A note about DIN for foreign nationals

When I was getting my DIN (I'm Mexican) I tried just submitting my papers notarized in India, with the notaries outside Bandra High Court. However, my application was rejected. Later on, I got my documents attested by my embassy in New Delhi, sent them again to MCA, and got them approved. I thought this might be a rule, but it seems I was wrong.

Raju, a reader of the blog, sent me the following message:

[...] I also had a quick question for you with regards to applying for DIN as a foreign director. We are currently facing some issues with getting the documents for DIN attested by the right person/people. My business partner is from the US and it might be difficult for him to travel back to New York to get the documents notarized. On your post on DIN, you mentioned something about embassy charges. Did you get your documents notarized/attested at an embassy in India? If not, is there no other option but to get the documents attested from the US?

After telling him my story, and him trying it out, he came back with the good, but confusing (for me) news:

Just wanted to drop you a note to say we finally managed to get the DIN approved. It was our 4th attempt. :-) The notarization from the US Consulate was rejected but we were told by the MCA DIN Cell that if the foreign director is in India, an Indian notary can do the attestation as long as a notarized copy of a valid Indian visa is also submitted.

Well... I guess it is matter of trying out different things until it works!

Thanks to Raju for telling me his experience and allowing me to post it here.

This article was also posted as a clarification into the original post about DIN.

How much TDS I should deduct?

I think it is nobody's cup of tea to pay taxes, nor to deduct taxes from anybody else. But as an employeer or business person who subcontracts job or gets services from other people it is our duty to deduct taxes from them. If we don't we could be penalized as well.

For each type of payment there is a different slab and different rate of TDS (Tax Deducted at Source) we should deduct. Of course, I haven't dealt with all types of payments, and will write here only about those I know but they all share the following characteristics.

• The amount deducted in any given month from the total invoiced should be paid in the first seven days of the next month.
• If a payment is delayed to the next month (from day 8 onwards) or more months, an interest of one percent per month delayed should be paid.
• The TDS payments should be filed quarterly, within the first fortnight of the next quarter.
• Delay in filing is more heavily penalized, at Rs. 100 per day of the delay, thus it could be a very expensive delay if you were to delay filing the TDS payments for any reason.

We can take an example. Let's say you have made a payment of Rs. 25,000 to a freelance developer on the 5th of April. The TDS applicable would be for Professional Services at 10.3%. The payments and dates would be as follows:

• 5th April, Rs. 22,425 (Rs. 25,000 - 2,575 TDS).
• The Rs. 2,575 should be paid before 7th May.
• And this payment should be filed along with all other TDS payments of April, May and June before 15 July.

Imagine that for some reason, you delay the TDS payment and you do it just before 7th June. Then you will have to pay Rs. 25 extra (i.e. 1%)... If one month later Rs. 50 (i.e. 2%) and so on and so forth 3%, 4%, 5%, etc.

By the way, I have some pending comments to reply to... sorry, lately I haven't had much free time. In fact, I wrote this post while traveling on my PDA (greatly helpful devices!). But I will surely get back to that soon.

Start working ASAP

At my post Legal process to start the company, I had said the following:

When setting up a new business you would like to start giving your service or selling your product immediately so as to begin receiving returns very soon. And it is in deed possible (at least that's what I did)...

And Chitra, a reader of the blog, said in a comment at Final Submission to register your company:

You are right in some sense but clear me one thing if we r going to develop a software company or some what a web development company,then do u think it is possible to start the service(or starting a project)exactly before registration of the firm.
Or in general, for a product based firm it will be tough to set up the machinery before any legal process.

I guess there are two options.

One is dedicate yourself full time to do the process of setting up the company. This way, the process will be quicker and you will perhaps do it better because you will be fully concentrated on it. However, there will be quite a few idle times because you will be just waiting for some of the approvals.

The other option is to work as if the company already existed. You can work in a sole proprietorship basis (which does not require any legal work). Or you can associate with another already setup company which belong to a friend and do the services through that. Or you can start offering the service to clients, invoicing them, if required, in a personal basis, as a professional does. Or you can just tell your clients that you are about to open the Pvt. Ltd. ("I'm just waiting for the final approval") and you will send the invoice at that time. There are countless things you can do.

Besides, during this time, since you are starting, you can have a main focus on the marketing. The only fear could be that you build brand name of a company for which you are not yet the owner, but I think there is little to fear in this respect. You can check availability of the name in the MCA web-site, and besides you will get the approval for the booking of the name (form 1A) in just a few days or maximum weeks. I don't think there are very high probabilities of loosing the name (perhaps the full name yes, but not the main keywords).

A new beginning... taxes

I have somehow finished writing about my experience on setting up the company legally. Most probably, there are quite a few things I have forgotten to write... if I remember, I'll do it later.

Now, the new Financial Year is beginning and I thought it would be a good opportunity to start writing about my experience with this issue. Most probably, what I will write will not help for the year that has just ended, but I hope it will help you for this year 2009-10.

I will be making posts about things such as:

• TDS (employees, contractors, professional services, etc)
  
• Personal tax
• Corporate tax

Nobody likes giving money just like that to the government in taxes. Thus, we always look at ways of reducing our liability. But before you do anything, don't forget to ask the experts as otherwise you may get into serious trouble.

I have also found a few good websites and blogs for this topic of taxes. I'll be sharing them as we move ahead of course: they know much more than I do.

Final submission to register your company

By now, if you have followed all the process to register your company you will have finished with quite a few things. You decided you wanted a Private Limited company. You got your DIN (Director Identification Number) and your Digital Signature. You have already received your confirmation for the name you chose for your company. Also, you drafted your MoA and AoA, of course with the proper legal advice. You have shelled out some money for stamp duty and registration fees. Finally, you are ready to give the last step and soon afterwards get your Incorporation Certificate for your newly approved Private Limited Company.

The last step is to submit form 1, form 18 and form 32. Of course, this will go along with the MoA, AoA and all the colourful rubber stamps you got in your papers at the time of the stamp duty and paying the registration fees.

• Form 1: Application and declaration for incorporation of a company.
  
• Form 18: Notice of situation or change of situation of registered office.
  
• Form 32: Particulars of appointment of managing director, directors, manager and secretary and the changes among them or consent of candidate to act as a managing director or director or manager or secretary of a company and/or undertaking to take and pay for qualification shares.

There are just a few things to take care while doing this.

First, that they are quite important forms for the future. For instance, when you want to open a bank account or do a similar procedure, you will be asked for copy of these forms (at least 18 and 32).

The other issues, since by this time you will be doing it with legal advice you need not worry much about it. But they are such as making sure you have the latest form, etc.

As usual, I like to tell people that is important you get to know about those things before meeting your CS (Company Secretary) so that the meeting is much more efficient and you are somehow in the same "frequency". Thus, it is better if you try downloading those forms and read what all information they ask for there. You can get them from the MCA website.