Illuminating facts of payroll processing

For any organization, one of the most crucial tasks is payroll processing with complications paving way as tax regulations as well as compliances. Also, incorrect computation of worker benefits can wreck the timing and accuracy of one’s payroll system. Payroll is a list of particulars of employees of the company including the amount they are to be paid. Human resource, for any organization, is the paramount resource and paying them for the work performed by them is not a choice but an obligation for the organization.
Nonetheless, it is paradoxical not to encounter any challenges when an in-house payroll system or outsourced payroll process hits rock bottom. Outsourcing payroll processing has gained immense popularity these days. Both in-house and outsourced services have scope of improvement to enable timely payments to the employees. Here are few tips to aid the process of payroll for all types of business organizations:

• Understanding taxation policiesPayroll procedure, if misjudged, can result in penalties. The only way to avoid such casualties is to have a lucid grip on tax laws and assimilating the same into the payroll process. Additionally, only a payroll compliant with the Indian laws will have legal existence in the eyes of law. This process should be undertaken typically during every pay cycle. In this era of constant change in rules and regulations, an outsourced payroll process will take a lot of burden off your shoulders. If going for in-house payroll process, one must be prudent on any amendments in tax laws to keep oneself abreast of any unforeseen event.
  
• Creating an explicit schedulePayroll is a persisting and exhaustive process that must be handled or prepared in a way that is systematic as well as recurring. It is pivotal for enterprises to have explicitly expounded almanac including all the guidelines and deadlines. Deadlines enable the staff to be focused also, payroll specialists do not have to rush working with confusion and stress which could swiftly accelerate into incorrect data filing. One such solution for mitigating this problem is by creating adequate time to have the job done, a stringent schedule could be of immense importance in this regard. For effectiveness and efficiency, try inculcating all the steps of the process in your schedule and allow oneself a realistic time frame.
  
• Conducting frequent checks and auditsIf your payroll department being susceptible to constant employee complaints, it is time for an audit of the whole processing system. The most foolproof method is by diagnosing and treating the wounds through an extensive workflow analysis. Efficient work operations, proper integration of payroll software and determination of whether or not time management of an employee is a snag that is tripping the process are the constituents of an efficacious audit.
  
• Transparency in approachTransparency in set standards, policies and procedures mitigates inconsistencies that arise as a result of misunderstanding of the payroll structure by the employees. Such misunderstandings are a result of inadequate representation or non-disclosure of pay policies to the employees. Staff members too can assist you in daily operations related to employee misclassification or underpaid taxes. The business should specify comprehensive policies and communicate the same to all the employees. This will develop employee’s understanding on how payroll process works, employees are classified or salaries are determined.
  
• Rendering online accessCreating an online presence is a crucial step for all business houses these days. One can upload the information regarding the organization, prior or current pays to employees, etc. and provide online access to all the employees. This enables employees to absorb more information about the entire system resulting in significant reduction in time used for educating them or responding payroll related enquiries. Online payroll system can also be integrated with accounting structure to create precise and accurate payroll results.
  
• Outsourcing payroll processIn-house payroll processing is not viable in case of small business houses because of comparatively lesser resources for investing in a building or in-house payroll office and time constraints for perpetually updating the previously ascertained records. Consequently, a professional full-fledged payroll management company can prove to be a strategic and worthwhile alternative. If opting for outsourcing payroll processing activities, one is more likely to secure and divert time, resources and energy on other thriving and developing opportunities.
  
• Upgrading already installed softwareErratically, all one needs is to upgrade already installed payroll processing software. Resultantly it diminishes wastage of time as well as streamlines entire payroll process for the business. The already installed software might be an older version and hence taking time to perform tasks thus delaying the whole process. New technology is developed and hence accurate, efficient and swift in processing data. Payroll software might cut off workload into half, however, one cannot rely completely on a computer program solely as it will not absolutely solve all the process issues.

