Labour Codes 2025 — Part 2: Procedural Guidelines, Lawful Structuring & Employer Compliance Roadmap

 By CA Surekha S Ahuja

“Compliance is not just adherence to rules — it is the strategic foundation of workforce stability, operational scalability, and business resilience.”

Introduction

The Labour Codes 2025, effective from November 21, 2025, consolidated 29 legacy laws into four unified frameworks:

1. Code on Wages, 2019

2. Industrial Relations Code, 2020

3. Code on Social Security, 2020

4. Occupational Safety, Health & Working Conditions (OSH) Code, 2020

Applicability:

• All establishments across India

• Specific thresholds: ≥10 employees for registration, ≥50 employees for creche/OSH facilities

• Existing employees: wage restructuring effective from April 1, 2026

• New hires: post-November 21, 2025, must comply immediately

This post provides a 360° procedural roadmap for lawful restructuring, digital registration, return filing, OSH compliance, social security obligations, and phased employer implementation.

Wage & Compensation Structuring

Principle: Basic + DA ≥50% of CTC; allowances above this threshold form part of wages.

Steps:

1. Extract all employee CTCs.

2. Audit allowances exceeding 50% of CTC.

3. Reclassify HRA, special allowances, variable pay.

4. Update payroll: PF, ESI, gratuity recalculation.

5. Issue revised appointment letters including wage breakup, gratuity, leave entitlement, termination clauses.

6. Conduct actuarial valuation (Ind AS 19).

7. Communicate changes to employees.

Outcome: Audit-ready payroll, retirement benefits compliance, wage transparency.

Employee Classification & Contract Compliance

• Categorize workforce: permanent, fixed-term, contract, gig/platform, supervisory roles

• Align contracts with Labour Code obligations

• Fixed-term employees: gratuity after 1 year

• Gig/fixed-term workers: register on e-Shram for social security

Digital Registration & Return Filing

Applicability: All units with ≥10 employees

1. Shram Suvidha Portal Registration

• One PAN-based registration, valid 5 years → Labour Identification Number (LIN)

• Steps: register establishment, provide PAN/TAN, officer details, scanned MOA/CIN, obtain LIN

2. Returns & Filing Obligations

Compliance Type	Frequency	Platform / Forms
Annual Return (CTC/Wages)	Annual	Unified return replacing Forms 5,7,12
Muster Roll / Attendance	Monthly/Quarterly	Forms I-II
Wage Register	Monthly	Forms III-IV
Standing Orders	Once / update	Form V
Contractor Labour Returns	Monthly	Forms VI-VII
Social Security Contributions	Monthly	PF/ESI portals linked to LIN
Gig / Fixed-Term Worker Registration	Onboarding	e-Shram portal, UAN-linked

Tips:

• Retain digital records for 8 years

• Reconcile payroll with PF/ESI portal monthly

• Auto-deemed approvals require internal timestamp documentation

Occupational Safety, Health & Women Compliance

• Draft standing orders: 8 hours/day, 48 hours/week, flexible schedules

• Creche for ≥50 employees

• Night shift SOPs: CCTV, transport logs, consent records

• Annual health check-ups: employees ≥40 years

• Maintain digital evidence for audits

Social Security & Gig Worker Compliance

• Register gig/fixed-term workers on e-Shram

• Allocate 1–2% of turnover to aggregator fund

• Enable UAN & Aadhaar portability for PF

• Monthly compliance tracking

Penalty Avoidance Matrix

Violation	Fine / Penalty	Prevention
Missing appointment letter	₹50K–2L	Issue Day-1, maintain digital record
Wage delay	12% interest + ₹1L	Auto bank transfers & payroll calendar
PF/ESI shortfall	25% damages	Quarterly reconciliation
Creche absence	₹2–5L + closure	Self-certify + portal audit
Standing orders missing	₹1–2L	Digitally file & update
Gig/social security default	1–2% turnover	Monthly aggregation & e-Shram update

Integrated 12-Week Compliance Roadmap (Gantt-Style)

Week	Key Focus Area	Action Items	Outcome / Deliverable
1	Wage Audit & Restructuring	Audit CTC, reclassify allowances, update payroll, issue revised letters	50% Basic compliance, audit-ready payroll
2	Digital Registration	Register all units on Shram Suvidha, obtain LIN, upload Forms I–VIII, migrate old filings	PAN-based registration, portal compliance
3	OSH & Women Compliance	Draft standing orders, creche setup, night shift SOPs, health checkups	Safety & women compliance readiness
4	Social Security & Gig Workers	Register on e-Shram, track aggregator fund, enable UAN portability	Formalized gig/fixed-term workforce
5	Payroll & Compliance Audit	Monthly payroll reconciliation, PF/ESI audit, validate muster rolls & wage registers	Errors & gaps corrected, audit-ready records
6	Payroll & Compliance Audit	Continuation & adjustments from Week 5	Complete reconciliation
7	Payroll & Compliance Audit	Contractor compliance tracking	All contractor obligations aligned
8	Payroll & Compliance Audit	Final quarterly review	Compliance assurance
9	Monitoring & Reporting	Monthly dashboard: wages, filings, OSH, social security	Early detection of deviations
10	Monitoring & Reporting	Board-level reporting on LIN, PF/ESI, OSH	Governance & strategic visibility
11	Monitoring & Reporting	Internal escalation & remediation	Risk mitigation
12	Monitoring & Reporting	State-level amendments tracking, update policies	Continuous compliance & adaptability

