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Why Engage Professionals for Valuation Services: The Importance of Experience and Expertise

As a business owner, you may be familiar with the concept of share valuation and the importance of knowing the true value of your shares. Valuation not only helps you make sound business decisions but also provides a foundation for negotiations, fundraising, or mergers and acquisitions. While there are various ways to approach share valuation, one thing is clear: Engaging professionals for valuation services can make a significant difference in the accuracy and credibility of the valuation exercise.

Experience and Expertise: The Value of Professional Valuers

When it comes to share valuation, experience and expertise matter. Professional valuers are trained and certified individuals who have dedicated their careers to the art and science of valuing businesses. They possess in-depth knowledge about the principles and practices of valuation and have extensive experience working with businesses across different industries.

Their expertise enables them to assess the nuances of your business and its unique characteristics to arrive at a fair and accurate value. Unlike a DIY valuation, where you may rely on generic formulas or assumptions, professionals bring a refined analytical approach that takes into account industry dynamics, market trends, and specific financial data. By leveraging their expertise and experience, professional valuers can provide you with a comprehensive and reliable valuation report.

Objectivity: Trustworthy Valuation Opinions

Another key benefit of engaging professionals for valuation services is the objectivity they bring to the process. Valuations need to be credible, unbiased, and independent to gain acceptance by regulatory authorities, investors, or other stakeholders. Professional valuers adhere to a strict code of conduct and are bound by ethical guidelines that require them to provide objective opinions.

Working with a professional valuer ensures that your valuation is conducted without any conflicts of interest. They are committed to providing factual and impartial opinions that are based on robust analysis and reliable data. This objectivity not only enhances the credibility of the valuation report but also instils confidence in your stakeholders, who can trust the results to be free from any influence or bias.

Comprehensive Analysis: Beyond the Numbers

Valuation is not just about crunching numbers; it requires a comprehensive analysis of various factors that influence your business’s value. Professional valuers have a deep understanding of these factors and take them into account during the valuation process. They analyze historical and projected financials, industry and market conditions, business risks, intellectual property, management capabilities, and more to determine an accurate value for your shares.

Professional valuers go beyond superficial calculations and take a holistic approach to valuation. They understand that the value of a business is not solely determined by its financial statements but is influenced by a range of intangible and qualitative factors. By considering all relevant aspects, they provide you with a thorough and robust valuation that captures the true worth of your shares.

Time and Cost Savings: Outsourcing Valuation Work

Outsourcing your valuation work to professionals can also lead to time and cost savings, particularly for smaller businesses. Share valuation is a complex task that requires a considerable amount of time and expertise. Many business owners find it challenging to allocate the necessary resources to conduct a valuation while managing day-to-day operations.

By engaging professionals, you can offload the burden of valuation and focus on your core business activities. Professional valuers have the knowledge, tools, and processes in place to efficiently conduct the valuation process within the agreed-upon timelines. They ensure that all necessary data is collected, analyzed, and documented professionally, allowing you to save valuable time and resources.

Moreover, outsourcing valuation work can help you avoid costly mistakes or penalties associated with non-compliance. Professional valuers are well-versed in the relevant regulations and standards governing valuation practices and ensure that your valuation is conducted in a compliant manner. This can save you from potential legal disputes, penalties, or the need for costly re-evaluations.

Conclusion: Unlocking the Benefits of Professional Valuation Services

In conclusion, engaging professionals for valuation services is crucial for any business seeking an accurate, well-supported, and trustworthy valuation. Professional valuers bring the experience, expertise, and objectivity necessary to navigate the complex valuation process. Their thorough analysis considers both quantitative and qualitative elements, providing a comprehensive view of your business’s value.

By outsourcing valuation work, you can also save valuable time and resources, allowing you to focus on driving your business forward. Furthermore, professional valuers ensure compliance with regulatory standards, reducing the risk of costly mistakes or penalties.

At GroomTax, we specialise in professional valuation services that deliver excellence, accuracy, and reliability. Our team of experienced valuers is committed to helping businesses like yours gain a clear understanding of their share value. Contact us today to schedule your valuation and unlock the benefits of professional valuation services.

The Foreign Exchange Management Act: What You Need To Know

The Foreign Exchange Management Act (FEMA) is a set of regulations governing the foreign exchange market in India. With the liberalization of the Indian economy and increased global exposure, there has been a sharp increase in the demand and supply of foreign exchange in the country. In order to ensure effective management of operations pertaining to foreign exchange, the Central Government enacted The Foreign Exchange Management Act (FEMA), 1999. This act came into force with effect from January 2000. The primary objective of FEMA is to establish a framework for monitoring and to regulate all transactions involving foreign exchange so as to prevent illegal fund flows, protect the external reserves of India, and guard against any potential threat to its economic stability. Let’s take a closer look at what you need to know about FEMA –

Know Your Rights

All Indian residents are entitled to make all kinds of payments in any foreign currency. There is no restriction on the number of foreign exchange transactions an Indian resident can make in a year. However, the Indian resident has to make a declaration to the RBI, if the total value of such transactions exceeds US$5000 per financial year. In case of any Indian traveller going abroad, the traveller is allowed to bring foreign exchange as applicable under the law, i.e., Indian residents are allowed to bring foreign exchange not exceeding US$5000 in any form, including travellers’ cheques, etc. In addition to this, Indian residents can also bring back gifts and souvenirs purchased on a trip outside India provided the value of such gifts and souvenirs does not exceed US$500 per person.

