How to apply PAN/TAN of a Foreign Company

PAN OF A FOREIGN COMPANY

1.What is PAN

In general speaking, PAN stands for Permanent Account Number which the Indian Revenue Department (Income Tax Department) allot to a Taxpayer / Company whose Income is Taxable in India. However, this is not the only condition. PAN number works in India as Tax Identification Number.

For a comprehensive list of events for which PAN number is required, you can refer Rule 114B by following the below link: https://incometaxindia.gov.in/pages/rules/income-tax-rules-1962.aspx

2 .Documents be submitted by Foreign Company along with the PAN application

Below is the list of documents required for applying PAN number by a Foreign Company in India:

  1. Copy of Certificate of Incorporation,
  2. Copy of Memorandum and Articles of Association,
  3. Copy of 3 month’s bank statement,
  4. Board Resolution favoring the person signing the application.

All these documents should be issued in the country where the applicant is located, duly attested by “Apostille” (in respect of countries which are signatories to the Hague Apostille Convention of 1961) or by Indian embassy or High Commission or Consulate in the country where the applicant is located or authorized officials of overseas branches of Scheduled Banks registered in India; 

Can a Company hold more than one PAN?​

A Company cannot hold more than one PAN. If a PAN is allotted to a person, then he cannot apply for obtaining another PAN. A penalty of Rs. 10,000/- is liable to be imposed under Section 272B​ of the Income-tax Act, 1961 for having more than one PAN.

If a person has been allotted more than one PAN then he should immediately surrender the additional PAN card(s).

What is the penalty for not complying with the provisions relating to PAN?

Section 272B provides for penalty in case of default by the taxpayer in complying with the provisions relating to PAN, i.e., not obtaining PAN, even th​ough he is liable to obtain PAN or knowingly quoting incorrect PAN in any prescribed document in which PAN is to be quoted or intimating incorrect PAN to the person deducing tax or person collecting tax. Penalty under section 272B  is Rs. 10,000.

TAN OF A FOREIGN COMPANY

1.What is the TAN number?

Tax Deduction Account Number or Tax Collection Account Number is a 10 -digit alpha-numeric number issued by the Income-tax Department. TAN is to be obtained by all persons who are responsible for deducting tax at source (TDS) or who are required to collect tax at source (TCS). It serves the purpose of Withholding Tax Account Number in India.

2. Who must apply for TAN?

All those persons who are required to deduct tax at source or collect tax at source are required to apply for and obtain TAN.

Why to apply for a TAN?

The provisions of section 203A of the Income-tax Act require all persons who deduct or collect tax at source to apply for the allotment of a TAN. The section also makes it mandatory for TAN to be quoted in all TDS/TCS returns, all TDS/TCS payment challans and all TDS/TCS certificates to be issued. Failure to apply for TAN or comply with any of the other provisions of the section attracts a penalty of Rs. 10,000/-.

Why is it necessary to have TAN?

TAN is required to be quoted in all TDS/TCS returns, all TDS/TCS payment challans and all TDS/TCS certificates to be issued. TDS/TCS returns will not be received if TAN is not quoted and challans for TDS/TCS payments will not be accepted by banks. Failure to apply for TAN or not quoting the same in the specified documents attracts a penalty of Rs. 10,000/-

What are the documents that need to accompany the TAN application?

Below is the list of documents required for applying TAN number by a Foreign Company in India:

  1. Copy of Certificate of Incorporation,
  2. Copy of Memorandum and Articles of Association,
  3. Copy of 3 month’s bank statement,
  4. Board Resolution favoring the person signing the application.

All these documents should be issued in the country where the applicant is located, duly attested by “Apostille” (in respect of countries which are signatories to the Hague Apostille Convention of 1961) or by Indian embassy or High Commission or Consulate in the country where the applicant is located or authorized officials of overseas branches of Scheduled Banks registered in India; 

In case duplicate TAN has been allotted, Which TAN should be used?

In case duplicate TANs have been allotted, the TAN which has been used regularly should be used. The rest of the TANs should be surrendered for cancellation using “Form for Changes or Correction in TAN” which can be downloaded from the website of NSDL (http://tin.nsdl.com).