Strategic & Analytical Impact

• Financial: Short-term payroll rise 8–15%; long-term cost saving via reduced litigation & attrition

• Legal: Audit-ready digital evidence reduces inspection & penalty risk

• HR & Governance: Transparent contracts, structured payroll, workforce dispute prevention

• Strategic: ESG compliance, investor confidence, scalable operations, formalized gig economy integration

Takeaway:

Labour Code 2025 compliance is strategic, lawful, and operationally essential.
Employers following this integrated roadmap achieve audit-ready payroll, structured workforce, digital governance, and long-term business resilience.

 

New Labour Codes 2025 — Amendments, Impact & Legal Reasoning: The Definitive Employer Guide (Part 1)

By CA Surekha s Ahuja

 “When the law changes, compliance becomes a strategy — not a reaction.”

India’s labour landscape entered a decisive new era in November 2025, with fresh amendments, clarifications, and accelerated implementation pathways for the four consolidated Labour Codes. For employers, this shift is not only regulatory — it is structural. The new framework recasts compensation, working conditions, benefits, and compliance into a unified architecture built around digital reporting, standardised definitions, and risk-based enforcement.

This Part 1 presents the most analytical, clause-based, professionally written review of what has changed, why it matters, and what employers must evaluate.

Legislative Intent Behind the 2025 Labour Code Amendments

The 2025 amendments mark the “operational trigger” phase after several years of partial notifications. The intent is clear:

1. Harmonisation

Remove conflicts between State Rules and Central definitions—especially around wages, contractor limits, overtime, and social security coverage.

2. Digitisation & Unified Compliance

Shift from dispersed filings to real-time digital registers, e-notices, and automated grievance redressal.

3. Employment Formalisation

Extend coverage to gig, platform, contract, and hybrid employees under Social Security Code (SSC).

4. Predictability for Employers

Replace discretionary inspections with risk-based, algorithm-driven, single-authority inspections.

5. Compensation Rationalisation

The “50% Wages Rule” becomes the anchor for PF, gratuity, leave encashment, and compensation calculation.

Core Legal Amendments: Clause-by-Clause Analytical Breakdown

Below is the most exhaustive interpretation of what changed in 2025, the exact clauses impacted, and why it matters.

Uniform Definition of Wages — Strengthened (Across All Codes)

Amendment Focus:
Clarification of inclusions/exclusions under Section 2(88) of the Code on Wages, now mandatorily mirrored in Social Security, OSHWC, and IR Code.

Key Clarifications Introduced (2025):

1. 50% cap rule reasserted — allowances cannot exceed 50% of total remuneration.

2. Employers must re-classify flexible pay structures to avoid “artificial allowance inflation”.

3. Retention bonus, joining bonus, and productivity-linked incentives given specific treatment:

   • Retention bonus to be treated as wages if periodic and not extraordinary.

   • Joining bonus excluded as one-time payment.

   • Variable pay included for calculation of social security if periodic in nature.

Employer Impact:

• Higher PF & gratuity outflow for high-allowance salary structures.

• CTC budgets and offer letters require complete restructuring.

• Non-compliant “split salary models” will be treated as wages suppression, attracting penal exposure.

Working Hours, Overtime & Spread-Over — OSHWC Code Amendments

The 2025 rules bring precision to ambiguity around:

Revised Limits

• 48 hours per week, but with flexibility to:

  • 4-day workweek (12 hours/day)

  • 5-day workweek (9.5–10 hours/day)

  • 6-day regime (8 hours/day)

• Spread-over capped at 12 hours (including breaks).

• Overtime: Now uniformly 2x wages, applicable across all sectors.

New Addition: Digital OT Register

All overtime logs must be maintained in e-Form OSH-7.

Reasoning:

To prevent misuse of flexible hours and ensure uniformity across States.

Employer Impact:

• Workforce planning must consider weekly cycle compliance, not just daily limits.

• Manufacturing, retail, logistics operations must redesign shift rosters.

• Overtime misuse can now be algorithmically flagged during digital inspections.

Contract Labour & Gig Workers — Social Security Code Strengthened

Key Amendment Areas

1. Universal Registration Mandated

Every platform worker, gig worker, and contract employee must be registered under Section 113 SSC onto the national Social Security Portal.

2. Coverage in PF & ESIC

Where sufficient “control & supervision” is established, contract workers fall under mandatory social security coverage irrespective of intermediary contracts.

