Author: virevonadmin

GST Search, Inspection and Seizure under Section 67: Rights and Responsibilities

A visit from GST officers for inspection or search can feel stressful, but the law sets out clear procedures, and knowing them helps a business respond calmly and correctly. GST search and seizure powers under section 67 of the CGST Act are meant to be used on a proper authorisation and in a structured way, with safeguards for the taxpayer.

This article explains what inspection, search and seizure mean, the documents you should see, your rights and responsibilities during the process, and what typically follows. It is written to help owners and finance teams stay prepared, not alarmed.

Key takeaways

Section 67 allows inspection, search and seizure only on written authorisation by an officer of the rank of Joint Commissioner or above, based on “reasons to believe”.
Authorisation for inspection or search is issued in Form GST INS-01, and seizure is recorded in Form GST INS-02.
Proceedings are recorded in a panchnama in the presence of independent witnesses; read it fully before signing.
CBIC Instruction No. 01/2022-23 (GST-Investigation) dated 25 May 2022 states that there should be no recovery by force or coercion during search; payment is only voluntary.
Most searches lead to follow-up summons and records requests, and any demand must go through the normal show cause process.

Inspection, search and seizure: what the terms mean

Inspection is a less intrusive step where officers visit your premises to examine goods, books or documents.
Search is a more detailed exercise to find goods, documents or things believed to be relevant to tax evasion or to proceedings under the Act.
Seizure is the taking into custody of goods, documents, books or things found during search that are useful for proceedings.

Where it is not practicable to seize goods, officers may instead issue a prohibition order (Form GST INS-03), asking you not to remove or deal with them without permission.

What you should see at the start

Identity of officers: ask to see identity cards.
Authorisation in INS-01: check the name of the person or business, the premises covered and the signing authority.
Independent witnesses: searches are generally conducted in the presence of two independent witnesses, as required by the procedure for searches.

If the premises in the authorisation are different from your premises, or the document is unsigned, politely point this out and note it for your records.

Your rights during GST search and seizure

Your right	What it means in practice
To see the authorisation	Officers should show INS-01 before starting
To have a copy of the panchnama	You can ask for a copy of the record of proceedings
To an inventory of seized items	Seized goods and documents are listed in INS-02
To copies of seized documents	You may take copies or extracts, except where it would prejudice the investigation
To have documents returned	Documents not relied upon in a notice are to be returned within 30 days of the notice
No coercive recovery	Tax may be paid only voluntarily, not under pressure
To legal advice	You can consult your advisers during and after the proceedings

Your responsibilities

A search goes more smoothly when the business cooperates professionally:

Provide access to the premises, records and systems covered by the authorisation.
Do not remove, hide or destroy goods or records, including digital data.
Give accurate information; if you do not know an answer, say so and offer to provide it later.
Nominate one senior person to coordinate with officers and keep notes of what is examined and taken.
Keep statements factual. Statements recorded can be used later, so they should be accurate and considered.

Seized goods and documents

Goods seized can be released provisionally on execution of a bond and security in the prescribed form, or on payment of applicable tax, interest and penalty. If no notice is issued within six months of seizure, the goods are to be returned to the person from whom they were seized, although this period can be extended by up to six months for sufficient cause.

For documents and books, officers retain them only for as long as needed for examination and proceedings. Keeping your own backup copies of key records, especially digital ones, makes business continuity easier.

Voluntary payment during search: know the position

Businesses are sometimes unsure whether to pay tax during or right after a search. The position under CBIC Instruction No. 01/2022-23 is clear: there should be no recovery by force or coercion during search, inspection or investigation. If a taxpayer chooses to pay voluntarily, it is done through Form DRC-03, and it should be a genuine, informed decision.

Before paying, consider:

whether the liability is correctly computed;
whether it relates to periods and issues that are genuinely payable;
the benefit of paying early, such as lower penalty exposure in some cases.

Our guide to DRC-03 voluntary payment and DRC-03A explains how such payments are recorded and later adjusted.

What usually happens after a search

Summons to record statements or produce documents.
Requests for reconciliations and supporting records for the periods under review.
Show cause notice, if the department believes tax is short paid or ITC wrongly availed, followed by a reply and personal hearing. Our guide on replying to a GST show cause notice covers that stage.

A readiness checklist for businesses

Keep invoices, e-way bills and stock records organised and up to date.
Reconcile books with GSTR-1, GSTR-3B and GSTR-2B monthly.
Maintain supplier due diligence, especially for new or high-value suppliers.
Store contracts and key correspondence centrally.
Brief senior staff on who will coordinate if officers visit.

Frequently asked questions

Who can authorise a GST search?

Under section 67, an officer not below the rank of Joint Commissioner can authorise inspection, search and seizure in writing, in Form GST INS-01.

Do I have to sign the panchnama?

The panchnama records the proceedings. Read it carefully before signing, and ensure it correctly lists what was examined and seized. You can ask for a copy.

Can officers force me to pay tax during a search?

No. CBIC instructions state there should be no recovery by force or coercion. Any payment must be voluntary, through Form DRC-03.

Will seized goods be returned?

Goods can be released provisionally against a bond and security. If no notice is issued within six months (extendable by six months), they are to be returned.

If your business is facing a GST inspection or search, or you want to strengthen your records in advance, our GST litigation team will be glad to guide you calmly through each step.

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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.

October 18, 2026

UAE E-Invoicing Mandate: Timeline and How Businesses Can Get Ready

UAE e-invoicing is moving from plan to practice. Instead of emailing PDF invoices, businesses will exchange structured electronic invoices through accredited service providers, with invoice data reported to the Federal Tax Authority (FTA) in near real time. The rollout is phased, starting with larger businesses from 1 January 2027.

The change is significant, but manageable with a clear plan. This guide explains the timeline, how the model works, what the penalties look like and the practical steps to get ready without disrupting your billing.

Key takeaways

The framework was set out in Ministerial Decisions No. 243 and 244 of 2025, with penalties under Cabinet Decision No. 106 of 2025.
A voluntary pilot started on 1 July 2026; businesses with revenue of AED 50 million or more go live on 1 January 2027.
Businesses below AED 50 million go live on 1 July 2027, and government entities on 1 October 2027.
Each business must appoint an Accredited Service Provider (ASP); the deadline for the first group was extended to 30 October 2026.
The initial scope covers B2B and B2G transactions; B2C is outside the first phase.

The UAE e-invoicing timeline

Group	Appoint ASP by	Mandatory from
Voluntary pilot participants	—	1 July 2026
Businesses with revenue of AED 50 million or more	30 October 2026	1 January 2027
Businesses with revenue below AED 50 million	31 March 2027	1 July 2027
Government entities	31 March 2027	1 October 2027

Revenue for grouping purposes is based on the rules in the ministerial decision, so businesses near the AED 50 million mark should confirm their category early. Businesses can also choose to join before their mandatory date.

