies may face delays, legal complications, and financial setbacks.

 It is crucial to invest time in gathering information, consulting professionals, and developing a comprehensive business plan that considers all aspects of company incorporation in India.

Choosing the Wrong Business Structure

Another common mistake to avoid while incorporating a company in India is choosing the wrong business structure. Choosing the right business structure is very important when registering your company. There are different options to consider, such as:

 Sole proprietorship

Partnerships

Limited liability partnerships

Public limited companies

Private limited companies.

 Each structure comes with legal restrictions and opportunities. Therefore, it's important to weigh the advantages and cons of each structure and match it to your business goals, expansion plans, and operations.

Ignoring compliance requirements

India has a robust regulatory framework that imposes various statutory compliances on businesses. These include:

 Registration with appropriate authorities

Filing annual returns

GST Return Filing

Director’s Report

Maintaining proper accounting records

Adhering to tax obligations

Ensuring compliance with labor laws.

 Failing to comply with these requirements can lead to severe penalties, legal consequences, and reputational damage. It is essential for entrepreneurs to familiarize themselves with the specific statutory compliances relevant to their industry and diligently fulfill them to operate within the bounds of the law.

Incorrect Share Capital Determination

Incorrect share capital determination in India can lead to significant complications during the incorporation process. Share capital represents the value of a company's shares and plays a crucial role in determining its financial structure and legal obligations.

 Incorrectly assessing the share capital can result in legal and compliance issues, delayed registration, and potential penalties.

 It is essential to carefully calculate and allocate the appropriate share capital, taking into account factors such as business needs, future growth, and regulatory requirements to avoid unnecessary complications and ensure a smooth and legally compliant incorporation process in India.

Inappropriate name selection

Another task when establishing a startup company is to decide on a unique name for Company Registration. However, this seemingly simple task can lead to potential problems if not done correctly. The Companies Act, 2013, Trademark Act, 1999, and the Names and Emblems Act, 1950, all govern the naming of a company. The Company Incorporation Rules, 2014, also lays down specific guidelines for the same.

 The name selection process should adhere to these guidelines, ensuring it is unique, relevant, and compliant with trademark laws. Neglecting these considerations can result in delays, additional expenses, and potential damage to the company's reputation.

 Therefore, careful thought and research should be invested in selecting a suitable and legally compliant name for your company in India.

Insufficient documentation

Insufficient documentation is a common mistake made during the company incorporation process in India. The Memorandum of Association (MoA) and Articles of Association (AoA) are vital documents that outline the company's objectives, rules, and regulations. Additionally, various supporting documents must be filed with the incorporation application to the Registrar of Companies (ROC).

 These supporting documents include proof of identity, proof of address, and PAN (Permanent Account Number) of the applicant director. If the office premises are rented, a rent agreement and a No Objection Certificate (NOC) from the owner are necessary. Alternatively, if the office space is owned by the company owner, property documents and an NOC from the owner are required.

 Failure to provide the complete and accurate documentation can lead to delays, rejections, and legal complications during the incorporation process. Thus, it is essential to submit the ROC application with all required documentation.

Lack of clarity in the Memorandum and Articles of Association (MOA and AOA)

Memorandum and Articles of Association (MOA and AOA) serve as the foundation of the company's structure and define its purpose, rights, and responsibilities. Failing to provide clear and concise information in the MOA and AOA can lead to confusion and disputes down the line.

 It is essential to ensure that these documents accurately reflect the company's objectives, shareholding structure, and operational guidelines, leaving no room for ambiguity.

Neglecting intellectual property protection

Intellectual property refers to a business’s creative ideas, innovations, designs, and inventions. Failing to protect it can lead to someone stealing an idea and claiming it as their own, resulting in potential financial loss and damage to your reputation.

 Even micro-businesses must protect their intellectual property to ensure their product remains rightfully and legally theirs. It's essential to comply with Intellectual property law and avoid copying another business’s logo, watermark, or copyright.