3. Principal Employer Liability Expanded

Section 141 (SSC) and corresponding OSHWC provisions make principal employers responsible for:

• Registration

• Contributions

• Digital attendance

• Payment verification

regardless of contractor defaults.

Employer Impact:

• Large companies must onboard contractors through unified contractor gateways.

• Unregistered gig workforce will trigger non-compliance flags in risk-based inspections.

• PE liability becomes “absolute” in social security matters.

Standing Orders, Dispute Handling & Employment Terms — Industrial Relations Code

2025 Amendments Clarify:

1. Applicability Threshold

Industrial establishments with 300+ workers continue to require Standing Orders; however, 2025 rules clarify:

• Fixed-term employees must be included.

• Remote/hybrid employees included for certain categories.

2. Notice of Change (Section 40)

Stricter timelines and uniform formats mandated for:

• Changes in shifts

• Salary restructuring

• Closure, lay-off or retrenchment actions

3. Fixed-Term Employment (FTE)

• FTE employees must receive hours, benefits, and work conditions equivalent to permanent employees.

• Gratuity eligibility for FTE on pro-rata basis reaffirmed.

Employer Impact:

• HR policies require overhaul to reflect FTE parity.

• Hybrid workforce management now legally codified.

• Notice defaults will directly lead to deemed non-compliance.

Unified Digital Compliance System — Major 2025 Push

What’s New:

1. Replacement of >40 registers with ONE Digital Register.

2. Real-time filings integrated with:

   • EPFO

   • ESIC

   • State Inspectorates

   • Wage Code authorities

3. QR-coded payslips and attendance logs mandated for:

   • Contract labour

   • Shops & establishments

   • Multi-location units

4. Compliance calendar generated automatically on the National Labour Compliance Portal.

Reasoning:

To eliminate human discretion, unify enforcement, and reduce corrupt practices.

Employer Impact:

• Legacy HRMS/ERP systems must be integrated.

• Any mismatch between payroll & social security filings triggers auto-scrutiny.

• Contractors using manual records will push PE into compliance red zones.

Comparative Analysis — How the 2025 Amendments Position India Globally

Area	India (2025)	Singapore	UAE	EU
Wage Definition	Uniform & statutory (50% rule)	Flexible	Employer-friendly	Sectoral
Digital Compliance	Centralised “one register”	Fully digital	Semi-digital	Fragmented
Gig Worker Coverage	Most progressive in Asia	Limited	Limited	Limited
Working Hours Flexibility	High (4-day week allowed)	High	Medium	High
Contract Labour Liability	Very strict	Moderate	Employer-friendly	Moderate

Conclusion:
India’s amended Codes now match global best practices while retaining stringent employer accountability, especially on wages and contract labour.

The Business Reality — What Employers Must Analytically Conclude

1. The era of allowance-heavy salary structures is over.

Wage definition enforceability is airtight.

2. Principal employer liability is absolute.

No contractor shielding is possible under the 2025 clarifications.

3. Overtime & shift planning need digital accuracy.

4. All compliance gaps will surface automatically.

The algorithmic risk scoring model ensures employers cannot hide inconsistencies.

5. FTE and hybrid employees must get statutory benefits parity.

6. Digital systems must be updated before implementation dates.

Procedural & Documentation Masterguide for Intercompany International IT Cost Reimbursements

By CA Surekha S Ahuja

Across Income Tax, GST, and Companies Act Compliance for India-Based and Global Entities

"Compliance is not merely following rules; it is structuring, documenting, and executing transactions so that every step speaks for itself under scrutiny."

INTRODUCTION

Cross-border intercompany IT cost reimbursements—between a global parent or overseas branch and an Indian entity—are common yet highly scrutinized. Risks include:

• Recharacterization as Fees for Technical Services (FTS) or Fees for Included Services (FIS)

• Misapplied GST or reverse charge provisions

• Related-party transaction issues under the Companies Act

• Potential transfer pricing adjustments

Without a disciplined framework, routine cost-sharing arrangements can trigger audits, penalties, or litigation.

This blueprint provides a step-by-step, audit-proof framework for structuring, executing, and documenting intercompany IT cost reimbursements in a tax-efficient and legally defensible manner.

PRE-IMPLEMENTATION CONTROL SYSTEM

1 Transaction Characterization

• Nature: Service, reimbursement, or composite

• Related-party status: Domestic or cross-border

• Fee type: Cost-to-cost recovery vs. markup

• Purpose: IT operations support, helpdesk, monitoring

2 Regulatory Mapping

• Income Tax: TDS sections, deductibility, treaty implications

• GST: SAC codes, rate, reverse charge mechanism, ITC eligibility

• Companies Act: Sec. 188 approvals, MBP-1 disclosures

• Transfer Pricing: Cost contribution agreements, arm’s length validation

3 Internal Diagnostic File Note

Document:

• Commercial rationale

• Regulatory mapping

• Valuation approach

• Risk assessment

• Planned evidence trail

This becomes the foundation for all future defense in case of audit or litigation.

