Author: virevonadmin

Cash Transaction Limits under Income Tax: Sections 269ST, 269SS and 269T

Cash still moves a lot of business in India, but the Income-tax law puts firm limits on how much of it you can receive, lend, borrow or repay. Understanding the cash transaction limits income tax rules sets out is one of the simplest ways to avoid a penalty that can equal the whole amount involved.

The good news is that the rules are few, the thresholds are easy to remember, and every limit can be met by switching to UPI, NEFT, RTGS or an account payee cheque. This guide explains the three core provisions, how they carry over into the Income-tax Act, 2025, the common exceptions, and a practical checklist for businesses and individuals.

Key takeaways

You cannot receive ₹2 lakh or more in cash from one person in a day, for one transaction, or for one event or occasion (section 269ST; section 186 of the Income-tax Act, 2025).
Loans, deposits and “specified sums” of ₹20,000 or more must be taken and repaid through banking channels (sections 269SS and 269T).
The penalty for a breach can be equal to the amount received, accepted or repaid, though relief is available where there was reasonable cause.
Transactions up to 31 March 2026 are tested under the Income-tax Act, 1961; transactions from 1 April 2026 fall under the new Act, which keeps the same limits.
Separate rules also restrict cash expenses above ₹10,000 per day to a person and cash donations above ₹2,000.

The three core cash transaction limits at a glance

Provision (1961 Act)	What it covers	Limit	Penalty for breach
Section 269ST	Receiving cash from a person	₹2 lakh or more	Equal to the amount received
Section 269SS	Taking a loan, deposit or specified sum in cash	₹20,000 or more	Equal to the amount accepted
Section 269T	Repaying a loan, deposit or specified advance in cash	₹20,000 or more	Equal to the amount repaid

Under the Income-tax Act, 2025, the rule on loans and deposits sits in section 185, the ₹2 lakh receipt rule in section 186, and the penalty for receipts in section 451. The repayment rule and its penalty have also been carried forward in the same chapter; if you are citing section numbers in a reply or report, check the official mapping table for the exact reference.

Section 269ST: the ₹2 lakh receipt limit

This rule applies to every person receiving money, not only businesses. A doctor, a jeweller, a landlord or an individual selling a car are all covered. The limit is breached if cash of ₹2 lakh or more is received:

In aggregate from one person in a single day — for example, ₹1.2 lakh in the morning and ₹90,000 in the evening from the same customer.
For a single transaction — even if paid in instalments over several days, such as a ₹2.5 lakh invoice settled as ₹1 lakh on three different dates.
For transactions relating to one event or occasion — for example, all payments for a wedding booking from one family.

The practical point is that splitting the payment across days or bills does not help. The test looks at the substance of the transaction.

Common exceptions

Receipts by the Government, banking companies, post office savings banks and co-operative banks.
Transactions already covered by the loan and deposit rule (section 269SS).
Cash withdrawn by a person from their own bank or post office account.
Other receipts notified by the Government from time to time.

Sections 269SS and 269T: loans, deposits and advances

A loan or deposit of ₹20,000 or more must be accepted through an account payee cheque, account payee bank draft, bank electronic clearing, or a prescribed electronic mode such as UPI, NEFT, RTGS or a debit or credit card. The limit also applies if the aggregate of existing unpaid loans from that person plus the new amount crosses ₹20,000.

The rule also covers “specified sums” — advances received in connection with a proposed transfer of immovable property, such as token money for a flat or plot, whether or not the deal finally goes through.

Repayment follows the same logic. If the loan or deposit (including interest) being repaid is ₹20,000 or more, or the outstanding balance is at that level, it must be repaid through banking channels.

Useful to know: where both the lender and borrower have only agricultural income and no taxable income, these rules do not apply. Loans from or to banks, the Government and certain notified institutions are also excluded.

Related cash restrictions you should know

The cash transaction limits above are about receipts and loans. A few other rules affect how cash payments are treated in your return:

Business expenses: a cash payment above ₹10,000 to one person in a day is generally disallowed as an expense (₹35,000 for payments to transporters for plying, hiring or leasing goods carriages).
Donations: cash donations above ₹2,000 do not qualify for the donation deduction.
Health insurance: premiums paid in cash do not qualify for the health insurance deduction (a small allowance exists for preventive health check-ups).
Large withdrawals: TDS can apply on large cash withdrawals from bank accounts, with lower thresholds for people who have not filed returns.
Businesses with turnover above ₹50 crore must offer customers prescribed electronic payment modes.

These are relevant during a tax audit too — Form 3CD asks for details of loans and repayments above the thresholds. Our tax audit checklist for FY 2025-26 covers these reporting points.

Penalties and the reasonable cause defence

A breach does not add to your income; it attracts a penalty that can equal the amount involved. That can be significant, but there is an important safeguard. Penalties are not imposed where the person proves there was a reasonable cause for the failure (section 273B of the 1961 Act; section 470 of the 2025 Act carries forward this protection).

Situations that have commonly been accepted as reasonable cause include genuine emergencies, remote locations with no banking access, and bona fide transactions with close family members where the source of funds is clear. Each case turns on its facts, so contemporaneous records matter.

If you receive a notice proposing a penalty, respond with:

A clear explanation of the transaction and why cash was used.
Supporting documents — bank statements, ledger, agreements, identity of the other party.
Evidence that the transaction was genuine and fully recorded in the books.

A simple compliance checklist

Set a house rule: no cash receipt of ₹2 lakh or more from any customer per day, bill or event.
Configure your billing software to flag cash receipts approaching the limit.
Take and repay all loans from friends, relatives and directors through bank transfer, and keep confirmation letters.
Route property token money and advances through banking channels.
Review the cash book monthly for split receipts from the same party.
Display UPI QR codes and card machines prominently so customers can pay digitally.
Keep a short note on file for any exceptional cash transaction explaining the reason.

For wider context on the new law, see our overview of the Income-tax Act, 2025 key changes.

Frequently asked questions

Can I accept ₹2 lakh in cash if I issue two separate bills?

Not if the bills relate to one transaction, one event or the same person on the same day. The limit looks at the substance of the deal, so splitting invoices does not avoid it.

Does the ₹2 lakh limit apply to the person paying or the person receiving?

The rule and the penalty apply to the person receiving the cash. The payer is not penalised under this provision, though other rules may affect the payer’s deductions.

Is a gift from a relative in cash covered?

Gifts of ₹2 lakh or more in cash from one person in a day or on one occasion fall within the receipt limit. Using a bank transfer keeps both the gift and its source clearly documented.

Do these limits still apply after the Income-tax Act, 2025?

Yes. The new Act, in force from 1 April 2026, retains the ₹2 lakh and ₹20,000 limits and the related penalties, with new section numbers.

If you want your cash receipts, loans or a penalty notice reviewed calmly and clearly, our team is happy to help — just reach out.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

November 7, 2026

GST Returns Time-Barred After Three Years: What It Means for Pending Filings

For years, a GST return that was missed could be filed later with interest and late fees. That is no longer the case. Amendments made by the Finance Act, 2023 introduced an outer limit, and the GST portal now enforces it: a return cannot be filed after three years from its due date. Understanding the GST return time barred 3 years rule is important for any business with gaps in its filing history, whether from an inactive period, a registration that was not closed, or annual returns that were skipped.

This article explains which returns are covered, how the three-year period is counted, the cut-offs coming up for FY 2023-24 periods, what the bar means for tax liability and registration, and how to deal with pending returns now.