About the Author: This article is contributed by CA Rajeev Gupta, Partner – SIGMAC & Co, Chartered Accountants, Location- Delhi NCR and Gurgaon.

In case of any query please feel free to contact us at: rajeev@sigmac.co.in

For more information and updates, you can contact CA Rajeev Gupta or visit our website https://www.sigmac.co.in/my-blog/.

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Disclaimer: This content has been prepared for general guidance of the reader on the matters of interest only. It should not be treated as professional advice. You should not act upon the information contained in this article without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information or provisions of the law contained in this article. Author and/ or SIGMAC & Co., Chartered Accountants, its members, employees and agents accept no liability, and disclaim all responsibility for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this article or for any decision based on it.

Foreign Accounting Function Outsourcing In India

What is Foreign Account Outsourcing in India?

 

Outsourced Foreign accounting is the assigning of accounting, book-keeping and/or compliance work to accounting professionals in another country. Outsourcing helps businesses save time and resources while benefiting from high-quality expert manpower. 

India is a leading country in the outsourcing industry, especially in the accounting and finance sector. India has an abundance of world-class accounting firms, BPO/KPO Companies and experienced manpower. 

To do this, a business owner needs to partner with an outsourced accounting services provider, who will present him or her with qualified candidates. Let’s say this business owner is you. You’ll then have the opportunity to screen, interview and hire the offshore candidates who will form your new global team.

In essence, the service provides you with an accounting department experience. You delegate the day-to-day work you may have been spending hours completing to your global team members. With the time you get back, you can focus on your core business or yourself.

Foreign companies can outsource their Accounting and Finance work to Indian Chartered Accountant (CA) firms to benefit from their cost-effective and quality services.  

What it covers

This depends on individual business needs, budget, etc.

However, there are certain common accounting services that are popular in India, including:

  • Accounts Receivable or Accounts Payable Services.
  • Book-keeping Services.
  • Drafting a Financial Statement.
  • Generating Bank Statements.
  • Controller Services.
  • Company Formation Registration.
  • Financial Planning and Analysis.
  • Cost or Financial Accounting.
  • Fraud or Forensic Accounting.
  • Tax Reporting and Filing.
  • Payroll Processing.
  • General Ledger Maintenance.

Benefits of Foreign Accounting Functions Outsourcing in India

  1. Trustworthy Professionals

There are several benefits when foreign companies outsource their work in India. In India this work can be done by Professional Accountants who are registered with a regulatory body in India (i.e. The Institute of Chartered Accountant of India) who can be trusted by Foreign Clients. The ICAI is one of the largest professional accounting bodies in the world. So, foreign clients can easily trust the registered members (CA) of ICAI.

  1. Access to Finance and Accounting Expertise

Outsourcing of accounting work helps you get the services of highly trained and experienced professionals. Professionals who know the ins and outs of not only accounting, accounting standards and principals but also taxation and how these taxes affect the book-keeping. Outsourcing gives a business owner an opportunity to hire these experts part time and have a comprehensive solution.

  1. Availability of periodical reports on profitability, receivables, payables and many more

Time to Time availability of periodical reports based on requirement. It helps in reviewing business positions from time to time. This allows the users to form an opinion regarding the company’s financial position for the period and the profits it earned. The users calculate financial ratios based on these financial statements and use these results to make decisions regarding extending credit or investing funds. Managers use these financial statements to evaluate their performance for the period and consider potential actions to improve the results.

  1.  Payroll Processing

Payroll is a time-consuming process. By relieving the payroll department of these burdens, these employees can focus on other key areas of the business, such as developing financial strategies that strengthen the company’s competitive advantage. By hiring professionals whose sole responsibility and focus is payroll, you minimize the chances of errors, missed deadlines, omissions, or late payroll tax filings. Payroll providers can dedicate time to resolve any queries or issues your employees may have, speeding up response times.

  1. Cost Savings

Outsourcing the finance department to India ensures that companies can save a good amount of money on their accounting costs. It reduces the expenditure on accounting personnel, who do not have to work on site, and also on the office taken on rent by the client.

  1. Dedicated Relationship Manager

Trust, understanding, and open communication are just some of the few foundations that can build a long-lasting work relationship between a client and an outsourcing company. To create those elements, it begins from key persons from both companies, i.e. the management personnel.