Conditions For Authorisation

The conditions for authorisation are – – The person is a resident of India. – He is a person of integrity. – He has adequate knowledge and experience of the business in which he is engaged or of the profession to which he is devoted. – He has net assets of not less than US$5000 or net income from business or profession of not less than US$5000 in the preceding fiscal year. – He has a net worth of not less than US$5000.

Rights And Duties Of Registered Dealer

Registered dealers are required to maintain records of all transactions related to foreign exchange for a period of five years. Moreover, they are expected to provide information to the Central Government or Reserve Bank of India when required. Registered dealers have the right to receive payment in any freely transferable currency against price in Indian rupees at the applicable official rate of exchange. Registered dealers have a duty to maintain an account of all transactions undertaken in relation to foreign exchange and to keep records of such transactions for a period of five years. Registered dealers have a duty to report the receipt and the foreign exchange payment to the Reserve Bank of India within seven days of the transaction.

Registration Requirement For Travellers’ Cheques, Receipts, And Payments

Indian residents travelling abroad can purchase travellers’ cheques from any registered dealer against payment in Indian rupees at the applicable official rate of exchange. Indian residents travelling abroad can also issue travellers’ cheques for the equivalent value in Indian rupees against payment in any freely transferable currency at the applicable official rate of exchange. Indian residents residing in India can purchase travellers’ cheques for the equivalent value in foreign exchange against payment in Indian rupees at the applicable official rate of exchange. Indian residents residing in India can also issue travellers’ cheques for the equivalent value in any freely transferable currency against payment in Indian rupees at the applicable official rate of exchange.

Best FEMA Consultants in India in 2022

Foreign Exchange Management Act (FEMA) Violation Penalties

The violation of FEMA can result in monetary penalties and imprisonment of up to three years. The key violations under FEMA are – Contravention of the specified restrictions on the amount of foreign exchange that can be imported or exported from India. – Importing or exporting foreign exchange against payment in violation of the specified procedure. – Issuing travellers’ cheques and receipts for foreign exchange in contravention of the specified procedure. – Contravention of the specified restrictions on the amount of foreign exchange that can be imported or exported by Indian residents. – Contravention of the specified restrictions on the amount of foreign exchange that can be imported or exported against payment in violation of the specified procedure by Indian residents.

Conclusion

How Foreign Direct Investment Affect the Exchange Rate

Foreign direct investment (FDI) is money that corporations from one country invest in companies in another country. In the process, the investing company usually buys a company or a percentage of shares in that company. A common belief is that FDI causes an exchange rate effect because it’s viewed as a supply of capital. That’s because FDI is a type of capital investment. The thinking goes that when investors have more capital, they demand stronger currencies to hold as reserves. This makes the local currency less attractive and depreciates its value. This article explains how FDI might affect the value of a nation’s currency and why it doesn’t always do so—especially when you consider why businesses choose to make such investments in the first place.

What is Foreign Direct Investment?

A common definition of foreign direct investment is the acquisition of a lasting interest in real assets, such as plants and machinery, located outside the borders of one’s own country. To put it another way, when a company based in one country buys a controlling interest in a company based in another country, it is considered to be FDI. The investing company usually buys a company or a percentage of shares in that company. There are many reasons why a company would choose to make an investment in another country. Some firms have the resources and expertise to expand into other countries and benefit from their advantages. Others are looking for a new source of income because their home market is too saturated for further growth.

Learn more about FDI in India

How does FDI affect the exchange rate?

The relationship between FDI and the exchange rate depends on the investor’s intentions. There are two main reasons why a company would make an investment in another country—to sell products in that country and to buy assets in that country. The former is known as “going out.” The latter is “going in.” Each has a distinct impact on the exchange rate because each is associated with a different type of capital demand.

Why does FDI cause a change in currency value?

Investing money in another country creates demand for some type of capital that is denominated in the foreign currency. For example, if a Japanese company buys a factory in another country, it will have to convert the Japanese yen into the local currency to pay for the factory. That creates demand for the local currency. Another investment is a joint venture to produce parts in another country. If a U.S. automaker buys parts from a Canadian manufacturer, it will pay Canadian dollars for the parts. That also creates demand for the Canadian dollar. The capital demand associated with going out is an investment in productive assets, including spending on research and development, or R&D. The capital demand associated with going in is spending on assets that are not involved in the company’s operational business, such as the shares and bonds of another firm or real estate.

When does Foreign Direct Investment not have an effect on the exchange rate?

Supply and demand is the basic model for how currencies are valued. In other words, when there is more demand for a currency than there is supply, the currency will rise in value. There are four factors that affect capital demand, and each of them must be present for an increase in demand to cause an appreciation. A factor that could counteract the increase in demand for a currency is whether the investors’ expectations are met. If a Japanese manufacturer buys a Canadian factory to increase its production, it may expect to increase sales in Canada due to lower production costs. If the Canadian market does not grow as quickly as expected, the Japanese company may conclude that the purchase was not cost-effective. In this situation, investors may sell the Canadian dollar and its value will fall.