Understanding and decoding constantly changing payroll compliances might prove to be a tedious task. Thus, if your company has employees working varying amounts of hours each month or has a significant turnover rate, hiring payroll professionals can be a time-saving and cost-effective alternative to internal processing. Our payroll professionals can help you to improve transparency of operations letting you spend more time and resources on critical business functions.
Our team can also assist you in setting up your business in India, accounting, bookkeeping, auditing, taxation, secretarial compliances, trademark registration, business structuring and advisory services. If you require any assistance or would like to know more about payroll, kindly click here

Impediments to Income Tax Act for assessment year 2019-20

The thrust of framing amendments in Income Tax Act (“IT Act”) was on social infrastructure, ease of living, and technology-led governance aiming at inclusive and equitable growth which means greater public expenditure. With the following trends of market, IT Act ought to be updated from time and onwards. Following are the amendments made to the IT Act with effect from assessment year 2019-20:

• Conversion of stock-in-trade into capital asset
  In accordance with section 2 (24), a new sub-clause (xiia) has been appended, stating fair market value of inventory to be included in income.
• Modification in terms of employment
  Sub-clause (xviib) introduced in section 2 (24) will include any compensation or other payment referred to in section 56 (2) (x).
• Determination of period for which the capital asset is held by the assesse
  In reference to section 2 (42A), new sub-clause (ba) has been introduced to provide conversion of inventory to be treated as a capital asset. The holding period shall be enumerated from the date of its conversion or the treatment. For the purpose of section 2 (42A), “equity oriented mutual funds” will have the same meaning assigned to it in section 112A.
• Aligning the scope of business connection with modified permanent establishment (PE) Rule as per multilateral instrument
  According to section 9 (1) (i), a person acting on behalf of a non-resident should commence any business activity to halt contracts or habitually plays the principal role leading to pinnacle of the contracts by the non-resident.
• Business connection to include significant economic presence
  Economic presence in India shall also aggregate business connection. For this purpose significant economic presence shall include:
• - Any transaction regarding any goods, property or services undertaken by a non-resident in India including provision of downloading any software or data in India provided the accumulation of payments arising from any such transaction (s) exceeds the prescribed amount at any time during preceding year; or
• - Imploring of its business operations, systematically and continuously; or
• - Interacting with number of prescribed users in India via digital mode.
• Standard deduction
  Interpolation of sub-clause (ia) in section 16 states standard deduction for amount decided INR 40,000 or the amount of salary, whichever is lower in reckoning income accountable under the head “salaries”.
• Deduction in respect to any market loss
  There are certain deductions that are under the head of “profits and gains of business or profession”. Sub-clause (xvii) conditions deduction in accordance with Income Computation and Disclosure Standards (ICDS) in respect to market loss shall be allowed.
• Cost of acquisition
  Cost of acquisition shall be deemed to be the fair market value which has been taken into account for the purpose of section 28 (via).
• Stamp duty value exceeds 105% of consideration
  According to section 56 (2) (X), the statement will be pertinent if a person removes an immovable property from any person. Also, subduction value between consideration and stamp duty value is more than INR 40,000.
• Standard deduction for medical insurance on senior citizens level
  According to Section 80D, deduction of INR 30,000 shall be permitted for a senior or super senior citizen.
• Incentive for employment generation
  The minimum number of days of employment in the years of employment shall be 150 days in place of 240 days.
• Conditions for section 80PA
  The assesse is a producer company under section 581 A, total turnover is less than INR 100 crores in any previous year.
• Failure to furnish return
  Provision to section 276CC administers that a person shall not be proceeded under the said section for dilapidation to furnish return if the tax payable by him on the total income determined on regular assessment (as reduced by advance tax / tax deducted at source) does not exceed INR 3,000

The above forecast highlights some areas which can be of great value for improving Indian income tax system. Rationalisation of tax rates, timely disposal of taxes, and upgradation of technology and tax regimes can help in improvement in tax administration. These changes in IT Act endeavour an extensive pre-lustration of different aspects of IT Act in India, but still there is a scope for further research in income taxation. Moreover, some studies conducted to examine various aspects of IT system and perception of professionals and taxpayers can be an addition to get a better IT Act regime. If you require any assistance in your tax compliances, tax computation, return filing, tax assessments or would like to discuss the above amendments further, our team of tax experts can assist you.
Our team can also assist you in setting up your business in India, accounting, bookkeeping, payroll, auditing, taxation, secretarial compliances, trademark registration, business structuring and advisory services. If you require any assistance, kindly click here

