Increase in penalty for not filing annual return
October 9, 2019
The Companies (Registration Offices and Fees) Second Amendment Rules, 2018 was notified by the Ministry of Corporate Affairs on 7th May 2018. For all Professionals and Entrepreneurs, who are directors of a company this rule plays an important role in their lives. By implementing this rule, there will be a very significant increase in penalty for not filing an annual return on 1st July 2018. Hence, to prevent any person who is a shareholder or Director in a private limited company must take steps to immediately file any overdue compliance to prevent heavy penalty which would become due from 1st July 2018.
Announcement by MCA
The Ministry of Corporate Affairs on 8th May 2018 announced the following on their homepage:
“The Companies (Registration Offices and Fees) Second Amendment Rules 2018 has been notified on 7th May 2018. Accordingly, in case the due date of filings under Section 92 (Annual Return) or 137 (Annual Financial Statement) of the Companies Act, 2013 expires after 30/06/2018, the additional fee @Rs.100 per day shall become payable in respect of MGT-7, AoC-4, AoC-4 XBRL and AoC-4 CFS.
In all other cases where the belated annual Income Tax returns or balance sheet/financial statement which were due to be filed whether under the Companies Act,1956 (23AC,23ACA,23AC XBRL,23ACA XBRL,20B,21A)or the Companies Act, 2013 (MGT-7, AoC-4, AoC-4 XBRL and AoC-4 CFS) additional fee as per the applicable slab for the period of delay up to 30th June 2018 plus @Rs.100 per day w.e.f 1st July 2018 shall become payable. Stakeholders are advised to take note and plan accordingly.”
MGT-7 & AOC-4
Form MGT-7 & Form AOC-4 must be filed by all companies in India as a part of their annual compliance. Even companies that have no actions are required to file Form MGT-7 and Form AOC-4.
Form MGT-7 is the form for filing an annual return by a company. The due date for filing MGT-7 is 60 days from the date of Annual General Meeting. The due date for conducting annual general meeting is on or before the 30th September following the end of a financial year. Hence, the due date for filing form MGT-7 is normally the 29th of November. (Know more about MGT-7)
The MCA form for filing financial statements is AOC-4. Hence, Form AOC-4 is submitted with the MCA for each Financial Year within 30 days of a company’s annual general meeting.
Increase in Penalty for Not Filing MGT-7 & AOC-4
With the above announcement, MCA has significantly increased the penalty for not filing an annual return of a company. The penalty for not filing an annual return of a company after 1st July 2018 would be Rs.100 per day perform. Since a company must file both MGT-7 and AOC-4, the penalty would be Rs.200 per day for not filing an annual return. If a company that was incorporated under Companies Act, 1956 or Companies Act, 2013 has so far not filed its annual return, it can file annual return paying the reduced penalty under the old regulations up to 30th June 2018. From 1st July 2018, the penalty would be increased multi-fold to Rs.100 per day/form. A comparison of penalty under present regulations and proposed rules from 1st July 2018 is reproduced below:
|Period of delay||Current Penalty||Proposed Penalty|
|Up to 15 days (sections 93,139 and 157)||Rs.400||Upto Rs.3000|
|More than 15 days and up to 30 days (Sections 93, 139 and 157) and up to 30 days in remaining forms.||Rs.800||Upto Rs.6000|
|More than 30 days and up to 60 days||Rs.1600||Up to Rs.12000|
|More than 60 days and up to 90 days||Rs.2400||Up to Rs.18000|
|More than 90 days and up to 180 days||Rs.4000||Up to Rs.36000|
|More than 180 days and up to 270 days||Rs.4800||Up to Rs.5400|
|Delay beyond 270 days||Rs.100 per day||Rs.100 per day/ form|
Filing Annual Return of Company
In 2018, the penalty for not filing MCA return and income tax return of a company has been significantly increased by the Government. Read our guides to know more about the changes in regulation:
- 2018 Penalty for Not Filing Annual Return or Income Tax Return of Company
- 2018 Income Tax and MCA Return Due Dates for Company.
To file the income tax return and annual return of a company and, the financial statements must be prepared, the director’s report must be prepared and the annual general meeting must be conducted.