How the system works: the five-corner model

The UAE has adopted a decentralised model based on the Peppol network:

Corner 1: the supplier creates the invoice in its accounting or ERP system.
Corner 2: the supplier’s ASP validates the invoice and converts it to the UAE standard (PINT AE).
Corner 3: the buyer’s ASP receives the invoice.
Corner 4: the buyer receives it into its system.
Corner 5: the FTA receives the tax data from the ASPs.

Because both sides need an ASP, buyers as well as sellers have to be ready. A business that only purchases in scope still needs to be able to receive e-invoices.

What counts as an e-invoice

A PDF, scanned copy or image is not an e-invoice under this framework. The invoice must be a structured file in the prescribed format, exchanged through the ASP network. Credit notes follow the same process and are required for cancellations, reductions or corrections.

Scope in the first phase

In scope: B2B and B2G supplies, whether taxable or not, subject to the exclusions in the decision.
Outside the initial scope: B2C transactions and certain specific categories, such as some financial and international passenger transport services, which follow separate rules.
VAT groups: a transition period applies for transactions within a VAT group.

Electronic invoices must be issued within the time prescribed from the date of supply, and records must be retained in line with the UAE’s record-keeping rules.

Penalties to be aware of

Cabinet Decision No. 106 of 2025 sets administrative penalties, including:

AED 5,000 per month of delay for failing to implement the system or appoint an ASP by the deadline.
AED 100 per invoice or credit note not issued or transmitted electronically, capped at AED 5,000 per month.
AED 1,000 per day for delays in reporting a system failure or notifying the ASP of data changes.

The amounts are modest compared with the operational disruption of a rushed implementation, which is the bigger reason to plan early.

A practical readiness plan

Step 1: Confirm your phase and scope

Check annual revenue, the type of customers (B2B, B2G, B2C) and any VAT group. Map which invoices and credit notes will be in scope.

Step 2: Clean your master data

E-invoicing rejects poor data. Review customer TRNs, legal names, addresses, item descriptions, tax codes and units of measure. This single step prevents most validation errors.

Step 3: Choose an ASP

Select an FTA-accredited provider that integrates with your ERP or accounting software. Compare onboarding support, pricing per invoice, archiving and reporting features.

Step 4: Update systems and processes

Configure invoice templates to capture the mandatory fields.
Set up integration or connectors between your software and the ASP.
Define how incoming e-invoices will be received, approved and booked.
Align credit note and cancellation workflows with the new rules.

Step 5: Test, train and go live

Run test invoices with key customers and suppliers, train the billing and payables team, and plan a short parallel run before the mandatory date.

How e-invoicing links with VAT and corporate tax

Structured invoice data gives the FTA near real-time visibility of transactions. That makes consistency between invoices, VAT returns and financial statements more important than ever. Businesses should reconcile e-invoice data with VAT returns every period and ensure the books support the corporate tax return. Our guide to UAE corporate tax basics covers the annual filing side. For official updates, refer to the Ministry of Finance e-invoicing page and FTA guidance.

Frequently asked questions

When does UAE e-invoicing become mandatory?

From 1 January 2027 for businesses with revenue of AED 50 million or more, 1 July 2027 for smaller businesses and 1 October 2027 for government entities.

Do small businesses need to do anything now?

Yes, planning should start now. Businesses below AED 50 million must appoint an ASP by 31 March 2027 and go live by 1 July 2027.

Is a PDF invoice sent by email an e-invoice?

No. An e-invoice must be a structured electronic file in the prescribed format, exchanged through accredited service providers.

Does e-invoicing apply to B2C sales?

B2C transactions are outside the first phase. The initial mandate covers B2B and B2G transactions.

If your UAE business is preparing for e-invoicing, our global accounting team would be glad to help you clean your data, align your books and plan a smooth go-live.

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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.

October 18, 2026

Income Tax Refund Delayed? Common Reasons and How to Track and Fix It

An income tax refund delay is one of the most common concerns after the filing season. You have filed your return, the refund is shown in your computation, and yet nothing has reached the bank. In most cases the cause is a simple, fixable issue such as verification, bank details or a pending communication from the Centralised Processing Centre (CPC).

This guide covers the usual reasons refunds get held up, how to read the refund status on the portal, and the practical steps to get things moving. It applies to returns for FY 2025-26 (AY 2026-27), which continue to be processed under the Income-tax Act 1961.

Key takeaways

Refunds are issued only after the return is e-verified and processed by CPC.
The refund is paid only to a pre-validated bank account linked to your PAN, and your PAN must be operative.
Mismatches between your return and TDS/AIS data often lead to adjustments or a pending proposal that needs your response.
A refund may be set off against an older demand, after prior intimation.
Where a refund is due, interest is generally payable at 0.5% per month under section 244A, subject to conditions.

First, check where your refund stands

Log in to the e-filing portal and go to e-File > Income Tax Returns > View Filed Returns. Each return shows its life cycle: filed, verified, processed, refund issued or refund failed. You can also check the refund status for a year through the refund status service linked from the portal.

Understanding the status tells you what to do next:

Status	What it means	What to do
Return filed, not verified	Processing has not started	E-verify within the time allowed
Verified, under processing	CPC is processing	Wait; check email and pending actions
Processed with refund determined	Refund sent to the bank	Allow some days for credit
Processed with adjustment	Refund reduced or nil	Read the intimation; rectify if wrong
Refund failed	Bank credit did not go through	Fix bank details and request a reissue
Response pending	CPC has raised a query	Respond in Pending Actions or Worklist

Common reasons for an income tax refund delay

1. Return not e-verified

A return is not treated as valid until it is verified. Verification through Aadhaar OTP, net banking or a digital signature is instant; a physical ITR-V takes longer. Returns verified late may also be treated as filed on the verification date.

2. Bank account not pre-validated

Refunds are credited only to a bank account that is pre-validated on the portal and linked to your PAN. A closed account, an IFSC change after a bank merger, or a name mismatch can cause a refund to fail. Check My Profile > My Bank Account and re-validate if needed.

3. PAN inoperative

If PAN is not linked with Aadhaar, it can become inoperative, and refunds are not issued while it remains so. Once linked and operative again, the refund can be processed.

4. Mismatch with TDS, AIS or Form 26AS

If you claim TDS that does not appear in the tax credit statement, or report income lower than the AIS, CPC may propose an adjustment. The refund then waits until you respond or the return is processed with the adjustment. Our guide to section 143(1) intimations explains these adjustments.

5. Defective return notice

If the return has a technical or data defect, a notice under section 139(9) is issued, and the refund waits until you correct it. See our guide to defective return notices.

6. Adjustment against an outstanding demand

If an earlier year shows a demand, CPC may adjust the refund against it after giving you prior intimation. Responding promptly, especially where the old demand is already paid or reduced, helps release the refund. Our guide on outstanding tax demand covers how to respond.

7. Additional review

Some returns are picked for further verification based on risk parameters or large refund claims. In such cases, keep an eye on your email and the portal for any request for information or clarification.