Key takeaways

Sections 37, 39, 44 and 52 of the CGST Act now prohibit filing returns after three years from the due date.
The bar covers GSTR-1, GSTR-3B, GSTR-4, GSTR-5, GSTR-5A, GSTR-6, GSTR-7, GSTR-8 and GSTR-9.
The amendments took effect from 1 October 2023, and the GST portal began blocking such returns from the July 2025 tax period onwards.
Returns whose due dates fell in late 2023 are now reaching their cut-off, including the GSTR-9 for FY 2022-23, due on 31 December 2023.
The bar stops the return, not the liability: tax, interest and consequences for non-filing can still follow.

What the law says

The Finance Act, 2023 added a provision to each of the following sections, stating that a registered person shall not be allowed to furnish the return after the expiry of three years from its due date, subject to conditions and restrictions the government may notify:

Section 37 – details of outward supplies (GSTR-1)
Section 39 – returns including GSTR-3B, GSTR-4, GSTR-5, GSTR-5A, GSTR-6 and GSTR-7
Section 44 – annual return (GSTR-9)
Section 52 – TCS statement by e-commerce operators (GSTR-8)

These provisions were brought into force from 1 October 2023. The GSTN issued advisories in October 2024 and again in 2025, and the portal started enforcing the bar from the July 2025 tax period. The reconciliation statement in GSTR-9C is not listed in the advisory, but it is filed along with GSTR-9, so a barred GSTR-9 affects it in practice.

How to count the three years

The period runs from the due date of the return, not from the end of the tax period or the date of any extension you may have assumed. Where the due date was extended by notification, the extended due date is generally treated as the due date.

Return	Tax period	Due date	Last date to file (three years)
GSTR-3B (monthly)	October 2023	20 November 2023	20 November 2026
GSTR-3B (monthly)	November 2023	20 December 2023	20 December 2026
GSTR-1 (monthly)	November 2023	11 December 2023	11 December 2026
GSTR-9	FY 2022-23	31 December 2023	31 December 2026
GSTR-9	FY 2023-24	31 December 2024	31 December 2027

QRMP filers, composition taxpayers and taxpayers in states with staggered due dates should check the specific due date for their category. If a return for September 2023 or earlier is still unfiled, it has very likely already passed the cut-off.

What happens to a barred return period

The bar is procedural, but it has real consequences:

Tax liability remains: if supplies were made, the tax is still payable. It may be paid through Form DRC-03 with interest; our guide on DRC-03 voluntary payments explains the process.
Assessment for non-filers: the proper officer can assess tax to the best of judgement for returns not filed. Ordinarily, filing the return within the permitted time after such an order leads to its withdrawal, but that route may not be available once the return itself is barred.
Input tax credit: ITC is claimed through GSTR-3B and is already subject to its own time limit under section 16(4). A barred return means credit for that period generally cannot be claimed through it.
Registration: long-term non-filing can lead to cancellation. Revocation normally requires filing all pending returns, so time-barred periods can complicate the process; see our article on GST registration cancellation and revocation.
Customers’ ITC: if GSTR-1 was never filed, your customers’ credits may not have appeared in their GSTR-2B, which can affect relationships and lead to demands on them.

Who should review their filing history now

The rule affects more businesses than one might expect. It is worth checking immediately if you:

Have a registration that became inactive but was never cancelled.
Took an additional registration in another state for a project that ended.
Skipped GSTR-9 for any year on the assumption that it was optional, without confirming the exemption threshold for that year.
Were a TDS deductor under GST (for example, a government department or notified body) and missed GSTR-7 for some months.
Changed accountants or software and are unsure whether all periods were filed.

The filing status on the GST portal gives a quick answer, and it is best to check each GSTIN under your PAN.

A practical plan for pending returns

Download your return filing status from the GST portal for all periods since registration.
List every unfiled return with its due date and the three-year cut-off, sorted by urgency.
Prioritise returns closest to the cut-off, especially GSTR-3B and GSTR-1 for late 2023 and GSTR-9 for FY 2022-23.
Prepare the data: sales and purchase registers, bank statements and e-way bill data for those periods.
Compute and pay tax, interest and late fees; late fees are capped per return under current notifications, which usually keeps the cost manageable.
File in sequence: GSTR-1 before GSTR-3B for the same period, and monthly returns before the annual return.
For periods already barred: document the position, pay any tax due with interest through DRC-03, and keep a clear working in case of later inquiries.

Example

A small trader stopped operations in 2023 but did not cancel GST registration. Returns from July 2023 onwards were never filed. By November 2026, the GSTR-3B returns for July, August and September 2023 are already time-barred, while October 2023 onwards can still be filed if done promptly. If there were no supplies, filing nil returns for the remaining periods and applying for cancellation is usually the cleanest path; for barred months with no liability, the trader should keep records showing no business activity.

Frequently asked questions

Does the GST return time barred 3 years rule apply to GSTR-9C?

GSTR-9C is not separately listed, but it is filed with GSTR-9. If GSTR-9 is barred, the reconciliation statement cannot practically be filed either.

Can I pay tax for a time-barred period?

Yes. The bar applies to filing the return, not to paying tax. Liability can be discharged through DRC-03 with applicable interest.

Can the three-year limit be extended?

The law allows the government to notify conditions and restrictions, and relief has been discussed for specific situations. Check for any current notification before assuming an extension.

Is the bar applicable to returns already filed but needing correction?

GST returns generally cannot be revised; corrections are made in later returns within their own time limits. The three-year bar concerns filing a return that was never filed.

If you have pending GST returns from earlier years, our GST team would be happy to help you review the cut-offs and plan the filings.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

November 7, 2026

Marketplace Settlement Reconciliation for Amazon and Flipkart Sellers

Selling on Amazon, Flipkart and other marketplaces brings reach and volume, but the money that reaches your bank account rarely matches the sales figure on your dashboard. Commissions, shipping charges, storage fees, GST on fees, tax collected at source, TDS, returns, promotions and reserves all sit in between. Regular e-commerce settlement reconciliation is the only way to know your real margin, claim every credit you are entitled to and keep your GST and income-tax filings consistent.

This guide explains what goes into a marketplace settlement, a step-by-step reconciliation method, a worked example for a single order, and the common leakages sellers recover once they start reconciling properly.

Key takeaways

Reconcile at the order level: each order ID should trace from the order report to the settlement report and then to the bank credit.
Marketplace fees carry 18% GST, which is usually available as input tax credit when the invoices are correctly captured.
GST TCS at 0.5% of net taxable supplies and income-tax TDS at 0.1% under section 194-O are deducted from payouts and must be claimed back through returns.
Returns, customer refunds, RTO shipments and reimbursement claims are where most money is lost if not tracked.
A monthly routine tied to your GST filing calendar keeps the books, returns and marketplace data aligned.

What a marketplace settlement contains

Marketplaces pay sellers periodically, often weekly or more frequently, net of deductions. A typical settlement includes:

Order value: the selling price including GST, and shipping charges collected from customers where applicable.
Marketplace fees: referral or commission fee, fixed or closing fee, shipping or weight handling fee, pick-and-pack and storage fees for fulfilment programmes, and payment collection fees.
GST on fees: charged at 18% by the marketplace on its services.
GST TCS: collected by the marketplace under section 52 of the CGST Act.
Income-tax TDS: deducted under section 194-O (carried forward under the Income-tax Act, 2025).
Adjustments: customer returns, refunds, cancellations, promotional discounts, advertising charges and reserves or holds.
Reimbursements: compensation for lost or damaged inventory and other claims.

