budget 2017, income tax, tax planning, tax calculation, exemption, section 80c, personal finance
Representational image of tax calculationCreative Commons

The Central government is planning to geo-tag companies to check whether too many firms are registered on the same address. This move is a part of a crackdown on shell companies.

What it means for the companies?

Firms will have to geo tag their registered office locations in a statutory filing to Registrar of Companies for the existing companies while for the upcoming firms, coordinates of the registered office would be mandatory to provide under the proposed move.

What is Geo tagging?

Geo tagging is the process of adding geographical identification to various media forms.It can help users find a wide variety of location-specific information from a device. For instance, someone can find images taken near a given location by entering latitude and longitude coordinates into a suitable image search engine.

How Geo tagging will keep a check on shell companies?

During the income tax filing, Geo Tagging will raise an alarm with the income tax officials if too many firms are registered on same co ordinates.

Minister of State, P.P Choudhary said "This will us identify instances of one building being used by hundreds of shell companies as their registered companies or citing vacant plots are their registered office premises. It will serve as an early warning system for detecting mushrooming shell companies," quoted Mint.

Registering of several companies on same address was red flagged by the former judge of Supreme Court Justice M.B Shah led special investigation team in 2015. It highlighted the role of shell firms in money laundering.

In the first leg of cleaning up the shell menace, government last year come down on 2,26,000 firms for not filing annual returns for last two years and ordered an investigation. The Ministry of Corporate affairs is all set to strike down 1 lakh such firms.

However, experts are of opinion that there are genuine cases of having same registered premises for firms like law and audit firms who operate from the same co ordinates.

The proposed move is good considering the ill effects of bogus firms and money laundering but it also needs to be seen that genuine firms are not harassed unnecessarily to prove that they are not shell companies.