Automating MSME Vendor Identification in Chemical Industry

Identifying MSME Vendors – How a Chemical Giant Automated the Process?

Ensuring Timely Payments and MSME Vendor Identification

The government has established explicit provisions to protect and reduce the credit risk of MSME vendors, including the crucial aspect of MSME Vendor Identification. To ensure that payments to MSMEs are not delayed beyond a specified period, the government mandates that companies disclose details when payments remain outstanding for over 45 days to MSME vendors. This provision necessitates accurate MSME Vendor Identification by companies.

What is an MSME?

Micro, Small and Medium Enterprises, also known as MSMEs, are defined under the Micro, Small and Medium Enterprise Development Act, 2006. The organizations that fulfill the following criteria are classified as MSME organizations:

Type of Enterprise Investment in plant & machinery or equipment should not be more than Turnover should not be more than
Micro Enterprise Rs. 1 crore Rs. 5 crores
Small Enterprise Rs. 10 crores Rs. 50 crores
Medium Enterprise Rs. 50 crores Rs. 250 crores

Thus, vendors who fulfill the above criteria will be classified as MSME vendors and consequently, the companies are required to ensure that their payments are completed within 45 days beyond which penal interest will be levied for micro and small companies. This necessitates them to verify which of their vendors are MSME vendors.

This becomes a tedious task especially when the company is dealing with thousands of vendors. Further, the MSME status keeps on changing each year. It is not necessary that a vendor who is an MSME vendor today will be an MSME vendor next year as well. Companies faced huge difficulties in verifying the MSME status of their vendors each year and automating this task was the need of the hour.

How A Ltd Automated MSME Confirmations?

A Ltd. is one of the giants in the chemical industry. Being one of the largest chemical companies, it dealt with 3 lakh vendors out of which 30,000 were active vendors. Its total annual purchases were Rs. 18,626.25 crores out of which it identified that only Rs. 110 crores were outstanding to the MSME vendors in the year end. Consequently, the huge gap in the figures raised concerns over the accuracy of the database. Clearly, automation was the need of the hour for getting MSME confirmations from such a huge number of vendors.

Earlier at A Ltd., the process for obtaining MSME confirmations was not systemised. A Ltd. obtained MSME confirmations 3 years before and the same confirmations were used each year to determine whether a particular vendor is an MSME or not. This led to inaccuracies in MSME identification and there were no updates as to whether an enterprise is still an MSME enterprise or not.

An automated solution was the need of the hour. That’s when they implemented Firmway’s MSME confirmation solution. Being a statutory compliance, it was important to ensure the accuracy of data. Due to non-accurate and untimely compliance led to penal interest @ 3 times of the bank rate notified by the RBI compounded with monthly rests. Consequently, this led to huge outflows in terms of penal interest which was a direct loss for the business.

How Firmway Helped A Ltd. Automate MSME Confirmations?

Firmway’s MSME confirmation tool allowed A Ltd. to automate its MSME confirmations. Following were the results that they witnessed after implementing Firmway’s MSME confirmation solution:

  • 30,000 MSME confirmations sent in a single click
  • 35% of the confirmations received in the first confirmation request itself
  • Overall, 80% response rate achieved. Earlier, it was just 15%-20%.
  • Nil error in detecting the MSME vendors.
  • 90% OCR verification success rate
  • 15,000 man-hours saved

Streamlining MSME Vendor Identification and Compliance

Earlier, they used to invest 100+ man-hours behind this confirmation exercise which eventually dropped to Zero after implementing the solution. Further, vendor education played an important role here. Firmway helped vendors understand the importance of MSME confirmations and why they were asked for their MSME status. Consequently, this led to a significant increase in their response rate.

Efficiently Managing MSME Vendor Data

Further, the solution auto-rejected old vendors from the system who claimed themselves as MSMEs earlier but were not MSMEs now. In fact, it identified that 40% of vendors were no more MSMEs. Further, the company had 3,000 new MSME vendors in the database and Firmway’s solution was able to identify MSME vendors with a 0% error rate.

