A Guide to Charitable Trust Registration

What is Udyog Aadhaar?

Udyog Aadhaar was introduced as a unique identification number for MSMEs to simplify the registration process. It replaced the older Small Scale Industries (SSI) registration system, allowing businesses to register with just a single-page form.

The primary purpose of Udyog Aadhaar was to ease the bureaucratic burden on small businesses and provide them with access to government schemes, subsidies, and financial assistance. This simplified registration made it easier for MSMEs to establish credibility and seek funding opportunities.

What is Udyam Registration?

Udyam Registration is the updated and more comprehensive registration system for MSMEs under the Ministry of Micro, Small, and Medium Enterprises.

Unlike Udyog Aadhaar, Udyam Registration is mandatory for businesses to avail themselves of government benefits after 2020. The online registration allows businesses to self-certify their classification as micro, small, or medium enterprises.

The Udyam Registration Certificate is an official document issued by the Ministry of Micro, Small, and Medium Enterprises (MSME) to businesses that successfully register under the Udyam portal. This certificate serves as legal proof of a business’s MSME status and contains a unique Udyam Registration Number.

Since the entire process is online and paperless, businesses can obtain their Udyam Registration Certificate quickly, ensuring seamless access to financial aid and growth opportunities.

Difference Between Udyog Aadhaar and Udyam Registration

Here is the difference between Udyog Aadhaar and Udyam Registration:

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Top 5 Benefits of Udyog Aadhaar

1. Access to Government Schemes and Subsidies

• Udyog Aadhaar holders could apply for various MSME support programs, including credit-linked subsidies and financial aid.
  

2. Easier Loan Approvals

• Banks and financial institutions provided loans at lower interest rates to Udyog Aadhaar-registered businesses.
  

3. Enhanced Business Credibility

• Registration helped businesses gain recognition and build trust with customers, investors, and suppliers.
  

4. Simplified Government Tender Applications

• Businesses could easily apply for government tenders, increasing their opportunities in public sector projects.
  

5. Tax Rebates and Concessions

• Udyog Aadhaar allowed businesses to benefit from various tax exemptions, reducing operational costs.
  

5 Key Benefits of Udyam Registration

1. Official Recognition and Credibility

• Udyam Registration serves as proof of a business’s legal status, making it easier to secure partnerships and attract investors.
  

2. Better Financial Support

• MSMEs registered under Udyam get easier access to bank loans, credit facilities, and government funding programs.
  

3. Simplified Access to Government Schemes

• Registered businesses can avail themselves of subsidies, grants, and financial incentives tailored for MSMEs.
  

4. Tax Benefits

• Udyam-registered MSMEs enjoy tax rebates and exemptions, reducing their overall financial burden.
  

5. Priority Access to Government Contracts

• Udyam Registration ensures that businesses get priority consideration in public sector tenders, helping them grow through government contracts.
  

How to Migrate to Udyam Registration?

With Udyam Registration now mandatory for government benefits, MSMEs registered under Udyog Aadhaar must migrate to the new system. The migration process is straightforward:

1. Visit the Udyam Registration Portal
   • Go to the official Udyam Registration website.
2. Enter Udyog Aadhaar Details
   • Provide your Udyog Aadhaar number along with Aadhaar-linked mobile details.
3. Submit PAN and GSTIN
   • Enter PAN and GSTIN details for verification.
4. Complete Self-Declaration
   • Fill in business classification details based on investment and turnover.
5. Receive Udyam Registration Certificate
   • After successful verification, the Udyam Registration certificate is generated.

Migrating to Udyam Registration ensures businesses continue to enjoy financial aid, easier access to credit, and government compliance.

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Conclusion

Understanding the differences between Udyog Aadhaar and Udyam Registration is essential for MSMEs to stay compliant and competitive.

While Udyog Aadhaar served as a stepping stone for MSMEs, Udyam Registration is now mandatory for accessing government benefits, funding opportunities, and enhanced business credibility.

Migrating to Udyam Registration ensures businesses remain eligible for financial support and government schemes, enabling them to grow and thrive in India’s evolving economic landscape. If you haven't yet migrated, now is the time to secure your business's future with Udyam Registration!

