As the world becomes increasingly digitized, IT companies have become a vital part of the global economy. However, like any other business, IT companies are subject to a wide range of statutory compliance requirements that they must adhere to in order to remain in good legal standing.

In accordance with the Companies Act, 2013, IT companies are typically required to register in order to offer their services or products. This registration process involves fulfilling certain formalities such as submitting a list of directors’ names, the company name, and other relevant details to the Registrar of Companies. Upon successfully completing the necessary steps, the company will receive an affirmation letter from the Registrar’s Office.

In this blog post, we will take a closer look at some of the most important statutory compliance requirements that IT companies must be aware of.

List of compliances

IT Companies need to hold Board meetings, Appoint an auditor, hold yearly general meetings, Issue a share certificate, Record the minutes of meetings, Maintain a book of accounts, Auditing the book of accounts, Circulating financial reports, File forms with the registrar of companies, Maintaining statutory registers and more.

As the IT company grows in size, a wide range of Provident Fund, TDS, attendance, Professional Tax, payroll, labor regulations, and other statutory compliances also need to be followed.

Key Compliances

1. Permanent Account Number (PAN)

The Income Tax Department issues a Permanent Account Number (PAN), which is mandatory for IT companies to apply for after their formation. This unique identification number is used by the Income Tax Department to monitor the company’s financial transactions and maintain a record of its tax payments and returns. Obtaining a PAN card ensures that a company is eligible for the maximum possible tax reduction.

2. Tax Deduction and Collection Account Number (TAN)

The Income Tax department issues Tax Deduction and Collection Account Numbers (TAN) to companies, which is mandatory for those who must deposit tax at the source. Employers who pay salaries to their workers are required to deduct Tax Deducted at Source (TDS) under Section 192 of the Income Tax Act, 1961. TDS deduction must be carried out by the employer prior to paying the employee, and the deducted amount must be credited to the government by the 7th of the following month.

3. Goods & Services Tax (GST)

Since its introduction, the Goods and Services Tax (GST) has replaced several existing central and state-level taxes, such as VAT and service tax. To comply with GST regulations, IT companies must maintain records and invoices, report purchases and sales, and follow specific procedures for paying taxes and filing returns.

GST Compliance Checklist

a) Check if your business has to be mandatorily registered as per the GST registration guidelines.

b) Get your business registered.

c) Supply and collect GST-compliant bills:

d) GSTIN to be issued to your vendors and customers

e) File GST returns on time.

4. Professional Tax (PT)

IT companies are required to pay professional taxes to their respective state governments. Income tax slabs may vary depending on an individual’s income. Professional tax must be applied within 30 days from the date of hire, and companies with multiple locations must register for professional tax with the relevant state governments accordingly. Typically, a payroll manager or payroll system handles these responsibilities.

5. Employee State Insurance (ESI)

The Employees State Insurance (ESI) is an insurance scheme for IT employees in India, which is administered by the Employees State Insurance Corporation (ESIC) in accordance with the ESI Act, 1948. The scheme offers both monetary and medical benefits to employees who earn a monthly salary of less than 21,000/- INR.

6. Employee Provident Fund (EPF)

The Employee’s Provident Fund (EPF) is established under the purview of the Employee Provident Fund Organization (EPFO), as mandated by the Employee’s Provident Funds and Miscellaneous Provisions Act, 1952, which falls under the Ministry of Labour and Employment. The primary objective of this act is to provide public assistance in areas such as work, death, higher education, unemployment, marriage, sickness, and more.

Conclusion

IT companies need to follow statutory compliances to ensure smooth functioning. Failure to comply with applicable laws and regulations can result in fines, legal action, and damage to the company’s reputation. By staying up-to-date with the latest statutory compliance requirements and implementing appropriate policies and procedures, IT companies can ensure that they remain in good legal standing and continue to thrive in a rapidly changing digital landscape.

Ease Up can help you comply with all the statutory compliances required for your IT Company. We provide Legal & Compliance Services for IT Companies in India and we are the leading Accountants for Tech companies in India. We provide Tax advisory Services for IT Companies in India.

We are a leading service provider for Technology and Digital Companies like Software Companies, Information Technology Outsourcing Companies, IT Enabled Service Providers, SAAS-based companies, etc.