Successful Implementation of Technology for MSME Compliance

A Ltd. was able to avoid penal interest rates as well as future ROC and CARO non-compliances. Identifying MSME vendors is posing significant difficulties for many such companies. However, by implementing technology, it is possible to automate the confirmations and ensure timely and accurate compliance. 

Section 43B

Understanding the practical applicability of Section 43B MSME payments amendment

Introduction to Section 43B Amendment

The recent Union Budget 2023 stirred discussions, especially regarding the unprecedented inclusion of payments to MSE vendors. This falls within the ambit of Section 43B of the Income Tax Act 1961. Section 43B contains provisions pertaining to “Income from Business and Profession.” It lists all the expenses a given business entity can seek as deductions from their business income only in the financial year when they make the actual payment, disregarding the year when the entity incurred such expenses. Thus, it advocates deduction of spending on an actual payment basis.

Section 43B: An Overview

 The inclusion of payments to MSE vendors in the above regulatory framework strives to address the key issues MSEs counter as a result of prolonged payments. MSEs make up a fundamental segment of the Indian business ecosystem. According to quantitative analysis estimates by the Economic Times, delayed payments to MSMEs in India have resulted in approximately Rs 10.7 lakh crore being held up, which represents around 6% of India’s Gross Value Added (GVA) for the financial year 2020-21. 

MSE Inclusion in Section 43B

The addition of the MSE payments clause (h) in Section 43B can prove as a cornerstone amendment to streamline the payment receipt process for MSE ventures. Business organizations dealing with MSE suppliers, need to duly comprehend the applicability of the amended Section 43B on your payments. You also need to pay attention to the requirements of Section 15 of the Micro, Small, and Medium Enterprises Development Act (MSMED), 2006. The latest Finance Bill 2023 permits the deduction of expense paid to MSEs in line with Section 43B only when it abides by the time limit specified in Section 15 of the MSMED Act 2006. Thus, one can claim deduction on payment to MSE vendors if they are paid within 15 days in cases where there is no agreement. Or 45 days or as per the time period in a pre-defined written agreement, whichever comes first.

Practical Insights and Illustrations

We provide practical insights on the treatment of payments to MSE vendors in various scenarios, assuming a predefined written agreement. Let’s explore specific situations to determine eligibility for deductions on MSE vendor payments based on the new clause addition.

Illustration 1:

A made a payment to a MSE after the time limit set by section 15 of the MSMED Act, 2006, but within the same financial year in which the expense was incurred. 

In this situation, A settled the payment after the specified time limit of Section 15 of MSMED Act, 2006. This activates the revised provisions of Section 43B. However, as the payment was made within the same financial year that the expense was accrued, deduction shall be permitted in that financial year as outlined by the regulations of the Income Tax Act, 1961.

Illustration 2:

Within the specified time limit under Section 15 of the MSME Act, 2006, B completes payment to an MSE and accrues the expense in the same financial year.

The provisions of section 43B of the Act would not apply to the payment that B made to the MSE. In the financial year in which the expense accrued, he will be permitted to take a deduction.

Illustration 3:

C dealt with an MSE where he had expenses that accrued in March 2024. However, he paid the vendor during the subsequent financial year in April 2024, within the deadline specified under Section 15 of the MSMED Act, 2006.

In this situation, C made the payment as per the time limit specified under section 15 of the MSMED Act, 2006. In the financial year 2023-2024, C will be able to calculate the payment in its tax on an accrual basis.

Illustration 4: 

D incurred an expense in the financial year 2023-2024 that was payable to an MSE. However, he settled it in the subsequent financial year, 2024-25. After the expiration of the time limit specified in Section 15 of the MSMED Act, 2006.