Each marketplace provides downloadable order, payment and tax reports. Save them monthly, because older reports can be harder to retrieve later.

A worked example for one order

A seller sells a product at ₹1,180 including GST at 18% (taxable value ₹1,000, GST ₹180). The settlement for this order shows:

Item	Amount (₹)
Order value received from customer	1,180
Less: commission, closing and shipping fees	(200)
Less: GST on fees at 18%	(36)
Less: GST TCS at 0.5% of taxable value	(5)
Less: TDS under section 194-O at 0.1%	(1)
Net amount credited to bank	938

In the books, this should be recorded as:

Sales ₹1,000 and output GST ₹180 (reported in GSTR-1 and GSTR-3B)
Marketplace fees ₹200 as an expense, with ₹36 input tax credit
TCS ₹5 as a receivable, claimed from the electronic cash ledger after it appears in your TCS credit data
TDS ₹1 as advance tax credit, claimed in the income-tax return
Bank ₹938

Most sellers make the mistake of booking ₹938 as sales. That understates turnover, loses the ITC on fees and leaves TCS and TDS unclaimed. Our article on GST for e-commerce sellers explains the TCS mechanism in more detail.

Step-by-step e-commerce settlement reconciliation

Download monthly reports: order or sales report, settlement or payment report, tax invoice reports for fees, returns report and inventory reports for fulfilment stock.
Build an order-level sheet: list every order ID with invoice value, GST, fees, TCS, TDS, adjustments and net settlement.
Match to the bank: group orders by settlement ID and match each payout to the bank credit. Our guide on bank reconciliation best practices covers the bank side.
Verify fees: compare charged fees with the marketplace’s published rate card for the category and weight slab. Flag unusual charges.
Track returns and cancellations: ensure refunded orders are reversed in sales through credit notes, and that returned stock is received back in saleable condition or claimed.
Reconcile GST TCS: match TCS in your records with the TCS data filed by the marketplace, and accept it on the GST portal so the credit reaches the cash ledger.
Reconcile TDS: match 194-O TDS with the tax credit statement before filing the income-tax return.
Book summary entries: post monthly journal entries from the reconciled sheet and keep the working as support.

Common leakages and how to recover them

Weight or dimension disputes: incorrect weight slabs lead to higher shipping fees; raise a correction with the marketplace.
Lost or damaged inventory in fulfilment centres: file reimbursement claims within the marketplace’s time window.
Customer returns not received: a refund issued but no product returned can often be claimed under seller protection programmes.
Duplicate or incorrect fee charges: especially after policy changes or promotions.
Unclaimed TCS and TDS: small per order but significant across a year.
Reserves not released: check that held amounts are released after the holding period.

Sellers who start reconciling regularly often find that recoveries alone cover the cost of the effort. Keep a simple claims log with the order ID, issue, date raised, amount and outcome, so nothing slips past the marketplace’s claim window.

Aligning with GST and income-tax filings

Sales in GSTR-1 should match your order-level data, and the marketplace’s TCS statement should agree with your sales net of returns.
ITC on marketplace fees should reconcile with the invoices appearing in your GSTR-2B.
Turnover in the income-tax return should match GST turnover and the marketplace data reflected in the Annual Information Statement.
Stock in fulfilment centres should be included in closing inventory at the year end.

Frequently asked questions

How often should Amazon and Flipkart settlements be reconciled?

At least monthly, before filing GST returns. High-volume sellers often reconcile weekly with each settlement cycle.

Can I claim ITC on marketplace commission?

Yes, GST charged on marketplace fees is generally available as input tax credit if you are a registered seller and the invoices appear in your GSTR-2B.

How is GST TCS deducted by marketplaces recovered?

It is credited to your electronic cash ledger after you accept it on the GST portal, and can then be used to pay tax or claimed as a refund.

Should I record sales at the net settlement amount?

No. Record sales at the full invoice value and account for fees, TCS and TDS separately, so that turnover, credits and expenses are all correct.

If you sell on marketplaces and would like help setting up a monthly settlement reconciliation, our e-commerce accounting team would be happy to help.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

November 6, 2026

Section 43B(h): Paying MSME Suppliers Within 45 Days to Protect Your Deduction

Delayed payments have long been a problem for small suppliers. To encourage prompt settlement, the Finance Act 2023 introduced clause (h) in section 43B of the Income-tax Act, 1961. Under section 43B(h) MSME payment rules, amounts owed to micro and small enterprises that are not paid within the time allowed under the MSMED Act are deductible only in the year they are actually paid. For a buyer with large supplier balances at year end, this can shift a significant expense into the next year.

This article explains who is covered, how the time limits work, how the disallowance is computed, and what finance teams can do to stay on the right side of the rule. The provision applies from FY 2023-24 and continues under the Income-tax Act, 2025 among the deductions allowed only on actual payment.

Key takeaways

The rule applies to amounts payable to micro and small enterprises registered under the MSMED Act; medium enterprises are not covered.
The time limit is 15 days from acceptance where there is no written agreement, and the agreed period, capped at 45 days, where there is one.
If an amount remains unpaid beyond the time limit at the end of the year, the expense is allowed only in the year of actual payment.
The usual relief for payment before the return due date does not apply to this clause.
Interest payable to MSMEs for delayed payment under the MSMED Act is not deductible.

Who is covered?

The rule applies when the supplier is a micro or small enterprise under the MSMED Act, 2006, usually evidenced by Udyam registration. Key points:

Medium enterprises are outside the rule.
Traders: the delayed payment provisions of the MSMED Act are generally understood not to extend to wholesale and retail traders, even if they hold Udyam registration for other purposes. Buyers should confirm the classification shown on the supplier’s Udyam certificate.
Unregistered suppliers: the rule applies to enterprises registered under the MSMED Act; obtain and keep declarations from suppliers.
Nature of purchase: the rule covers goods and services supplied by the MSE to the buyer in the course of business; capital goods are generally treated differently because their cost is claimed through depreciation, so seek advice on specific cases.

Our guide on Udyam registration and MSME benefits explains how enterprises are classified.

How the time limits work

Section 15 of the MSMED Act requires the buyer to pay:

On or before the date agreed in writing, which cannot exceed 45 days from the day of acceptance (or deemed acceptance) of the goods or services, or
Where there is no written agreement, within 15 days of acceptance.

The day of acceptance is usually the date of delivery or performance, unless an objection is raised within the specified period. Section 43B(h) uses this MSMED Act deadline to decide whether the deduction is at risk.

Worked cases at the year end

Assume the financial year ends on 31 March and the buyer has a written agreement with each supplier for 45-day credit.

Case	Invoice accepted	MSMED due date	Payment date	Deduction for the year ending 31 March?
A	5 January	19 February	15 February	Yes – paid within time
B	5 January	19 February	10 March	Yes – paid late but within the same year
C	5 January	19 February	20 April	No – overdue at year end; allowed next year
D	1 March	15 April	10 April	Yes – paid within the MSMED time limit
E	1 March	15 April	30 April	No – paid after the time limit; allowed next year

Cases B and C show why the year end matters. A late payment made within the same year still gets the deduction that year. An amount that is overdue and unpaid at year end, or paid after the MSMED deadline in the following year, moves to the year of payment.