  1. Avoid Turnover and Time-off issues

Outsourcing your accounting and finance processes will also allow you to avoid manpower turnover problems and staff time off. When you are a smaller organization, each team member is vital to the success of the company. When a team member is sick or on vacation, or in the worst-case scenario, they leave, it causes stress and anxiety for remaining employees. When you outsource your accounting and finance to an external company that becomes the company’s problem. That’s not your problem. If the person assigned as contact is out, their team will help you instead, if necessary.

  1. Flexibility to meet business needs

Any business owner will jump at the chance to have more flexibility. When you outsource your accounting needs, you can do just that. You can choose the level of service you need and scale up or down as your business grows or changes. This flexibility is not possible with an in-house accounting department.

  1. Work profile can be customized based on Client’s need

Any business owner may customize its work profile with an outsourcing agency from time to time as per requirement of the businessman.

  1. Clients Data Security

There are a number of computer network security best practices that outsourcing agencies implement to secure their data and build more impenetrable protection against hackers and viruses. There is also so much software available in the market that is used by outsourcing agencies to secure client’s data. Many of these software providers like Quickbooks take a security certificate from the recognized agency. Many method uses by outsourcing agency to secure client’s data like:

  • Physical Network Security

Physical security controls are designed to prevent unauthorized personnel from gaining physical access to network components such as routers, cabling cupboards and so on. Controlled access, such as locks, biometric authentication, access card and other devices, is essential in any organization.

  • Technical Network Security

Technical security controls protect data that is stored on the network or which is in transit across, into or out of the network. Protection is twofold; it needs to protect data and systems from unauthorized personnel, and it also needs to protect against malicious activities from employees.

  • Administrative Network Security

Administrative security controls consist of security policies and processes that control user behavior, including how users are authenticated, their level of access and also how IT staff members implement changes to the infrastructure.

Type of Network Security

  • Network Access Control

To ensure that potential attackers cannot infiltrate your network, comprehensive access control policies need to be in place for both users and devices. Network access control (NAC) can be set at the most granular level. For example, you could grant administrators full access to the network but deny access to specific confidential folders or prevent their personal devices from joining the network.

  • Antivirus and Antimalware Software

Antivirus and antimalware software protect an organization from a range of malicious software, including viruses, ransomware, worms and Trojans. The best software not only scans files upon entry to the network but continuously scans and tracks files.

  • Firewall Protection

Firewalls, as their name suggests, act as a barrier between the untrusted external networks and your trusted internal network. Administrators typically configure a set of defined rules that blocks or permits traffic onto the network. For example, Force point’s Next Generation Firewall (NGFW) offers seamless and centrally managed control of network traffic, whether it is physical, virtual or in the cloud.

  • Virtual Private Networks

Virtual private networks (VPNs) create a connection to the network from another endpoint or site. For example, users working from home would typically connect to the organization’s network over a VPN. Data between the two points is encrypted and the user would need to authenticate to allow communication between their device and the network. Force point’s Secure Enterprise SD-WAN allows organizations to quickly create VPNs using drag-and-drop and to protect all locations with our Next Generation Firewall solution.

Some famous software that Indian Accounting Firms uses for doing foreign client accounting are:

  • Quick books
  • Fresh Books
  • Zoho books
  • Acumatica Cloud ERP
  • Tipalti
  • Ledger Lite
  • Ledger plus
  • Netsuite
  • Veryfi
  • Xero
  • Sag Intact
  • Till point
  • Wave  Accounting
  • Free Agent
  • Saasu
  • Debitoor
  • MYOB Essential

Key Takeaways

A key feature of this content is to explain benefits for any Foreign Country Clients for outsourcing their accounting and related work in India. Outsourcing companies also provide full security and data safety to foreign companies. Also there are more benefits like cost saving, time saving, payroll processing, and other benefits also. Time to Time availability of financial reports helps Company’s owners / management evaluate their performance for the period and consider potential actions to improve the results.

About the Author: This article is contributed by CA Rajeev Gupta, Partner – SIGMAC & Co, Chartered Accountants, Location- Delhi NCR and Gurgaon.

