Income tax compliance in micro finance company should not be neglected in any circumstances. know everything about it now.
A micro finance company compliance notice is mailed or sent to the taxpayers by the income tax department. If the department finds out that the person has taxable earnings but the Income Tax Return (ITR) has not been filed for such income. In this situation the department collects all the data from different sources and then based on their estimation sends notices to people who have reached the desired transactions. This blog provides you the details about Micro finance and Income tax compliance for it.
What Is a Micro-Finance company?
A microfinance company is registered under the central government and is used for the betterment of this society and other important objectives. The Non-Governmental organisation (NGOs) are called microfinance companies registered under the Companies Act, 2013. The members of a microfinance company will not be able to profit from the investment made as an outcome of charitable activities.
The profit which is earned from the company should be invested again in the same company to enhance the undertaken goals of the company. microfinance company has to oblige with all the compliances explained under the Companies Act, of 2013. microfinance companies need to fulfill all the compliances specified by the Government. If a company does not correlate with all the microfinance company compliances, they can end up paying a huge penalty to the Government.
Income Tax Compliance
The person who receives the notice has to give an immediate reply to the income tax department by mentioning the reason why they did not file ITR 2 form
- Log in to the income tax department’s official website or type incometaxindiaefiling.gov.in
- Now click on the ‘Compliance’ menu and click the ‘View and submit option.
- If you have not documented your ITR, then choose the reason for return below the ‘Business has been closed/ no taxable income/ others’
- If you have filed your ITR already but still received this notice – present the ITR by filing the acknowledgment number
- It is also required to submit the compliance from which associates to the transactions which you have managed in the financial year for which the notice has been published.
After furnishing all the above-mentioned details, the taxpayer also has to submit the details of the 3rd party data. This data will be gathered by the when to file Income tax department through several references and then taxpayers would be expected to provide all the features of the reference of income for such agreements that are discussed below:
- Self investment or the expense is out of free Income
- Self investment or expenses is over the accumulated conservations
- Self investment or expenses is out of Gifts or Loan from Others
- Self investment or expenses is out of Foreign profits
- Self income from transactions is free
- Self income from transaction is below taxable restrictions
- Self income from transaction associates to different appraisal year
- Self not remembered
- Other PAN – this is to be assigned if the 3rd party data is associated with another taxpayer
- In such cases, the PAN of the taxpayer is to be compulsory
- Not known – this choice is to be assigned if the taxpayer has no data about such a transaction
- I need more information – This choice is to be assigned if the taxpayer realizes the 3rd party information but requires extra information to submit acknowledgment.
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Annual Compliance Tasks and Other Compliance
Experts at Vakilsearch suggest following the annual Income tax compliance tasks expected to be achieved by micro finance company:
Appointment of an Auditor: Under Section 139 of the Companies Act , 2013, all the companies need to assign an auditor
Maintenance of a Register: The company will be maintaining a statutory register containing loans collected, payments generated, its members, etc as computed under micro finance company Act, 2013
Convening Meetings: Annual general board meeting for the company partners has to be conducted every year without fail
Report by Directors: The managing directors of the company have all the rights to file their yearly annual reports. These reports should document the fiscal information and corporate social accountabilities, in an applicable manner
Financial Statement of the Company: The balance sheet, profit and loss A/C, cash flow records, and other financial affidavits to be documented by the company for the prior financial year
Tax Returns: The income tax returns for section 8 company have to be documented before the 30 of September at the end of every financial year
Filing of Financial Statements: The financial statement shall be documented in the application form (e-FORM, AOC-4) within 30 days from the board meeting by the company partners
Filing Returns: The companies need to file Form16 with the Registrar of Companies (ROC), for filing recoveries within 60 days of the annual general meeting
Click here to Know more: Section 8 Company Registration
Other Compliances
Other than preparing the annual compliance mentioned above, the micro finance company may have to accomplish some other compliance tasks depending on the scenario like
- Director’s consent for (Form DIR 2) to maintain the office within 30 days from the director’s authorization
- Returns form (Form MR-1) within 60 days from the appointment of a managing administrator, executive, or other key managerial broadcasting
Benefits of Annual Compliance
Avoid Penalties: Non-filing of compliances can result in liabilities and fees for the company
Building Trust : A company documenting compliance and publishing financial data on periods improves trust among suppliers, dealers, and buyers
Transparency of Operations : Documenting compliances indicates the original problem prevailing in company systems. Filing of compliances such as financial returns can disclose the financial nature of the company.
Avoid any Legal Issues : Non-filing of compliances can give an increase in legal outcomes such as notice from The Ministry of Corporate Affairs (MCA): https://www.mca.gov.in/MinistryV2/incorporation_company.html therefore one should document compliances on period to prevent any legal difficulties.
Credibility : Compliances make it simple for a company to get economic aid and increase the market value in case the compliances are immediately documented than a company whose compliances are not applicable.
How Vakilsearch Can Help in Annual Compliances of Micro-Finance Company?
Carrying out the annual compliance task is a complex procedure. Even if you miss one of the documents it may result in a penalty. Experts at Vakilsearch handle more than 1000 companies in a month. They ensure that the company is trustworthy and doesn’t face any penalties due to non-compliance.
Our team will file your annual returns and prepare the minutes of board meetings. We provide a share certificate and update the statutory registers. Our experts on your behalf will file directors disclosures to the registrar. We provide a holistic solution but it comes to annual Income tax compliance tasks. Reach out to us right now for any queries.
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