Illustration of the impact

A manufacturer has ₹80 lakh payable to micro and small suppliers on 31 March, of which ₹30 lakh is beyond the 45-day limit and paid only in May. The ₹30 lakh is added back to income for the current year and claimed next year. At a 25% tax rate (plus surcharge and cess), this means roughly ₹7.5 lakh or more of tax paid a year earlier than expected, besides interest on any resulting shortfall in advance tax.

Where interest comes in

If payment is delayed, the MSMED Act entitles the supplier to compound interest at three times the bank rate notified by the RBI. That interest is not deductible for income-tax purposes, so late payment carries a double cost: the timing disallowance under section 43B(h) and a permanent disallowance of any interest paid. Suppliers may also approach the MSME Facilitation Council for recovery, which adds management time and strains relationships.

Reporting and documentation

The disallowance is reported in the tax audit report where the business is subject to tax audit, and reflected in the computation of income. Our tax audit checklist covers the preparation steps.
Companies also disclose MSME dues and interest in their financial statements under Schedule III.
Maintain for each MSE supplier: Udyam certificate, classification, credit terms, invoice acceptance dates and payment dates.

A practical payables process

Tag suppliers in the vendor master as micro, small, medium or non-MSME, with Udyam numbers and certificate copies.
Record credit terms in written purchase orders or agreements, not exceeding 45 days.
Capture acceptance dates for goods receipts and service confirmations.
Run a weekly ageing report for MSE suppliers highlighting invoices approaching the deadline.
Prioritise MSE payments in the payment run, particularly in February and March.
Reconcile at year end and compute the disallowance before closing the books and paying the last advance tax instalment.
Review annually: suppliers’ classifications can change, so ask for updated declarations each year.

Frequently asked questions

Does section 43B(h) apply to payments to medium enterprises?

No. The clause covers only micro and small enterprises as defined under the MSMED Act.

If I pay before filing my return, will the deduction be allowed for the same year?

Not under this clause. Unlike other items in section 43B, payment before the return due date does not save the deduction if the MSMED time limit has passed.

What if my agreement allows 60 days’ credit?

The MSMED Act caps the agreed period at 45 days, so payment after 45 days is treated as late for this purpose.

Does the rule apply to businesses using presumptive taxation?

Where income is computed on a presumptive basis, expenses are not claimed separately, so the disallowance generally has no practical effect.

If you would like help setting up an MSME payables tracker or reviewing your year-end exposure under section 43B(h), our team would be glad to assist.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

November 6, 2026

Closing a Private Limited Company: Strike-Off through Form STK-2

Not every company goes on to become a thriving business. Some are set up for a project that never took off, some complete their purpose, and others become inactive when promoters move on. Leaving such a company dormant on the register without filings only builds up late fees and can lead to director disqualification. A company strike off through Form STK-2 is the simplest way for an eligible private limited company to close cleanly.

This article explains which companies can apply, what must be completed before filing, the documents required, how the application is processed, and what happens after the name is removed. It also covers the points that most often cause applications to be returned.

Key takeaways

A company can apply for strike off if it has not carried on business for the two immediately preceding financial years, or did not commence business within one year of incorporation, and has not obtained dormant status.
The company must have no assets and no liabilities at the time of application, supported by a recent statement of accounts.
Overdue annual filings up to the end of the financial year in which business ceased must be completed before filing STK-2.
STK-2 applications are processed centrally by the MCA’s Centre for Processing Accelerated Corporate Exit (C-PACE).
Liability of directors and members for past acts continues even after strike off, and restoration is possible in certain cases.

Who can apply for strike off?

Under section 248(2) of the Companies Act, 2013, a company may apply to the Registrar to remove its name if:

It has failed to commence business within one year of incorporation, or
It has not carried on any business or operation for the two immediately preceding financial years and has not applied for dormant company status.

Companies that cannot use this route

Listed companies and certain delisted companies
Companies registered under section 8
Companies under inspection or investigation, or with prosecution pending
Companies that have accepted public deposits that remain outstanding, or have charges pending satisfaction
Companies with pending applications for compromise or arrangement
Companies that, within the previous three months, changed their name or registered office state, disposed of property or rights for value other than in the normal course, or engaged in any activity other than that needed for closure

If the company is not eligible, voluntary winding up under the Insolvency and Bankruptcy Code or other routes may be needed.

Preparing the company for closure

Before filing, the company should reach a clean position:

Settle all liabilities: pay creditors, statutory dues, director loans (or obtain waivers) and any tax demands.
Realise or write off assets: sell or distribute assets and bring the balance sheet to nil.
Close tax registrations: apply for cancellation of GST registration and file the final return; see our guide on GST registration cancellation. Close professional tax and other registrations where applicable.
File overdue returns: file financial statements (AOC-4) and annual returns (MGT-7 or MGT-7A) up to the end of the financial year in which the company ceased business. Our ROC annual filing guide explains these forms.
Income-tax: file pending income-tax returns and resolve any outstanding demands or proceedings.
Close the bank account: obtain a closure certificate or confirmation.

Documents for Form STK-2

Document	Purpose
Board resolution	Approves filing and authorises a director
Special resolution or consent of 75% of members (by paid-up capital)	Members’ approval for strike off
STK-3 indemnity bond from each director	Directors indemnify against any liability that arises later
STK-4 affidavit from each director	Confirms the company’s position and eligibility
STK-8 statement of accounts	Assets and liabilities as on a date not more than 30 days before filing, certified by a practising professional
Bank account closure evidence	Shows no bank account remains open
Pending litigation statement	Details of any legal proceedings, if any

The government fee for STK-2 is ₹10,000. From time to time, the MCA has announced schemes with reduced fees for inactive companies, so check whether any scheme is running when you file.

How the application is processed

Filing: STK-2 with attachments is filed on the MCA portal, signed by a director and certified by a practising professional.
Scrutiny at C-PACE: the application is examined centrally; queries may be raised and must be answered within the time allowed.
Public notice: if satisfied, the Registrar issues a public notice in Form STK-6, published on the MCA website, in the Official Gazette and in newspapers, inviting objections within 30 days.
Consultation with regulators: departments such as income-tax may be informed and can raise objections.
Dissolution: if no objection survives, the Registrar strikes off the name and publishes the notice of dissolution in Form STK-7.

Processing times vary with the volume of applications and the quality of documents. Clean applications with complete filings typically move faster.

After strike off

The company stands dissolved from the date of the STK-7 notice.
The liability of every director, officer and member continues and may be enforced as if the company had not been dissolved.
Any assets that were overlooked vest with the government, so it is important to account for everything before applying.
An aggrieved person can appeal against the strike off within three years; a company, member or creditor can seek restoration from the Tribunal within twenty years in specified circumstances.

Common reasons for rejection or resubmission

Annual filings not completed up to the required year.
Statement of accounts older than 30 days or showing balances.
Bank account not closed, or GST registration still active.
Signatures or dates inconsistent across STK-3, STK-4 and the resolutions.
Charges on the MCA register not satisfied.
Pending notices or proceedings not disclosed.

Frequently asked questions

How long does a company strike off take?

It depends on C-PACE processing and the 30-day public notice period. Complete applications with all filings up to date are generally processed faster.

Do we need to file all pending annual returns before STK-2?

Yes. Financial statements and annual returns must be filed up to the end of the financial year in which the company stopped business.