In this situation, because D made the payment beyond the time limit specified in Section 15 of the MSMED Act, 2006, and in the subsequent year, 2024-25, D will not be eligible to claim a deduction for that payment in the financial year 2023-2024 when the expenses initially accrued.

Illustration 5:

On March 16, 2024, E received an invoice from the MSE (Micro and Small Enterprise) for the supply of goods. E dealt with the MSE. The delivery person delivered the goods on the same day. On March 18, 2024, E communicated concerns about the quality of the supplied goods to the MSE vendor. Both parties resolved the dispute on April 30, 2024, and E made the payment on May 31, 2024.

Regulatory Compliance

It’s important to note that the disputing party raised the invoice dispute within 15 days of the delivery date. Therefore, the time limit defined in section 15 of the MSMED Act 2006 starts from the resolution of the dispute. E can claim a deduction for the payment in the financial year 2023-24. If E makes the payment within 45 days from the resolution of the dispute when the expenses accrued.

In summary, to ensure timely deductions and optimize your tax liability. It’s crucial to adhere to the regulatory requirements outlined in both the Income Tax Act 1961. The MSMED Act 2006. Failure to confirm your vendor’s MSME registration status could result in disallowed payment deductions and late payment penalties.

Firmway’s MSME Status Confirmation Tool

Collaborate with Firmway to gain an avante-garde solution in the form of an MSME status confirmation software. By using Firmway’s MSME Status confirmation tool, you can seek MSME status from your vendors and verify the same through MSME government databases and OCR technology. It simplifies the process of getting your vendor’s MSME status validation by leaps and bounds. 

Reach out to know more about this software.

Firmway is a SaaS based startup that has successfully automated Balance Confirmation and Ledger Reconciliation, for well-known companies such as Sodexo, Asian Paints, IPCA, Bluestar, Gati Logistics, and 500 more.


Promoting Timely Payments to MSMEs in India: A Look at Budget 2023-24

Promoting Timely Payments to MSMEs in India: A Look at Budget 2023-24


The Indian government’s unwavering commitment to promote Micro, Small, and Medium Enterprises (MSMEs) growth remains a cornerstone of economic development. This sector significantly contributes to employment, production, and exports, making it a focal point in the recent Budget 2023-24.

Budget 2023-24 Highlights

In her recent Budget 2023-24 speech, Finance Minister Nirmala Sitharaman introduced pivotal measures, consequently aiming at incentivizing timely payments to MSMEs. Now, let’s delve into the key proposals, thereby shaping the landscape for MSMEs in India.

Understanding the Proposed Clause

A critical aspect of the budget is the proposed insertion of clause (h) in  section 43B of the Income Tax Act. This clause dictates that any sum payable to a micro or small enterprise beyond the time limit specified in Section 15 of the Micro, Small and Medium Enterprises Development (MSMED) Act 2006 is deductible only upon actual payment.

The MSMED Act 2006 defines the time limit for payments as 45 days from the date of acceptance or the date of deemed acceptance of any goods or services.

Empowering MSMEs

The new clause not only promotes timely payments but also bolsters the bargaining power of MSMEs in negotiations with larger businesses. This is a significant stride towards creating a more equitable business environment.

Challenges in Identifying MSMEs Vendors

Despite these positive developments, identifying MSME vendors poses challenges due to turnover limit fluctuations and UDYAM certificate migrations. The need for a reliable solution is evident.

Firmway’s MSME Confirmation Software

To address this issue, the introduction of Firmway’s MSME confirmation software comes as a great relief for enterprises. The software helps enterprises identify the MSME status of their vendors, collect UDYAM certificates, and validate them using OCR technology.

By using Firmway’s software, enterprises can ensure that they are not only making timely payments to MSMEs but also saving them from incorrect information pass by MSME vendors.

The software efficiently streamlines the process of identifying MSMEs, consequently eliminating the need for manual verification and significantly reducing the chances of making mistakes.