Frequently Asked Questions

Definition of Articles of Association Under Companies Act 2013

The Articles of Association, as per the section 2(5) of Companies Act, 2013, is a legally binding document that defines a company’s internal regulations and governance. It outlines the rights, duties, and responsibilities of shareholders, directors, and officers, ensuring structured management. Governed by Section 5 of the Companies Act, 2013, the AOA plays a crucial role in decision-making, dispute resolution, and compliance. A well-drafted AOA is essential for smooth company operations and legal clarity.

Objectives Outlined in Articles of Association

Section 5 of the Companies Act, 2013, defines the objective of AOA, outlining the internal rules that govern a company's management. Here are key objectives of Articles of Association:

• Serve as a regulatory framework, ensuring compliance with legal provisions.
  
• Define the company’s matters as prescribed under the relevant rules.
  

Additionally, companies have the flexibility to add provisions or make necessary alterations to their Articles of Association, provided they comply with legal requirements.

Purpose of Articles of Association

• Governance Framework: The AOA acts as a rulebook for a company’s management, outlining the rights and duties of directors, shareholders, and officers. It establishes decision-making processes and ensures smooth operations.
  
• Legal Requirement: As per the Companies Act, 2013, every company must have an AOA, which must be submitted to the Registrar of Companies (ROC) during incorporation. It serves as a legally binding document governing corporate affairs.
  
• Operational Clarity: The AOA defines clear procedures for shareholder meetings, director appointments, and financial management, ensuring all stakeholders understand company regulations and business operations.
  
• Shareholder Protection: It safeguards shareholder rights by establishing rules for voting, dividends, and dispute resolution. It also provides mechanisms to address conflicts and protect minority shareholders.
  
• Flexibility for Future Changes: The AOA allows modifications to accommodate business growth, structural changes, or legal amendments, provided the changes comply with the Companies Act, 2013.
  

By setting a lawful, transparent, and structured operational framework, the AOA ensures corporate stability and effective governance.

Scope and Extent of Articles of Association

The Articles of Association are legally binding on all current and future members, including heirs, successors, and legal representatives. They form a contractual agreement between the company and its members, outlining mutual rights, duties, and obligations. The Memorandum of Association sets the company's main objectives and key details, and it can only be changed at an Annual General Meeting (AGM) or Extraordinary General Meeting (EGM) with statutory approval.

The Registrar of Companies ensures that the company follows all legal regulations and operates within the law. Additionally, the shareholders have the right to appoint auditors who review financial records and ensure transparency in the company's finances.

Nature of Articles of Association

The Articles of Association is a legally binding document that governs a company’s internal management and operations. It sets the rules that directors, shareholders, and officers must follow. It also defines their rights, duties, and responsibilities within the company. By ensuring a structured and lawful operational framework, the AOA serves as the foundation of corporate governance, helping companies function efficiently and transparently.

Contents Encompassed Within the Articles of Association

• Share Capital: It defines shareholder rights, share certificates, and commission payments.
  
• Shareholder Rights: It specifies voting rights and dividend entitlements.
  
• Share Transactions: It covers share transfer, transmission, forfeiture, and surrender.
  
• Capital Alteration: It details processes for increasing, decreasing, or restructuring capital.
  
• Governance: It outlines director appointments, qualifications, powers, and board meetings.
  
• Financial Matters: It includes provisions on borrowing powers, accounts, audits, and reserves.
  
• Winding Up: It specifies procedures for closing the company and settling liabilities.
  

Components of AOA

• Name Clause: It states the official name of the company and specifies whether it is a public or private ltd. company.
  
• Registered Office Clause: It defines the company’s registered office address, which serves as the official location for all legal communication.
  
• Object Clause: It outlines the main objectives of the company and lists the business activities it is legally allowed to undertake.
  
• Liability Clause: It explains whether the members (shareholders) of the company have limited or unlimited financial liability.
  
• Share Capital Clause: It specifies the authorised share capital of the company, the different types of shares issued, and the rights and privileges of shareholders.
  
• Management Clause: It defines the powers, responsibilities, and duties of the directors, along with the procedures for their appointment, removal, and remuneration.
  
• General Meetings Clause: It sets the rules for conducting shareholder meetings, including notice periods, quorum requirements, voting rights, and decision-making procedures.
  