Can a section 8 company apply for strike off?

No. Section 8 companies are excluded from this route and must follow other procedures.

Can a struck-off company be revived?

Yes, in certain circumstances, through an application to the Tribunal within the time limits set by the Act.

If you have an inactive company and would like an orderly closure, our corporate team would be happy to plan the strike-off steps with you.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

November 6, 2026

GST Registration in 2026: Documents, Aadhaar Authentication and Approval Timelines

A GST registration is often the first compliance step for a new business, and it affects everything that follows: raising tax invoices, claiming input tax credit, selling on marketplaces and working with larger customers. The GST registration process has changed in recent years with Aadhaar and biometric authentication, stricter verification of business premises, and a new fast-track route for small businesses introduced from 1 November 2025.

This guide explains who must register, the documents you need, how authentication works, the approval timelines under the normal and simplified routes, and the steps to take immediately after getting your GSTIN.

Key takeaways

Registration is required once aggregate turnover crosses the threshold (generally ₹40 lakh for goods and ₹20 lakh for services, with lower limits in some states), or in specified mandatory cases.
Applications are filed online in Form GST REG-01 with PAN-based details, documents and authentication.
Aadhaar authentication, and in many states biometric verification at a GST Suvidha Kendra, is now a core part of the process.
Normal approval is within 7 working days, extendable up to 30 days where physical verification or further checks are needed.
Under Rule 14A, eligible applicants whose output tax on supplies to registered persons does not exceed ₹2.5 lakh a month can get registration within 3 working days.

Who needs to register?

There are two routes to mandatory registration:

Threshold-based: when aggregate turnover in a financial year exceeds the applicable limit. The limit is generally ₹40 lakh for suppliers exclusively of goods in most states, and ₹20 lakh for service providers, with lower limits in certain special category states.
Compulsory cases, regardless of turnover, listed below.

The compulsory cases include:

Inter-state taxable supply of goods (with limited exceptions)
Casual taxable persons and non-resident taxable persons
Persons liable to pay tax under reverse charge
E-commerce operators and, in most cases, sellers supplying through them
Persons required to deduct TDS or collect TCS under GST
Input service distributors

Many businesses also register voluntarily below the threshold because customers want tax invoices or they wish to claim input tax credit. Small businesses should also consider whether the composition scheme suits them.

Documents checklist

Applicant	Key documents
Proprietor	PAN and Aadhaar of proprietor, photograph, proof of principal place of business, bank details
Partnership firm or LLP	PAN of entity, partnership deed or LLP incorporation certificate, PAN and Aadhaar of partners, authorised signatory letter
Company	Certificate of incorporation, PAN of company, PAN and Aadhaar of directors, board resolution for authorised signatory
All applicants	Proof of address (electricity bill, property tax receipt or municipal record), rent agreement or consent letter with owner’s ID if not owned, photographs of premises where asked

The most common reasons for queries are mismatched addresses between the application and the proof, unclear rent or consent documents, and missing photographs of the business premises. Checking these before submission saves time.

Step-by-step GST registration process

Part A of REG-01: enter PAN, mobile number and email on the GST portal and verify with OTPs to receive a temporary reference number (TRN).
Part B of REG-01: fill in business details, promoters, authorised signatory, principal and additional places of business, goods and services (HSN/SAC), and upload documents.
Aadhaar authentication: opt for authentication for the promoters and authorised signatory. Depending on the state and the risk assessment, this may be OTP-based or may require a visit to a GST Suvidha Kendra for biometric authentication and photographs.
Verification and submission: sign using DSC (mandatory for companies and LLPs) or EVC.
Processing by the officer: the application may be approved, or a query may be raised in Form REG-03, which must be answered in REG-04 within the prescribed time.
Grant of registration: the certificate in Form REG-06 is issued with the GSTIN.

Approval timelines

Normal cases: where Aadhaar authentication is successful and no physical verification is needed, the application should be decided within 7 working days.
Higher-risk cases: where authentication is not done, the system flags the application on risk parameters, or physical verification of premises is required, the timeline extends to up to 30 days.
Rule 14A simplified route: from 1 November 2025, an applicant who determines that its output tax liability on supplies to registered persons will not exceed ₹2.5 lakh per month can opt for simplified registration, which is granted electronically within 3 working days after Aadhaar authentication and data-based risk checks. Only one registration per PAN per state can be taken under this route, and if the business later exceeds the limit it must apply to withdraw from the scheme through the prescribed form.

After you receive your GSTIN

Furnish bank account details within 30 days of registration or before filing the first GSTR-1 or IFF, whichever is earlier. Missing this can lead to suspension; our article on GST registration suspension and REG-31 explains the consequences.
Display the GSTIN and registration certificate at the place of business.
Set up invoicing with correct invoice series, HSN codes and GST rates under the current 5%, 18% and 40% structure.
Mark return due dates for GSTR-1 and GSTR-3B (or the quarterly QRMP option if eligible).
Add additional places of business through an amendment whenever you open a new godown or office.

Common mistakes that delay approval

Uploading an address proof that does not match the address entered.
Providing a rent agreement without the owner’s ID or a consent letter.
Skipping Aadhaar authentication, which pushes the application into the longer route.
Missing the biometric appointment at the Suvidha Kendra where required.
Choosing incorrect HSN or SAC codes that do not reflect the actual business.
Not replying to REG-03 queries within the time allowed, leading to rejection.

Frequently asked questions

How long does the GST registration process take in 2026?

Normally up to 7 working days after successful Aadhaar authentication, up to 30 days where physical verification is required, and 3 working days under the Rule 14A simplified route for eligible applicants.

Is there a government fee for GST registration?

No government fee is charged for obtaining GST registration.

Who can use the Rule 14A simplified registration?

Applicants whose output tax on supplies to registered persons is not expected to exceed ₹2.5 lakh a month, subject to Aadhaar authentication and other conditions.

Can I start invoicing with GST before registration is approved?

No. You can charge GST only after receiving the GSTIN, although a revised invoice may be issued for the period between the effective date of registration and the date of grant, as permitted by the law.

If you are starting a business and would like help with your GST registration and first returns, our GST team would be happy to guide you.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

November 5, 2026

Virtual CFO Services: What a Part-Time Finance Leader Brings to a Growing Company

Many companies reach a stage where the founder is still the de facto finance head, the accountant is busy with bookkeeping and filings, and important questions go unanswered: how long will cash last, which product actually makes money, and what will investors or banks want to see? Hiring a full-time CFO at this stage is often too early and too expensive. Virtual CFO services fill this gap by giving a growing company access to senior finance leadership on a part-time basis.

This article explains what a virtual CFO does, how the role differs from bookkeeping and accounting support, the signs that a business is ready for one, how engagements are usually structured, and what a practical first 90 days looks like.

Key takeaways

A virtual CFO provides strategic finance leadership part-time, typically a few days a month, alongside your existing accounts team.
The focus is on planning, cash, decision support, investor and lender readiness, and strong financial controls.
It suits companies that have outgrown founder-led finance but do not yet need or cannot yet afford a full-time CFO.
A clear scope, defined deliverables and regular review meetings make the engagement effective.
The first 90 days usually cover diagnosis, a reporting pack, a cash forecast and a prioritised improvement plan.