 Copyrighting ideas is an effective way to protect intellectual property. Requesting an attorney to make an inventory of the business’s intellectual property can also help ensure that it's protected from infringement.

Failure to obtain necessary licenses and permits

Failure to obtain necessary licenses and permits can be a critical mistake while incorporating a company in India.

 Obtaining the right licenses and permits is crucial for ensuring legal compliance and avoiding potential penalties or legal disputes. From business registrations to sector-specific licenses, such as environmental clearances or food licenses, each industry has its own set of requirements. Ignoring or neglecting these obligations can lead to operational disruptions, hefty fines, or even closure of the business.

 Therefore, it is essential to thoroughly research and diligently obtain all the necessary licenses and permits to ensure a smooth and legally compliant business operation.

Lack of clarity in the company's objectives

Starting out with a corporate vision and mission is crucial. Without a clear goal, it's hard to make strategic decisions, attract investors, and establish a powerful brand.

 By explicitly stating your company's goals, you set a course for success, align your staff, and lay the groundwork for development and sustainability.

Conclusion:

When incorporating a company in India, it is crucial to be aware of and avoid common mistakes. By recognizing and avoiding those above pitfalls, entrepreneurs can enhance their chances of successfully establishing a company in India. Proper preparation, adherence to regulations, and seeking expert advice are key to navigating the complexities of the incorporation process and setting a strong foundation for business growth and compliance in the Indian market.

 Source:https://www.manishanilgupta.com/blog-details/top-mistakes-to-avoid-while-incorporating-a-company-in-india

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Company vs. LLP: Which Structure Offers More Benefits?

In this video, I have shared Pvt. Ltd Company vs. LLP: Which Structure Offers More Benefits?

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The Importance of Benchmarking in Transfer Pricing Compliance for International Business Growth

Are you planning to expand your business internationally? In this video, I have shared to the concept of benchmarking in transfer pricing compliance and🔍 why it is crucial before entering into international markets.➡️Don't let your business miss out on potential growth and profits in the global market.

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Navigating the Complexities of GST Refunds for Exports

Are you an exporter looking to stay competitive in the global market?

With the implementation of the Goods and Services Tax (GST) in India since July 2017, navigating the export landscape has become more complex.

How can you ensure that your business meets all necessary compliance requirements, including laws and regulations, tax and duty payments, and quality and safety standards?

For those opting for the Letter of Undertaking (LUT) scheme, the GST refund process may seem daunting.

Therefore, this article offers valuable insights into the potential challenges and pitfalls during the GST refund process and highlights reasons why the tax department might not process Input Tax Credit (ITC) refund applications.

Get ready to discover key strategies for streamlining your GST refund experience and ensuring a successful outcome!

Reasons Why Applications May Not Process

Let's explore some of the common reasons why applications for refunds of ITC do not get processed in the tax department.

1. Discrepancies in GST Returns for the Relevant Period

One of the common reasons why GST return applications for exports may not be processed in the department is due to a failure to reconcile GST returns for the concerned period.

* GSTR-1 with GSTR-3B: Reconciling GSTR-1 with GSTR-3B is important. Failing to do so can result in a show-cause notice from the GST authorities and create difficulties in processing of GST refund applications. Therefore, it is crucial for exporters to perform reconciliation from time to time to avoid any discrepancies.

* GSTR-2A with GSTR-3B: Another crucial step in the GST return process for exports is the reconciliation of ITC claimed in GSTR-3B with one reflecting in GSTR-2A. This exercise enables businesses to claim the full Input Tax Credit (ITC) and rectify any excess ITC claimed. By performing reconciliation before filing GSTR-3B, exporters can avoid any potential demand notices from the tax authorities, thereby making it an essential step to easy processing of refunds.

2. Mismatched Details in Shipping Bill and Invoice

It is crucial for exporters to ensure that the details in the shipping bill align with those in the invoice to avoid any issues with refunds. If there are discrepancies between the two, the refund may be withheld by the department.