DOCUMENTATION BEFORE EXECUTION

1 Board / Management Approval

Board note should include:

• Transaction background and necessity

• Commercial justification and arm’s length rationale

• Scope and fee/reimbursement mechanism

• Delegation of authority and approvals

2 Agreement Essentials

Ensure clarity and defensibility:

• Scope of Services: Operational IT support, clearly enumerated

• Fee Structure: Cost-to-cost, zero markup, supported by third-party invoices

• Tax Clauses: GST, TDS, withholding provisions

• Record-Keeping: Obligations for both parties

• Term & Termination: Fixed term, renewal and exit conditions

• Exclusion Clause: No transfer of IP or autonomous capability

EXECUTION PROCEDURES

1 Invoicing Protocol

• Include service/reimbursement description

• Correct SAC / HSN codes

• Reference agreement and period

• Attach supporting third-party invoices

• Declare “cost only, no markup”

2 TDS Compliance

• Identify correct TDS section

• Deduct at time of credit or payment

• Deposit timely and file quarterly returns

• Issue Form 16A and reconcile with 26AS

3 GST Compliance

• Verify classification and rate

• Apply forward charge or RCM as applicable

• Follow time-of-supply rules

• Avail ITC only after supplier invoice reflects in GSTR-2B

• Maintain service consumption evidence

4 Companies Act Compliance

• Obtain MBP-1 declarations

• Board approval/resolution for related-party transactions

• Maintain contract register under Sec. 189

• Document arm’s length rationale

POST-EXECUTION CONTROL & DOCUMENTATION

1 Audit Trail

Maintain:

• Signed agreements and board resolutions

• Invoices, bills, payment proofs

• Service delivery proof and cost allocation evidence

• GST ledgers and reconciliations

• TDS calculation sheets and challans

• Communication/email evidence

2 Annual Management Certification

Confirm:

• Services delivered per agreement

• Reimbursements match actual costs

• No personal/non-business expenditure

• Compliance with all regulatory obligations

INCOME TAX PROCEDURAL BLUEPRINT

• Prepare TDS determination note

• Maintain defense-ready folder: agreement, ledgers, bank proofs, 26AS

• Document commercial rationale and arm’s length validation

• Link service delivery to reimbursement

GST PROCEDURAL BLUEPRINT

• Prepare GST position note: classification, RCM, ITC, valuation

• Avail ITC only after invoice reflection and service receipt

• Maintain reimbursement chain and reconciliations

COMPANIES ACT PROCEDURAL BLUEPRINT

• Director MBP-1 disclosures

• Board resolution approval and minutes

• Maintain contracts and related-party registers (Sec. 189)

• Document arm’s length rationale for cross-border cost sharing

MODEL AGREEMENT HIGHLIGHTS

Title: Group Cost Contribution Agreement – Centralized IT Support

• Scope: Operational IT services only

• Fee/Reimbursement: Cost-to-cost, zero markup, supported by invoices

• Exclusions: No IP transfer or know-how sharing

• Tax Compliance: GST and TDS clauses

• Record-Keeping: Audit-ready obligations

• Term & Termination: Fixed term with clear exit conditions

• Arm’s Length Confirmation: Commercial justification statement

INTERNAL COMPLIANCE CHECKPOINTS

Stage	Checklist
Pre-Transaction	Agreement, board approval, MBP-1, TDS & GST notes
Monthly	Invoices, RCM, ITC, TDS deposit, service delivery evidence
Annual	26AS / IT reconciliation, GSTR-2B alignment, contract register, management certification

CLOSING

A transaction becomes legally sound when its law is correct, procedurally strong when steps are disciplined, and fully defensible when documents tell a complete, consistent story. Compliance is not a burden—it is a shield. With this procedural blueprint, every intercompany IT cost reimbursement is clear, traceable, justified, and protected across Income Tax, GST, and Companies Act regimes.

Structuring Non-Taxable Intercompany IT Cost Reimbursements in India

By CA Surekha S Ahuja

Grounded in the Invesco Ruling (Delhi ITAT, 2025)

“Compliance has no shortcuts. It rewards those who choose clarity over convenience and structure over improvisation.”

Introduction — Why This Topic Matters Today

In a world where companies operate on integrated digital infrastructure, group entities routinely depend on centralised IT systems managed by a parent or global shared services centre. These arrangements often involve cost pooling and subsequent cross-border reimbursements.

However, Indian tax authorities frequently seek to recharacterise such reimbursements as technical service fees or income-bearing payments. This leads to prolonged litigation, withholding tax exposure, GST disputes, transfer pricing challenges, and even Companies Act-related non-compliance findings.

The 2025 Delhi ITAT ruling in Invesco Holding Company (US) Inc. v. ACIT brought long-awaited clarity. It affirmed that when IT support is routine, non-strategic, and does not transfer technology, and when recoveries are cost-to-cost with no profit element, the payment is not taxable in India.