In conclusion, the Indian government’s initiative to promote timely payments to MSMEs. Firmway’s MSME confirmation software and, consequently, go hand in hand in promoting the growth and development of this vital sector. Additionally, the software provides a simple and efficient solution to the challenge of identifying MSME vendors. Consequently, it aids enterprises in taking advantage of the tax benefits offered by the government.

  • Data collection with customized forms and follow-ups
  • MSME confirmations to help you know whether an entity is an MSME or not

It is time for all our readers to accelerate processes in their respective companies through efficient automation. Click here if you wish to take help.

Business Automation

Business Automation – Game Changer

What is Business Process Automation?

Business Process Automation (BPA) is the use of technology to automate business processes and reduce human intervention. It basically automates the workflows of the enterprise to make it faster and more efficient. Automated business is the key digital transformation strategy for today’s businesses. A BPA solution can help businesses as:

  • It automates repeatable tasks so that employees can focus on more productive tasks.
  • It replaces manual tasks that are prone to human errors. Thus, it increases the accuracy of the tasks.

Types of BPA

It is upon the organization to decide the level of automation it wants to achieve. Following are the four different types of Business Process Automation that organizations can implement:

  • Basic Automation: This involves automating simple and fundamental tasks using basic automation tools. Additionally, it requires little to no coding, eliminating errors and accelerating the process. Examples of basic automation include file transfer and order entry.
  • Process Automation: Process automation involves automating business processes for bringing transparency and uniformity. This is handled by dedicated software that enhances productivity and efficiency while also providing valuable insights into the business. Automating the hiring process, employee onboarding, logistics and supply chain management etc. are examples of process automation.
  • Advanced Automation: Advanced automation supports more complex processes within the organization. It further coordinates between humans and machines to handle complex tasks. ­­­­­­It relies on machine learning, natural language processing and analysis, etc. for automating business processes. Safety monitoring, error detection and recovery, and repair diagnostics are some examples of advanced automation.
  • Intelligent Automation: Powered by Artificial Intelligence, business intelligence automation enables the machine to learn and stimulate human intelligence and make decisions accordingly. Intelligent automation has use cases in several industries. It can pull data from the database, update records etc. Further, it can be used by insurance companies to extract data from claims form and port information to the CRM.

Benefits of Business Automation

Achieving automation with the best automation software for business can unlock the following benefits:

  • Lower Operating Costs: As business automation automates manual and redundant tasks, consequently, it directly reduces the operating costs of businesses.
  • Faster ROI: Automated business improves the speed of operations and processes. This provides a better and faster return on initial  investment in automation.
  • Being More Competitive: To remain competitive, businesses must enhance operational efficiency. In doing so, they should focus on core competencies and prioritize objectives. Automation is the key to achieving these goals.
  • Reduced errors and increase in speed: Business process automation reduces errors due to reduced manual intervention. This further helps in speeding up the reconciliation exercise.
  • Increased Profits: Profits tend to increase as the business moves from manual redundant tasks towards more productive tasks.

Business Automation with Firmway

Business automation software that allows you to automate accounting functions. This includes:

It is time for all our readers to accelerate processes in their respective companies through efficient automation. Click here if you wish to take help.

Struck off Companies

Identifying Struck Off Companies: A simple Guide to What You Must Know

What is the Meaning of Struck Off Companies?

The term struck-off on the other hand, implies that the Registrar of Companies (ROC) has removed the name of a company from the register of companies for certain reasons. Once the register removes the company’s name, the company’s legal existence is lost. Then it cannot continue its operations until it restores its name in the register.

The striking of a company’s name can happen either voluntarily; furthermore, it can occur due to a compulsory strike-off by the ROC.

Voluntary Striking Off:

Here, the company decides to shut down its operations and liquidate the company. However, the company shall file an application with the ROC for dissolution and consequent striking off the name of the company.

Compulsory Striking Off:

If the company fails to comply with the requirements of the law or any rules or regulations made henceforth, the ROC may strike off the name of the company from the register considering the intensity of the contravention.

