Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Monday, June 1, 2020

New Definition for MSME

The definition of Micro, Small and Medium Enterprises has been proposed to be changed again with the following revised thresholds.

Micro Enterprise
(i) Investment in plant & machinery or equipment up to Rs. 1 crore; AND
(ii) Sales turnover of less than Rs. 5 crores in a financial year

Small Enterprise
(i) Investment in plant & machinery or equipment up to Rs. 5 crore; AND
(ii) Sales turnover up to Rs. 50 crores in a financial year

Medium Enterprise
(i) Investment in plant & machinery or equipment up to Rs. 50 crore; AND
(ii) Sales turnover up to Rs. 250 crores in a financial year


- The difference in definition for Manufacturers and Service Providers has been done away with.

- Traders were earlier not considered in the category. As the distinction between manufacturers and service providers has been done away with, we shall find out with further clarifications if the benefits are also extended to traders

- These changes have been notified in the Official Gazette vide SO 1702(E) dated 01.06.2020 so as to change the definition in the Micro Small and Medium Enterprise (MSME) Development Act, 2006

- The Notification shall come into effect from 1st July, 2020

- Benefits of borrowing at lower interest rates and timely receipt of outstanding dues from customers may be extended to all entities falling under this definition

- Please speak with your bankers to avail lower interest rates as available to MSMEs under various schemes

Saturday, May 30, 2020

New 26AS Format - FY 2020-21 / AY 2021-22

The Annual Information Statement in Form 26AS will come into effect in its new form from 01-Jun-2020 and will disclose the following details.

1. Tax Credits
(i) TDS deducted on payments made to you
(ii) TCS collected on payments made by you

2. Specified Financial Transactions (SFT) as filed in Form No. 61A.
These are high-value transactions entered into by you during the year, such as:
(i) Purchased or sold immovable property
(ii) Bought shares, debentures or bonds of a company exceeding Rs. 10 lakhs
(iii) High value cash deposits or payments in an account as reported by banks
(iv) Credit card payments of Rs. 1 lakh or more made in cash
(v) Bought units of a scheme of mutual fund exceeding Rs. 10 lakhs
(vi) Bought or sold foreign currency exceeding Rs. 10 lakhs

3. Taxes Paid for the Year
(i) Advance Tax
(ii) Self Assessment Tax
(iii) Tax paid on Regular Assessment

4. Demands Outstanding & Refunds
(i) Demands outstanding for payment to the tax department
(ii) Refunds due but not received
(iii) Refunds paid

5. Pending Tax Proceedings
(i) Scrutiny assessments pending before the Assessing Officer
(ii) Appeals pending before the Tax Tribunal

6. Completed Tax Proceedings
(i) Tax Assessments
(ii) Appeals before the CIT(A)

Tuesday, May 26, 2020

Reduced PF Rates from 12% to 10%

Rate Reduction: The rate of PF contribution of both employer and employee has been reduced from 12% of basic wages and dearness allowance to 10%

- All class of establishments covered under the EPF & MP Act, 1952
- Not applicable to Public Sector enterprises or any establishment owned/controlled by the govt.
- Not applicable to establishments eligible for PMGKY benefits

Period: Wages for three months of May, June & July 2020

Effect: the Employee shall have a higher take home pay due to reduction in deduction from his pay on account of EPF contributions and employer shall also have his liability reduced by 2% of wages of his employees

Administrative Charges: No change in the EPF administrative charges (0.5% of EPF wages subject to minimum prescribed) and EDLI contributions (0.5% of wages), which continue to be payable by employers.


MSME: Guaranteed Emergency Credit Line (GECL Loan)

The GECL is a loan product announced by the Government as a measure to help fund business activities of the MSME sector during the months affected by the onset of the Covid-19 outbreak in India.

Salient Features

Type of Facility: Additional working capital term loan facility in case of Scheduled Commercial Banks (SCBs) and Financial Institutions (FIs), and additional term loan facility in case of Non-Banking Financial Companies (NBFCs) - such lenders are referred to as Member Lending Institutions (MLIs)

Limits: Up to 20% of the borrower’s total outstanding credit. Additional credit under the scheme to be capped at Rs. 5 crore.

Type of Borrower: Eligible MSMEs including business enterprises constituted as Proprietorships, Partnerships, Companies, Trusts, LLPs, and borrowers under PMMY.

Tenure: 4 years from date of disbursement

Moratorium: 1 year on the principal amount where interest is payable - Principal to be repaid in 36 months after moratorium

Guarantee/Collateral: 100% guarantee by National Credit Guarantee Trustee Company (NCGTC); no additional collateral to be given

Pre-Approved Loan: An offer will go out from the MLI to the eligible borrowers for a pre-approved loan which the borrower may choose to accept. If the MSME accepts the offer, it will be required to complete requisite documentation. An ‘opt-out’ option will be provided to eligible borrowers

Period of Disbursement: Applicable to all loans sanctioned under GECL from 23-May-20 to 31-Oct-20 up to a total sanctioned amount of Rs. 3 lakh crore

No. of Lenders: In case a borrower has existing limits with multiple lenders, GECL may be availed either through one lender or multiple lenders

Eligibility Criteria

(i) Outstanding as on 29-Feb-20: MSME borrower accounts with combined outstanding loans across all MLI's of up to Rs. 25 crore

(ii) Turnover: Annual sales turnover of up to Rs. 100 crore in FY 2019-20

(iii) Existing Customer of Lender Bank: Borrower should be an existing customers of MLI