This Guidance Note distils the Invesco principles into a unified compliance framework that integrates Income Tax Act, DTAA, GST, Transfer Pricing, and Companies Act obligations—ensuring that intercompany IT reimbursements are structured flawlessly and defended confidently.

Essence of the Invesco Ruling

Delhi ITAT deleted a ₹54.85 crore addition by holding that:

1. The IT services provided were routine operational support such as helpdesk, access management, monitoring, and standard application assistance.

2. These services did not make available any knowledge or capability to the Indian entity as per Article 12(4)(b) of the India–USA DTAA.

3. The cost-sharing model involved actual pooled costs, with clear allocation keys and no markup.

4. The payments were therefore pure reimbursements, not consideration for services.

5. As per Section 90, the DTAA override applied, making the amounts non-taxable.

This ruling now guides how multinational groups should structure their IT reimbursement mechanisms.

Income Tax Treatment Under Section 9, DTAA Article 12 and Section 195

1 Domestic Law View

Section 9(1)(vii) deems technical services income to accrue in India. The definition is expansive and can capture anything remotely technical unless carefully structured.

However, income tax applies only where there is income.
A reimbursement without an income component falls outside the charge.

2 DTAA Override

Under Section 90, DTAA provisions prevail if beneficial.
Article 12(4)(b) of the India–USA DTAA taxes IT support only if the services make available technical knowledge, skill, experience, know-how, or processes enabling the recipient to perform the work independently.

Routine IT support does not satisfy this test because:

• the Indian entity continues to remain dependent,

• no proprietary tools or manuals are handed over,

• there is no ability to perform the support independently later.

Thus, the entire mechanism falls outside FIS.

3 Judicial Support

The Invesco ruling sits firmly on a decade of jurisprudence including:

• Bio-Rad (Delhi HC): capability transfer is the essence of “make available”.

• Dassault Systems (Delhi HC): standardised IT support is not FIS.

• XYZ Technology Services, Boston Consulting, and other cases consistently rejecting taxation of routine support under DTAA.

GST Characterisation — When RCM Applies and When It Does Not

GST operates independently of income tax. The central question is: is there a supply of service?

1 When No GST Applies

If the cross-border payment is a genuine cost-to-cost sharing of pooled corporate IT expenditure without:

• any independent service intention,

• any value addition,

• any markup or qualification as a deliverable,

GST does not apply because there is no supply under Section 7 of CGST Act.

For example, where the foreign entity pays SAP license costs, Microsoft subscriptions, cybersecurity subscriptions and then proportionately bills affiliates, it amounts to pure reimbursement of pooled expenditure.

2 When GST Under RCM Applies

Reverse charge applies when the foreign entity actually performs IT support or IT-enabled functions for the Indian entity.
Here, even if tax authorities accept the cost-to-cost nature for income tax, GST may still apply because GST law is supply-driven.

Typical services that may attract RCM include:

• helpdesk management,

• real-time network monitoring,

• cybersecurity alert handling,

• software troubleshooting.

RCM GST is neutral as the Indian entity can typically claim full ITC, provided documentation is in order.

3 GST Documentation Requirements

• A valid intercompany agreement.

• Monthly cost allocation sheet.

• Self-invoice under RCM if applicable.

• Books classification: import of services or cost reimbursement based on nature.

• ITC claim records.

Companies Act Alignment — A Critical but Often Ignored Angle

Intercompany reimbursements are related party transactions under Sections 177 and 188.

Key compliance components include:

1 Approvals and Governance

• Audit Committee approval for all related party transactions.

• Board approval where required.

• Disclosure in financial statements under Ind AS 24 or AS 18.

2 Arm’s Length Standard

Even if the tax position treats it as reimbursement, Companies Act demands fairness and transparency.
A brief TP benchmarking note showing the reasonableness of cost allocations supports compliance.

3 Documentation Sync with IT and Finance

The organisational risk arises when:

• IT team signs technical SLAs with service language,

• finance team records as reimbursement,

• tax team claims pure cost-to-cost.

This inconsistency has been a frequent litigation trigger.
A single aligned agreement and consistent descriptions across all filings is essential.

The Structuring Blueprint — How to Design a Non-Taxable, Fully Compliant Cost Reimbursement Arrangement

1 The Agreement

The agreement should reflect:

• the purpose of cost contribution for centralised IT systems,

• explicit statement of zero markup,

• definition of cost pool components,

• transparent allocation keys (headcount, usage, bandwidth, revenue share),

• clear articulation that services are routine and operational,

• explicit confirmation that no IP, manuals, or capability is transferred,

• affirmation of continued dependency of Indian entity.

An agreement drafted with precision is the strongest evidence against tax recharacterisation.

2 Nature of Activities

Activities should be described as:

• support,

• monitoring,

• operational handling,

• administrative assistance.

Avoid descriptive terms like:

• consultancy,

• strategic review,

• system design,

• solution architecture.

These words have historically triggered FIS disputes.