Disclosure Requirements for Struck-Off Companies

While we understood the struck-off meaning, however, it is important to understand the associated disclosure requirements. As per the requirements of the Ministry of Corporate Affairs (MCA) then companies need to disclose their transactions with struck-off companies. This disclosure requirement is effective beginning from FY 2021-22 Further, they shall disclose their relationships with the company as part of additional regulatory information.

The following are the disclosures required:

  1. Name of the company being struck off
  2. Nature of transactions. This can include:
    • Receivables
    • Investment in securities
    • Payables
    • Shares held by the struck-off company
    • Any outstanding balance

3. Balance outstanding

4. Relationship with the company

Steps to Identify Struck-Off Company on MCA

To identify struck-off companies from the register firstly, you can visit the Ministry of Corporate Affairs website. Follow the below steps to identify:

  1. Visit the MCA portal
  2. Navigate as follows: MCA Services >> Master Data >> View Company / LLP Master Data
  3. Add a company name or CIN number and enter the captcha
  4. Check the status of the company.

How Firmway Identifies Struck-Off Companies?

Finding the companies on the MCA website can be cumbersome and time-consuming, especially if you transact with multiple companies. The solution, therefore, is to identify such companies with Firmway!

Firmway allows for bulk searches using the list of struck-off companies; consequently this helps in determining if it hasn’t been struck off. Following are the steps to identify companies using Firmway:

  1. Download the template, Input & upload the party list with the Name or PAN
  2. Automate Matching the Name with the list shared by MCA
  3. Highlight the risk associated in the percentage
  4. Automate scrutinize the data highlighted with the MCA list for 100% verification

Firmway has a data repository storing 1-year data. Its software checks and share the probability % and helps you identify how many companies are there in the list of struck-off companies. Ease your search with Firmway and ensure accurate disclosures!

Automate TDS Reconciliation with Firmway: Benefits & Challenges

Automating TDS Reconciliation: The Crucial Move from Manual to Automated

Why Companies Need to Automate TDS Reconciliation?

On every sale of Goods and Services above a certain limit, TDS is deducted by the Customers. Companies need to reconcile TDS periodically by extracting transaction data from Accounting Software as well as 26AS form from the government portal to ensure that the client has given proper credit, and avoids penalties and audit risk. The TDS and TCS that are eligible for the credit are reflected in the statement while reconciling with the ledgers. The amount stated in the statement is like advance tax paid by the deductee and eligible for credit. Hence, matching the amount with the TDS/TCS in the receivable ledgers of the deductee is of utmost importance. If you are doing it manually, the process is very vast, but Firmway can help you automate TDS reconciliation in 60 seconds.

Unlocking Efficiency: The Role of Automate TDS Reconciliation

The majority of organizations today manually perform this crucial process.. A survey revealed that Tax managers dedicate, on average, at least 8 hours a week to manual data tasks, with 25 percent reporting spending over 20 hours a week on such tasks.

In another survey of over 280 companies, respondents reported that they could eliminate a large part of inefficiencies by using automated tools, with 62 percent indicating this. Just like the other financial functions, TDS reconciliation is faced with a similar fate. Accurate reconciliation of TDS credit reduces the tax burden and ensures no loss of TDS credit. However, due to manual intervention, faces the following challenges:

Challenges spelled out 

  • The possibility of manual errors in inputting amounts while filing returns can result in a mismatch.
  • For deductees having a large number of customers, matching amounts is a herculean task.
  • The frequent updates to 26 AS make it time-consuming to reconcile and track on excel worksheets.
  • Adopting manual work involves different people and their different ways of working. This lacks standardization and discipline. Communication usually happens over email and is easy to falsify or spread misinformation.
  • Proactive tracking of discussions with tax deductor/collector for corrections due to identified mismatches. Teams in finance need to manually communicate over endless emails and calls.
  • Version control of excel sheets and other documentation can cause issues in many instances.
  • While working in a manual model, you might keep the reports in disparate places.
  • The booking of TDS in the books of the deductor and deductee can be in different periods. Time differences spill over from one quarter to another quarter in the form of 26AS causing further discrepancies.