• Dividend Clause: It explains how and when the company distributes profits in the form of dividends to its shareholders.
  
• Winding-Up Clause: It describes the process for dissolving the company in case of liquidation, bankruptcy, or closure.
  

These components work together to create a structured framework that governs the company’s operations, financial management, and legal compliance.

Different Forms of Articles of Association

The Articles of Association must follow specific formats outlined in Schedule I, with forms categorised under Tables F, G, H, I, and J, depending on the type of company. Companies are required to adopt the form that aligns with their legal structure while registering their AOA.

Role of AOA in Company Registration

The Articles of Association play a crucial role in the company registration process. Along with the Memorandum of Association, it is a mandatory document required for incorporation under the Companies Act, 2013. The AOA defines the company’s internal governance, specifying rules for management, the rights and duties of members, and operational procedures. A well-structured AOA ensures legal compliance, protects stakeholders' interests, and provides clear guidelines for future operations. It also helps in conflict resolution by outlining decision-making processes and responsibilities, ensuring the smooth functioning of the company.

Difference Between Memorandum and Articles of Association

Conclusion

The Memorandum of Association and Articles of Association are essential documents for company formation and governance. While the MOA defines the company’s objectives and its relationship with external entities, the AOA outlines the internal rules for management, ensuring smooth operations. A well-drafted AOA, aligned with legal provisions, helps establish clear roles for directors, shareholders, and stakeholders, fostering transparency and efficiency. Together, these documents provide a strong legal foundation, guiding the company's growth and compliance with regulatory requirements, making them indispensable for long-term success.

Frequently Asked Questions

Budget 2024 Latest Update on Corporate Tax Rate

Finance Minister Nirmala Sitharaman has proposed a reduction in the corporate tax rate for foreign companies, bringing it down from 40% to 35% in the 2024 budget.

Subdivisions of Direct Taxes

Direct taxes in India are categorized as follows:

1. Personal Income Tax
   
   • Paid by individual taxpayers based on their income.
   • Taxed according to predefined slabs at different rates.
2. Corporate Income Tax (CIT)
   
   • Paid by domestic and foreign companies on their income earned in India.
   • The CIT is levied at rates specified by the Income Tax Act, subject to annual revisions in the Union Budget.

What is Pvt. Ltd. Tax Rate?

The Pvt. Ltd. tax rate refers to the corporate income tax rate applicable to private limited companies in India. Under the Income Tax Act, 1961, domestic companies are generally taxed at 30% on their total taxable income, with variations based on turnover and certain conditions.

For companies with a turnover of less than ₹400 crore, the tax rates are as follows:

• Turnover up to ₹1 crore: Taxed at 25%.
• Turnover between ₹1 crore and ₹10 crore: Taxed at 25% on profits exceeding ₹25 lakh, plus an additional ₹25 lakh.
• Turnover above ₹10 crore: Taxed at 30%.

A 4% Health and Education Cess is levied on the total tax payable.

Companies may also opt for a reduced tax rate of 22% under Section 115BAA, provided they forgo certain exemptions and deductions. This option also includes the surcharge and 4% cess.

Additionally, new manufacturing companies incorporated after October 1, 2019, can avail a 15% tax rate (plus surcharge and cess) under Section 115BAB, subject to specific conditions.

Corporate Income Tax Rate for AY 2022-23

The Corporate Income Tax Rate for the Assessment Year 2022-23 varies based on the company's turnover and the applicability of surcharge and cess. Here's a table summarising the effective tax rates:

For Companies with Turnover Above ₹400 Crore

For Companies with Turnover Below ₹400 Crore

Key Budget 2022 Updates

1. No Changes in Tax Rates: The corporate tax structure remained unchanged.

2. Updated Surcharge Cap for Cooperatives: Surcharge capped at 7% for cooperatives with income between ₹1 crore and ₹10 crore.

3. Set-Off for Losses in Case of Start-ups: Extended incorporation date for start-ups to claim tax holiday under Section 80-IAC to 31 March 2023.