3 Cost Pool Validation

Maintain:

• vendor invoices forming the cost pool,

• payroll allocation for IT teams,

• annual certification by independent auditors,

• cost allocation computation worksheets,

• internal benefit memos from IT heads.

A thorough evidence chain is the backbone of the tax position.

4 Withholding Tax Protocol

Once DTAA non-taxability is established:

• obtain TRC and Form 10F,

• CA certificate confirming DTAA Article 12 non-taxability,

• file Form 15CA/CB,

• retain communication trails,

• maintain folders for each remittance.

Consistency and documentary sufficiency are key to preventing Section 201 exposure.

Transfer Pricing Reporting

Even though the transaction is cost-to-cost, it remains an international transaction.
Therefore:

• report in Form 3CEB,

• justify allocation keys through FAR analysis,

• demonstrate that services generate operational benefit,

• maintain contemporaneous documentation.

This prevents TP adjustments and strengthens income tax defence.

Litigation Prevention and Assessment-Ready Position

A robust compliance repository should include:

• the IT cost-sharing agreement,

• complete cost pool evidence,

• allocation basis justification,

• IT support logs,

• MIS dashboards,

• cost-benefit notes prepared annually,

• GST and income tax filings synchronized with each other.

Every word in every document must tell the same story.

Conclusion — The Compliance Perspective

“In cross-border taxation, the narrative must be as strong as the numbers and the structure must speak before the scrutiny begins.”

Intercompany IT reimbursements can be legally and safely treated as non-taxable when based on a pure cost-sharing model, supported by the DTAA’s “make available” principle, and aligned with GST and Companies Act requirements.
The Invesco ruling provides the industry with a clear judicial foundation.

With the right structuring, documentation, and internal alignment, companies can secure tax certainty, minimise litigation risk, and ensure complete regulatory compliance for years ahead.

The Virtual CFO: Guardian of Legacy, Architect of Growth, Catalyst of Family Prosperity

By CA Surekha Sahuja

A Virtual CFO doesn’t just manage wealth—they sculpt a legacy that thrives across generations

In today’s rapidly evolving Indian business landscape, family offices are no longer passive entities. They are strategic engines of growth, cohesion, and legacy preservation. At the heart of this transformation stands the Visual CFO—a visionary leader who combines financial mastery, strategic foresight, and emotional intelligence to protect and grow family wealth.

A Virtual CFO does more than manage numbers. They orchestrate strategy, governance, investments, and family dynamics. They transform complexity into clarity and fragmented assets into cohesive, purpose-driven prosperity.

Virtues That Transform Legacy and Growth

A Visual CFO’s impact stems from their blend of intellect, foresight, and integrity. Their virtues drive the long-term success of both the family and the business:

Virtue	Strategic Value
Visionary Thinking	Anticipates market trends, aligns investments with family goals, and channels capital into ventures that create lasting impact.
Strategic Stewardship	Integrates governance, succession, and risk management for sustainable wealth continuity.
Analytical Excellence	Uses ERPs, BI dashboards, and FP&A tools to optimize resources and uncover hidden inefficiencies.
Emotional Intelligence	Reconciles diverse aspirations, fosters trust, and strengthens family cohesion.
Responsibility & Accountability	Safeguards assets, turning fragmented wealth into coherent, actionable strategies.

These virtues make the Visual CFO the linchpin of modern family offices, uniting wealth, governance, and legacy under one strategic vision.

How Visual CFOs Drive Growth and Safeguard Legacy

Visual CFOs provide full-spectrum financial and strategic leadership, touching every facet of family wealth:

Strategic Financial Planning & Advisory

• Mapping all assets, liabilities, and investments.

• Optimizing capital allocation across businesses, real estate, startups, and financial instruments.

• Scenario planning and stress-testing portfolios.

• Succession planning for seamless intergenerational wealth transfer.

Investment Management & Risk Oversight

• Portfolio diversification: equities, debt, real estate, private equity, alternatives.

• Mitigating financial, operational, and regulatory risks.

• Real-time performance tracking using KPIs and dashboards.

• ESG and impact investing aligned with family values.

Governance & Compliance

• Board reporting, family council support, and strategic committee coordination.

• Tax structuring, cross-border compliance, and regulatory navigation (Companies Act, FEMA, SEBI, RBI).

• Internal control frameworks and audit readiness.

Operational & Financial Integration

• ERP and BI system implementation for real-time visibility and automation.

• Cash flow and working capital optimization.

• Intercompany fund flow management.

• Cost and efficiency improvement initiatives.

Philanthropy & Social Impact Advisory

• Structuring charitable trusts, foundations, and giving programs.

• Aligning philanthropy with family values and tax efficiency.

