IMPORTANCE OF STATUTORY COMPLIANCE OF BUSINESSES IN INDIA

No organization can function without people. The company’s employees work in various roles to fulfill the purpose of an organization. And, for a company to function well, it needs to be streamlined and organized, with proper norms & regulations set in place. These regulations are applied to every aspect of an organization, including the company’s interactions with its employees and its finances. This is known as statutory compliance.

Why is it important?

Statutory compliance relates to the various taxation & labor laws prevalent in India. These laws can differ on a State and National level, and it is necessary for companies to obey them. Non-compliance with these laws can land a company into some big legal trouble such as penalties, fines, or worse. This is why companies spend a good amount of resources for ensuring being statutory compliant with all the laws.

It is important to have a good understanding of the various labor and taxation laws in India and to keep updated with any changes that need to be incorporated since the laws and rules are very dynamic, and keep on changing from time to time.

Let’s take a look at the tax compliances that companies are required to give importance to:

• Account bookkeeping that presents fair and complete information on the financial position of the company. These books must be maintained keeping in mind the compliance with the relevant accounting standards and must be audited by a certified Chartered Accountant or Auditor.

• Depositing TDS & advance taxes on time, and filing returns according to the norms. This can vary according to the nature of the company.

• Whenever the law demands it – conducting a statutory audit.

• All other paperwork and documentation regarding the formation and registration of the company, among others, must be in place.

All these laws must be followed, as they are mandatory for every organization in India.

Ensuring Statutory Compliance

Understandably, it is difficult to know each and every labor and taxation law and its nitty-gritty. Hence, what could be the solution to ensure complete statutory compliance without any errors? A proper payroll management system.

A payroll management system calculates –

• How much tax is to be restrained when calculating the salary of an employee.

• How much of the net salary is to be paid to an employee after tax and other deductions.

Both labor and tax law compliance is taken care of with the payroll management system. It does all the calculations for the employee after all the basic information is entered. Just make the modifications that are required as and when they are done, the system takes care of the rest.

Importance and Advantages of Statutory Compliance

The most important advantage of statutory compliance to employees is that it ensures fair treatment of labor. It prevents employee’s exploitation or when they are made to work for unmanly hours or in inhuman conditions. It also ensures that they are paid in fair proportion according to the work done and that companies must comply with the minimum wage rate.

This gives a solid advantage to organizations which are the timely payment of taxes, which also avoids a lot of legal trouble like penalties and fines. These predefined rules make it easier for the Government to collect the revenue as well as for companies to organize their financials. Statutory compliance is important to prevent legal troubles. Depending on the non-compliance, companies can be fined monetarily as well as be tried in a court of law.

In Conclusion

Statutory compliance is of great importance and must be given due consideration. Companies must have a proper payroll management system instead of streamlining it.

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