Genesis of a business entity

India is the fastest growing economy and a substantial recipient of foreign direct investment (FDI) globally. Among all, India shines to be the most stable economy claiming 100th
spot in World Bank’s recently released Ease of Doing Business rankings. In addition to this, Make in India campaign, startup India and digital India has been a welcoming change. In order to reap the benefits of the fast growing economy, varied forms of business organizations are set up for doing business in India and are flourishing. Below mentioned is a brief connotation to incorporate an entity.
Incorporation of an entity idea suggests forming a new entity formally recognized by your state of incorporation. After establishing your business, it becomes a legal business entity distinct from the persons who formed it. These are the 3 key regions any business entity should acknowledge:

• Distinctive element- An association should make its segments distinctive which makes it contrasting from other companies.
• Descriptive element- This targets on type of activities and business, an entity follows.
• Legal ending- Any constituent that proves an entity’s existence in legal terms to succeed any claim is legal ending.

An entrepreneur can choose any of the following forms to register its business in India:

• Public limited company - It is an association holding minimum 7 members with no restriction on transferability of shares or minimum capital requirement.
• Private limited company - It is an association possessing 2 to 200 members and an ironclad restriction on transferability of shares.
• Company limited by guarantee - It requires no share capital or shareholders , only members who act as guarantors can take part in contributing a nominal amount at the time of winding up of the company.
• Unlimited company - It is a company where the legal liability of the members or shareholders is not limited and incorporated with or without the share capital or shareholders.
• Section 8 company - These are the limited companies established under the Companies Act and granted an exclusive license by Government under Section 8 association. It is a non-profit organization acquiring numerous tax benefits which are availed under Section 80G of Income Tax Act, 1961. They delight in minimal stamp duty structure and do not require much share capital. Funding for such organizations comes from subscriptions or donations made to them.
• Limited liability partnerships (“LLP”) – In a LLP, the liabilities are limited for all partners up to an extent.

Apart from the above, following entities can also be entitled to undertake business activities in India:

• Associate company – It is a company which provides another company a significant portion of voting shares.
• Subsidiary company - A corporation holding more than 50% of shares in a company. It becomes part of parent company to provide parent with explicit synergies especially taxation benefits, diversified risk, equipment and property.
• Foreign company – It is an entity that is incorporated in abroad but also holds a place in domestic country by conducting any business activity in various specified manner.
• Liaison office - It functions as a representative office primarily set up to explore and understand the business and investment climate. For establishing a liaison office in India, a profit-making track record during the immediately preceding three financial years in the home country and net worth of not less than USD 50,000 or its equivalent is required.
• Branch office - It is a location other than head office where business is conducted. A profit making track record during the immediately preceding five financial years in the home country and net worth of not less than USD 100,000 or its equivalent is required.
• Project office - For establishing a project office in India, the project is funded directly by inward remittance and cleared by an appropriate authority.

Following prerequisites need to be followed while establishing an entity:

• Resilience – Align your goals with a proper configuration so as to support the growth cycle and development of the association.
• Liability – Corporation carries least amount of personal liability, since the law holds that it is its own entity.
• Taxation – In early stages of incorporation, avoid double taxation. You can pay personal taxes, social security and medicare, on your personal return for what you were paid throughout the year.
• Control – A board of directors is constructed so as to keep an inspection and audit to ensure that ethics and regulations are followed accordingly.
• Capital investment – Obtain outside or inside funding alike selling stock of shares or using personal credit.
• Licensing – Specific licenses and permits are required to register your association at local, state and federal levels.

India is a favorable business destination globally because of its growing middle class, large pool of skilled english speaking manpower and minimal labor cost. Entirely, the concept of incorporation is advantageous to business and owners in easy transfer of ownership to another party, achieving a lower tax rate than on personal income, and receiving more lenient tax restrictions on loss carry forwards.
If you are looking forward to establish your business in India, we can offer a comprehensive range of professional services including registration process, business structuring, advisory services, tax planning and statutory compliances as per your business requirements.
Our team can also assist you in various other services including bookkeeping, auditing, internal audit, trademark registration, tax audit, payroll compliances, management audit, STPI registration, statutory audit, income tax, tax planning, setting up of virtual office, direct taxes, service tax, Delhi value added tax, sales tax, company formation, business consultation, company registration / incorporation in India, corporate compliance, foreign branch / liaison office registration. For detailed discussion or assistance in compliance related issues, kindly click here