After the company is registered, it needs to apply for a few licenses based on the applicability. These licenses may vary depending on which city and state in which the company is registered. Here is the list of some of the licenses which may be applicable for your company in Karnataka (Bangalore).

1. Karnataka Shops and Commercial Establishment License:

Shops and Commercial Establishment license is issued from the department of labour and is mandatory for all businesses registered in Karnataka.

2. Karnataka Professional Tax Registration:

Professional Tax Employer Registration - Certificate of Enrolment (EC)

Every business registered in Karnataka should obtain the Certificate of Enrolment (EC) from the Profession Tax Officer within Thirty days from the date of commencement of business. Certificate of Enrolment is mandatory for all business entities whether they have employees or not.
If the company fails to obtain Certificate of Enrolment within the specified time, the professional authority may impose a penalty for delay for non registration. This registration fee must be paid every year before 30th of April.
The fee to be paid depends on the nature of business, you can click here to know more

Professional Tax Employee Registration -- Certificate of Registration (RC)

If the company pays salary which is Rs 15,000 or more to its employees, then the company must deduct Profession Tax from the salary and pay such amount to the professional tax department on or before the due date.
It is the responsibility of the Company to deduct tax and pay on behalf of all such employees within 20 days of expiry of the month. Penalty for non-payment of tax by enrolled person and registered employer with interest at rate of 1.25% per month and Penalty not exceeding 50% of the tax amount due.
Here is an example: Salary to employee X for Jan 28th is Rs 16,000 Salary you will pay is Rs 15,800 (16,000 minus 200) Professional tax to be paid to govt is Rs 200 before the 20th of Feb.

3. Import Export License (IEC):

IEC is required in the following situations

1. When the company is into importing or exporting business. The shipments will be cleared from the customs authorities only after providing supporting documents.
2. When the company is into exporting services and receives money in foreign currency directly into his bank account then its required by the bank

4. Goods and Service Tax Registration (GST)

GST registration is mandatory for if your business fulfils any one of the below conditions

  • Any business whose turnover in a financial year exceeds Rs 20 lakhs (Rs 10 lakhs for North Eastern and hill states).
  • GST is also required if the business is into Exporting of services

There are other conditions too

  • Every person who is registered under an earlier law (i.e., Excise, VAT, Service Tax etc.) needs to register under GST, too.
  • When a business which is registered has been transferred to someone/demerged, the transferee shall take registration with effect from the date of transfer.
  • Anyone who drives inter-state supply of goods
  • Casual taxable person (see below)
  • Non-Resident taxable person (see below)
  • Agents of a supplier
  • Those paying tax under the reverse charge mechanism
  • Input service distributor (see below)
  • E-commerce operator or aggregator*
  • Person who supplies via e-commerce aggregator
  • Person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person
If your business entity fall in any of the above category, GST is mandatory

5. Employees’ State Insurance Scheme (ESIS)

ESI scheme is a contributory fund that enables Indian employees to take advantage of self-financing and healthcare insurance fund contributed by the employee and the employer. The scheme is managed by Employees’ State Insurance Corporation which is a self- financing social security and labour welfare organization. It administers and regulates ESI scheme as per the rules mentioned in the Indian ESI Act of 1948.
ESI is one of the most popular integrated need-based social insurance schemes among employees that protects their interest in uncertain events, such as temporary or permanent physical disability, sickness, maternity, injury during employment, and more.

Eligibility for ESI Deduction

ESI scheme applies to all establishments, like corporate organizations, factories, restaurants, cinema theatres, offices, medical and other institutions which are located in the scheme-implemented areas, where 10 or more people are employed. All employees of a covered unit, whose monthly incomes (excluding overtime, bonus, leave encashment) does not exceed Rs. 21,000 per month, are eligible to avail benefits under the Scheme. ESI fund provides cash and medical benefits to employees and their immediate dependents.
Gross salary is described as the total income earned while working in a job, before any deductions made for health insurance, social security and state or federal taxes.
For ESI calculation, the salary comprises of all the monthly payable amounts such as basic pay, dearness allowance, city compensatory allowance, HRA, incentive allowance, attendance bonus, meal allowance and special allowance. The salary, however, does not include annual bonus, retrenchment compensation, encashment of leave and gratuity.
The contributions under the ESI Scheme are raised from the employees & employers. The rates of contribution, as a percentage of wages payable to the employees are:

Employees’ contribution Employers’ contribution
1.75% of the gross pay 4.75% of the gross pay

Thus, 6.50% of the wages is to be paid as contribution to Scheme for each worker.

ESI Calculation

Consider the gross salary of an employee is Rs. 12,000 per month then the ESI calculation for the employee would be calculated as:

Employees’ contribution Employers’ contribution
12,000*(1.75/100) = 210 12,000*(4.75/100) = 570

In case, the salary goes above Rs. 21,000 per month during the contribution period (as defined below), the ESI would be calculated on the higher salary.
For example, if the salary of an employee is raised to Rs. 25,000 per month during the ESI contribution period, then the ESI would be calculated on Rs. 25,000 instead of Rs. 21,000.
For ESI, there are two contribution periods each of six months duration:

  1. starting from 1st April to 30th September and
  2. starting from 1st October to 31st March of the year following.
If the gross salary of an employee exceeds Rs. 21,000 in a month after the commencement of the contribution period, the employee continues to be covered under ESI scheme till the end of that contribution period and the contribution is deducted on the total income earned by the person.
For example, during the first contribution period (April to September) if an employee’s gross pay is increased from Rs. 18,000 (below ESI limit) to Rs. 25,000 (above ESI limit) in the month of June, the deductions will continue to happen till the end of the ESI contribution period i.e. September. And the deducted amount will be calculated on the increased gross salary, i.e. Rs. 25,000. When the 6 months contribution period ends, if the employee salary is more than the ESI limit, no further deductions will take place.

6. Employee Provident Fund

The statutory compliance requirement for PF deduction is as follows:
Just like ESI, the Employees Provident Fund (EPF) is also a contributory fund in which both the employee and employer contribute amount. EPF is a compulsory and contributory fund for the Indian organizations under “The Employees’ Provident Fund and Miscellaneous Provisions Act 1952”.

Employee and Employer Contributions for PF Deduction Statutory Compliance

For EPF, both the employee and the employer contribute equal amount, which is 12% of the salary of the employee. However, the employee contributions may differ. Employees can contribute more than 12% of their salary voluntarily. However, in such a case, the employer is not bound to match the extra contribution of the employee.
For PF contribution, the SALARY comprises – BASIC SALARY and DA.
For the PF deduction, the maximum limit of salary of the employee is Rs 15,000 per month. This means that even if the employee’s salary is above Rs 15,000, the employer is liable to contribute only on Rs 15,000 i.e., (15000*12%)=Rs 1,800.
The statutory compliance for PF contribution has some less known facts associated with it. The PF is divided into EPF and EPS (Employee pension Scheme) contributions. The employees’ contribution goes straight to EPF whereas from employer’s contribution, the 8.33% goes to EPS subject to Rs 1,250 a month and the rest goes to EPF.

  • PF contribution of the company - 12% of SALARY.
  • Minimum of 12% of SALARY or Fixed Monthly PF deduction.

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