What a virtual CFO actually does

The role sits above day-to-day accounting. Typical responsibilities include:

Planning and forecasting: annual budgets, rolling forecasts and scenario analysis for hiring, pricing or expansion decisions.
Cash and working capital: short-term cash forecasts, receivables and payables discipline, inventory levels, and banking relationships.
Management reporting: designing the monthly MIS pack and KPIs, and presenting insights to founders or the board. Our guide on MIS reporting for SMEs outlines what such a pack contains.
Fundraising and lending support: financial models, investor updates, data room preparation, and responses to due diligence queries.
Systems and controls: choosing and configuring accounting tools, approval workflows, and segregation of duties.
Compliance oversight: making sure GST, TDS, payroll and company law obligations are tracked and completed on time by the responsible team.
Unit economics and pricing: margin analysis by product, customer or channel, and cost reduction opportunities.

How it differs from other finance roles

Role	Main focus	Typical time commitment
Bookkeeper	Recording transactions, reconciliations	Daily or weekly
Accountant or finance executive	Books, payroll, statutory returns, month-end close	Full-time or regular part-time
Financial controller	Accuracy of accounts, controls, close process	Full-time in larger companies
Virtual CFO	Strategy, planning, cash, investors, decision support	A few days a month, scaled as needed
Full-time CFO	All of the above, plus team leadership and long-term strategy	Full-time

A virtual CFO does not replace the accounts team. The best outcomes come when a reliable bookkeeping and compliance function is in place and the virtual CFO builds on it.

Signs your company is ready

Revenue is growing, but cash always feels tight and forecasts are rough guesses.
The founder spends evenings on spreadsheets instead of customers and product.
Monthly accounts arrive late or are not trusted for decisions.
You are preparing to raise equity, take a larger bank facility or enter a new market.
Investors or the board are asking for structured reporting and budgets.
You are expanding into new states or countries and need to understand the tax and cost implications.

If three or more of these apply, part-time finance leadership is likely to pay for itself through better cash management and clearer decisions.

Consider a consumer brand with annual revenue of about ₹25 crore selling through its own website and marketplaces. Sales are growing, but marketplace settlements arrive late, inventory is building up in two warehouses and the bank has asked for projections to renew its working capital limit. A virtual CFO spending a few days a month could set up a weekly cash forecast, a channel-wise margin report and a bank-ready projection, giving the founders a clear view without adding a full-time senior salary.

How engagements are usually structured

Retainer model: a fixed number of days or hours each month with agreed deliverables such as the MIS pack, cash forecast and a monthly review meeting.
Project model: a defined piece of work, such as building a financial model for a fundraise or implementing a new accounting system.
Hybrid model: a monthly retainer with add-on projects when needed.

Whatever the model, agree in writing on scope, deliverables and timelines, access to systems and data, confidentiality, and who in your team the virtual CFO works with. Good engagements also include a quarterly review of whether the scope still fits the business.

A practical first 90 days

Days 1–30: diagnose

Review the last 12 months of accounts, bank statements and key contracts.
Map current processes: invoicing, collections, payables, payroll and compliance.
Identify quick wins, such as overdue receivables or duplicate subscriptions.

Days 31–60: build the foundation

Agree a chart of accounts and cost centres that support decision-making.
Introduce a monthly close calendar and a standard MIS pack.
Build a 13-week cash forecast and review it weekly.

Days 61–90: plan and improve

Prepare the budget or reforecast for the rest of the year.
Present a prioritised improvement plan covering systems, controls and team roles.
Where relevant, streamline processes such as supplier payments; our note on accounts payable automation gives ideas.

By the end of this period, the founder should have a reliable monthly view of performance and cash, and a clear agenda for the next two quarters.

Getting the most from a virtual CFO

Share context openly: plans, concerns and upcoming decisions, not just numbers.
Keep the books current: strategic insight depends on timely, accurate accounts.
Hold a fixed monthly review: a regular meeting keeps momentum and accountability.
Measure outcomes: for example, faster month-end close, lower DSO, improved gross margin or a successful funding round.
Plan the transition: as the company grows, the virtual CFO can help define the role and hire a full-time finance leader.

Frequently asked questions

What do virtual CFO services cost compared to a full-time CFO?

Costs depend on scope and time commitment, but because the engagement is part-time, they are usually a fraction of a full-time senior salary.

Does a virtual CFO handle bookkeeping and tax filings?

The virtual CFO oversees these areas and ensures they are done well, while day-to-day bookkeeping and filings are usually handled by the accounts team or a separate service.

Can a virtual CFO help with fundraising?

Yes. Preparing financial models, investor reports and due diligence responses is a common part of the role.

How often does a virtual CFO meet the management team?

Most engagements include at least a monthly review, with additional calls during budgeting, fundraising or major decisions.

If you are considering part-time finance leadership for your company, our team would be glad to discuss how virtual CFO support could work for you.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

November 5, 2026

Annual Information Statement (AIS) and TIS: How to Reconcile Before Filing

The income-tax department now receives a large volume of information about each taxpayer: salary and TDS from employers, interest from banks, dividends from companies, mutual fund and share transactions from registrars and brokers, property purchases from registrars, and much more. All of this appears in the Annual Information Statement. Careful AIS reconciliation before filing is the single most effective way to avoid mismatch intimations and scrutiny questions later.

This guide explains what the AIS and the Taxpayer Information Summary (TIS) contain, how they relate to the tax credit statement, how to reconcile them with your own records, and how to use the feedback facility when something is wrong. A sample reconciliation shows how differences are typically explained.

Key takeaways

The AIS lists information reported by third parties; the TIS summarises it by category and feeds the pre-filled return.
TDS and TCS credits are claimed based on the tax credit statement (Form 26AS, which is Form 168 under the new law for later years), and AIS mirrors this data.
Five feedback options let you confirm, correct, deny or flag information as duplicate or belonging to another PAN or year.
Differences are normal; what matters is that you can explain each one and your return reflects the correct figure.
Reconciling a few weeks before the due date leaves time for deductors or reporting entities to correct errors.

What AIS and TIS contain

The AIS is organised into broad parts:

TDS and TCS information: salary, interest, rent, professional fees, sale of property, and other payments on which tax was deducted or collected.
Statement of financial transactions (SFT): savings and deposit interest, dividends, purchase and sale of shares and mutual funds, cash deposits, credit card payments, and property transactions above reporting thresholds.
Payment of taxes: advance tax and self-assessment tax paid.
Demand and refund: outstanding demands and refunds issued.
Other information: data such as GST turnover, interest on income-tax refunds and information from other government sources.

The TIS aggregates these entries by category (for example, total interest from savings accounts) and shows a processed value and a derived value after any feedback. The pre-filled return uses these figures, which is why reconciling them matters.

You can download both from the income-tax e-filing portal under the AIS section, in PDF, JSON or CSV format.

A step-by-step AIS reconciliation

Download everything: AIS, TIS and the tax credit statement for the financial year.
Gather your records: salary slips and the salary certificate, bank statements and interest certificates, broker capital gains reports, mutual fund statements, rent receipts, property documents and tax payment challans.
Match TDS line by line: compare each deductor, amount paid and tax deducted with your records. Differences here directly affect your credit.
Review SFT entries: check interest, dividends and securities transactions against statements; look for duplicates, joint accounts and transactions of family members reported under your PAN.
Check the year: interest reported on accrual versus receipt, or year-end transactions reported in the wrong year, are common causes of mismatch.
Record your reconciliation in a simple working sheet: AIS value, your value, difference and explanation.
Submit feedback for genuine errors, then file the return with the correct figures.