Summary

Foreign direct investment is a transfer of capital across a country’s borders. When a foreign investor invests in another country, it can affect the exchange rate in two ways. One way is when the investment is going out, when the investor builds a factory or buys land in the other country. In this situation, the investor usually pays the currency of that country. The other way is when the investment is going in. An investor buys shares of a company in the other country. In this situation, the investor usually pays the currency of that country. All investments add to the total supply of capital in the market, which can affect the exchange rate. The exchange rate is determined by the amount of demand for the currency relative to the supply. When there is more money flowing into a country than out, there is likely to be an appreciation of the exchange rate.

5 Ways Foreign Direct Investment Can Affect Inflation

Foreign direct investment (FDI) is the buying of businesses or assets in one country by individuals or businesses from another country. As FDI flows increase, a country may see an increase in its stock market value and foreign exchange reserves. In some countries, there may also be an increase in domestic production and employment opportunities for local people. However, as many emerging economies are cautious about how a sudden influx of capital can affect their economy, they often impose regulations on the type and size of FDI that comes into their country. For example, many emerging economies have strict laws regarding foreign ownership of land and real estate, which is meant to protect native landowners. There are various forms of FDI that investors can choose from when putting money in another country:

What is the role of FDI in inflation?

When a country receives a significant amount of FDI, it can affect inflation in a number of ways. As the amount of money in circulation increases, there is a chance that inflation will rise, as more money is competing against a limited amount of goods and services. FDI can also affect inflation in other ways, such as through increased demand for certain goods, higher wages paid to employees employed by foreign investors, or an increase in prices charged by local providers as they try to compete with the newly invested companies. The amount of domestic production that happens as a result of FDI may also affect the exchange rate, which in turn can affect inflation. Inflation is the rate at which the price of goods and services is rising. Inflation can be detrimental to an economy as it can cause instability – especially in a country that relies on imports.

Supply Chain Problems

When large amounts of FDI flow into a country, the supply chain may become overloaded as a result. In some cases, this may lead to delays in the delivery of products or interruptions in production. When supply chains become congested, it can affect the price of certain goods – especially if the price of transportation goes up as a result of more shipments being shipped around the country. In addition, there may be a shortage of certain resources, such as trucks or warehouses, to accommodate all the extra shipments, which can lead to supply chain problems. The supply chain is the process by which goods or products are shipped or transported from one location to another.

Currency Fluctuations

If the amount of FDI being invested in another country increases, this may affect the country’s currency. When a large amount of foreign currency is being exchanged, this can shift the value of a country’s currency, which can affect the price of goods and services in the country. If a country has an abundance of its own currency, this can make it more difficult for the country’s businesses to compete in the global marketplace, as the companies have to pay more for imports. On the other hand, if the amount of foreign currency in a country is low, the country may not have enough funds to purchase the necessary goods and services that it requires, which can cause a shortage.

Shifting Importance of Commodities

In addition to importing goods, some countries are also major importers of commodities such as minerals, oil, and natural gas. When a large investment of FDI is made in one of these countries, it can affect the amount of commodities that the country imports and, in turn, the amount of money it needs to pay to import these commodities. When a sudden influx of capital is invested in an economy, there may also be a shift in the types of commodities that the country imports. For example, if a country that imports large amounts of oil sees an increase in FDI, the country may start importing more natural gas, as it can be cheaper than the oil that it was previously importing.

Conclusion

When a significant amount of FDI flows into a country, it can have several effects on the country’s economy, including an increase in inflation. If the amount of FDI being invested in another country increases, this may affect the country’s currency. When a sudden influx of capital is invested in an economy, there may also be a shift in the types of commodities that a country imports.

What Is A Foreign Direct Investment In India? (FDI)

If you often wonder, What is Foreign Direct Investment in India? Well, A foreign direct investment (FDI) occurs when a business or investor from outside the country buys a stake in the company. The phrase typically refers to a commercial decision to buy a substancial portion of a foreign company or to buy it altogether in order to expand its operations to a new area. It is not frequently used to refer to an investment in foreign firm stock.

How do FDIs Operate?

FDIs operate when companies that are thinking about making a foreign direct investment often only examine open economies with trained labour and above-average growth potential for the investor. The value of minimal government regulation is also common. FDI typically includes non-capital investments as well. It might also entail the provision of management, technology, and tools. The fact that foreign direct investment develops effective control over the foreign company, or at the very least significant influence over its decision-making, is one of its key characteristics.

What are the special considerations under FDI?

There are number of special considerations under FDI and here we’ll learn about them.

A foreign subsidiary or associate firm can be established, a controlling stake in an existing foreign business can be purchased, or a merger or joint venture with a foreign business can be made. These are just a few examples of the various ways that foreign direct investments can be made.
According to rules set by the Organisation for Economic Co-operation and Development (OECD), a foreign business must have at least a 10% ownership holding in order for foreign direct investment to acquire a controlling interest.
Its scope is open-ended. In some circumstances, obtaining less than 10% of a company’s voting shares can result in the establishment of an effective controlling interest in the business.