Typical Fee Structures

Visual CFO services are premium, yet value-accretive:

Type	Typical Range / Notes
Annual Retainer	₹25 lakh – ₹1 crore+, depending on family size and complexity.
Monthly Fee	₹2 lakh – ₹10 lakh for smaller or multi-family offices.
Project-Based / Consulting	₹5 lakh – ₹50 lakh+ for restructuring, succession planning, IPO readiness, or strategic initiatives.
Performance-Linked	Part of remuneration tied to investment performance or operational efficiencies.
Expenses & Technology	Additional for ERP/BI tools, software, or outsourced support.

Multi-family offices can share CFO expertise, reducing costs while maintaining high-level guidance.

Real-World Transformations

Murthy Family – Catamaran Ventures
The Visual CFO orchestrates diversified investments, entrepreneurial ventures, and philanthropy. Capital flows efficiently, compliance is ensured, and social impact is maximized—creating a legacy of wealth and purpose.

Leading Indian Conglomerate
Embedding a Visual CFO across legacy businesses, startups, and real estate optimized cash flow, unlocked bottlenecks, and enabled smooth succession. Leadership transitions occurred seamlessly, preserving family harmony and enterprise value.

Multi-Family Offices
Smaller families now access premium CFO expertise, enabling structured investment decisions, robust tax planning, and risk management—unlocking value previously inaccessible.

Why Every Family Office Needs a Visual CFO

A Visual CFO delivers multi-dimensional value:

• Financial Clarity: Real-time visibility of assets, investments, and businesses.

• Compliance & Tax Excellence: Confident navigation of Indian and global regulations.

• Strategic Growth: Identify opportunities, optimize capital, and enhance returns.

• Legacy Preservation: Align family interests and ensure intergenerational cohesion.

• Peace of Mind: Families gain confidence that wealth, vision, and values are protected.

They turn wealth management from a reactive task into a proactive, visionary enterprise, creating tangible and intangible returns that endure for generations.

The Strategic Imperative

In today’s volatile, globalized environment, a Visual CFO is not optional—it is essential. They are guardians of legacy, architects of strategy, and catalysts of generational prosperity.

Families who embrace a Visual CFO:

• Convert fragmented wealth into cohesive, growth-oriented strategy.

• Navigate complex economic, regulatory, and technological challenges confidently.

• Ensure smooth succession and intergenerational alignment.

• Align wealth with values, purpose, and long-term vision.

A Visual CFO ensures family offices not only endure but lead, turning wealth into a lasting, purpose-driven legacy.

Conclusion

The Visual CFO is the heartbeat of a modern family office. Combining analytical rigor, strategic foresight, emotional intelligence, and disciplined governance, they ensure that family wealth is protected, optimized, and purposefully directed.

They are strategists, guardians, and visionaries—transforming scattered financial resources into cohesive, thriving, and sustainable family enterprises.

"The right CFO doesn’t just manage numbers—they safeguard legacy, cultivate growth, and shape the future for generations to come."

Ultimate Professional Guidance Note on GSTR-9 and GSTR-9C (FY 2024-25)

By CA Surekha S Ahuja

Complete Procedural, Law-Anchored and Audit-Proof Guide 

The annual GST compliance for FY 2024-25 has been significantly reshaped through Notification 16/2025 dated 17 September 2025 and Circular 246/03/2025. With enhanced ITC segmentation, stricter mismatch reporting, and automated scrutiny modules, professionals must adopt a highly structured, defensible approach to GSTR-9 and GSTR-9C to avoid audit objections, interest exposure, and late fee escalation.

Applicability and Filing Framework

GSTR-9 is mandatory for businesses with aggregate turnover above ₹2 crore, while GSTR-9C is mandatory for turnover above ₹5 crore. GSTR-9C is self-certified where applicable. Filing is considered complete only when both forms, where applicable, are successfully submitted.

Certain categories remain exempt, including Input Service Distributors, TDS/TCS deductors, casual taxable persons, non-resident taxable persons, OIDAR suppliers, and foreign airlines (for GSTR-9C only).

Professional Insight: Filing completeness requires careful attention to both thresholds and exempt categories. Misreporting applicability is a common trigger in audits.

Pre-Filing Documentation and Reconciliation

Successful GSTR-9 and GSTR-9C filing starts with robust documentation. Required working papers include:

For GSTR-9:

• GSTR-1, IFF, and GSTR-3B filings for FY 2024-25

• GSTR-2A/2B reconciliation

• Complete sales and purchase registers

• Debit and credit notes

• Import data and reverse charge inward supply (RCM) workings

• HSN summary, including 6-digit for turnover > ₹5 crore and 4-digit for B2B up to ₹5 crore

• Payment challans and DRC-03 where applicable

Additional for GSTR-9C:

• Audited financial statements

• Trial balance and ledger extracts

• GSTIN-wise turnover split by state

• Fixed asset register

• Expense-wise ITC eligibility and mapping sheet

• RCM and import ITC workings

• Management representation letter

Professional Insight: Well-maintained pre-filing documentation forms the backbone of a defensible annual return and GST audit. Each reconciliation should be supported by working papers ready for scrutiny.

