India has been one of the fastest-growing economies of the world, ranking 5th with a nominal GDP of $2.94 trillion, as per IMF’s World Economic Outlook Database, October 2019. The service sector contributes more than 60% to its economy, following this is the manufacturing sector, reckoning to gain a larger driving force with PM’s envisioning of an Atmanirbhar Bharat and finally, the agriculture sector.
India with a jump to 63rd position from 77th position last year, as per the World Bank’s Ease of Doing Business ranking report published on 24th of October 2019, has been performing phenomenally. Seeing the country perform consistently well 3 years in a row, Simeon Djankov, the director of Development Economics at World Bank has affirmed the country’s potential in leading the others. Despite the economic slowdown across the globe, the inflows from the FDI doesn’t seem to have been affected and is envisaged to keep burgeoning at a healthy rate, states Guruprasad Mohapatra, Secretary Department for Promotion of Industry and Internal Trade (DPIIT). Thus, India will continue to be a Foreign Direct Investment destination by the global companies in the years to come.
However, restrictive and shifting regulatory laws of the nation are hard to comply with for the businesses, as it entails a long list of laborious tasks.
Briefing you of the relevant know-how for getting started:
The Class 2 digital signature reaffirms the already mentioned details of the user and is used for various form-filings, tax filings, email attestation, etc. It is valid for a period of 1 or 2 years and must be renewed on-time every time before the expiry of its validity in order to refrain from probable business losses.
After being established as a legally standing association, the company needs to have a TAN, PAN, PF and ESI number for processing payroll in India. The social security registrations like PF and ESIC undertake a period of 15-45 days for completion and is taken care of by the company. The other registrations such as the Professional Tax(PT) and Labour Welfare Fund(LWF) depends on the location where the company is operating.
Taxes in India
People belonging to different age groups and having different earning levels fall under different tax brackets. Any Indian citizen below 60 years of age and earning more than 2.5 lakhs
p.a. or elderly people aged above the 60s and earning more than 3 lakhs p.a. or people above 80s earning more than 5 lakhs are liable to pay taxes. However, the tax slabs might range from the lowest of 10% to the highest of 30%. Foreign nationals are taxed under the Income Tax Act, 1961, under sec 10(6).
A mandatory e-filing of taxes for income exceeding 5 lakhs has been in exercise since 2013. Necessary e-filing of taxes needs to be done for tax relief claims under certain sections. Tax from salaries should be deducted at source along with professional fees, rent, interests and dividends but, in case of any shortcomings in the individual’s liability at the source, a self-assessment return or advance payment of tax is binding. Also, if the total estimated tax exceeds 10 lakhs, then it needs to be paid in advance and in 4 instalments.
Hence, in India, processing payroll in compliance with the regulatory norms of the country becomes an extremely complicated affair and so picking an A1 payroll service provider is advisable, instead of bearing the headache of running an in-house payroll system single-handedly.