Therefore, it is important for taxpayers to enter correct details such as Shipping Bill number, Shipping Bill date, Port Code, etc., and file them in their subsequent Form GSTR-1.

3. GST Officer's Field Visit

Business owners should not take a field visit by a GST officer lightly and should ensure that someone from the company is present at the premises during the visit.

The officer may ask for documents related to the business, such as sale invoices, purchase invoices, bank statements, and details of goods. Therefore, it is crucial for exporters to have proper documents readily available to show the officer during the visit.

The officer's primary objective is to verify that the business premises are actually functioning and in compliance with GST regulations. Being prepared with the necessary documents can help ensure a smooth and hassle-free field visit, making it easier to process refunds.

4. Ineligible ITC Claims on Capital Goods

It is important for exporters to note that capital goods are not eligible for ITC claims if exports are made through LUT, and their claim may be denied in the GST refund. Despite this, many exporters file GST return applications to claim refunds against ITC of these goods.

Therefore, it is essential for exporters to exclude these goods before filing their applications to avoid any issues with the processing of their refunds.

By excluding these goods, exporters can ensure that their claims for eligible goods are processed quickly and without any issues.

5. Inconsistent Monitoring of Refund Status

Exporters should regularly check the status of their refunds to ensure that the process is moving smoothly. In some cases, the tax department may issue deficiency memos or show cause notices against the refund application if they find any discrepancies or issues.

Therefore, it is crucial for exporters to monitor the status of their refunds regularly and address any issues promptly to avoid any potential delays or complications in the process.

By staying on top of their refund status, exporters can ensure that they receive their refunds in a timely and hassle-free manner.

6. Unclaimable ITC Due to Vendor's Cancelled GSTIN

Exporters must be aware that if the tax department cancels a vendor's GSTIN, the exporter cannot claim ITC on purchases made from that vendor. Therefore, it is essential for exporters to identify such vendors and avoid claiming ITC credit for their purchases.

This is because the tax department will not provide a credit or refund for purchases made from vendors with cancelled GSTINs.

By being proactive in identifying such vendors and avoiding ITC claims, exporters can ensure that their GST refund applications are processed quickly and without any issues.

7. Late Filing of GST Refund Applications

Exporters should be aware that there is a time limit for filing GST refund applications. The relevant date for determining the time limit is the date on which the taxpayer exports the goods or delivers the services.

The application for a refund must be filed within two years from the relevant date. Exporters who miss the deadline to file their refund applications risk having their applications rejected by the tax department.

Therefore, it is crucial to ensure that the refund application is filed within the designated time frame to avoid any delays or rejections.

8. BRC/FIRC Amount Discrepancies or their non-avalability

Exporters must ensure that they obtain the Bank Realization Certificate (BRC) and Foreign Inward Remittance Certificate (FIRC) for the full value of the exported goods or services.

These certificates serve as proof of payment for the goods or services exported and are essential for claiming the GST refund.

Therefore, it is important to ensure that the BRC and FIRC received from the bank match the invoice amount and payment received. In case of any discrepancies, the exporter must take corrective action with the bank and obtain the correct certificates before filing the refund application.

This will ensure that the tax department does not reject the refund application due to missing or incorrect BRC/FIRC.

9. Inaccurate HSN Codes on Invoices and Annexure B

Correct invoicing is crucial for claiming GST refunds, and the HSN code on the invoice must match with Annexure B. Any discrepancies or mismatches can result in the rejection of the GST refund application.

Therefore, it is important to ensure that the HSN code mentioned in the invoice is accurately reflected in Annexure B, which is a statement of inward supplies filed by registered taxpayers. This can help avoid any unnecessary delays or rejections in the GST refund process.

10. Ineffective Coordination with GST Officer

When it comes to GST refunds, a lack of coordination with the GST officer can cause delays or even rejections.

While the process of filing for a refund is primarily online, the process of verifying and approving the refund is often manual and requires coordination with the GST officer.

This means that if there is a lack of coordination between the taxpayer and the officer, it can lead to misunderstandings and delays in the refund process.