Outward Supplies and Turnover Reporting

Outward supplies reported in Tables 4 and 5 must reconcile B2B, B2C, export, and SEZ supplies with GSTR-1. RCM inward supplies in Table 4G must match Tables 6C and 6D to avoid mismatch flags.

Non-taxable, exempt, and nil-rated supplies must be accurately reported. The final turnover is the sum of taxable and exempt supplies, less RCM inward supplies.

Professional Insight: Turnover misreporting is one of the highest scrutiny triggers. All adjustments such as credit notes, advances, unbilled revenue, and deemed supplies should be reflected consistently in books, GSTR-9, and GSTR-9C.

Input Tax Credit (ITC) – The Critical Focus Area

ITC is the most scrutinized area in FY 2024-25. New segmentation requires reporting:

• Table 6A1: ITC of earlier years claimed in the current year

• Table 6A2: Net ITC for the current year

• Table 7A1: Rule 37A reversals for suppliers not filing returns by 30 September

• Table 8H1: Import ITC claimed in the next FY

Reversal checks:

• Rule 37: Non-payment by 180 days

• Rule 37A: Supplier non-compliance

• Rule 42/43: Exempt/blocked use

• Section 17(5): Blocked credits

Reconciliation Process:

• Compare auto-populated GSTR-2B with book ITC

• Ensure first-time claims of next FY are only in Table 8C

• Differences must be classified under Tables 8E or 8F

• Identify ineligible, unclaimed, or excess ITC

Professional Insight: Automated GST scrutiny flags ITC mismatches, overshoot claims, and Rule 37/37A discrepancies. Each claim must have supporting invoices, ledger evidence, and reversal calculations.

Tax Liability and Amendments

Tax, interest, and late fees reported in Table 9 must reconcile with GSTR-3B filings. Negative liability adjustments and additional DRC-03 payments for any under-reported liability must be verified.

Amendments made until 30 November 2025 must be reported under Tables 10–13, which are now mandatory. Ensure all differences due to valuation adjustments under Section 15 are explained.

HSN Reporting

HSN classification is crucial. Six-digit HSN is mandatory for turnover exceeding ₹5 crore, and four-digit HSN for B2B supplies up to ₹5 crore. Inaccurate HSN mapping is a frequent audit trigger.

GSTR-9C – Reconciliation Statement

GSTR-9C begins with audited financial statements and reconciles:

Turnover: Adjust for unbilled revenue, advances, deemed supplies, and credit notes. All differences must have clear explanation.

Tax Liability: Rate-wise reconciliation (5%, 12%, 18%, 28%) and forward/reverse charge matching. Any additional liability must be paid via DRC-03.

ITC: Map book ITC to GSTR-9 figures, identify ineligible, unclaimed, or excess ITC, and maintain expense-wise ITC mappings. This is especially critical for capital goods and blocked credits.

Professional Insight: Reconciliation statements are the first document auditors examine. Every difference must be supported by workings and ledgers.

High-Risk Scrutiny Points

• Turnover mismatches between GSTR-1, GSTR-3B, and books

• ITC mismatches across GSTR-2B, books, and Table 8B

• RCM mismatches between 4G and 6C/6D

• ITC blocked under Section 17(5) claimed erroneously

• Rule 37 and 37A non-compliance

• HSN mismatches

• Wrong reporting between Table 6H and 8C

• Unreconciled liability in Table 9R of GSTR-9C

Automated scrutiny detects overshoot, leakage, amendment patterns, and mismatch trends.

Late Fee, Interest, and Critical Deadlines

Late fees vary by turnover:

• Up to ₹5 crore: ₹50/day, capped at 0.04% of turnover

• ₹5–20 crore: ₹100/day

• Above ₹20 crore: ₹200/day, capped at 0.50% of turnover

Interest at 18% applies to additional tax liability.
ITC claims and amendments must be completed by 30 November 2025, and GSTR-9/GSTR-9C filing is due 31 December 2025.

Professional Filing Strategy

• Reconcile GSTR-1 with books and GSTR-3B before starting GSTR-9

• Validate book ITC against GSTR-2B monthly

• Review Rule 37 and Rule 37A supplier compliance

• Ensure RCM liabilities and claims match

• Verify HSN codes across ERP, GSTR-1, and GSTR-9

• Prepare a detailed reconciliation workbook

• Maintain expense-wise and supplier-wise ITC sheets for GSTR-9C

• Save ARN receipts and working files for audit defense

Post-filing, ensure all Tables 12 and 13 are mapped to next year’s ITC claims.
Conclusion

FY 2024-25 introduces unprecedented ITC segmentation, stricter mismatch reporting, and automated scrutiny, making disciplined reconciliation indispensable.

Professionals must adopt a structured, documentation-heavy, and law-compliant approach, ensuring all turnovers, ITC, reversals, amendments, and HSN codes are reconciled.

A fully reconciled and defensible GSTR-9 and GSTR-9C will minimise audit queries, interest exposure, and late fee risk, positioning the business for smooth compliance under the latest GST framework.