These are some of the special consideration under FDI

(FDI) Foreign Direct Investment in India

FDI or Foreign Direct Investment in India plays an important role. Foreign direct investment is a significant source of funding for India’s economic growth. After the crisis of 1991, India began its economic liberalisation, and FDI has steadily expanded ever since. India now ranks first internationally in the greenfield FDI ranking and is a member of the top 100-club for ease of doing business (EoDB).

Routes by which India receives FDI

Here are the routes by which India receives FDI

* Automatic route: Automatic route is where the RBI or Indian government’s prior approval of the non-resident or Indian company for FDI is not necessary.

* Government route: Government route is where approval from the government is required. Through the Foreign Investment Facilitation Portal, which enables single-window clearance, the company will need to submit an application. After consulting with the Department for Promotion of Industry and Internal Trade (DPIIT), the Ministry of Commerce, the appropriate ministry receives the application and either approves or rejects it. The Standard Operating Procedure (SOP) for processing applications under the current FDI policy will be published by DPIIT.

Sectors that fall under the “up to 100% Automatic Route” category are

– Medical Devices: up to 100%

– Pension: 49%

– Infrastructure Company in the Securities Market: 49%

– Insurance: up to 49%

– Petroleum Refining (By PSUs): 49%

– Power Exchanges: 49%

The following industries fall under the “up to 100% Government Route” category:

– Banking & Public sector: 20%

– Broadcasting Content Services: 49%

– Mining & Minerals separations of titanium-bearing minerals and ores: 100%

– Core Investment Company: 100%

– Food Products Retail Trading: 100%

– Multi-Brand Retail Trading: 51%

– Print Media (publications/ printing of scientific and technical magazines/speciality journals/ periodicals and facsimile editions of foreign newspapers): 100%

– Print Media (publishing of newspapers, periodicals and Indian editions of foreign magazines dealing with news & current affairs): 26%

– Satellite (Establishment and operations): 100%

FDI Prohibition

FDI prohibition are a few sectors where all forms of FDI are outright forbidden. These sectors are

– Atomic Energy Generation

– Any Gambling or Betting businesses

– Lotteries (online, private, government, etc)

– Investment in Chit Funds

– Nidhi Company

– Agricultural or Plantation Activities (although there are many exceptions like horticulture, fisheries, tea plantations, Pisciculture, animal husbandry, etc)

– Housing and Real Estate (except townships, commercial projects, etc)

– Trading in TDRs

– Cigars, Cigarettes, or any related tobacco industry

Governmental measures to boost FDI into India

There are certain schemes and measures that government do in order to boos FDI into India

To entice foreign investment, government programmes like the 2020 production-linked incentive (PLI) scheme for electronics manufacturing have been announced.
The government’s revision of the FDI Policy 2017 to allow 100% FDI under the automatic route in coal mining activities increased the FDI influx in 2019.
The government confirmed in 2019 that investments in Indian firms involved in contract manufacturing are also permitted under the 100% automatic route if they are carried out through a valid contract, even though FDI in manufacturing was previously under the 100% automatic route.
The administration also allowed 26% FDI in the digital sectors. The market in India offers a considerable market opportunity for the foreign investors because of favourable demographics, significant mobile and internet penetration, massive consumption, and technology acceptance.
The Government of India’s online single-point interface with investors to assist FDI is known as the Foreign Investment Facilitation Portal (FIFP). It is managed by the Ministry of Commerce and Industry’s Department for Promotion of Industry and Internal Trade.

FDI investment is anticipated to rise

Foreign investors have expressed interest in the government’s efforts to privatise airports and allow commercial train operations
Future substantial investments are also anticipated in valuable industries like defence manufacturing, where the government increased the FDI quota under the automatic method from 49% to 74% in May 2020.

FDI AND FEMA

For nations where cash is scarce, foreign direct investment (FDI) has been a crucial source of funding. A person or organisation can invest money from abroad in an Indian company through foreign direct investment. The Foreign Exchange Management Act (FEMA), 1999, governs India’s foreign direct investment policy, which is overseen by the Reserve Bank of India (RBI). FDI is defined as an investment that is more than 10% in value or that is made from outside the country, according to data published by the Organization for Economic Co-operation and Development (OECD).

FEMA is a crucial resource for the expansion and development of numerous Indian industries. FEMA’s key goals are to encourage orderly growth, balance payments, and allow international trade while also maintaining India’s access to foreign currency. The following is a list of significant FEMA provisions for compliance with foreign investment:

– Foreign Assets and Liabilities as well as Annual Return

– Commercial loans from outside sources.

– Report on Annual Performance.

– Form for Advance Reporting.

– Single master form

– Form FC-GPR

FC-TRS Form
ODI form

Check Why We Are One Of The Best FEMA Consultants In India?

What Is The Valuation Of Shares In Corporate Accounting?

Knowing the worth of a company’s shares is done through the valuation of shares process. Share valuation is based on quantitative methods, and the value of a share will change depending on market supply and demand. It is simple to find out the share price of listed corporations that are traded publicly. However, the valuation of shares is extremely significant and difficult with regard to private corporations whose shares are not sold publicly. Here, in this article we will know about how valuation of shares in corporate accounting is done.