It is important for taxpayers to communicate clearly and provide all necessary information to the officer in a timely manner so that the officer can process the refund application efficiently.

11. Unfiled GST Returns for the Relevant Period

In order to claim a GST refund for a particular period, it is mandatory to file the GST returns for that period. If the returns are not filed, refund application could not be filed and obviously there will be delays and in GST refund.

It is crucial for exporters to be aware of the filing deadlines and ensure the timely submission of returns to avoid delays in receiving refunds. Additionally, proper documentation and accurate information are key factors in facilitating a smooth refund process.

12. Non-compliance with Circular 125

Circular 125, issued by the GST authorities, provides guidelines and clarifications on the GST refund process. It is important to comply with the circular while filing the GST refund application, as it specifies the necessary documents and information that need to be submitted.

Non-compliance with the circular may lead to the rejection of the refund application. Therefore, businesses should carefully review the circular and ensure that all the requirements are met before filing the GST refund application.

13. Inappropriate Shipping Methods

Proper shipping of goods is crucial for successful exports. It is important to ensure that the goods are shipped thorough proper channel under custom authorities. It is not advisable to ship through private courier companies. These modes do not qualify for taking GST refunds from the department.

Final Thoughts

Navigating the GST refund process for exports can be complex due to various compliance requirements and potential issues.

Some common reasons for unprocessed refund applications include unreconciled GST returns, discrepancies in shipping bills and invoices, ineligible ITC claims, and lack of coordination with the GST officer.

To ensure a smooth refund process, it's crucial to maintain accurate documentation, regularly check refund status, adhere to compliance guidelines, and maintain open communication with the GST officer.

For professional assistance in managing your GST refund process, don't hesitate to reach out to a qualified expert who can guide you through the intricacies and ensure timely and hassle-free refunds.

Source: https://www.manishanilgupta.com/blog-details/navigating-the-complexities-of-gst-refunds-for-exports

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5 Innovative Transfer Pricing Methods for Multinational Enterprises

Are you concerned about transfer pricing issues in your related party transactions?

Don't let the complexity of this topic overwhelm you.

In my previous article, I talked about What It Transfer Pricing and Why It Matters to Multinational Companies? (Link in the comments)

In this article, I will break down the most commonly used transfer pricing methods!

1. Comparable Uncontrolled Price (CUP) Method:- the CUP method involves comparing the price and terms of a transaction between related parties with that of an uncontrolled transaction between independent parties. The comparison is only valid if the transactions are identical or very similar.

2. Resale Price Method:- This method uses the resale price of a product or service to determine the arm’s length price. The resale price is reduced by a gross margin determined from similar but unrelated transactions. Then, costs associated with purchasing the product are subtracted from the total.

3. Cost-Plus Method:- This method determines the arm’s length price by adding the supplier's costs and markup to the product or service. It is often used when semi-finished goods are transacted between related entities or when related parties have long-term arrangements.

4. Transactional Net Margin Method (TNMM):- TNMM compares the net profit margin of a transaction between related parties with that of similar transactions between unrelated entities.

5. Profit Split Method: - The profit split method is used when related parties engage in complex, interdependent transactions. The profits from such transactions are split between the parties, based on the terms that unrelated parties would have agreed upon.

The choice of method depends on the circumstances of each case.

However, the goal is to determine a fair price for the transaction, and these methods help achieve that.

In conclusion, transfer pricing methods play a critical role in ensuring that related parties transact at arm’s length.

➡️To discuss about the issues that you are facing, you can connect with me by clicking on this link. https://bit.ly/3GJcEhW

Source: https://www.linkedin.com/pulse/5-innovative-transfer-pricing-methods-multinational-ca-manish-gupta/

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Challenges in GST refund process and their solutions | CA Manish Gupta

In this video, I have shared challenges in GST refund process and their solutions.

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Understanding Transfer Pricing What It Is and Why It Matters to Multinational Companies

Are you a multinational company operating in multiple countries? 