A sample reconciliation

Item	AIS/TIS value (₹)	Your records (₹)	Difference and explanation
Savings bank interest	42,300	42,300	Matches
Fixed deposit interest	1,86,000	1,24,000	Joint deposit with spouse reported fully under your PAN; your share is 2/3
Dividend	18,500	9,250	Same dividend reported twice (duplicate)
Sale of mutual fund units	6,40,000	6,40,000	Sale value matches; compute gain using cost from statement
TDS on rent (from tenant)	24,000	36,000	Tenant deducted but has not filed one quarter’s TDS statement; follow up for credit

In this example, the return would show the correct fixed deposit interest and dividends, with feedback submitted for the joint deposit and duplicate dividend. For the missing rent TDS, the taxpayer asks the tenant to file or correct the TDS statement, because credit is generally allowed only when it appears in the tax credit statement.

For capital gains, remember that AIS shows sale value, not profit. You still need the purchase cost and dates to compute gains correctly; our guide to capital gains tax rates explains the rates and holding periods.

Using the feedback options

For each AIS entry, you can choose one of the following:

Information is correct
Information is not fully correct – enter the correct amount
Information relates to other PAN or year
Information is duplicate – identify the matching entry
Information is denied – for transactions that do not relate to you at all

After feedback, the modified value appears alongside the reported value, and the derived value in TIS is updated. In some cases, the information is sent to the reporting entity for confirmation. If the source confirms its original figure, you may need to follow up with it directly.

Feedback does not replace filing the correct return. Its value is in creating a record of your explanation, which helps if the department later questions a difference.

What happens if you do not reconcile

If the return shows lower income than the AIS without explanation, the processing system may make adjustments or issue an intimation. Our article on section 143(1) intimations explains how to respond when that happens. Larger unexplained differences can also lead to compliance e-campaigns or scrutiny selection. Reconciling upfront is far easier than explaining later.

Practical tips

Start early: download AIS in June or July; many deductors file corrections around the first quarter due dates.
Watch joint holdings: banks often report joint account interest under the first holder’s PAN.
Check high-value entries: property purchases, large cash deposits and credit card payments are frequently reviewed.
Keep evidence: save the working sheet and supporting statements with the return acknowledgement.
Revisit after filing: AIS is updated during the year; if new information appears, consider whether a revised or updated return is needed.

Frequently asked questions

Is AIS reconciliation mandatory before filing?

It is not a separate legal requirement, but it is strongly advisable, because returns are processed against this data and mismatches can lead to adjustments or notices.

What is the difference between AIS and TIS?

AIS lists individual transactions reported by third parties, while TIS summarises them by category and shows the values used in the pre-filled return.

Will my TDS credit be allowed if it appears in AIS but not in Form 26AS?

Credit is generally given based on the tax credit statement. Both draw from the same TDS data, so check whether the deductor’s statement has been filed and processed correctly.

Can I change AIS feedback later?

Yes, feedback can generally be modified, and the latest submission is considered.

If you would like help reconciling your AIS before filing or responding to a mismatch, our tax team would be glad to assist.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

November 4, 2026

GST on Employee Perquisites, Gifts and Recoveries: What Employers Should Know

Employers spend meaningful amounts on their people beyond salary: festival gifts, meals, transport, health insurance, mobile phones and club memberships. Many also recover part of these costs from employees. Each of these raises GST questions: is the benefit a taxable supply to the employee, is a recovery taxable, and can the employer claim input tax credit (ITC)? Understanding GST on employee gifts perquisites and recoveries helps you design benefits confidently and avoid avoidable disputes.

This article explains the basic principles, the ₹50,000 gift threshold, the CBIC’s clarification on contractual perquisites, the treatment of common recoveries such as canteen charges and notice pay, and how the blocked credit rules apply. A quick reference table brings the common items together.

Key takeaways

Services by an employee to the employer in the course of employment are neither goods nor services under Schedule III, so salary itself is outside GST.
Gifts to an employee up to ₹50,000 per year are not treated as a supply, even without consideration.
Perquisites provided under the employment contract are part of the employment relationship and are not treated as a separate taxable supply, as clarified in Circular No. 172/04/2022-GST.
ITC on items such as food, club membership, health services and leave travel is generally blocked under section 17(5), unless the facility is obligatory for the employer under a law.
Recoveries from employees need case-by-case review; the answer depends on the underlying arrangement, not on the label in the payroll.

The starting point: employer and employee are related persons

Under GST, an employer and employee are treated as related persons. Schedule I of the CGST Act deems certain supplies between related persons to be taxable even without consideration. This is why free benefits to employees are examined at all.

Two important carve-outs reduce the practical impact:

Gifts up to ₹50,000: Schedule I specifically states that gifts not exceeding ₹50,000 in value in a financial year by an employer to an employee are not treated as a supply of goods or services.
Contractual perquisites: the CBIC has clarified that perquisites provided by the employer to the employee in terms of the contractual agreement are in lieu of the services provided by the employee in the course of employment, and are not subject to GST.

Together, these mean that most routine benefits written into appointment letters or HR policies are not taxed as separate supplies to employees.

Gifts to employees in practice

A gift is something given without consideration and not as an entitlement under the employment contract. Festival hampers, anniversary presents and one-off rewards typically fall in this category.

If the total value of gifts to an employee in a financial year stays within ₹50,000, no GST is payable on the gift as an outward supply.
If it exceeds ₹50,000, the gift may be treated as a supply and GST may apply on its value.
Separately, ITC on goods given as gifts is blocked under section 17(5), regardless of value. So the employer usually pays GST on the purchase and cannot claim credit.

Maintaining an employee-wise gift register helps show that the threshold has not been crossed.

Perquisites and blocked credits

Many perquisites fall within section 17(5), which blocks ITC on specified items. The proviso allows credit where the employer is obligated under any law to provide the facility. The blocked list is explained in detail in our guide on blocked credits under section 17(5).

Benefit	GST on the benefit to employee	ITC for the employer
Food and canteen	Generally not taxed if a contractual perk	Blocked, unless obligatory under a law (for example, a statutory canteen)
Health insurance and medical services	Not taxed if contractual	Blocked, unless obligatory under a law
Club and fitness memberships	Not taxed if contractual	Blocked
Leave or home travel concessions	Not taxed if contractual	Blocked
Employee transport (cabs, buses)	Not taxed if contractual	Depends on the nature of service and vehicle rules; review carefully
Laptops, mobiles used for work	Business use, not a perk	Generally available if used for business
Festival gifts	Not a supply up to ₹50,000 a year	Blocked

The distinction between a business tool and a personal benefit matters. A laptop issued for work is a business input; a smartphone given as a personal reward is closer to a gift.

Recoveries from employees

Employers often recover part of the cost of a benefit from employees. Common examples include:

Canteen charges: where the employer recovers part of the food cost and does not retain any margin, various rulings have taken the view that GST is not payable on the recovered amount, particularly where the employer has not claimed ITC on the canteen service. The facts, including who the caterer bills and whether the employer is making its own supply, need careful review.
Transport recoveries: similar reasoning applies; if the employer merely passes on part of the cost of a facility forming part of the employment arrangement, a separate supply is often not intended. Documentation is key.
Notice pay: amounts recovered when an employee leaves without serving notice have been widely viewed as compensation for breach rather than consideration for a service, in line with the CBIC’s clarification on liquidated damages and similar payments in Circular No. 178/10/2022-GST. Confirm the position with reference to your contract terms.
Asset buy-back and damage recovery: selling an old laptop to an employee is a sale of goods and may attract GST at the applicable rate; recovery for damage should be examined on its facts.