When is a Share Valuation necessary?

The following are some scenarios where the share valuation is necessary:

* One significant factor is when you are preparing to sell your firm and need to determine its value.

* As soon as you ask your bank for a loan using shares as security

* Share value is crucial during mergers, acquisitions, reconstruction, amalgamations, and other business transactions.

* When your company’s shares are about to be converted, going from equity to preference

* When creating an employee stock ownership plan, valuation is necessary (ESOP)

* When determining tax obligations under the wealth tax or gift tax legislation

* When share valuation is mandated by law during a court proceeding shares that a brokerage firm owns

* The corporation is nationalised after paying the stockholders compensation.

What are Share Valuation Methods?

1. Asset-based

The value of the company’s assets and liabilities, including intangible assets and contingent liabilities, is the foundation of this strategy, called Asset-Based. For manufacturers, wholesalers, and other businesses that use a significant amount of capital assets, Asset-based may be quite helpful. The conclusions drawn using the income or market methodologies are likewise verified using this method as a reasonableness check. Here, the value of each share is calculated by dividing the company’s net assets by the total number of shares.

2. Income Based

When only a small number of shares are being valued, this method is employed. In Income Based, the emphasis is on the anticipated returns on the business investment, or what the company will produce in the future. A popular technique is to divide predicted earnings by a capitalization rate to determine the worth of a company. Besides these two, DCF and PEC are also employed. A company that is well established can employ PEC, but more complex analyses like discounted cash flow analysis are better suited for freshly created businesses or firms with erratic short-term earnings assumptions.

3. Market-Based

The market-based method typically makes use of the stock or asset sales of comparable private organisations as well as the share prices of comparable publicly traded companies. There are numerous proprietary databases on the market that can be used to get information about private companies. What is more crucial is how to choose similar companies; there are several factors to take into consideration while making this decision, including the size, industry, size, financial standing, and date of the transaction, among others.

To know more about the Share valuation methods, tap on the link to know more about it in detail.
GroomTax

The practice of share valuation is essential to your knowledge and success, regardless of whether you are a trader or a long-term investor. As a result, traders can compare the stocks of other companies using a variety of share value techniques. Long-term investors might assess their possibilities and approach them using a variety of techniques. Therefore, it’s crucial to keep up with the greatest share valuation techniques according to your needs and objectives.

Best FEMA Consultants in India in 2022

In this article, we’ll get to know how GroomTax is acing the FEMA Consultants area and who are the best FEMA Consultants in India in 2022 but before that let’s just develop an understanding of what exactly FEMA is. The governmental agency that consolidates and updates legislation governing foreign exchange in India is known by the full name FEMA, which stands for “Foreign Exchange Management Act.” “Enabling external trade and payments and supporting the orderly development and preservation of the foreign currency market in India” was the FEMA act’s principal goal. The Foreign Exchange Regulation Act (FERA) of 1973 was replaced by FEMA, which was passed by the Indian Parliament in its winter 1999 session. To manage international commerce and exchange operations, the RBI proposed FEMA in 1999. The formal directive stated that FEMA will “consolidate and revise the foreign exchange (forex) law with the purpose of facilitating external trade and payments and for fostering the orderly development and preservation of foreign exchange market in India.” The first of June 2000 marked the official implementation of the Foreign Exchange Management Act. The Prevention of Money Laundering Act (PMLA) of 2002 was made possible by the entrance of the currency market in India, which the RBI now governs. FEMA was primarily implemented in India in order to de-regulate and establish an open economy. Best FEMA Consultants in India are often the ones to adhere to all the guidelines.

Objectives of FEMA

* Facilitating international trade and payments was the primary reason FEMA was implemented in India. FEMA was also developed in order to support the orderly growth and upkeep of the Indian currency market.

* All foreign exchange transactions in India must follow the rules and processes outlined by FEMA. Current Account Transactions and Capital Account Transactions are the two categories into which these foreign exchange transactions have been divided.

* According to the FEMA Act, the balance of payment is a record of transactions involving commodities, services, and assets between citizens of several nations. Capital Account and Current Account make up the majority of its divisions.

* All financial transactions are included in the capital account, whereas commerce in goods is included in the current account. Current Account transactions are those that include money moving into and out of a country or countries over the course of a year as a result of trading or providing goods, services, and income.

* An economy’s health is shown by the current account. As was already established, the balance of payments consists of both current and capital accounts; the capital account, which represents the movement of capital in the economy due to capital receipts and expenditures, makes up the remaining portion of the balance of payments. The capital account recognises both domestic and foreign investment in domestic assets.

Services of FEMA

We offer our broad perspective in the following FEMA advice services that we provide since our FEMA consultants have carved out their own distinct niche in the field of FEMA Consultancy. Here are a few services of FEMA:-

– Consultations for foreign exchange-related transactions

– Help with common issues affecting the interpretation of FEMA regulation

– Services for inward investment advisory.

– Consulting services for international investments.