How to fix a failed refund: refund reissue

If the status shows refund failed, the portal allows a refund reissue request:

Go to Services > Refund Reissue and create a request.
Select the relevant return and a pre-validated bank account.
E-verify the request through Aadhaar OTP, EVC or a digital signature.
Track the status; the refund is re-sent to the selected account.

Before raising the request, make sure the account is active, the name matches your PAN records, and the account is enabled for electronic credit.

Interest on delayed refunds

Where a refund arises from excess TDS, TCS or advance tax, interest under section 244A is generally payable at 0.5% per month or part of a month, usually from 1 April of the assessment year (or the date of filing, if the return was filed late) to the date the refund is granted. Interest is not paid if the refund is less than 10% of the tax determined, and any delay attributable to the taxpayer is excluded. Interest on refund is taxable in the year it is received.

A quick checklist to avoid refund delays next year

File early and e-verify immediately.
Keep one primary bank account pre-validated and EVC-enabled.
Confirm PAN-Aadhaar linkage well before the filing season.
Match income and TDS with AIS and the tax credit statement before filing.
Clear or respond to any old demands shown on the portal.
Check your registered email and mobile regularly during processing.

Frequently asked questions

How long does an income tax refund take?

Straightforward returns are often processed within a few weeks of e-verification. The legal time limit for processing is nine months from the end of the financial year in which the return was filed.

Why does my refund show as failed?

Usually because of bank account issues such as a closed account, IFSC change, name mismatch or an account that is not pre-validated. Fix the details and file a refund reissue request.

Will I get interest if my refund is delayed?

Generally yes, at 0.5% per month under section 244A, subject to conditions such as the refund being at least 10% of the tax determined.

Can the department adjust my refund against old dues?

Yes, after giving prior intimation. Respond with reasons if the old demand is already paid, reduced or under appeal.

If your income tax refund is stuck or has been adjusted incorrectly, our team will be glad to review the status and help you with the right response.

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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.

October 17, 2026

Liberalised Remittance Scheme (LRS): Limits, Purposes and TCS on Foreign Remittances

The Liberalised Remittance Scheme (LRS) lets resident individuals send money abroad for a wide range of purposes, from a child’s university fees to an overseas investment. Alongside the foreign exchange rules, there is an income-tax angle: banks collect tax at source on many remittances, and understanding the LRS remittance TCS rules helps you plan cash flow and claim the credit properly.

The TCS rates were simplified from 1 April 2026 by the Finance Act 2026, with lower rates for education, medical treatment and overseas tour packages. This guide explains the LRS limit, the permitted purposes, the current TCS structure and how to get the TCS back.

Key takeaways

Resident individuals can remit up to USD 250,000 per financial year under LRS for permitted current and capital account purposes.
From 1 April 2026, TCS on education and medical remittances is 2% above ₹10 lakh, and nil where education is funded by a loan from a financial institution.
Overseas tour packages attract 2% TCS from the first rupee.
Other purposes such as investments and gifts attract 20% TCS above ₹10 lakh in a financial year.
TCS is not an extra cost: it is credited against your tax liability and can be refunded through your return.

What LRS allows

LRS is framed by the Reserve Bank of India under FEMA. The limit of USD 250,000 applies per resident individual per financial year, including minors (through a guardian), and covers all permitted purposes together.

Commonly used purposes include:

Education abroad, including tuition and living expenses.
Medical treatment abroad.
Travel, both private and business, and overseas tour packages.
Gifts and donations to persons or bodies abroad.
Maintenance of close relatives living abroad.
Investments, such as listed foreign shares, overseas mutual funds, and immovable property abroad, subject to the overseas investment rules.
Opening and maintaining a foreign currency account with a bank abroad.

Certain remittances are not allowed under LRS, such as margin or speculative trading abroad, lottery and similar payments, and remittances to countries identified as non-cooperative by the FATF. Businesses making overseas investments follow the separate overseas investment framework; our guide to overseas direct investment rules covers that route.

The remittance process

Choose an authorised dealer bank and the purpose code for the remittance.
Submit Form A2 (the purpose declaration) along with your PAN, which is mandatory for LRS.
Provide supporting documents such as an admission letter, hospital estimate, tour operator invoice or investment account details.
The bank checks the LRS limit and collects TCS where applicable.
Keep the remittance advice and TCS certificate for your records.

LRS remittance TCS rates from 1 April 2026

The table below summarises the structure that applies to remittances made on or after 1 April 2026.

Purpose	Up to ₹10 lakh in a financial year	Above ₹10 lakh
Education funded by a loan from a financial institution	Nil	Nil
Education (self-funded) or medical treatment	Nil	2% on the excess
Overseas tour package	2% from the first rupee	2%
Other purposes (investment, gifts, maintenance, etc.)	Nil	20% on the excess

The ₹10 lakh threshold is applied per individual for the financial year across all LRS remittances through the same collector, so it is worth planning larger payments early in the year and keeping all remittance records together.

Worked examples

Self-funded tuition of ₹25 lakh: no TCS on the first ₹10 lakh; 2% on ₹15 lakh = ₹30,000.
Overseas tour package of ₹4 lakh: 2% = ₹8,000.
Investment of ₹30 lakh in US shares: 20% on ₹20 lakh = ₹4,00,000, which is a significant cash-flow item until adjusted in your return.

Under the Income-tax Act 2025, these rules continue in the corresponding TCS provision, and TCS credit is reflected in the annual tax statement (Form 168, which replaced Form 26AS).

Getting the TCS back

TCS is collected in your name against your PAN. You can:

Claim credit in your income-tax return for the tax year in which it was collected. If your total tax liability is lower, the excess is refunded.
For salaried employees, ask your employer to take the TCS into account while computing tax deduction on salary, so less tax is deducted during the year.

Always check that the TCS appears correctly in your annual tax statement before filing. Where a bank has not reported it, ask for the TCS certificate and a correction.

Practical tips for families and investors

Plan the purpose correctly: education and medical remittances enjoy lower rates, so use the right purpose code with proper documentation.
Use education loans where sensible: remittances funded by a loan from a financial institution attract nil TCS.
Spread investment remittances thoughtfully and budget for the 20% TCS on amounts above ₹10 lakh.
Keep a remittance log for the family: date, bank, purpose, amount in USD and INR, and TCS collected.
Report foreign assets in your return where required, especially after investing abroad.

Frequently asked questions

What is the LRS limit for 2026-27?

The limit is USD 250,000 per resident individual per financial year, covering all permitted purposes together.

What is the TCS on education remittances now?

From 1 April 2026, self-funded education remittances attract 2% TCS on amounts above ₹10 lakh, and nil TCS where funded by a loan from a financial institution.

Is TCS a permanent cost?

No. TCS is an advance collection of tax. You can adjust it against your tax liability and claim any excess as a refund in your return.

Is PAN mandatory for LRS remittances?

Yes. PAN is required for remittances under LRS, and TCS is collected and reported against it.

If you are planning education, travel or investment remittances abroad, our FEMA and tax team will be happy to help you plan the route, documents and TCS efficiently.

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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.

