March 18, 2024

In this age of cut-throat competition, everyone wants to grow their business beyond the limits of the domestic market. Doing business globally is more easy now-a-days due to the advent of internet and technology. However, before going business globally, you need to follow several procedures and laws and get various registration and license. IEC (Import Export Code) license is one of such prerequisites when you’re thinking of importing into or exporting from India. It is also known as Importer- Exporter Code. IEC (Import Export Code) is required by anyone who is looking to kick-start his/her import/export business in the country. It is issued by the DGFT (Director General of Foreign Trade). IEC is a 10-digit code that has lifetime validity. Predominantly importer merchants cannot import goods without the Import Export Code and similarly, the exporter merchant cannot avail benefits from DGFT for the export scheme, etc., without IEC. International trade is a gateway to a world of opportunities for businesses in India. Whether you’re looking to import goods, export products, or expand your business globally, having an Importer Exporter Code (IEC) is your key to entering the international market. This code is issued by the Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce. For importers, the IEC is indispensable for the clearance of customs and facilitating payments to foreign banks, ensuring smooth international trade transactions. Similarly, exporters rely on the IEC to streamline the process of sending shipments and receiving payments from overseas clients. Import Export Code (IE Code) Import & Export Code is to be obtained by the business entity for import into or export from India. Import & Export Code is popularly known as the IEC number. Import & Export Code is a ten-digit unique number issued by the Directorate General of Foreign Trade (DGFT). IEC registration certificate is mandatory for a business involved in import and export. Hence, before initiating an import of goods into India, an importer must ensure that the importing entity has GST registration and IE code – both of which are required to clear customs. If an importer does not have both IE code and GST Registration, the goods will be stuck at the port and start incurring demurrage charges or could be destroyed. Importance of Import Export Code International market unlocks: As the IE Code is a requirement for the import and export business, they allow the products to reach the global market. IE code makes the entry of the international Indian company smoother and opens doors for growth and expansion. Online registration: The process to find the IE Code is entirely online and hassle-free with short document submission. Less document requirement: It is not required to submit many documents to obtain an IEC. Lifetime Validity: IE Code is a lifetime registration valid as long as the business exists. Hence, there are no issues with updating, filing, and renewing Import Export Code registration. The IE registration is valid until the company exists or the registration is not revoked or surrendered. Reduces illegal goods transportation: The most basic requirement for the Import-Export code is that you need to provide authentic information. Without giving proper information, IE code cannot be obtained. This criterion makes the transportation of illegal goods impossible. Availing Several Benefits: IE code has enormous benefits for importers and exporters. The registered business entities can get help through subsidies from the Customs, Export Promotion Council or other authorities. With LUT filing under GST, the exporters can make exports without paying taxes. If the exports are made with tax payment, the exporter can claim the refunds of the paid tax amount. Compliances: Unlike other tax registration, the person carrying import or export does not require to fulfill any specific compliance requirements such as the annual filing or the return filings. Validity of IE Code As mentioned above, IE Code registration is permanent and valid for a lifetime. Hence, there will be no hassles with updating, filing, and renewing the IEC registration. It is valid till the business exists or the registration is not revoked or surrendered. Further, unlike tax registrations like GST registration or PF registration, the importer or exporter does not require to file any filings or follow any other compliance requirements like annual filing. As IE code registration is one-time and requires no additional compliance, it is recommended for all exporters & importers to obtain IE code after incorporation. Nature of the Firm obtaining an IEC Proprietorship Firm Partnership Firm Limited Liability Partnership Limited Company Trust Hindu Undivided Family (HUF) Society Pre-Requisites for Applying for IEC Valid Login Credentials to DGFT Portal (After Registering on DGFT Portal) IEC may be applied on behalf of a firm which may be a Proprietorship, Partnership, LLP, Limited Company, Trust, HUF, and Society. The Firm must have an active Firm’s Permanent Account Number (PAN) and details like Name as per Pan, Date of Birth, or Incorporation. The Firm must also have a bank account in the Name of the Firm and a valid address before applying Documents required for IEC Code registration The list of scanned documents required for IEC Registration is listed as follows: Proof of establishment/incorporation/registration: The following type of Firm needs to submit the establishment/incorporation/registration certificate: Partnership Registered Society Trust HUF Other Proof of Address: Proof of Address can be any one of the following documents: Sale Deed Rent agreement Lease deed Electricity bill Telephone landline bill Mobile, post-paid bill MoU Partnership deed Other acceptable documents (for proprietorship only): Aadhar card Passport Voter id Note: In case the address proof is not in the Name of the applicant firm, a no objection certificate (NOC) by the firm premises owner in favor of the Firm, along with the address proof, is to be submitted as a single PDF document. Proof of Firm’s Bank Account Canceled Cheque Bank Certificate User should have an active DSC or Aadhaar of the Firm’s member for submission. Active Firm’s Bank accounts for entering its details in the Application and making online payment of the application fee. FAQs Is IEC mandatory? Yes. An Importer-Exporter Code (IEC) is mandatory for import to India or export from India. It is a significant

