Lower Deduction Certificate of a Start Up Company

Client Industry :  E-commerce Industry

 Background :

The client was a start-up company engaged in e-commerce business. In its initial years of operation, the client was operating in huge losses, thus there was no taxable income of the client. The Customers of the client were deducting tax at the prescribed rate. Since the client had no taxable income, this has resulted in huge tax refunds which was claimed by way of filing income tax return. It further took more than a year to get the refund amount credited in the bank account. Thus, there was huge cash flow issue for the client because the client was in its initial years of operation and was faced with shortage of funds. The client approached us to suggest a way how the same can be avoided.

Our Approach :

• We reviewed the financials and tax computation of the client and advised to obtain a lower deduction certificate from the tax Authority
• We worked with the finance team of the client to prepare all relevant documents and tax computation to be filed with the application for issue of LDC
• We assisted the client in filing the application with the tax authority online for issue LDCat an appropriate rate along with all relevant documents
• We further, assisted the client, in liaising with the tax department for early issue of LDC

Outcome/Impact : 

We were successful in getting the LDC well before time which in turn helped the client to ensure that all the payment that it received was subject to lower rate of tax deduction as per the LDC. This resolved the cash flow issue of the client which very crucial for a start up company.