October 17, 2026

GST Departmental Audit under Section 65: What to Expect and How to Prepare

A GST audit under section 65 is a scheduled examination of your records by the tax department. It is different from a notice triggered by a specific mismatch: the officer reviews your returns, books and documents for a chosen period to check whether tax, credit and refunds have been dealt with correctly.

For a well-organised business, a departmental audit is largely an exercise in presenting records clearly. This guide explains the notice, the timelines, what officers typically ask for, and how to prepare so that the process stays smooth and professional.

Key takeaways

Section 65 of the CGST Act empowers the Commissioner or authorised officers to audit any registered person; Rule 101 sets out the procedure.
You receive an advance notice in Form GST ADT-01, at least 15 working days before the audit.
The audit is to be completed within three months of commencement, extendable by up to six months with recorded reasons.
Findings are communicated in Form GST ADT-02 within 30 days of completion of the audit.
Where tax is found short paid, it can be paid voluntarily; otherwise proceedings may follow under the demand provisions.

How the GST audit under section 65 works

The ADT-01 notice

The audit begins with Form ADT-01, which names the period to be audited and asks you to either make records available at your place of business or produce them at the tax office. The notice period of at least 15 working days gives you time to gather documents and plan internally.

When the audit is treated as commenced

The three-month clock starts from the date on which the records called for are made available to the officer, or the date the audit actually begins at your premises, whichever is later. Keeping a note of submission dates is helpful for tracking timelines.

Observations and your reply

During the audit, the officer verifies documents, examines returns and financial statements, and may seek clarifications. Discrepancies noticed are communicated to you, and you get an opportunity to respond with explanations and supporting working. This is the most important stage: a well-reasoned reply often resolves an observation before it appears in the final report.

The ADT-02 report

On conclusion, the officer informs you of the findings, your rights and obligations, and the reasons, in Form ADT-02 within 30 days.

Timeline at a glance

Stage	Form or event	Timeline
Intimation of audit	ADT-01	At least 15 working days before the audit
Commencement	Records made available or audit starts	Later of the two dates
Completion	Audit concluded	Within 3 months, extendable by up to 6 months
Findings	ADT-02	Within 30 days of conclusion
Follow-up	Voluntary payment or demand proceedings	As per the findings

Documents officers commonly ask for

The exact list depends on the business, but most audits cover the following:

Financial statements, trial balance and ledgers for the audit period.
Sales and purchase registers with GSTIN, HSN/SAC, rate and tax details.
GSTR-1, GSTR-3B, GSTR-9 and GSTR-9C for each registration.
GSTR-2A/2B downloads and your ITC reconciliation.
E-invoice and e-way bill data, and delivery documents.
Bills of entry and shipping bills for imports and exports; LUT copies.
Contracts and agreements for significant supplies, including related-party arrangements.
Credit and debit notes, with the linkage to original invoices.
Records of ITC reversals under Rule 42/43 and for non-payment to suppliers.

Areas that usually get attention

Knowing where officers commonly focus helps you pre-check your position:

Turnover reconciliation: books versus GSTR-1, GSTR-3B and GSTR-9, including other income, scrap sales and asset disposals.
ITC eligibility: blocked credits under section 17(5), time limit under section 16(4), and credit claimed without matching supplier reporting.
Reverse charge: legal services, goods transport, import of services and other notified services.
Classification and rates: especially after the GST 2.0 rate changes effective 22 September 2025, where items moved between rate slabs.
Common credit: apportionment between taxable and exempt supplies.
Related-party supplies and cross-charges: valuation and invoicing between distinct persons.

Our guides on GSTR-2B vs GSTR-3B reconciliation and blocked credit under section 17(5) are useful for the pre-audit check.

How to prepare: a practical checklist

Nominate one coordinator who handles all communication and keeps a log of documents submitted.
Build a reconciliation pack for each year: turnover, tax liability, ITC and RCM, with clear explanations for differences.
Index your documents so that any invoice or contract can be retrieved quickly.
Review the period yourself first, identify genuine errors and decide how to deal with them.
Respond in writing to every observation, attaching working and legal basis where relevant.
Keep copies and acknowledgements of everything submitted.

Handling the findings

If the audit identifies a short payment that you agree with, you can pay it along with interest through Form DRC-03, which often closes the point without further proceedings. Where you disagree, the officer may start proceedings under section 73 or 74 for earlier periods, or section 74A for FY 2024-25 onwards, beginning with a show cause notice. At that stage you get a full opportunity to reply and be heard.

If that happens, our guides to voluntary payment through DRC-03 and replying to a GST show cause notice explain the next steps.

Frequently asked questions

What is Form GST ADT-01?

It is the notice informing a registered person that a departmental audit will be conducted under section 65, stating the audit period and asking for records to be made available.

How long does a GST departmental audit take?

It should be completed within three months from its commencement. The Commissioner can extend this by up to six months for recorded reasons.

Can the audit be conducted at the tax office?

Yes. The audit may take place at your place of business or at the tax authority’s office, as stated in the notice.

Does an audit observation mean I must pay tax?

Not necessarily. You can explain or contest observations during the audit. Only agreed amounts are usually paid voluntarily; disputed points follow the formal show cause process.

If you have received an ADT-01 notice or want your GST records reviewed ahead of an audit, our GST team will be glad to help you prepare a well-organised audit file.

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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.

October 17, 2026

UAE Corporate Tax Basics: Registration, 9% Rate and Filing Deadlines
UAE corporate tax has now settled into a routine for most businesses: register with the Federal Tax Authority, keep proper accounts, and file one return a year. For many small and mid-sized companies, the actual tax payable is modest, but the compliance steps still need to be done correctly and on time.

This guide explains who must register, how the 0% and 9% bands work, what Small Business Relief and free zone status mean in practice, and the deadlines that matter. It is written for founders and finance teams, including Indian businesses with a UAE entity.

Key takeaways
- Corporate tax applies under Federal Decree-Law No. 47 of 2022 to financial years starting on or after 1 June 2023.
- Taxable income up to AED 375,000 is taxed at 0%, and income above that at 9%.
- Registration is mandatory for taxable persons, even when no tax is payable, and late registration attracts a penalty.
- Small Business Relief can apply where revenue is AED 3 million or less, for tax periods ending on or before 31 December 2026.
- The return and payment are due within nine months from the end of the tax period.
Who needs to register for UAE corporate tax

Registration is done on the FTA’s EmaraTax portal. Broadly, the following must register:
- UAE companies and other juridical persons incorporated in the UAE, including free zone entities.
- Foreign companies effectively managed and controlled in the UAE, or with a permanent establishment there.
- Individuals (natural persons) carrying on business in the UAE whose turnover from that business exceeds AED 1 million in a calendar year.
The FTA has set registration deadlines based on the entity’s licence issue date or incorporation date. New entities generally need to register within three months of incorporation. Registration results in a Tax Registration Number, which is needed for filing and for dealing with banks and counterparties.