Have you ever wondered how intercompany transactions impact your tax liabilities? 

If so, then transfer pricing is a topic that should be on your radar. 

In this article, I will help you to understand what transfer pricing is and why it is crucial for multinational companies to understand and comply with relevant regulations.

Transfer pricing is when a multinational company does business transactions between associated companies in different countries. This can affect the company's tax liabilities in each country. 

To comply with regulations, companies need to do transaction at "arm's length prices," which are prices that would be paid between unrelated companies in similar circumstances.

However, transfer pricing can also be a complex and challenging process. 

It requires companies to carefully analyze their business operations and the market conditions in each country where they operate. 

Moreover, transfer pricing regulations can vary significantly from country to country, making compliance a difficult task.

Multinational companies need to document their intercompany transactions and methodologies to show that they are following regulations.

In the end, I would suggest, If you're a multinational company operating in multiple countries, it's crucial to understand and comply with transfer pricing regulations. 

Failing to do so could result in significant legal and financial risks. 

So, if you haven't already, it's time to assess your transfer pricing practices and ensure that you're doing transactions at arm's length prices and properly documenting your intercompany transactions. 

Talk to your tax advisor to learn more about how to comply with transfer pricing regulations and protect your company's financial health.

Source:https://www.linkedin.com/pulse/understanding-transfer-pricing-what-why-matters-companies-gupta

[charteredaccountantjanakpuri]

How a simple initiative from our Virtual HR has had a significant impact on our team's well-being and productivity?

How a simple initiative from our #VirtualHR has had a significant impact on our #team's well-being and productivity?

Every other week, they provide us with a meditation session and guide us in implementing a 15-minute daily meditation practice to start our day.

This has bridged the gap between #management and employees, fostering a sense of connection and aiding us in achieving our daily goals.

The outcomes have been truly remarkable!

Incorporating meditation into our daily routine has allowed us to approach each day with a clear and focused mind.

As a result, we have experienced enhanced decision-making, improved #communication, and a more positive work #environment. Moreover, #productivity has increased while stress levels have decreased.

I cannot thank Dishi Jain & Manish Jain founders of unHR enough for continuously coming up with unique ideas to boost team morale.

I urge everyone to consider integrating mindfulness practices such as meditation into their workday.

The benefits are undoubtedly significant!

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Why filing ITR U in india is important for NRIs

In this video, I have shared Why filing ITR U in india is important for NRIs?

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Company Incorporation in India: Is Physical Presence of Directors Required?

In this video, I have shared Company Incorporation in India: Is Physical Presence of Directors Required?

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Easy Company Formation | The Ultimate Guide for Foreign Entrepreneurs & NRI | CA Manish Gupta

In this video, I have shared Easy Company Formation the ultimate Guide for Foreign Entrepreneurs & NRI?

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Compliance Relief for Newly Incorporated Companies: Exemption from Filing ROC Annual Return

Are you a newly incorporated company struggling to meet compliance requirements?

Well, here's some good news!

The Ministry of Corporate Affairs has already given a holiday from filing Annual Returns and Financial Statements for companies incorporated on or after 1st January to 31st March.

If you are sailing in the same boat then it will be a cost-saving advantage for you.

Well, lets dive into further details.

India has made strides in improving the ease of doing business, thanks to initiatives by the government aimed at transforming the regulatory environment, balancing stakeholders' interests, and strengthening institutions for world-class corporate governance.

As a result, companies incorporated on or after 1st January to 31st March enjoy several benefits, including a cost-saving advantage in ROC annual filing.

While the date of incorporation may not matter to the promoter or shareholders, it is essential to note that companies formed after 1st January to 31st March are exempt from ROC annual filing for the first financial year or can choose to file for either three or fifteen months.

However, if a company opts for three months, it does not exempt them from ITR and other RBI compliance.

Thus, filing for 15 months is an excellent option to save money while keeping in mind other laws and compliances.

The decision to file for 3 or 15 months depends on the company's specific circumstances, such as its future plans to apply for a tender or loan, which requires a three-year track record.