(iv) Non NPA Account: Borrower accounts should be classified as Regular, SMA-0 or SMA-1

(v) GST Registration: Borrower must be GST registered, if mandatory for it to register

Interest Rates

- For Banks and FIs, lending rate linked to one of the benchmark rates by RBI +1%
- The interest rate from Banks to not exceed 9.25% p.a.
- For NBFCs, the interest rate shall not exceed 14% p.a.
- No additional processing fee shall be charged
- No penal interest for prepayment

Wednesday, May 20, 2020

Significant Beneficial Owner (SBO) in Companies - Related Compliance (BEN-1, BEN-2)

Legal References

1) Section 90 of the Companies Act, 2013
2) Companies (Beneficial Interest and Significant Beneficial Interest) Rules, 2018
3) Companies (Significant Beneficial Owners) Amendment Rules, 2019 (MCA Notif. 08.02.19)

Important Concepts

Registered Owner: A person whose name is entered in the register of members of a company as the holder of shares in that company but who does not hold the beneficial interest in such shares

Beneficial Owner: A person who actually holds the beneficial interest in the shares but whose name is not registered in the Register of Members is commonly called as the beneficial owner.

Wholly Owned Subsidiary: A wholly owned subsidiary is a company that is completely owned by another company. The company that owns the subsidiary is called the parent company or holding company.

Significant Beneficial Owner (SBO): SBO in relation to a reporting company means an individual who directly and/or indirectly through one or more persons such as companies, partnership firms or trusts possesses:

(i) No. of Shares: not less than 10% shares; or
(ii) Voting Rights: not less than 10% of the voting rights in the shares; or
(iii) Right to Dividend: right to receive or participate in not less than 10% of the total distributible dividend; or
(iv) Significant Influence or Control: has right to exercise significant influence or control in any manner other than through direct-holdings alone.

Significant Influence: Significant influence means the power to participate, directly or indirectly, in the financial and operating policy decisions of the reporting company.

Control: Right to appoint majority of directors or control management or policy decisions excercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of the shareholding or management rights or shareholders agreements or voting agreements or in any other manner.

Indirect Right or Entitlement: An individual shall be considered to hold a right or entitlement indirectly in the reporting company if he satisfies any of the following criteria:

(i) Body Corporate: where the member of the reporting company is a body corporate (whether incorporated or registered in India or abroad), other than a LLP, and the individual
(a) holds majority stake in such body corporate; or
(b) holds majority stake in the ultimate holding company (whether incorporated or registered in India or abroad) of that member;
(Majority stake means holding more than 50% of the equity share capital or 50% of the voting rights in the body corporate or having the right to receive more than 50% of the distributable dividend.)

(ii) HUF: where the member of the reporting company is a HUF and the individual is the Karta of the HUF;

(iii) Partnership: where the member of the reporting company is a partnership entity [either under the Partnership Act or LLP Act] and the individual:
(a) is a Partner; or
(b) holds majority stake in the body corporate which is a partner of the partnership entity; or
(c) holds majority stake in the ultimate holding company of the body corporate which is a partner of the partnership entity.

(iv) Trust: where the member of the reporting company is a trust and the individual
(a) is a trustee in case of a discretionary trust or a charitable trust;
(b) is a beneficiary in case of a specific trust;
(c) is the author or settlor in case of a revocable trust.

(v) Pooled Investment Vehicle: where the member of the reporting company is
(a) a pooled investment vehicle; or
(b) an entity controlled by the pooled investment vehicle, based in member State of the Financial Action Task Force on Money Laundering and the regulator of the securities market in such member State is a member of the International Organization of Securities Commissions, and the individual in relation to the pooled investment vehicle is a general Partner or Investment Manager or CEO

Documents & Forms

BEN-1: Declaration to be filed by every individual who is an SBO in a reporting company

BEN-2: Return to be filed by reporting company with MCA in e-form on receipt of declaration from SBO. The e-Form can be downloaded with Instruction Kit from the MCA website here.

BEN-3: Register to be maintained by reporting company with details of beneficial owners

BEN-4: Notice given by a reporting company to an individual or other entity seeking for them to declare beneficial ownership in the company

Process for Reporting & Timelines

1) A company which has entities other than individuals as shareholders and has information and/or reason to believe that any such individuals may hold significant beneficial interest in the company, it may then give a notice to such individuals or entities in Form BEN-4 to declare its beneficial interest in such reporting company.

2) Every SBO is required to file the Declaration in Form BEN-1 within 90 days from the date of commencement of Companies (SBO) Amendment Rules (i.e. 08-May-2019), and within 30 days of change in SBO with the reporting company in which the hold beneficial interest.

3) Reporting company to file e-Form BEN-2 with ROC within 30 days of receipt of declaration in BEN-1 from the SBO.

4) Reporting company to maintain a register of SBOs in the format prescribed under BEN-3, which should be available for inspection to the members at its registered office.

5) The MCA had issued Circular 01 dated 01.01.2020 whereby the date of filing BEN-2 without late fee was extended up to 31st March, 2020.

Penal Provisions

Failure to make declaration by SBO in BEN-1:
(i) Imprisonment up to 1 year; or
(ii) Fine from Rs. 1 lakh up to Rs. 10 lakh; or
(iii) Both imprisonment and fine.

Failure to maintain Register in BEN-3:
Company and/or every officer in default may be fined from Rs. 10 lakh to Rs. 50 lakh

Willful furnishing of incorrect information:
Penalty under section 447 of the Companies Act, 2013