How the 0% and 9% rates work

The structure is simple:

Taxable income Rate
Up to AED 375,000 0%
Above AED 375,000 9% on the excess

Example: A Dubai trading company has taxable income of AED 600,000. Tax is 9% of (600,000 − 375,000) = AED 20,250.

Taxable income starts from the accounting profit in financial statements prepared under IFRS (or IFRS for SMEs where permitted), and is then adjusted. Common adjustments include:
- Non-deductible expenses such as fines, penalties, most entertainment costs (50% disallowed) and donations to non-qualifying bodies.
- Limits on net interest expense, generally 30% of adjusted EBITDA, with a safe-harbour threshold for smaller amounts.
- Exempt income such as qualifying dividends and gains on qualifying shareholdings.
- Transfer pricing adjustments for transactions with related parties and connected persons.
Large multinational groups with global revenue of EUR 750 million or more are also subject to a 15% Domestic Minimum Top-up Tax for financial years starting on or after 1 January 2025, but that does not affect typical SMEs.

Small Business Relief: a useful simplification

A resident person whose revenue is AED 3 million or less in the relevant tax period and each previous tax period can elect for Small Business Relief. If elected, the business is treated as having no taxable income for that period, and simplified reporting applies.

Points to note:
- The relief is available for tax periods ending on or before 31 December 2026, unless extended. Businesses should plan for regular computation from 2027 onwards.
- It must be elected in the return; it does not apply automatically.
- Qualifying Free Zone Persons and members of large multinational groups cannot use it.
- Accounts still need to be maintained, and the business must still register and file.
Free zone companies

A free zone company that meets the conditions of a Qualifying Free Zone Person can pay 0% on qualifying income, while non-qualifying income is taxed at 9%. The main conditions are adequate substance in the free zone, earning qualifying income, not electing to be taxed at the regular rates, meeting transfer pricing rules, preparing audited financial statements and staying within the de minimis limit for non-qualifying revenue (the lower of 5% of total revenue or AED 5 million).

Being in a free zone does not automatically mean zero tax. Businesses should map each revenue stream against the qualifying activities list every year, because failing the conditions can mean losing the benefit for the current and the following four tax periods.

Filing and payment deadlines

The tax period is normally the entity’s financial year. For a company following the calendar year:
1. Tax period: 1 January to 31 December.
2. Return and payment due: 30 September of the following year.
3. Records: keep books and supporting documents for at least seven years.
The return is filed on EmaraTax, and the tax is paid through the portal’s payment options. Where a business has related-party transactions above prescribed thresholds, a transfer pricing disclosure form is filed with the return. Some businesses, including those with revenue above AED 50 million and Qualifying Free Zone Persons, must also have audited financial statements.

Late filing and late payment attract administrative penalties, so it is worth fixing an internal timeline: close the books within three months of year-end, finalise tax adjustments by month six, and file with a comfortable margin.

Practical checklist for the year
- Confirm your Tax Registration Number and that your EmaraTax profile is up to date.
- Keep IFRS-compliant books with monthly reconciliations.
- Track related-party transactions and keep simple documentation.
- Decide early whether Small Business Relief or free zone status applies.
- Keep an eye on the UAE’s move to e-invoicing, which will change how invoices are issued and reported. Our guide to the UAE e-invoicing mandate covers the timeline.
- Refer to the Federal Tax Authority for the latest guides and decisions.
Frequently asked questions

What is the UAE corporate tax rate?

Taxable income up to AED 375,000 is taxed at 0%, and income above that at 9%. Qualifying Free Zone Persons may pay 0% on qualifying income.

Do I need to register if my company makes no profit?

Yes. Registration is required for taxable persons regardless of profit, and a return must still be filed each year.

When is the corporate tax return due?

Within nine months from the end of the tax period. For a calendar-year company, that is 30 September of the following year.

Is Small Business Relief automatic?

No. It must be elected in the tax return, and it is currently available only for tax periods ending on or before 31 December 2026.

If you run a UAE company or are setting one up, our global accounting team will be happy to help you keep IFRS books and stay on top of corporate tax 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.
October 16, 2026

Taxable income	Rate
Up to AED 375,000	0%
Above AED 375,000	9% on the excess

Outstanding Income Tax Demand: How to Check, Disagree or Rectify under Section 154

An outstanding tax demand on the income-tax e-filing portal can be unsettling, especially when it relates to a year you thought was closed. The good news is that many such demands arise from mismatches, unprocessed credits or old orders that were later reduced, and the portal gives you clear ways to agree, disagree or correct them.

This guide walks through how to find out where a demand came from, how to respond on the portal, when a rectification under section 154 is the right tool, and how to stop a disputed demand from being adjusted against your refund.

Key takeaways

Every demand flows from an order or intimation, so the first step is to identify that document and the tax year it relates to.
The Response to Outstanding Demand facility lets you confirm, partly accept or disagree with a demand, with reasons.
Section 154 of the Income-tax Act 1961 covers mistakes apparent from the record; its counterpart under the Income-tax Act 2025 is section 287.
A rectification is ideal for clear errors like missing TDS credit or wrong interest; disputes on merits usually need an appeal.
Responding promptly helps protect future refunds from being adjusted against a demand you do not owe.

Step 1: Find out where the outstanding tax demand came from

Log in to the e-filing portal and open Pending Actions > Response to Outstanding Demand. Each entry shows the assessment year, the section under which the demand was raised, the demand reference number, the date and the amount, including interest.

Common sources of a demand include:

An intimation under section 143(1) after processing of your return, for example because TDS was not credited or a deduction was disallowed.
An assessment order under section 143(3) or 147 after scrutiny or reassessment.
Interest under sections 234A, 234B or 234C computed differently from your return.
TDS/TCS defaults from processed statements, for deductors.
Old manual demands that were never updated after an appeal or rectification.

Download the underlying order or intimation and compare it line by line with your return. If the demand came from a processing adjustment, our guide on section 143(1) intimations explains how to read it.

Step 2: Choose the right response on the portal

Once you know the cause, submit a response against each demand entry. The portal offers three broad options:

Your position	Portal option	What to provide
The demand is correct	Demand is correct	Pay through the tax payment facility; the demand is closed once the challan is mapped
Part of it is correct	Demand is partially correct	Pay the accepted part; give reasons for the balance
The demand is not payable	Disagree with the demand	Select the reason and give details

Typical reasons for disagreement include: the demand has already been paid (with challan details), it was reduced or deleted by a rectification or appellate order, an appeal is pending, a stay has been granted, or a rectification application is pending. Attach or quote the relevant order numbers and challan identification numbers wherever the form asks for them.

This response is not a legal remedy in itself; it places your position on record and alerts the Assessing Officer or CPC. The actual correction still happens through rectification, appeal or updating of records.

Step 3: When section 154 rectification is the right route

Section 154 allows an income-tax authority to rectify any mistake apparent from the record. It suits errors that are obvious and do not need a long debate or fresh evidence. Examples:

TDS or advance tax paid but not given credit.
An arithmetic error in computing tax or interest.
A deduction or relief shown in the return but ignored while processing, where the facts are already on record.
A demand that should have been reduced after an appellate order but was not.

