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Web-based returns to deter attempts to float shell cos

New Delhi, Apr 4, 2023

The government is stepping up security and KYC requirements in the new reporting system

Firms may have to file their annual returns, financial statements and related statutory filings in new web-based forms with enhanced security features and authentication requirements from later this year, a move that will likely deter attempts to float tax-dodging shell companies.

The government is stepping up security and know-your-customer requirements in the new reporting system for corporations to check the creation of shell companies with dummy directors suspected to be used in financial irregularities like tax evasion, diversion of funds and money laundering.

The Serious Fraud Investigation Office took action against a Gurugram-based firm last September for allegedly setting up shell companies with links to Chinese entities.

The idea is to have tech-enabled real-time oversight of statutory filings by the nation’s 1.5 million registered active companies as the government gears up to complete the technological upgrade of its statutory filing portal MCA21.

The highlight of the new filing system is that data entered on the form before submission will be verified in real-time with the information already available, with the government from previous filings to prevent errors and enhance compliance. The new filing system also entails two-factor authentication.

The plan is to roll out about 40 more statutory forms in the new format under version three of the MCA21 portal, which has been built from scratch, according to multiple professional users of the platform who are aware of the development.

On average, about 7 to 7.5 million statutory forms are filed in a year. In FY23, over 7.5 million statutory forms were filed on the portal, a brisk pace of statutory filings despite the phased migration of filings into the new system, said one of the persons cited above who asked not to be named.

The new forms will be rolled out once the current filing process becomes more seamless. The effort is to migrate annual return forms too to the new system in the coming filing season, said the person.

Companies must file annual returns within 60 days of their annual general meeting, which is to be held within six months of the financial year’s end.

Despite the initial teething issues, form filings were robust on the MCA21 portal in FY22. In the case of nine new web-based forms launched last August, around 2.8 million forms were filed in FY22, compared to 2.65 million forms in the same period a year ago.

In the case of the 56 new forms rolled out on 23 January this year, around 230,000 filings have been made so far, the person said. The number of financial statements and annual returns filed in FY22 in the previous version of the forms are also higher than the filings in the year before. Companies have to file around 100 forms a year as part of compliance. LLP (limited liability partnerships) filings have crossed 520,000 in FY23, up from around 475,000 in FY22. LLPs have to file around 20 statutory forms every year.

There was no formal response to queries emailed to the ministry of corporate affairs on Monday.

The number of statutory filings reported in the just concluded financial year indicates that the transition to the new reporting regime for corporations, a major e-governance initiative of the government, is set to get completed in a few months.

Officials of the Registrar of Companies had last month searched a virtual accounting firm in Chennai for allegedly using fake documents for incorporating companies, The Hindu reported on 24 March.


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