Automating this process will enhance accuracy for 26 AS and significantly reduce time in processing low-value-adding activities. It also enables us to manage TDS and TCS credits as per Form 26AS and books of accounts and almost nullify leakages.

What are the benefits of automating the reconciliation process? 

Running a tax department equates to having a plethora of responsibilities, especially concerning compliance and regulations like TDS. However, using reconciliation automation tools helps expedite the reconciliation process and closure while also improving compliance, enhancing accuracy, and promoting transparency.

  • Firmway’s 26 AS Reconciliation Software is also one such software that makes the reconciliation process seamless for the organization.
  • Maps the TAN number with the PAN number for reconciling
  • It can reconcile large volumes in 60 seconds.
  • With the flexibility, it offers in quarterly, half-yearly, and annual reconciliations, it highlights mismatches and classifies entries into different buckets for ease of operations.
  • Efficiently manages communication with parties and generates actionable reports as and when required

Automation of the reconciliation process is truly the need of the hour for any business. With manual processes, it’s difficult to scale in response to the reconciliation when there is an increase in transactions. However, automation of the process makes the entire process effortless.

Is Audit a dying profession?

Is Audit a dying profession?

The audit industry is at a crossroads: as market expectations are shifting, technology is empowering auditors and improving quality, the case for audit’s evolution is growing, and more and more businesses are realizing the importance of the audit and assurance industry. In fact, many businesses that previously did not conduct audits now see the value in doing so.

People feel auditing is a dying industry, but it is not. As per research by Deloitte, the audit industry will grow rapidly in the coming 10 years. Times are challenging and auditing is evolving with the help of AI, which helps auditors to automate time-consuming manual activities and focus on higher-value activities. They are realizing the importance of returning to basic management principles in order to identify and correct problematic management practices; auditing plays an important role in this regard because only a genuine and effective audit can drive effective fraud detection and risk management procedures within a company.

AI helps auditors optimize their time by allowing them to perform better and smarter, allowing them to use their human judgment to assess a broader and deeper range of data and documents. The incorporation of modern technologies such as machine learning (ML), cloud computing, and artificial intelligence (AI) with audit software will drive market expansion. These products are used to improve organizations’ risk management skills.

As new standards enable Artificial Intelligence to create new chances for evidence generation, there is also an opportunity to rethink the skills that auditors can gain on the job. As data-driven methodologies grow more common in today’s audits, auditors may now claim to be learning key business skills as well as AI skills. The knowledge that auditors gain through these automation tools equips them to do their job better and deliver better quality reports and results to their clients.

Some people assume that when a part of a profession becomes automated, the human element of the same is devalued. I see the opposite happening with audit automation. As auditors are freed from the more tedious and manual aspects of auditing that are spreadsheet-driven and tick-and-tie tasks — there is more room for strategic insights and critical thinking. This only expands the significance of the work auditors carry out, the influence they have, and their relevance to the capital markets and the global economy.


About the Author:

Prashant Gupta is a Chartered Accountant by qualification but an Entrepreneur by passion. He comes with 5 years of experience as a Statutory Auditor before starting his own company Firmway Services, with a vision to Automate Audit Confirmation & Reconciliation for Auditors & Corporates.

A tech enabled approach for auditors to safeguard themselves from increased surveillance risk

A tech enabled approach for auditors to safeguard themselves from increased surveillance risk


In the recent past, the audit profession has been the subject matter of public commentary and scrutiny thanks to the searing probe it is facing.