Record the basis of each recovery in the HR policy and payroll so that the GST treatment is consistent across the year.

Designing benefits with GST in mind

Put benefits in writing: list perquisites in appointment letters or a benefits policy so they are clearly contractual.
Separate gifts from entitlements: track gifts per employee against the ₹50,000 limit.
Map ITC eligibility: review each benefit against section 17(5) and reverse credit where blocked.
Check statutory obligations: where a law requires you to provide a canteen, crèche or medical facility, the ITC proviso may apply.
Review with payroll changes: salary restructuring under the labour codes is a good moment to revisit benefits; see our note on new labour codes and payroll.
Keep supporting documents: policies, caterer contracts and recovery workings are what an officer will ask for during an audit.

Frequently asked questions

Is GST payable on Diwali gifts to employees?

Not if the total gifts to an employee in the financial year do not exceed ₹50,000. However, the employer generally cannot claim ITC on the gifts purchased.

Are perquisites under the employment contract taxable under GST?

The CBIC has clarified that perquisites provided under the contractual agreement are not subject to GST as a separate supply to the employee.

Can an employer claim ITC on canteen services?

Generally not, because food and beverages are blocked credits, unless providing the canteen is obligatory under a law applicable to the employer.

Is notice pay recovered from an employee taxable?

It is widely treated as not taxable, being compensation for breach rather than consideration for a service, but review the contract and current clarifications for your case.

If you would like a quick GST review of your employee benefits and recovery policies, our GST team would be happy to help.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

November 4, 2026

Significant Beneficial Ownership (SBO) and Form BEN-2: Who Must Report

Company law in India wants to know not just who is on the share register, but who ultimately owns or controls a company. That person is the significant beneficial owner (SBO). Where an individual holds a stake through another company, a trust, a partnership or a nominee, the company must identify them, record them and report them to the Registrar of Companies in Form BEN-2.

Most private companies with simple shareholdings have straightforward SBO positions, but group structures, foreign holding companies and nominee arrangements need a closer look. This guide explains who counts as an SBO, the forms and timelines, and how to keep the records current.

Key takeaways

An SBO is an individual who, alone or with others, holds at least 10% of shares, voting rights or dividend rights, or exercises significant influence or control, through indirect holdings.
The SBO must declare in Form BEN-1 within 30 days of becoming an SBO or of any change.
The company must file Form BEN-2 with the ROC within 30 days of receiving the declaration, and keep a register in Form BEN-3.
The company must actively identify SBOs, including by sending Form BEN-4 notices to non-individual members holding 10% or more.
Section 90 prescribes penalties for the SBO, the company and its officers in default.

Who is a significant beneficial owner?

Section 90 of the Companies Act 2013 and the Companies (Significant Beneficial Owners) Rules 2018 define an SBO as an individual who, acting alone or together with others (including through a trust), holds indirectly, or together with direct holdings, any of the following:

at least 10% of the share capital;
at least 10% of the voting rights;
the right to receive or participate in at least 10% of distributable dividends or other distributions; or
the right to exercise significant influence or control in any manner other than through direct holdings alone.

An individual who holds shares only directly, in their own name, is recorded as a member rather than reported as an SBO. The rules focus on the indirect element.

Tracing indirect holdings

The rules explain how to look through intermediate entities:

If the member is a	The individual is treated as holding through it if they
Company	Hold a majority stake in that company, or in its ultimate holding company
Hindu undivided family	Are the karta of the HUF
Partnership firm or LLP	Are a partner, or hold a majority stake in a body corporate that is a partner
Trust	Are a trustee (discretionary or charitable trust), a beneficiary (specific trust), or the author or settlor (revocable trust)
Pooled investment vehicle	Are a general partner, investment manager or CEO of the manager, where the vehicle is based outside India

A simple example

ABC Private Limited has two members: Ms Rao holds 40% directly, and XYZ Holdings Limited holds 60%. Mr Mehta holds 70% of XYZ Holdings. Mr Mehta is an SBO of ABC because he holds a majority stake in a body corporate that holds 10% or more of ABC. Ms Rao holds her shares directly and is shown as a member, not as an SBO, unless she also has an indirect route.

The forms and the timeline

BEN-1: the SBO gives a declaration to the company within 30 days of acquiring SBO status or any change in it.
BEN-2: the company files a return with the ROC within 30 days of receiving the BEN-1 declaration.
BEN-3: the company records SBO details in a register of significant beneficial owners, open for inspection by members.
BEN-4: the company sends a notice to any non-individual member holding 10% or more (and to any person it believes may be an SBO), seeking information to identify SBOs.

If a person does not respond or the company is not satisfied, the company may apply to the Tribunal for directions, including restrictions on the shares.

Exemptions

The rules do not apply to the extent shares are held by:

the Investor Education and Protection Fund Authority;
the holding company of the reporting company (provided the holding company itself reports its SBOs);
the Central or a State Government, or a local authority;
a body corporate or entity controlled by the Central or State Governments;
investment vehicles registered with and regulated by SEBI, RBI, IRDAI or PFRDA, such as mutual funds, alternative investment funds, REITs and InvITs.

Limited liability partnerships have a separate but similar framework under the LLP (Significant Beneficial Owners) Rules 2023, with their own forms.

Penalties under section 90

Default	Penalty
SBO fails to declare	₹50,000, plus ₹1,000 per day of continuing failure, up to ₹2 lakh
Company fails to maintain the register, file BEN-2 or allow inspection	₹1 lakh, plus ₹500 per day of continuing failure, subject to the statutory cap
Every officer in default	₹25,000, plus ₹200 per day of continuing failure, subject to the statutory cap

The MCA has issued many adjudication orders for late BEN-2 filings, so it is worth treating these timelines as firm.

A practical significant beneficial owner checklist

Map the shareholding chart, including all intermediate companies, trusts, firms and foreign parents, up to individuals.
Send BEN-4 notices each year and whenever a corporate or non-individual shareholder holds 10% or more.
Collect BEN-1 declarations at every change: share transfers, fresh allotments, group restructurings, changes in trusteeship.
File BEN-2 promptly and update the BEN-3 register.
Align with other filings: the annual return (MGT-7 or MGT-7A), FDI reporting such as FC-GPR, and bank KYC should show consistent ownership. Our guides on ROC annual filing and FDI reporting cover these.
Review nominee and beneficial interest declarations under section 89 at the same time.

Frequently asked questions

Who is a significant beneficial owner under the Companies Act?

An individual who, through indirect holdings alone or together with direct holdings, has at least 10% of shares, voting rights or dividend rights, or significant influence or control over the company.

What is the due date for Form BEN-2?

Within 30 days of the company receiving the BEN-1 declaration from the SBO.

Does a company with only individual shareholders need to file BEN-2?

Usually not, if all members hold shares directly in their own names and no one exercises control through an indirect route. The company should still document its assessment.

What is Form BEN-4?

It is a notice the company sends to a non-individual member holding 10% or more, or to anyone it believes may be an SBO, seeking the information needed to identify SBOs.

If you would like help mapping your ownership structure and completing SBO filings, our corporate compliance team is happy to assist.

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This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

November 4, 2026