An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company in the form of shares of stock. ESOPs give the sponsoring company—the selling shareholder—and participants various tax benefits, making them qualified plans, and are often used by employers as a corporate finance strategy to align the interests of their employees with those of their shareholders. What is ESOP? An ESOP (Employee stock ownership plan) refers to an employee benefit plan which offers employees an ownership interest in the organisation. Employee stock ownership plans are issued as direct stock, profit-sharing plans or bonuses, and the employer has the sole discretion in deciding who could avail of these options. However, employee stock ownership plans are just options that could be purchased at a specified price before the exercise date. There are defined rules and regulations laid out in the Companies Rules that employers need to follow for granting employee stock ownership plans to their employees. How Does an Employee Stock Ownership Plan (ESOP) Work? An ESOP is usually formed to facilitate succession planning in a closely held company by allowing employees the opportunity to buy shares of the corporate stock.ESOPs are set up as trust funds and can be funded by companies putting newly issued shares into them, putting cash in to buy existing company shares, or borrowing money through the entity to buy company shares. ESOPs are used by companies of all sizes, including a number of large publicly traded corporations.Contrary to what some people say, companies with an ESOP must not discriminate and are required to appoint a trustee to act as the plan fiduciary. Among other things, it is not possible for senior employees to receive more shares or for ESOP participants to have no voting rights. Cost of ESOPs and Distributions Legal fees, accounting fees, and administrative expenditures may be included in the initial costs of an Employee Stock Ownership Plan (ESOP) in India. The cost of establishing and sustaining an ESOP varies according to the plan’s size and complexity. Furthermore, ESOP distributions in India may occur in a variety of ways. When an employee exercises their stock option to obtain shares, they have the option of selling them immediately or storing them for future appreciation. If the employee decides to sell the shares, the proceeds, less any taxes due on the gain, will be sent to them. If the employee agrees to keep the shares, they will own a piece of the company and may be eligible for dividends or capital gains if the stock price rises. Why Company offers ESOPs to their employees? Organisations often use Employee stock ownership plans as a tool for attracting and retaining high-quality employees. Organisations usually distribute the stocks in a phased manner. For instance, a company might grant its employees the stocks at the close of the financial year, thereby offering its employees an incentive for remaining with the organization for receiving that grant. Companies offering ESOPs have long-term objectives. Not only do companies wish to retain employees for the long term, but also intend to make them the stakeholders of their company. Most of the IT companies have alarming attrition rates, and ESOPs could help them bring down such heavy attrition Start-ups offer stocks for attracting talent. Often such organisations are cash-strapped and are unable to offer handsome salaries. But by offering a stake in their organisation, they make their compensation package competitive. ESOPs from an employee’s perspective With ESOPs, an employee gets the benefit of acquiring the shares of the company at the nominal rate, and selling them (after a defined tenure set by his employer) and making a profit. There are several success stories of an employee raking in riches together with founders of the companies. A very notable example is Google when it went public. Its founders Sergey Brin and Larry Page became the richest persons in the world, even the stock-holder employees earned millions too. ESOP Taxation ESOPs have dual tax effects: When an employee exercises their rights and purchases company stock When the employee sells the stock after purchasing it Let’s take a closer look at these examples: Tax treatment at the time of buying the shares Employees can purchase shares after the vesting date at a price less than the share’s Fair Market Value (FMV) on that date. As a result, the difference between the FMV and the exercise price of the share is considered a pre-condition in the employee’s hands and taxed at his income tax slab rate. However, in the case of new businesses, the government has softened the tax implications of ESOPs. Employees at the start-up would not have to pay the tax on the perk in the year in which they exercised the ESOP. TDS on ESOPs would be delayed until the sooner of the following dates: Five years from the date of the ESOP grant When does the employee sell the ESOP? Date of departure from the company Tax treatment at the time of selling the shares If the employee sells the shares, the difference between the selling price and the FMV on the date the share was exercised is taxable as capital gains. If you sell your shares within a year of buying them, you will have to pay a 10% tax on any profits over Rs.1 lakh. If the shares are sold within 12 months, the profits are taxed at 15%. Taxation of foreign ESOPs in India is also similar, and you would be taxed in India on the perquisites earned from a foreign company.  Benefits of ESOPs for the employers Stock options are provided by an organization as a motivation to its employees. As the employees would benefit when the company’s share prices soar, it would be an incentive for the employee to put in his 100%. Although motivation, employee retention and awarding hard work are the key benefits which ESOP brings to employers, there are several other noteworthy advantages too. With the help of ESOP options, organisations could avoid cash compensations as a reward,