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Annual Compliance Checklist for Start-ups in India

The annual compliances are a mandatory requirement set by the Government, through the Ministry of Corporate Affairs. The compliances apply to companies with a minimum paid up capital of Rs. 50 lakh or turnover below 2 crores.

Most start-ups and new businesses in India are registered as private limited companies. Under the provisions of the Companies Act, 2013, there are certain compliance requirements that Private limited companies would need to comply with in order to avoid penalties, or worse, strike-off. These annual compliances include mandates covered under various provisions of the Act, along with the mandates under the Companies Rules.

The Categorization of Annual Compliances

Most start-ups in India fall under the category of private companies that have its paid-up capital as less than INR 50 lakhs. Under the Companies Act, annual compliance can be classified as:

  • Compliances with the Registrar of Companies
  • Other compliances, including those with tax authorities

Compliance with the Registrar 

Nature of Compliance

Form

Submission Mandates

When?
Appointment of  Company Auditor   E-form ADT-1 The Auditor of a company is appointed for a period of Five years. Upon Appointment, the form ADT-1 will be filed to disclose the 5-year appointment. When a company is incorporated, the Statutory Auditor will have to be appointed within a period of 30 days.
Annual General Meeting (AGM)  Every company must hold one Annual General Meeting every financial year There cannot be a gap of more than 15 months between two AGMs  
Directors Report  Directors’ Report must be prepared under the norms and guidelines specified in companies act The Directors' Report is to be signed by the Chairman so authorized by the Board.  
Filing of Annual returns  E-form MGT-7 The Annual returns of the company must be furnished and filed within a period of 60 days from the AGM The financial years for the returns will be April 1 to March 31
Filing of Financial Statements. E-form AOC-4 The Company's financial statements such as Balance Sheet and Profit and Loss Account is to be filed Other documents include Directors’ Report, Auditors’ Report and Notice of the AGM
Directors Disqualification and Directors KYC  DIR - 8 and DIR - 3 Every director must file a declaration of non-disqualification under DIR - 8 and must follow annual Directors KYC norms under DIR - 3 Directors KYC under form DIR - 3 would have to be filed within 30 days from the close of the financial year.
Note: Above mentioned compliances are all mandatory compliances.

Compliance not Related to Registrar

Companies have to complete the following compliances as well that are not filed with the registrar of companies:

  • All the monthly as well as the quarterly GST returns
  • Filing all the Income tax returns on the tax rate of 25%
  • Assessment of businesses under different laws
  • Payments of all the dues of the companies.

Tax and other Compliances

Apart from compliances with the MCA and the Registrar of Companies, the company would have to comply with the following.

  • Income Tax Returns
  • Tax Audit Report
  • Periodic returns – GST, TDS, TCS
  • Advance tax payments

In case of Non-Compliance

The companies must ensure that all the mandatory compliances are filed with the Registrar of the Companies (ROC) or else the company is charged a heavy penalty based on the number of compliances missed. Moreover recently MCA has increased the penalty cost to 200 Rs per day.

If all the compliances are not completed the Digital signature of the director is suspended and will only be activated again if the complete penalty and compliances are paid.

NOTE: In certain cases, the directors of the companies can be charged and imprisoned as well.

Conclusion

Hiring a professional to take care of your annual compliance makes running a business in India much easier. While there are certain regulations to be followed, you also need to be abreast about any changes and notifications in the company compliance rules.

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