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Income Tax Rate for Domestic Manufacturing Companies for AY 2022-23

New manufacturing companies incorporated in India on or after October 1, 2019, and commencing production before March 31, 2023, can avail a concessional tax rate for private limited companies of 15% under Section 115BAB. However, this is subject to certain conditions, such as:

• The company should be engaged in the business of manufacture or production of any article or thing
• It should not be formed by splitting up or reconstruction of an existing business
• It should not use any plant or machinery previously used in India (with certain exceptions)
• The option to avail Section 115BAB must be exercised in the first year of operation

The applicable tax rates for domestic manufacturing companies for the assessment year 2022–23 are outlined below:

Education Cess for Companies

Private limited companies are required to pay an education cess at the rate of 4% on the total income tax, including the applicable surcharge. Below is a detailed explanation of the corporate income tax rates for FY 2021–22 or AY 2022–23:

For companies with a turnover of up to ₹400 crore:

• Income up to ₹1 crore is taxed at 25%.
• Income exceeding ₹1 crore but up to ₹10 crore is taxed at 25% plus ₹25,00,000. A 7% surcharge applies.
• Income above ₹10 crore is taxed at 25% plus ₹2,50,00,000, with a 12% surcharge.

For companies with a turnover exceeding ₹400 crore:

• Income up to ₹1 crore is taxed at 30%.
• Income exceeding ₹1 crore but up to ₹10 crore is taxed at 30% plus ₹3,00,000. A 7% surcharge applies.
• Income above ₹10 crore is taxed at 30% plus ₹3,00,00,000, with a 12% surcharge.

The education cess of 4% is uniformly applicable to the total tax payable, including any surcharge, regardless of turnover.

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Income Tax Rate for Foreign Company

Foreign companies, i.e., those incorporated outside India but earning income from Indian sources, are taxed at a basic rate of 40% (plus applicable surcharge and cess). The surcharge is levied at 2% on income between ₹1 crore to ₹10 crores and 5% on income exceeding ₹10 crores.

It is important to note that foreign companies can avail beneficial provisions under the Double Taxation Avoidance Agreement (DTAA) between India and their country of residence to minimize their tax liability.

Minimum Alternate Tax for Company

The Minimum Alternate Tax (MAT) provisions apply to companies whose tax payable under the normal provisions of the Income Tax Act is less than 15% of their book profits. In such cases, MAT is levied at 15% (plus applicable surcharge and cess) of the book profits.

However, MAT is not applicable to companies opting for the concessional tax regimes under Section 115BAA and Section 115BAB. Further, the credit for MAT paid is allowed to be carried forward for 15 years to be set off against future tax liabilities.

H2 - How to Calculate Total Income for a Company?

To arrive at the taxable income for a private limited company, the following steps are involved:

The Corporate Income Tax Rate is then applied to this taxable income to determine the tax liability of the private limited company.

Returns Applicable for Domestic Company for AY 2022-23

Private limited companies are required to file their income tax returns annually. For the assessment year 2022-23, the following returns are applicable:

1. ITR-6: This return is applicable for companies other than those claiming exemption under Section 11 (income from property held for charitable or religious purposes).

2. ITR-7: This return is applicable for companies claiming exemption under Section 11.

The due date for filing the return is 31st October of the assessment year. However, for companies required to furnish a report in Form No. 3CEB under Section 92E (relating to international transactions), the due date is 30th November of the assessment year. Companies must also ensure timely compliance with advance tax payments, TDS/TCS obligations, and tax audit requirements (if applicable) to avoid penal consequences.

Domestic Company Tax Slab for AY 2024-25

For the Assessment Year (AY) 2024–25, the income tax rates for domestic companies depend on their turnover or gross receipts during the financial year (FY) 2020–21, as well as the tax provisions they choose to apply under specific sections of the Income Tax Act. The applicable rates are as follows:

• If the total turnover or gross receipts during FY 2020–21 do not exceed ₹400 crores:
  
  • Tax rate: 25%
• If the company opts for Section 115BA:
  
  • Tax rate: 25%
• If the company opts for Section 115BAA:
  
  • Tax rate: 22%
• If the company opts for Section 115BAB:
  
  • Tax rate: 15%
• For any other domestic company:
  
  • Tax rate: 30%

These rates are exclusive of surcharge and cess, which will be applied additionally based on the applicable income slabs.

Frequently Asked Questions