– Aid in litigation and advocacy before authorities

– Help open liaison, branch, and project offices both inside and outside of India.

– Services for an expert business licence, such as CDSCO License and IE Code, etc.

– Services for filing annual returns.

– Assistance and certification with business valuation

– Help with submitting specific forms, such as FCGPR, FCTRS, etc.

Applicability of FEMA Act

The Foreign Exchange Management Act (FEMA) is applicable to all of India as well as to organisations and offices abroad (which are owned or managed by an Indian Citizen). The Enforcement Directorate is the name of FEMA’s headquarters, which is located in New Delhi. FEMA is applicable to:

– Foreign exchange.

– Foreign security

– Exporting goods or services from India to a nation outside of India.

– Importation of commodities and/or services from countries other than India.

– Securities as outlined in the 1994 Public Debt Act.

– Any form of purchase, sale, or exchange (i.e. Transfer).

– Services in banking, finance, and insurance.

– Any foreign corporation when at least 60% of the ownership is held by an NRI (Non-Resident Indian).

– Any Indian national living inside or outside the country (NRI).

According to the FEMA Act, the current account transactions have been divided into three categories, namely:

– Transactions that FEMA forbids,

– The Central Government must approve the deal,

– The RBI must approve the transaction.

Prohibition on Drawal of Foreign Exchange

– Any payment received as a result of winning the lottery.

– Any payments made from winnings from racing, riding, etc.

– Any payments made to purchase lottery tickets, football pools, sweepstakes, magazines that are prohibited or prescribed, etc.

– Commissions on exports are paid in exchange for equity investments by Indian companies in joint ventures and foreign wholly owned subsidiaries.

Penalties Under FEMA

There are a few things that we should keep in mind in order to avoid any penalties under FEMA. Any person who violates the terms of FEMA or any rule, direction, regulation, order, or notification issued thereunder is subject to a fine of up to Rs. 2 lakh, which is equal to three times the amount of the violation. For each day that the violation persists, the offender will be subject to a further penalty of up to Rs. 5,000 in the case of a continuing violation.

Now that we have a fairly good idea about FEMA and how GroomTax functions, it’s safe to say that we are the best FEMA Consultants in India in 2022. To know more, click here…

What Does Startup Valuation Mean In India?

When we think about the word, Startup Valuation, there are times when we often think about what does startup valuation mean in India? Now that India is taking center stage in global markets due to high growth & reform expectations, demographic dividend, and significant demand, many Indian startups have emerged, especially in the last couple of years, building scalable businesses (substantially Tech-enabled) to solve a variety of problems we face in our daily lives. Internet-based companies have experienced unprecedented growth throughout the world.

If this question ever comes to your mind, What does Startup Valuation mean in India then, Startup valuation is, to put it simply, the process of determining a company’s valuation, or how much it is worth. At the seed fundraising round, an investor makes a financial commitment to a business in exchange for equity in a piece of the enterprise. Because it enables them to choose how much ownership to give a seed investor in exchange for money, valuation is essential for business owners. For an investor, it is also crucial since they need to know how many shares of the business they will receive in return for the initial money they contributed.

What is the importance of Startup Valuation?

Investors frequently choose to fund early-stage businesses because they can see the full potential of the business. There are is so much that startup needs to do in its initial stage and here are some of the importance of Startup valuation. An early-stage startup should assess the worth of the company for the following reasons:

* Helps attract investments

Investors are constantly looking for company plans with a strong business strategy and a thorough and accurate assessment and startup valuation helps attract investments. You must create a solid business strategy that is supported by solid financial information as an early-stage startup. Without this information, investors might not be interested in your investment proposition. The decision of an investor to invest in the growth of an early-stage business depends heavily on the startup’s value. Startup valuation definitely helps attract investments.

* Helps predict future sales

Various financial metrics must be used in order to help predict future sales and profits of the company. An early-stage startup’s value is used to calculate the right amount of supplies and other investments that will help to ensure the company’s growth. It’s critical to keep in mind that early-stage firms may face unforeseen challenges, making their success questionable. Using an early-stage startup’s valuation can boost the company’s projected sales.

* Helps in determining the potential of a business

Different sorts of early-stage startups exist, each with a unique potential. Knowing the startup valuation will help in determining the potential of a business. While some firms might not even survive to the following quarter, others might be extraordinarily successful. It’s crucial to be aware that evaluating a startup’s potential can aid in your decision regarding which business to pick.

* Making Decisions

Making decisions is aided by startup value. The process of knowing your business is valuation. The entrepreneur needs to be aware of the company’s true value before making any decisions, such as deciding how much equity to issue to the investor or concluding any deals. When you know the valuation of your startup, making decisions comes handy.

Here are few more Importance of Startup Valuation :-

* Negotiation Authority

Knowing the true value of your startup business will make it much simpler for you to negotiate a fair price during mergers. it also helps you being a negotiation authority. When a larger firm wants to make you its daughter company in the early stages, startups merge. If you have all the value figures for your startup endeavour at that time, you can simply accept the request. Being in the position of negotiation authority comes with its own benefits.

