Changes via Company Auditor’s Report Order , 2020 CARO

CARO Reporting, 2020 being notified

MCA has notified particular issues being important & thereby should be reported as per particular norms with the financial statements for certain entities as a part of their audit reports for almost all companies except a few below.

Banking, Insurance, Charitable setups & small cos. or OPC has been kept out of this exercise. Also, some smaller setups with below norms are exempt from this as below –

  • Not a holding or subsidiary of a Public company
  • Paid-up Capital plus Reserves l< 1 Crore at the reporting date.
  • Borrowings less than or equal to Rs. 1 Crore at any time during the year
  • Revenue less than or equal to Rs. 10 Crores in the financial year

Key points of change suggest towards-

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  • Whether the company is maintaining proper records showing full particulars of intangible assets
  • Reporting on revaluation of Property, Plant and Equipment’s by company
  • Reporting of proceedings under the *Benami Transactions* (Prohibition) Act, 1988. i.e. whether the company has appropriately disclosed the details in its financial statements
  • Reporting if the *stock statements filed with banks* are in line with books of accounts, if the company was sanctioned working capital limits in excess of five crore rupees or more from banks or financial institutions. To report any discrepancies of 10% or more in the aggregate for each class of inventory
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  • Report quarterly returns or statements filed by the company with such banks or financial institutions are in agreement with the books of account of the Company, if not, give details
  • Reporting of *investments* in or providing of any *guarantee or security* or granting any loans or advances.
  • Loans overdue for more than 90 days, *evergreening of loans, reporting on any *loan default*, etc.
  • Report on evergreening of loans – specify the aggregate amount of such dues renewed or extended or settled by fresh loans and the percentage of the aggregate to the total loans or advances in the nature of loans granted during the year
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  • Reporting of compliances with RBI directives* and the provisions the Companies Act with respect to deemed deposits.
  • Reporting with respect to transactions not recorded in the books of account but now surrendered or disclosed as income in the income tax proceedings.
  • Report on  balances outstanding at the balance sheet date with respect to such loans or advances and guarantees or security to subsidiaries, joint ventures, and associates
  • Reporting on treatment by the auditor of *whistle-blower complaints* received during the year by the company
  • Reporting on the internal audit system
  • Reporting on cash losses
  • Reporting on the resignation of the statutory auditors
  • Reporting on the uncertainty of company capable of meeting its liabilities
  • Reporting transfer of *unspent CSR* amount to Fund specified in Schedule VII
  • Investment, Guarantee & Security given has been covered now along with loans & Advances – in terms of benefits to the company
  • Clarification required for Non-Disclosure of Properties taken on Lease by the Lessee
  • Auditor has to specifically comment on coverage and procedure adopted as per audit approach Also Materiality has been  defined as 10% or more in each class of Inventory

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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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DPT 3 & Compliance Requirements

A company can accept funds from 18 specified categories which will not be deemed as Deposits under Deposit definition as mentioned in Companies Act 2013. Ministry of Corporate Affairs has defined 18 categories under rule 2 (1) (c) of the Deposit Rules 2014 which are called Exempted Categories. DPT 3-  is a negative return,

MCA vide its notification dated 22.01.2019 notified that every company needs to provide details of funds accepted in previous years under these categories. 

 

Applicability :-

All companies (Except Govt companies and NBFC) are required to file Form DPT 3

Every company needs to file Initial return as on 22.01.2019 on or before 29th June 2019 and then Annual Return as on 31st March on or before 30th June every year.

Timeline :-

For Initial Return – 29th June 2019 and for Annual Return – 30th June 2019.

Initial Return: Amount of outstanding receipt of money or loan by company as on/from 1st April 2014 from any date (after incorporation) to 31.03.2019 under any of 18 specified categories under rule 2 (1) (c) of the Deposit Rules 2014 and it is Outstanding as on 31.03.2019.

Annual Return: Amount of outstanding receipt of money or loan by company as on 31.03.2019 under any of 18 specified categories under rule 2 (1) (c) of the Deposit Rules 2014 to 31.03.2019 and its Outstanding as on 31.03.2019.

There are 18 specified categories under rule 2 (1) (c) of the Deposit Rules 2014

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Prescribed Fee for filing with Late Fee

For , normal authorised share capital – (from Rs. 200/- to 600/- slab) and additional fee – upto 12 times of normal fee depending on delay in filing.

NIL Return is NOT required to be filed

 

Documentation @ DPT3

Mandatory: Signed attached excel sheet by management certifying details to be filled in Form DPT 3.

Recommendatory: Certificate from Statutory Auditors of the company giving details of Outstanding amount to be shown in Return. Since Balance Sheet will be affected with these disclosures.

Additionally,  Net Worth on the basis of Previous Audited Balance Sheet.

Newly Incorporated Company is also required to comply with Law of DPT-3, if any amount/loan accepted as per rule 2 (1) (c ) of Deposit Rules 2014. New company will also be required to file both returns.

Net worth in that case will be calculated as per current year values.

Certicom- Group of Charrtered Accountants
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What If not filed:-

Serious Implications if, management/Auditors are careless and not serious in providing details properly to be filled in Form…

Section 76A of the Companies Act 2013 will be applicable and following penalties will be attracted:

Section 76A. Where a company accepts or invites or allows or causes any other person to accept or invite on its behalf any deposit in contravention of the manner or the conditions prescribed under section 73 or section 76or rules made thereunder or if a company fails to repay the deposit or part thereof or any interest due thereon within the time specified under section 73 or section 76 or rules made thereunder or such further time as may be allowed by the Tribunal under section 73,—

(a) the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than one crore rupees or twice the amount of deposit accepted by the company, whichever is lower but which may extend to ten crore rupees; and

(b) every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years and with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees:

Provided that if it is proved that the officer of the company who is in default, has contravened such provisions knowingly or wilfully with the intention to deceive the company or its shareholders or depositors or creditors or tax authorities, he shall be liable for action under section 447 (Fraud).