In case of any query please feel free to contact us at: rajeev@sigmac.co.in

For more information and updates, you can contact CA Rajeev Gupta or visit our website https://www.sigmac.co.in/my-blog/.  

Disclaimer: This content has been prepared for general guidance of the reader on the matters of interest only. It should not be treated as professional advice. You should not act upon the information contained in this article without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information or provisions of the law contained in this article. Author and/ or SIGMAC & Co., Chartered Accountants, its members, employees and agents accept no liability, and disclaim all responsibility for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this article or for any decision based on it.

Payroll Processing and Outsourcing in India

What is Payroll?

Payroll is defined as the process of paying salary to a company’s employees. It starts with preparing a list of employees to be paid and ends with recording those expenses. It’s a tangled process that needs different teams such as payroll, HR and finance to work together. But, businesses can manage all the complexities effortlessly by choosing modern technology and also to manage this process various kinds of software are also available in the market. The process involves arriving at what is due to the employees after adding in monthly emoluments various items like incentives, bonuses, leave encashment etc. for a particular payroll cycle and adjusting the necessary deductions like leaves, Withholding Tax (TDS) as per Country’s tax regulations, employees’ Social Security contributions like Provident Fund, Insurance, meal coupons etc. It is further adjusted for deduction of any advance given to employees.

A payroll cycle is the time gap between two salary disbursements. Businesses can opt to pay salaries on a daily basis, weekly, bi-weekly, or monthly basis. Generally, it is processed every month worldwide.

Nowadays, many businesses, both big and small, consider outsourcing their payroll processing function to a third party. These third party consultants are generally experts in the field of payroll processing. Outsourcing payroll helps businesses minimize expenses and quantify visible and hidden costs around payroll management. By hiring professionals whose sole responsibility and focus is payroll, you minimize the chances of errors, missed deadlines, omissions, or late payroll tax filings.

Some benefits of Outsourcing of Payroll is:

 

1.Time Savings / Productivity

Payroll processing in-house is a time-consuming process. Keeping track of benefit deductions, new hires and terminations, paid time off as well as federal and state regulation changes can be frustrating tasks. Outsourcing payroll allows employers to concentrate on their core business and frees up the business owner, human resources or accounting personnel to work more on strategic tasks that could ultimately affect your bottom line.

2.Reduce Cost

The direct costs of processing payroll can be greatly reduced by working with a payroll provider. Big businesses can afford to maintain robust payroll departments. However, Small/medium sized businesses, having an in-house payroll process is a money burner. If your business has fewer than 500 employees, there’s a very good chance that you can save money by outsourcing your payroll operations. Do the math. Figure out how many labor hours your employees are devoting to payroll-related activities (calculating payroll for each time period, printing, signing, and distributing paychecks, computer software and program maintenance, training and support, keeping up with changes in tax rates/laws, preparing and remitting payroll taxes and returns to government agencies, new hire reporting, generating reports for in-house and accountant use). Calculate how much you’re spending and compare the amount to the plans offered by several payroll-services providers. 

3.Avoid Penalties & Mistakes

Government rules and regulations are always changing and business owners can’t be expected to stay on top of these changes. Professional payroll providers, on the other hand, must stay current with rules, regulations and changes in tax rates. A good payroll-services provider is far less likely to make a serious error than your in-house staff.  Many outsourced payroll providers calculate payroll taxes, manage filings and payments so long as you provide the necessary information and funds on time.

4.Team of Experts

Most business owners and payroll related staff don’t have time to research and study constantly changing regulations, withholding rates, and government forms. By outsourcing payroll, a small business can take advantage of expertise that was previously available only to big companies.  The most valuable payroll companies have a team of experts who handle many areas of Human Resources and Payroll.

5.Enhanced Security

Payroll processing is a complex and potentially risky business operation. Most payroll services have technologies that can spot and alert clients to various types of payroll fraud. Additionally, online payroll solutions offer a “safe haven” for your confidential payroll data. In addition to redundant backup and multiple server locations, a quality payroll provider invests in state-of-the-art systems for storing and protecting data, simply because it’s part of the service provided to clients.