* Setting the future

Setting the future is important for an entrepreneur. The entrepreneur is able to predict the company’s future and existing state with the help of a proper startup valuation study. As a result, the business owner will be better able to set their sights on the desired outcomes, devise plans for achieving those outcomes, and adapt and put into practise new plans for advancing the startup’s present stage. You may quickly and simply benefit from Startup Valuation after you have accurate valuation information for your business.

* The true value is known

Startup valuation is important when trying to persuade investors to give money to your business. As for the investors, they learn what they will get in return for their investment, which benefits both the company and the investors. The Startup Valuation benefits are primarily derived from the procedure and the true value is known.

Importance of startup valuation is important to every business because it influences how much equity an entrepreneur must provide to an investor in exchange for the necessary money. This suggests that in exchange for a seed investment, a firm that is valued higher must grant a smaller percentage of equity or shares to the investor. Startup valuation is crucial from an investor’s perspective as well as from the perspective of entrepreneurs since it enables investors to estimate the return they will get on their investment.

What are the Valuation Factors for Startups?

Now that we have seen how a proper or incorrect valuation can make or break a deal, the next obvious question is what are the valuation factors for startups. Before learning how it’s done, let’s take a closer look at the variables that affect a company’s valuation:

Here are a few valuation factors for Startups

* Traction

It is one of the key elements affecting seed stage valuation. Traction primarily serves as the quantitative indicator of growing client demand for a startup. Traction is the most crucial factor in persuading investors to put money in a company since it plainly shows expansion and growth.

* Reputation

The founders must make sure they have a good reputation in the market before moving forward with the valuation round. The founder’s reputation and abilities are two of the most crucial factors that investors consider before making an investment.

* Prototype

A key element that can affect an investor’s choice is the creation of a prototype. Therefore, make sure the prototype is ready before preparing to pitch to an investor.

* Pre-valuation revenues

Revenues are unquestionably crucial for any business since they simplify the assessment process for investors. Therefore, if a product has already been launched and is making money, it may influence an investor’s choice in favour of that firm and serve as a true deal-breaker.

* Distribution Channel

It is highly probable that the product or service will also be in its early stages throughout the startup phase. Due of the potential impact on valuation, founders should exercise caution when choosing the distribution channel.

* The Industry

Investors are quite likely to pay a premium if the company is in a booming sector of the economy. This suggests that it’s critical to pick the appropriate industry because it will raise a company’s value

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VALUATION OF SHARES

MEANING

Valuation of shares is defined as the process of calculating the value of shares of any company. The value of each share depends on some external factors such as market demand and supply. This process is done through various quantitative techniques.

IMPORTANCE

The Valuation of Shares is very important for any company as it helps to manage the business. It tracks the performance in terms of estimated change in value and not just in revenue terms. It also helps to track the effectiveness of the Strategic Decision Making Process.

The Valuation of shares is also important when Business has to be sold out and the value of the business is required to be known. Some of the cases where the valuation is important are Acquisition, Amalgamation, Merger and Reconstruction. The Valuation of Shares is also important for the Investors as higher valuations would mean more money per share can be sold to the investors and it will be easier for them to borrow the money.

EFFECT OF VALUATION IN DECISION MAKING

Valuation of shares helps in the decision making by following ways:-

1. The growth of the business depends on Valuation of Shares. The higher the rate of growth, the higher shall be the value of business.

2. Business Risks and issues related to the owner and management are reduced by the Valuation process.

3. It increases the cash flow and the investors are interested in future cash flows.

METHODS

Following are the Five Methods of Valuation of Shares:-

1. Asset Backing Method:- It is also called Net Asset Method. The Valuation made in this method is based on the assets of the company. Under this Method, the valuation of each share is calculated as the value of the total net assets of the company (including goodwill) divided by the total number of shares issued with an entitlement to assets on wind up.

2. Yield- Basis Method:- Yield is defined as the effective rate of return(ROR) on investments which is invested by the investors. Under this method, The Valuation is made on the basis of Yield. It is expressed in terms of Percentage.

3. Price- Earning Ratio Method:- The Price- Earning Ratio (P/E Ratio) is calculated by dividing the Market Value Price Per Share by the Company’s Earning Per Share (EPS). The Investors get a better sense of the value of share of the company by this ratio. It shows the willingness of the market to pay for a stock today based on the past or future earnings. If this ratio is high, then the price of the stock is high in relation to the earnings and possibly, it is overvalued.

4. Return on Capital Employed Method:- Return on Capital Employed is a type of profitability ratio and is calculated through dividing Earning Before Interest and Tax (EBIT), by capital employed. Capital Employed is the difference between total assets and current liabilities. It measures how efficiently a company is using its capital to generate profits. If the value of this ratio is high, it shows that a large amount of profits can be invested back in the company for the benefit of all the shareholders.

5. Fair Value Method:- Firstly, under this method, the profit is calculated on the basis of past average profit, and then the capitalised value of profit is calculated on the basis of Normal Rate of Return. Finally, the capitalised value of profit is divided by the number of shares to find the value of each share.

6. Discounted Cash Flow Method:- This is a method of valuation that is used to determine the value of investment which is based on it’s return or future expected cash flows. The return of investment must be greater than the Weighted Average Cost of Capital (WACC).

