Managing StartUps with Regular Compliance – Virtual CFO

We have many inspiring stories that have given birth to budding entrepreneurs and in turn, have inspired a generation of young minds to solve complex practical issues of life and thus create a living for self and also employment for society.

Startup India is also a govt initiative to promote and nurture entrepreneurship across the country. As per Startup India Program, the main focus is to promote bank financing and encourage startups with newer business ideas and thus help the Govt in the moto of job creation.

Therefore Start-ups not only cross new horizons on their business but also need to keep the requirements of other stakeholders like Govt. Compliance, Banks, FI’s, Auditors, Investors like HNI, PE or VC’S.

Again, Finance is often ignored in most of the start-ups as the focus is always on getting business, model validation & tech enablement.
Its often seen that there is a huge chunk of money remaining either unutilized or being spent on unwanted penalties which are often overlooked within the given due dates and compliance calendar.

Common Asks:-

Basic Requirements mainly stems around say accounting, finance & compliance on a day to day basis
Other growing organizations may have constant requirements for Cash Flow Management & Project Management
Again some established setups may require a complete control on Inventory Management or a constant watch on Working Capital Requirements

Again, Start-ups go through the cycles of their own, in terms of starting high and growing multiple times and again a few of them ending with no salaries to pay, failing on compliances.
Often the business managers depend on excels and all calculations are done with no focus on actual tax filings, regulations or cash management.
Therefore, no matter whatever it is, Budding entrepreneurs are always on their toes to keep up the pace with compliance n certification.
Hence the Finance function should be taken perhaps a bit on individual perspective

Model:-

Idea is to start small and simple with minimal compliance and then build big as per customer profile, business operations, nature of transactions, etc.
Sometimes projects are it with Govt or some large corporate (domestic or global )drives the registration process or other times it is decided by the Investors and their involvement including entry-exit criteria.
We @ Certicom suggest starting lean with minimal compliance & then build as per Growth path as the transition is handhold-ed to the Directors and partners with end to end support.

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Will the New Optional Tax Regime, affect Tax Savings in Larger India??

Budget 2020 – Optional Tax Regime and Side Effects.

Its argued that with an option to choose Tax model as per Budget 2020, Individuals may have lower incentives to save which can impact long term savings in India. It augurs well for the Govt, considering we are in relative slowdown times and look to boost consumption.

As against the Wishlist of a few for a New TAX Savings bond, the new option does not incentivize the bonds and all the more, assesses’ are induced towards reduced taxes for no deduction overall.

Much discussed but perhaps not so acknowledged issue of low demand metrics seems to be addressed by the new tax method as it enables citizens to choose rather than forced save for taxes.

Changing Habits:-
Saving habits are already changing with lifestyle changes and digital ways of living.
As per a recent study, there is a marked reduction in Indian savings from erstwhile 36% in 2012 to just about 30% currently.
However, the big question among all is that, whether the tax incidence on lower and lower middle class reduces overall in absolute terms? During these times of slowdown where Govt is constantly looking for more revenue sources, perhaps the idea is to move towards deductions free regime with simplified tax model which can engulf more Indians in the tax net with a specific eye on the largely let off businesses so far & the unorganized sector.

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TCS on Foreign Tours & Travel:- Income Tax Amendment 1st April 2020

 TCS on Foreign Tours & Travel

As they say, the devil lies in the details, Budget 2020 has got a lot of catches to relate to. One of the important ones is that our FM Nirmala Sitharaman has seemed to have zeroed on folks traveling abroad on foreign tours & travel, their travel plan being booked by travel agents as part of small holiday packages. This is very common now in both Govt & Private Sector employees.

Union finance minister Nirmala Sitharaman has raised alarm bells for those who travel abroad on tour package booked by others, which is a common trend to oblige senior officials in government and private sectors in the country.

Come, April 1, 2020, every foreign traveler will have to pay 5% (PAN holder) and 10% (non-PAN holder) TCS (Tax Collection at Source) on the total amount of tour package. Once the TCS is charged, total income for individuals will automatically be grossed up as liability & thus a large entity will be encircled with the realms of Income-tax department, which often escapes the TAX FILED income as per IT RETURN.

Earlier provision to mention passport number in ITR is now given more teeth to levy a tax on a large number of people, who go abroad on leisure trips several times in a year.

More often than not, there is black money involved as trips are often financed by the business houses in return for undue favors from bureaucrats, govt officials and other business entities in society. Trips can be a form of bribe or enticement in return for the aforesaid work insight.

As it may look, that every foreign visitor whether he is an income taxpayer or not will now be part of the tax gambit. However, there is a relief for people whose annual income is under the threshold limit (under Rs 5 lakh) visits a foreign country. These folks can apply for a refund of TCS from the Dept. of Income-tax.

The move is seen very effective as it will restrain the massive use of unaccounted money into the system via Foreign Tours and large no. of individuals n entities will be added newly to the mainstream Tax System @ GOI.

Industry Impact-

On top of levy of taxes, Govt intends to bank on new-age technology like DATA Analytics, etc. to retrieve information about frequent flyers who often end up spending lavishly on Global tours and travel. 5% TCS is a huge sum on the foreign travel package bill which will increase the burden of this distinctive travel class. Travel Industry is also looking to change and adapt to the new business dynamics. With all this, this can turn to abound to challenging provision for government employees and their family members, doctors, etc. who visit abroad on sponsorship.

Key Changes –
  • Every foreign traveler has to pay 5% and 10% tax collection at sources (TCS) on the total amount of tour package
  • Stop the practice of Concentration of Tour operators with a view of group bookings as an operator  maligning the process with illicit funding via unorganised channels.

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