Although, there are other areas also which should be considered for the newly incorporated subsidiaries.

1.  The company has to keep a record of the first board meeting, which should be held within 30 days from the date of incorporation of the company. Further, the company is required to file Form INC-20A within 180 days from its incorporation, as the company cannot commence its business without filing this form.

2.  The subscription money and the foreign remittance is to be deposited in the bank account of the company within 60 days from the date of incorporation. Afterwards, Form FCGPR has to be filed in regard to the foreign remittance within 30 days from the date of money received in the bank account of the company.

The key point here which is ignored by most of the companies are “the stamp duty payable on the Share Certificates”.

3.  In parallel to the compliances, the company is also required to take other registrations, which help the companies in the “Ease of doing Business”. For taking the maximum benefit of financial transactions and in order to continue making imports/exports without the payment of IGST, the company has to apply for GST registration along with the Letter of Undertaking (LUT) on a timely basis.

4.  Another Crucial point which should be considered is that the subscription money is not regarded as a transaction by most of the companies, where the chances of missing these types of transactions enhance, which leads to the non-reporting of these transactions in the Transfer Pricing Report.

5.  As per the Act, the AGM is to be held within six months from the date of the closing of the Financial Year. In the case of a newly incorporated company, the exemption of extra three months is given, so in the case of these companies, the first AGM can be held within nine months from the close of its financial year.

In conclusion, newly incorporated companies in India have some benefits and advantages, such as a holiday from filing Annual Returns and Financial Statements for the first financial year, depending on their date of incorporation. However, companies still need to comply with other regulatory requirements, including holding board meetings, filing necessary forms, depositing subscription money and foreign remittance, and registering for GST. Furthermore, companies need to keep track of all transactions, including subscription money, to avoid non-reporting in Transfer Pricing Reports. It is also essential to hold the Annual General Meeting within the stipulated time frame. Overall, while there are some benefits for newly incorporated companies, it is crucial to stay compliant with all relevant laws and regulations to ensure a smooth business operation.

Source: https://www.manishanilgupta.com/blog-details/exemption-from-filing-roc-annual-return

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Benefits given by Govt. to recently | Incorporated Subsidiary Companies

In this video, I have shared what benefits are given by govt to recently incorporated Subsidiary companies??

[charteredaccountantjanakpuri]

Taxability of ESOP and Shares outside India

The main idea behind any investment is to earn maximum returns. And this is exactly why investment in foreign stocks is a very good option.

To explain, investing in attractive and scalable global companies can offer huge returns over a long term. For example, had you invested in any of the tech giant companies like Facebook, Apple, Amazon, Netflix, Google, etc about a decade ago, you would have earned outstanding returns by now.

So, if you are a seasoned investor, you can diversify your investments in stocks geographically.

Here is how you can invest in foreign stocks:

You can buy shares of a foreign company using various methods, like,

·       Direct Investment or

·       Employee Stock Option Plan (ESOP) of an organisation whose parent company is located outside India.

However, tax implications associated with such investments become an important point of consideration for Indian investors.

So, in this article we would like to throw light upon Tax implications on

·       Investment in stocks outside India and

·       ESOP of parent company situated outside India.

The Truth

A new fast-rising trend among Indian investors is Investment in the foreign stock market.

For the uninitiated, yes, Indian citizens can invest in the shares of the foreign companies that are listed on foreign stock exchanges. But they should hold less than 10% stake in the entity in which the investment is being made, and must not have any control over it.

Yes, Indian citizens can buy stocks of companies like Amazon, Apple, Microsoft etc. How?

By:

·       Either opening an overseas trading account with an Indian broker having tie-up with international brokers, such as, ICICI Direct, HDFC Securities, Kotak Securities, and Axis Securities etc.,

·       Or by directly opening an account with a foreign broker having presence in India like Charles Schwab, Ameritrade, Interactive Brokers, etc.

Also, since multinational companies are recruiting employees from across the globe today, the Employee Stock Option Plan is another way of investing in the parent company which is situated outside India.