Filing a rectification with CPC

For returns processed by CPC, go to e-File > Rectification, select the assessment year and the latest order, and choose the request type. The options include re-processing of the return, tax credit mismatch correction and return data correction. Where the correction needs changes to return data, you upload corrected data in the prescribed schema.

Filing with the Assessing Officer

Where the demand arises from an assessment order passed by the Assessing Officer, the rectification application is addressed to that officer, generally online through the e-proceedings facility, with a clear note of the mistake and the supporting records.

Time limits to keep in mind

Under the 1961 Act, rectification can generally be made within four years from the end of the financial year in which the order was passed. Once an application is made, the authority is expected to pass an order within six months from the end of the month in which it was received. The Income-tax Act 2025 carries these rules forward in sections 287 and 288, and the old provisions continue to govern orders for earlier years.

Step 4: Protect your refund from adjustment

If you are due a refund for another year, the department may propose to adjust it against an outstanding demand. Before doing so, CPC normally sends a prior intimation and gives you an opportunity to respond. This is exactly why an early disagreement matters: if you have already recorded that the demand is paid, reduced or under appeal, the adjustment can be avoided or reversed.

When you receive such an intimation:

Check whether the demand is genuinely payable.
Respond within the time allowed, selecting agreement or disagreement with reasons.
Keep screenshots and acknowledgement numbers of your response.

When an appeal is better than rectification

If the demand arises from a disagreement on law or facts, such as the treatment of a receipt, a disallowance after scrutiny or a valuation issue, a rectification will usually be rejected because the mistake is not “apparent”. In that case, an appeal before the Commissioner (Appeals) is the appropriate route, and a stay of demand can be requested while the appeal is pending. Our guide to filing an appeal in Form 35 explains the process and timelines.

A simple checklist before you respond

Download the order or intimation behind each demand.
Match TDS credits with Form 26AS or the annual information statement for that year.
Collect challans for taxes already paid.
Gather any appellate or rectification orders that reduced the demand.
Decide: pay, rectify, appeal, or a combination.
Record your response on the portal and save the acknowledgement.

Frequently asked questions

How do I check my outstanding tax demand?

Log in to the income-tax e-filing portal and open Pending Actions, then Response to Outstanding Demand. It lists each demand with the year, section, amount and reference number.

Does disagreeing with a demand cancel it?

No. It records your position and alerts the department. The demand is actually reduced only through a rectification order, appellate order or by mapping taxes already paid.

What is the time limit to file a rectification under section 154?

Generally, rectification can be made within four years from the end of the financial year in which the order sought to be amended was passed.

Can my refund be adjusted against an old demand?

Yes, but you are normally given prior intimation and a chance to respond. Replying on time with reasons and documents helps protect the refund.

If an outstanding tax demand is showing on your portal, our income-tax team can help you trace its source and choose the right response, rectification or appeal.

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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.

October 16, 2026

DRC-01C Notice: GSTR-2B vs GSTR-3B ITC Mismatch and How to Explain the Difference

A DRC-01C intimation is the GST portal’s way of saying that the input tax credit you claimed in GSTR-3B is noticeably higher than what your GSTR-2B shows for the same period. It is an automated, early-stage alert, not a demand order, and in most cases it can be closed with a clean reconciliation and a short explanation.

The key is to respond on time. A DRC-01C that is left unanswered can stop you from filing your next GSTR-1, which affects your customers’ credit as well. This guide explains why the intimation is generated, how to work out the difference, and how to reply confidently.

Key takeaways

DRC-01C is issued under Rule 88D of the CGST Rules, inserted by Notification No. 38/2023-Central Tax dated 4 August 2023.
As recorded in the 50th GST Council minutes, it is generated when the excess ITC in GSTR-3B over GSTR-2B crosses both ₹25 lakh and 20%; the system parameters can be revised.
You get seven days to respond in Part B: either pay the excess through DRC-03 or explain the difference.
If you do neither, the portal can block filing of your next GSTR-1 or IFF.
Most differences are genuine timing or classification gaps, so a well-documented reconciliation usually resolves the matter.

What a DRC-01C intimation actually says

The intimation is system-generated and reaches you by email and on the GST portal under the notices section. Part A shows the tax period, the ITC available as per GSTR-2B, the ITC claimed in GSTR-3B, and the difference head-wise (IGST, CGST, SGST and cess).

Part B is your response. Rule 88D gives you two routes, and you may use a combination of both:

Pay the excess credit, with applicable interest, through Form DRC-03 and quote the ARN in Part B.
Explain the difference, with reasons and supporting details, for the portion you believe is correctly claimed.

The intimation itself does not fix any tax liability. It is designed as a nudge so that genuine errors are corrected early, and genuine claims are placed on record before any formal proceeding.

Why the ITC in GSTR-3B can exceed GSTR-2B

GSTR-2B is a static statement built from what your suppliers report, cut off on a fixed date each month. Your GSTR-3B claim is based on your books. The two will rarely match exactly, and many differences are perfectly legitimate.

Reason for the difference	Is the ITC valid?	What to show in Part B
Supplier filed GSTR-1 after the 2B cut-off; invoice appears in next month’s 2B	Usually yes (timing)	Invoice list and the later GSTR-2B period in which it appears
ITC on reverse charge supplies paid in cash through GSTR-3B	Yes, if RCM tax is paid	RCM liability paid, challan/3B reference, self-invoices
IGST on imports where Bill of Entry data reached 2B in a later period	Usually yes (timing)	Bill of Entry numbers, dates and ICEGATE status
ITC reversed earlier and reclaimed now (for example, after paying a supplier within 180 days)	Yes, if reversal was reported	Electronic Credit Reversal and Re-claimed Statement entries
Credit from an Input Service Distributor received late	Usually yes	ISD invoices and GSTR-6 details
Invoice rejected or kept pending in IMS, or never uploaded by the supplier	Needs review	Supplier follow-up; consider reversal or payment
Excess or duplicate claim, or ineligible credit	No	Pay through DRC-03 with interest

The first five rows are the most common and are generally explainable. The last two need honest review, because they may be a real excess claim.

How to reconcile before replying to DRC-01C

A structured reconciliation makes the reply simple and credible. Work through it in this order:

Download GSTR-2B for the period in the intimation and the two or three months after it.
Export your purchase register for the same period, including RCM entries, imports and ISD credit.
Match invoice by invoice, using GSTIN, invoice number and taxable value. Most accounting tools and the portal’s own comparison reports can help here.
Bucket every unmatched item into timing, RCM, imports, reclaim, ISD or excess.
Check later GSTR-2B periods to confirm that timing items have since appeared.
Quantify the excess that has no explanation and decide whether to pay it.

It helps to link this exercise with your routine monthly checks. Our guide to GSTR-2B vs GSTR-3B ITC reconciliation sets out a monthly process that keeps these gaps small in the first place.