The increased weightage placed on statutory duties of auditors has exceptionally increased the risks associated with the audit profession. It is safe to say that scrutiny on auditors has substantially increased due to the constitution of the National Financial Reporting Authority under Section 132 of the Companies Act 2013. Now, auditors are looking at possible penalization for failure to detect fraud or non-compliance with statutory provisions. The penalization includes the power to debar the auditor or audit firm from undertaking an audit for up to 10 years. Even Big4s are not spared.

The shift in the spotlight can be clearly noticed in some recent case laws. For instance, in ICAI v. Mukesh Gang, the Hyderabad High Court held the auditors guilty of gross negligence and violation of auditing standards. The level of strictness with which auditors are penalized for such wrongs- is in contrast with decisions in cases such as Union of India v. M.N. Basu where the Calcutta High Court had stated that non-reporting of extending loan without passing a resolution under Section 370 of the Companies Act, 1956, was not due to gross negligence but due to an erroneous interpretation of the law.

The proposition of an auditor being a ‘watchdog and not a bloodhound’ in Re Kingston Cotton Mills is now seeming outdated. In the past, auditors have failed to pay too much heed to nuanced expectations like receiving independent external confirmations. However, with the paradigm shift in the way the profession is being viewed, auditors agree that the risk – rewards relationship is heavily skewed and while the risks of audit have disproportionately increased, the revenue is subpar.

This is driving auditors to become more innovative within the audit practice and use forward-looking and proactive tech enabled audit tools. Technology has started to make inroads in most audit firms, and this directly and positively impacts the quality of each audit. The use of sophisticated technology solutions like practice management, audit confirmation, sampling, and data analytics is fast becoming standard operating practice as firms are embracing the digital-first approach to engagements. Not only are these tools enabling auditors to improve accuracy and analyze anomalies, trends, and areas of risk, but they are also proving to be much more cost effective for auditors.

One such tool that is helping auditors optimize the quality of processes and mitigate potential risks related to audit confirmation is Firmway. Firmway provides web-based SaaS platform that digitize the entire audit confirmation process. In cases like the Satyam fraud case, it was found that auditors’ failure to properly execute third-party confirmation procedures resulted in the fraud going undetected. It was held that the auditor relinquished control of cash confirmations entirely to their client and failed to question the integrity of the confirmation responses they received from the client by following up with the banks.

The entire fraud would have been nipped in the bud if there had been a platform where auditors could independently confirm all balances from third-parties. In Arrangement with The ICAI, Firmway is one such platform that helps auditors automize the independent audit confirmation process in compliance with SA 505. Firmway intends to show a clear picture of the company’s financials and curtail any potential fraud and misinformation. It thus provides auditors and authorities a higher level of assurance and smoothens the overall audit process.

To know more about the Audit Confirmation tool – Click here

What, Why & How for the New TDS Rules That Will Be In Effect From July 1, 2021

What, Why & How for the New TDS Rules That Will Be In Effect From July 1, 2021


The Assessment Year (AY) 2020-21 accumulated 6.83 crores Income Tax Returns (ITR) out of a working population of about 66.22 crores. And these are only individuals. With 10.07 lac active companies in India, the number of ITRs filed is alarmingly low.

In order to bring an end to this menace, the Government of India in its Union Budget 2021 has proposed to levy a higher rate of tax deducted at source (‘TDS’) and tax collected at source (‘TCS’) on non-filers of the income tax return.

According to the Finance Minister’s Budget, this new TDS rule will take effect from July 2021.


-All Companies who are liable to deduct TDS on Vendors

-Companies with a turnover of more than 10 crores who are liable to collect TCS from customers



Section 194Q (TDS) & Section 206C(1H) (TCS)

– Section 206C(1H) – w.e.f 01st July 2021, a seller with a turnover of more than Rs. 10 Cr in the previous financial year needs to collect 0.1% TCS on sale made to a resident buyer over and above 50 Lakhs

– Section 194Q – w.e.f 01st July 2021, a buyer having a turnover of over Rs. 10 Crore in a previous financial year need to deduct 0.1% TDS on purchase made from a resident seller over and above 50 Lakhs


Section 194Q shall not apply to a transaction on which:

(a) tax is deductible under any of the provisions of this Act; and

(b) tax is collectable under the provisions of section 206C other than a transaction to which section 206C(1H) applies.