The employee who agrees for ESOP scheme can acquire the stocks of the Employer Company if he fulfils certain conditions like completion of specified number of years in the company or meeting the company's revenue target etc. as defined by the company.

On realization of the conditions proposed by the employer company, the ESOP is vested with the employees.

Overseas entities often grant shares under the Employee Stock Option Plan to the Indian residents who are employed with, or are directors of, an office or branch of the parent company situated in India.

Resident individuals can acquire shares under Employee Benefits Scheme offered by such overseas entities, whether listed or unlisted, up to 10% of its paid-up capital at a predetermined rate (mostly below overall market value of shares).

ESOP has mutual benefits for the employer and his employees.

By offering ESOP, the employer can retain a talented workforce, save cash flows, increase productivity and achieve enhanced profitability. This enhanced profitability further results in increased market value and intrinsic value of the employer company’s shares, while the employee is motivated to put in his best efforts as the employee benefits if the company benefits, leading to a win-win situation.

Tax Implications associated with Direct Investment

RBI allows investment in foreign companies through many routes like the Liberalised Remittance Scheme (LRS) under FEMA Act, Overseas Direct Investment (ODI), Income Tax Act 1961 compliances, etc. Investors investing in foreign stocks may have to comply with these regulations laid down by the Government of India.

To determine tax applicability, firstly we have to determine the residential status of the taxpayer. The residential status of the taxpayer would be dependent upon the number of days for which the individual has resided in India during the relevant previous year.

Based on the above calculation, residential status can be classified as under:

1. Resident and ordinarily resident (ROR) – For residents, all income earned and received globally is taxable in India.

2. Resident but not ordinarily resident (RNOR) – Taxability arises only when foreign income is received or accrued in India from a business or profession controlled or set up in India.

3. Non-resident (NR) – Income is taxable only when foreign income is received or earned in India.

After determining the residential status, capital gain would arise when foreign stocks are sold higher than the purchase price. However, capital gain can further be divided into two categories depending on the holding period of the investment:

·       Long Term Capital Gain

·       Short Term Capital Gain

Long Term Capital Gain

Long Term Capital Gain arises when the shares of foreign company have a holding period of more than 24 months or two years. Long Term Capital Gain from the sale of foreign stocks will be taxable at the flat rate of 20% along with health and education cess (plus surcharge, if applicable) along with the indexation benefit on cost of the investment.

Short Term Capital Gain

Short Term Capital Gain would arise if shares of the foreign company have a holding period of upto 24 months or 2 years. Short Term Capital Gain is added to the taxpayer's total income and is taxable at individual slab rates.

Tax Implications via Employee Stock Option Plan

Employee Stock Option Plan gives the right to Indian employees to subscribe to shares of the parent company at a predetermined rate (usually below the market price). Although, the difference between the fair market value and the exercise price is taxable in the hands of the employee as "perquisite."

Further, when shares are disposed of, the difference between the sale price and fair market price at the time of sale would be taxed as capital gain. Tax rate applicable at the time of sale would be the same as in case of direct investment depending upon the holding period of the option by the employee.

Reporting in Income Tax Return Form

As per Income Tax Act, it is mandatory for every taxpayer holding foreign stocks or earning income from overseas entities, to file income tax return in India, irrespective of the basic exemption limit.

In income tax returns, the taxpayer must disclose all foreign investments with overseas entities in Schedule-FA of ITR 2 or ITR 3, depending on the nature of income; failing which he could invite penal actions.

Moreover, India has entered into Double Taxation Avoidance Agreement (DTAA) with more than 95 countries which can help you to claim tax credit taxation.

Summing Up

While evaluating an investment in foreign stocks or in overseas entities, one must not only determine the returns based on income and capital appreciation potential or fluctuation of foreign exchange rates but should also consider the after-tax yield from such an investment.

Source:https://www.manishanilgupta.com/blog-details/taxability-of-esop-and-shares-outside-india