6.Employee Access / Gaining a Human Resource Information system (HRIS System)

Human Resource Information Systems (HRIS) have become one of the most important tools for many businesses. Even a small, 20-person office needs to realize the benefits of using HRIS to be more efficient. Many firms do not realize how much time and money they are wasting on manual human resource management tasks until they sit down and inventory their time.  It allows companies to cut costs and offer more information to employees in a faster and more efficient way. Below are some examples of how employers and employees gain access to HR Information:

Employers Gain ability to:

  • View Invoices and Payroll Reports
  • Access and Update Employee Information
  • Enter New Employees
  • Enter Time Reporting Information
  • Offer Benefit Open Enrollment
  • Communicate with Employees
  • Track PTO ( Paid Time Off)
  • Upload Benefits Plans and Custom Benefits Documents
  • Upload Employee Handbooks and other HR PDF
  • Track Licenses / Certifications for Employees
  • Performance Reviews
  • Training Records
  • Total Compensation Reports

Employees gain access to:

  • Payslips
  • Tax Information
  • Expenses claim
  • Review Checks
  • Review Benefit Information
  • Update Information
  • Any Corporate Documents
  • Online Benefits Enrollment

7.Avoid Technology Advancement costs

A constant question for small business owners is whether they have the latest version of their payroll software and the most recent tax tables installed on their computer. Using the wrong tax tables can result in stiff penalties. Paying a maintenance fee and having to upgrade software is a fixed cost ongoing.  Outsourcing payroll removes those costs / headaches and keeps payroll running smoothly.

8.Losing Payroll Expertise 

Multi-tasking payroll responsibilities with an overworked office manager or accounting employee,  depending on a inexperienced subordinate to run payroll. Whatever the situation, every business with in-house payroll runs the risk of receiving notice that your payroll person is taking an extended vacation, FMLA, fell ill, took another job or is not able to do payroll.   If your bookkeeper or controller gets a new job, they will walk out the door with their knowledge of the payroll process and how you do it. Outsourcing your payroll will assure retaining the knowledge of all the ins and outs of payroll-related tax laws and regulatory mandates on the federal, state and local levels.

9.Offer  Direct Deposit

Providing direct deposit to employees is difficult if a company doesn’t use an outside payroll service. Increasingly, small businesses recognize that employees want direct deposit. Not having to make a trip to the bank is an important convenience for them. More importantly for business owners, direct deposit eliminates time-consuming and error-prone paper handling and the need to reconcile individual payroll checks every month. Using direct deposit reduces the risk of fraud by eliminating the use of paper checks that could be altered or counterfeited. Unlike a paper check that bears your account number for all to see, when you use direct deposit your account number remains confidential to your financial institution or payroll provider. Confidentiality is another benefit of outsourcing payroll.

10.Peace of Mind

With the help of a professional payroll service provider, the hassle and pain often associated with processing payroll is gone.  You provide the basic information, and your payroll company takes care of the rest. And with guarantees of error-free payroll and tax filings and payments, you can eliminate the worry that many experience when it comes to paying employees and taxes correctly and on time.

 11.Key Takeaways

In Conclusion, when you encounter a business owner or manager who can identify with 1 or more of these 10 factors that prevent productivity and hinder profitability centered around the time and cost associated with administering your own payroll, one can usually find a business case to make the switch for outsourcing payroll.  These are the key benefits of outsourcing payroll. Assuming the payroll provider does a quality job and serves the client, these outsourcing relationships become long standing business partnerships. Outsourcing of Payroll process also makes the owner of the business tension free about any breach of law regarding payroll laws and error free and hassle free payroll is processed.

About the Author: This article is contributed by CA Rajeev Gupta, Partner – SIGMAC & Co, Chartered Accountants,  Location- Delhi NCR and Gurgaon.

In case of any query please feel free to contact us at: rajeev@sigmac.co.in

Disclaimer: This content has been prepared for general guidance of the reader on the matters of interest only. It should not be treated as professional advice. You should not act upon the information contained in this article without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information or provisions of the law contained in this article. Author and/ or SIGMAC & Co., Chartered Accountants, its members, employees and agents accept no liability, and disclaim all responsibility for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this article or for any decision based on it.