BENEFITS

Following are the benefits of Valuation of Shares:-

1. It Helps to Identify Risk Areas of the company and proper precautions can be taken to avoid such shares that are dangerous for the portfolio.

2. Analysis of Stock can be done easily after its valuation.

3. Comparative Analysis within the sector and industry becomes easier.

4. Impact of Corporate Events, such as Acquisitions, Mergers, etc., can be assessed easily using stock valuation as these events may affect future cash flows and value of share of the company.

DISADVANTAGES

Following are some disadvantages of Valuation of Shares:-

1. Occurrence of Faults in Assumptions that are taken during the valuation process. These assumptions frequently go wrong since these are based on estimates. In case, if the assumptions go wrong, the value of shares can be affected by which wrong decisions will be taken by the management.

2. Intangible Assets are not considered during the valuation of shares which shall result in wrong investment decisions.

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TDS Provisions as per Sections 194R and 194S

Introduction – In Finance Act 2022, two new TDS sections have been inserted in Income Tax Act, which are effective from 01-07-2022.

Applicability of Section 194R
It is applicable on any person whether resident or non-resident responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from a business or the exercise of a profession, by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, deduct TDS in respect of such benefit or perquisite under section 194R.
Rate and amount of Deduction
Any person resident or non-resident responsible for providing any benefit or perquisite to a resident, shall deduct TDS at a rate of 10% of the value or aggregate of the value of such benefit or perquisite provided or likely to be provided to such resident.
TDS under section 194R is to be deducted on fair market value of the benefit or perquisite and if the benefit or perquisite has been purchased by the deductor then the purchase price or actual cost shall be the value on which TDS will be deducted.
In case such item is manufactured by the deductor himself then the price charged by the deductor to its customer shall be the value on which TDS will be deducted.

Time of deducting TDS
TDS under this section shall be deducted at the time of providing benefit or perquisite to the deductee by the deductor.
In case where the benefit or perquisite is wholly in kind or partly in cash and partly in kind but such part in cash is not enough to deduct TDS in respect of whole of such benefit or perquisite, the person responsible for providing such benefit or perquisite shall, before releasing the benefit or perquisite, ensure that TDS required to be deducted has been paid in respect of the benefit or perquisite.

Exception to this section
Provisions of this section shall not apply where value or aggregate of value of the benefit or perquisite provided or likely to be provided to such resident during the financial year does not exceed Rs. 20 thousand.
Provisions of this section shall not apply where being an individual or Hindu undivided family, whose total sales, gross receipts or turnover does not exceed Rs. 1 crore in case of business or Rs. 50 lakhs in case of profession, during the previous year of the financial year in which such benefit or perquisite, as the case may be, is provided by such person.

Example
Mr. Darshan provided following benefits and perquisite to Mr. Raju. Define TDS deductibility in each of the following cases:
In case where Mr. Darshan transferred ownership of his car to Mr. Raju, who is employee of Mr. Darshan.
In case where target base payment is done by Mr. Darshan to Mr. Raju on achieving the target provided to him.
In case where Dr. Raju gets free samples of medicine provided by Mr. Darshan.

Solution- Deductibility in following cases are as follows:
Transfer of capital assets is covered under section 194R, therefore TDS will be deducted.
Section 194 provided that TDS will be deducted on incentive or gift on target completion.
TDS will be deducted on fair market value of such item.

Applicability of Section 194S
Under this section any person responsible for paying to any resident any sum as it’s consideration for transfer of a virtual digital asset shall deduct TDS. In case where the consideration for transfer of virtual digital asset is wholly in kind or in exchange of another virtual digital asset, where there is no part in cash or partly in cash and partly in kind but the part in cash paid is not enough to pay TDS liability of such transfer, the person responsible for paying such consideration shall, before releasing the consideration, ensure that TDS required to be deducted has been paid in respect of such consideration for the transfer of virtual digital asset. If TDS under section 194O is applicable on a transaction along with section 194S then provisions of section 194S will be applicable.

Time of deducting TDS
Earlier of the following shall be the time of deducting TDS under this section: –
At the time of credit of such sum to the account of the resident even if such sum is credited to the suspense account or any other account by different name in the books of the person liable to pay such income
at the time of payment of such some by any mode

Rate of Deducting TDS
TDS under this section on consideration for transfer of virtual digital asset shall be deducted at 1% rate of such sum.

Exception to this section
Following are the exceptions on which TDS under section 194S is not applicable: –
TDS shall not be deducted under this section if consideration is payable by a specified person and the value or aggregate of such value does not exceed Rs. 50 thousand during the financial year.
TDS shall not be deducted under this section if consideration is payable by any person other than specified person and the value or aggregate of value of such consideration does not exceed Rs. 10 thousand during the financial year.

For this section “specified person” means
a person being an individual or a Hindu Undivided Family, whose total sales, gross receipts or turnover, from the business carried on by him does not exceed Rs. 1 crore and in case of profession exercised by him does not exceed Rs. 50 lakhs during the financial year immediately preceding the financial year in which such virtual digital asset is transferred.
being an individual or Hindu Undivided Family, not having any income under the head “Profits and gains of business or profession”.

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