Drafting the Part B reply

The Part B text box is short, so the explanation should be crisp and factual. A practical structure looks like this:

Summary line: total difference as per the intimation, amount explained, and amount paid (if any).
Breakdown by reason: for example, “₹X relates to 14 invoices reflected in the GSTR-2B of the following month; ₹Y is ITC on RCM paid in cash in the same GSTR-3B.”
Payment details: DRC-03 ARN and date for any portion you have chosen to pay.
Documents offered: mention that invoice-wise workings and supporting documents are available and can be produced on request.

A short worked example

Suppose GSTR-2B shows ITC of ₹40 lakh and GSTR-3B shows ₹72 lakh, a gap of ₹32 lakh (80%). On reconciliation:

₹18 lakh appears in the next month’s GSTR-2B (late supplier filing).
₹9 lakh is IGST on imports where the Bill of Entry reflected in the following period.
₹3 lakh is RCM on legal and freight services, paid in cash.
₹2 lakh relates to a supplier who never uploaded the invoices.

The reply would explain ₹30 lakh with references, and the business would either obtain proper reporting from the supplier or pay the ₹2 lakh through DRC-03 with interest, quoting the ARN.

What happens if you do not respond

Rule 59(6) restricts filing of GSTR-1 or IFF where a DRC-01C intimation has not been addressed through Part B. That block affects your customers, whose GSTR-2B will not show your invoices until you file. It is also important to remember that unexplained excess credit can later be taken up through a formal show cause notice, under section 73 or 74 for earlier years, or section 74A from FY 2024-25 onwards.

If you are already at that stage, our guides on replying to a GST show cause notice and voluntary payment through DRC-03 explain the next steps.

Good habits that keep DRC-01C away

Reconcile GSTR-2B with your books before filing every GSTR-3B, not at year-end.
Use the Invoice Management System to accept, reject or keep pending supplier invoices deliberately.
Keep a simple timing register of invoices claimed before they appear in GSTR-2B.
Report reversals and reclaims correctly so the credit ledger statements support you.
Follow up with suppliers who file late or report under the wrong GSTIN.

Frequently asked questions

Is DRC-01C a show cause notice?

No. It is an automated intimation under Rule 88D asking you to pay or explain an ITC difference. It becomes a demand only if the matter later moves to formal proceedings.

How many days do I get to reply to DRC-01C?

Rule 88D provides seven days from the date of the intimation. Replying early is always better, especially if your next GSTR-1 is due soon.

Can I partly pay and partly explain the difference?

Yes. You can pay the portion you accept through DRC-03 and explain the rest in the same Part B response, quoting the DRC-03 ARN.

What if the invoices appeared in GSTR-2B later?

Mention the later tax period and the invoice details in your reply. Timing differences of this kind are among the most common and accepted explanations.

If you have received a DRC-01C or want your monthly ITC reconciliation set up properly, our GST team will be glad to help you prepare a clear, well-documented reply.

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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.

October 15, 2026

Overseas Direct Investment (ODI) from India: Rules for Companies and Individuals

Indian businesses and founders are increasingly investing abroad, whether to set up a sales subsidiary in Dubai, acquire a small company in the UK or form a US entity to serve American clients. The ODI rules overseas investment framework under FEMA sets out who can invest, how much, in what and with what reporting. Getting the structure right at the start avoids approvals and compounding later.

The current framework came into force in August 2022 through the Foreign Exchange Management (Overseas Investment) Rules, 2022, the related Regulations and RBI’s Master Direction. This guide summarises the main rules for Indian companies and resident individuals.

Key takeaways

ODI means investment in unlisted foreign equity, or 10% or more of a listed company’s equity, or investment with control; other investments are overseas portfolio investment (OPI).
An Indian entity can make financial commitments up to 400% of its net worth; commitments above USD 1 billion in a financial year need RBI approval.
Resident individuals invest within the LRS limit of USD 250,000 a year, only in operating entities outside financial services, and cannot control an entity with its own subsidiaries.
Investments in real estate business, gambling and INR-linked financial products are prohibited.
Reporting runs through the authorised dealer bank: Form ODI before or at the time of investment, and an Annual Performance Report by 31 December each year.

ODI or OPI: the first question

Investment	Classification
Any equity in an unlisted foreign company	ODI
Less than 10% of a listed foreign company, without control	OPI
10% or more of a listed foreign company, or any stake with control	ODI
Debt, guarantees or pledges for a foreign entity in which ODI is made	Part of financial commitment

‘Control’ includes the right to appoint a majority of directors or to control management or policy decisions, including through shareholding of 10% or more of voting rights. Once an investment is classified as ODI, it remains so even if the stake later reduces, unless it is fully disinvested.

Rules for Indian companies and LLPs

Financial commitment limit

An Indian entity’s total financial commitment, covering equity, debt, guarantees and pledges, cannot exceed 400% of its net worth as per the last audited balance sheet. Some commitments are counted at a lower value, and some forms of guarantee are included only in part, so the calculation should be prepared carefully.

Where the investment can go

A foreign entity engaged in a bona fide business activity, directly or through step-down subsidiaries.
Investment in a foreign entity in the financial services sector is allowed subject to extra conditions, such as the Indian entity itself being in financial services and meeting profitability and regulatory tests.
Investment in start-ups abroad is allowed only from the Indian entity’s internal accruals.

Round-tripping safeguards

An Indian entity cannot make ODI in a foreign entity that has invested, or invests, in India if the structure results in more than two layers of subsidiaries, subject to specified exceptions. Structures such as an Indian parent owning a foreign company that in turn owns an Indian company need careful review.

Worked example

A Pune software company has net worth of ₹12 crore as per its last audited balance sheet. Its ODI limit is 400% of that, or ₹48 crore. It plans to invest USD 2 million (roughly ₹17 to 18 crore) in equity of a new Singapore subsidiary and give a corporate guarantee of USD 1 million for the subsidiary’s bank line. Both count toward the limit, which is comfortably met, so the investment can proceed under the automatic route with Form ODI filed through its AD bank.

Rules for resident individuals

Investment is made under the Liberalised Remittance Scheme, within USD 250,000 per financial year across all LRS remittances.
ODI is permitted only in an operating foreign entity, not engaged in financial services.
An individual cannot make ODI with control in a foreign entity that has a subsidiary or step-down subsidiary.
Shares can also be acquired by gift, inheritance, ESOPs or sweat equity, subject to conditions.
Remittances under LRS can attract TCS above the threshold at the time of remittance, which can be adjusted against income-tax.

If you are setting up a US entity as an individual, our guide to compliance for a US LLC owned by an Indian resident covers both sides of the border.

Prohibited investments

ODI is not allowed in a foreign entity engaged in:

Real estate activity, meaning buying and selling of real estate or trading in transferable development rights (building townships or infrastructure is permitted).
Gambling in any form.
Dealing in financial products linked to the Indian rupee without RBI approval.

Investments in certain jurisdictions, such as Pakistan, need government approval, and investment in countries identified as non-cooperative by FATF is restricted.