Section 206AB – Escalated TDS & Section 206CCA – Escalated TCS

TDS is to be deducted and TCS is to be collected at twice the rate specified, or twice the rate in force or 5%, whichever is higher, if

– The person to whom payment is being made (Section 206AB) OR to whom the sale is being made (Section 206CCA) has not filed ITR for the last two FY for which the ITR filing deadline has expired, and

– In these two FY’s, TDS deducted and/or TCS collected of that person was Rs 50 thousand or more in each FY.


– Section 206AB shall not apply where the tax is required to be deducted under the following sections of the Act:


*The above requirement (Pt 1 & 2) is not applicable to vendors.

Further, with ITR acknowledgements and PAN Number, you can search the ITR filing status on the Income-tax website –

As evident from the above checklist, fulfilling compliance with these provisions is no mean task. The most cumbersome part of it would involve reaching out to all customers and vendors, endless follow-ups, validating the data, which is imperative to the compliance process. For large organizations, this could easily take weeks, putting their finance team under undue pressure.

With Firmway, you can save significant time and efforts by automating the entire process of collection of ITR acknowledgements and declarations. It will reach out to all your party, follow up with them, collect and validate the data through smart forms and give you a dashboard to track the response. This will ensure your compliance procedure is complete well within the deadline.

To get started, simply fill out this form and our representative will get back to you within 24 hours. In case of any specific questions, you can reach out to us at [email protected] or give us a call at 9769599848.

Budget 2021 On Corporate Finance

Budget 2021 On Corporate Finance

Budget measures: Direct and Indirect Tax changes

  1. Relief granted on dividend income earned by shareholders:
    1. Advance tax liability will now be computed on dividends only after declaration or receipt whichever is earlier;
    2. TDS exemption on dividends paid by SPVs to REITs and InvITs;
  2. TDS related provisions have been made more stringent:
    1. TDS at 0.1% to levied on the purchase of goods above INR 5 mn a year, where the turnover of the buyer exceeds INR 100 mn
    2. The rate of TDS/ TCS shall be higher than 2x actual rate, or 5%, in case of non-filing of ITR for the last 2 years
  3. Late deposit of employee contribution to labor welfare funds would not be allowed as a deduction to the employer.
  4. Tax Audit applicability based on turnover limit has been increased from INR 50 mn to INR 100 mn, with 95% of receipts and payments being digital;
  5. GST minor compliance changes – Form 9 substituted with self-reconciliation and Form 9C being scrapped.

Has the Budget made managing Corporate Finance somewhat easier?

  1. Relief on dividend income is a welcome move since this helps CFOs to pay dividends more tax-efficiently, making future investments in their companies more lucrative;
  2. Additionally, dividend relief to REITs and InvITs shows the government’s commitment to continue providing support to the conglomerates operating in real estate and infrastructure space (eg. Logistics);
  3. However, the government seems to be more and more unforgiving to defaults in TDS/ TCs norms. Companies/ CFOs ought to take note and ensure compliances accordingly;
  4. With easing of tax audit norms (both income and GST), it has reduced the compliance burden for smaller and subsidiary companies of larger MNC groups, whose turnover is within the limits, helping the CFOs to focus on running financing operations of the group.


CFOs ought to take note of the changes in the Budget and plan their next financial year accordingly. The budget may come off as somewhat bittersweet, however, relief in dividend provisions, including for REITs and InvITs, is an indicator for the government’s push to bring more investment into India. TDS provision becoming more stringent comes as no surprise given the current risk of non-compliance (monetary penalties in addition to the risk of prosecution of managerial personnel of the defaulting companies).