Reporting and ongoing compliance

Event	Report	Timeline
Financial commitment	Form ODI through the AD bank	Before or at the time of the investment
Evidence of investment	Share certificate or equivalent	Within six months
Annual performance	Annual Performance Report (APR)	By 31 December each year, based on the foreign entity’s accounts
Restructuring or disinvestment	Form ODI / FC as applicable	Within 30 days
Portfolio investments by listed Indian companies	Form OPI	Half-yearly
Foreign liabilities and assets	FLA return to RBI	By 15 July each year

Delays can generally be regularised by paying a late submission fee, under a formula similar to the one we explain in our guide to FDI reporting through FC-GPR and FC-TRS. An Indian entity with reporting delays cannot make further financial commitments until the delay is regularised.

Practical checklist before you invest abroad

Decide the investor: the Indian company, an LLP or the promoter individually.
Confirm ODI vs OPI and check the sector and jurisdiction restrictions.
Calculate the financial commitment limit from the latest audited net worth.
Obtain a valuation where the rules require it for acquisitions or transfers.
Pass board (and where needed, shareholder) resolutions.
Share documents with the AD bank, obtain the UIN and remit.
Calendar the share certificate, APR and FLA deadlines.
Plan the tax side, including transfer pricing for intra-group transactions and disclosure of foreign assets.

Frequently asked questions

What is the limit for an Indian company to invest abroad?

Up to 400% of its net worth as per the last audited balance sheet, with commitments above USD 1 billion in a financial year needing RBI approval.

Can a resident individual set up a company abroad?

Yes, within the LRS limit and in an operating business outside financial services. The individual cannot control an entity that has its own subsidiaries.

What is the due date for the Annual Performance Report?

The APR is due by 31 December each year for every foreign entity in which ODI has been made, based on its latest accounts.

Is RBI approval needed for most ODI?

No. Most investments fall under the automatic route through the AD bank. Approval is needed only in specified cases, such as exceeding the limits or investing in restricted sectors or jurisdictions.

If you are planning an overseas investment from India, our team would be glad to help you structure it and manage the FEMA reporting.

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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.

October 15, 2026

Companies House Identity Verification and Annual Accounts: What UK Directors Should Know

The UK company register is changing more in these few years than in decades. The Economic Crime and Corporate Transparency Act 2023 introduced Companies House identity verification, which became a legal requirement for directors and people with significant control (PSCs) from 18 November 2025. At the same time, the familiar duty to file annual accounts on time continues, with further reforms to accounts filing planned from 2028.

For directors, especially those living outside the UK, the practical question is simple: what needs to be done, by whom and by when? This guide answers that in plain terms.

Key takeaways

Every director and PSC must verify their identity once and receive a Companies House personal code.
Existing directors provide their code when the company files its next confirmation statement after 18 November 2025; new directors must be verified on appointment.
PSCs have their own 14-day windows, depending on whether they are also directors and when they became a PSC.
Private company accounts remain due nine months after the financial year-end, with automatic late filing penalties.
From around April 2028, accounts must be filed through software, and small companies will need to file a profit and loss account.

Who must complete Companies House identity verification

Person	When the code is needed
New directors (appointed after 18 Nov 2025)	At appointment or incorporation
Existing directors	With the company’s next confirmation statement
PSCs who are also directors	Within 14 days after the confirmation statement date
PSCs who are not directors	Within the first 14 days of their birth month (during the transition year)
New PSCs (after 18 Nov 2025)	When added to the register, or within 14 days
LLP members	Along similar lines to directors

Identity verification for people who file on behalf of companies (presenters) is expected later, not before November 2027, when third-party agents will also need to be registered as Authorised Corporate Service Providers (ACSPs).

How to verify

There are two main routes:

Directly with Companies House, using GOV.UK One Login and an accepted photo ID, often through the GOV.UK ID Check app. Many overseas directors with a biometric passport can use this route.
Through an ACSP, such as an accountant or company formation agent registered with Companies House, who checks your identity and reports it.

Once verified, you receive a personal code. It is linked to you as an individual, not to a company, so the same code is used for every UK company you are involved with. Keep it safe and share it only with the person filing for your company.

Practical tips for overseas directors

Check that your passport is valid and machine-readable before starting.
Ensure your name matches exactly across the passport and the Companies House register; resolve differences before the confirmation statement is due.
If the app route does not work for your document, use an ACSP.
Diary the confirmation statement date, since that is the practical deadline for existing directors.

Annual accounts: deadlines and penalties

Identity verification sits alongside, not instead of, the annual accounts duty.

Private companies must file accounts within nine months of the end of the financial year.
First accounts are due 21 months after incorporation (if the first period is longer than 12 months).
The confirmation statement must be filed at least once every 12 months, within 14 days after the end of the review period.

Late filing penalties for a private company are automatic:

Delay	Penalty
Up to 1 month	£150
1 to 3 months	£375
3 to 6 months	£750
More than 6 months	£1,500

Penalties double if accounts are filed late two years in a row. Company tax returns to HMRC are a separate filing with their own deadlines.

Size categories

Company size thresholds were raised for financial years beginning on or after 6 April 2025. A micro-entity now has turnover up to £1 million and balance sheet total up to £500,000; a small company has turnover up to £15 million and balance sheet total up to £7.5 million (two of three conditions, including employees, must be met). Check which category applies each year, as it affects the form and content of accounts.

Accounts changes coming by 2028

Companies House has published a transition plan with the following reforms expected from April 2028, with advance notice:

All accounts to be filed using commercial software; paper and web-form filing of accounts will end.
Small companies and micro-entities to file a profit and loss account, with options on public disclosure.
The abridged accounts option to be removed.
Stronger audit exemption statements from directors.
Limits on how often a company can shorten its accounting reference period.

Moving your bookkeeping to cloud software now makes this change painless. Our comparison of QuickBooks Online vs Xero may help, and our guide to UK VAT returns under MTD covers the VAT side.

A simple annual checklist for UK directors

Confirm each director and PSC is verified and has a personal code.
File the confirmation statement on time with the codes included.
Close the books and prepare accounts well before the nine-month deadline.
File accounts with Companies House and the company tax return with HMRC.
Update the register promptly for any change of directors, PSCs or registered office.
Keep the registered email address current, as Companies House now uses it for statutory communications.

Frequently asked questions

Is Companies House identity verification a one-time requirement?

Yes. Each individual verifies once and receives a personal code, which is used for all their UK company roles.

I am an existing director. When do I need to verify?

You must provide your personal code when your company files its next confirmation statement due after 18 November 2025. It is sensible to verify well before that date.

Can a director living outside the UK verify identity?

Yes. Overseas directors can use the GOV.UK One Login route with an accepted document or verify through a registered ACSP.

What happens if I do not verify?

Failing to verify can be an offence and may affect the company’s ability to file. It also risks the director being shown as unverified on the public register.

If you are a UK company director and want help with identity verification, accounts or annual filings, we would be happy to support 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.

October 14, 2026