Tuesday, November 22, 2016

USD vs INR

Rupee has slumped really fast and it is currently at 68.22 from 66.62 which was the rate on 8th of November when demonisation was announced, this signals a drop of 2.4% in 2 weeks (if annualized comes to a whopping 62%).  However Euro continues to be below 73 and it is currently at 72.56.

Reasons :

  • Demonetisation of Indian rupee has brought in huge liquid cash into system pushing interest rates down.  If interest rates go down rupee will not be a favourite currency for investors pushing its value down (meaning alternate currency USD value is increasing).
  • Trump effect – his promises on infrastructure boost, tax cuts is expected to spur growth and inflation in US. Inflation means higher interest rates (Fed Governor Yellen has already indicated an increase in interest rates soon).  USD is expected to gain in the short term atleast
  • Euro is weak against USD hence Euro / INR rates did not go up as much as USD / INR


Outlook – USD will continue to be above 68 till December.   Purchases in USD will be expensive


Monday, July 29, 2013

Brief on New Pension Scheme - NPS

New Pension Scheme (NPS) is one of the best retirement products available today in India.  This is a Defined Contribution based pension scheme, which is being administered in India by Pension Fund Regulatory and Development Authority (PFRDA).  If planned properly and if the contribution is made by employer we can avail tax exemption under section 80CCE.  Main advantages of this scheme are
  1. It is open to all citizens of India between the age of 18 and 55. 
  2. Administration cost is one of the lowest, for non Government employees charge is subject to a limit of 0.25% which is lowest amongst all existing schemes
  3. Scheme closely monitored by PFRDA
  4. Clearly defined investment options which choice resting with employee or in case employee feels it can be an automated option, it is also available.  The auto choice is as below (Class G - Government securities; Class E - Equity; Class C - Corporate Debt).  The visibility is clear, higher the age lesser the risk and viceversa
 


The next question arises what is the return over the last 3 years.  I have been investing since 2010 April and in these 3 years I have received 8% returns which is a decent return considering the additional interest due to tax benefit which I received on contribution.  The calculation of my contribution is as below as on 7th May 2013 and on that date my fund value was Rs.37,350


I would recommend for all non governmental employees who do not have a proper pension plan to adopt NPS and start contributing from an early age to benefit from decent returns and a handsome corpus on retirement.

Sunday, July 28, 2013

A Brief guide to Income tax returns filing - PY 2012-13 / FY 2013-14

Select your relevant form
 
ITR1

    • Income from salary / pension
    • Income from one house property (excluding losses brought forward from previous year)
    • Income from other sources (excluding lottery, horse races)

    ITR2 – ITR1 categories plus / or 
    • Income from Capital Gains
    • Income from other sources including Lottery, races 
    ITR3 
    • Income from partnership firms by way of salary, interest, bonus, commission includable under the head “Profits or Gains of business or profession”
    ITR4
    • Individual or HUF who is carrying on a proprietary business or profession

     ITR4S – ITR1 categories plus / or 
    • Income from business computed under special provisions of section 44AD & 44AE of income tax act (presumptive taxation)
    ITR5 
    • Returns by Firms, Association of Persons, Body of Individuals
    ITR6
    • Returns by companies 
    ITR7
    • Returns under section 139(4A) , 139(4B), 139(4C) & 139(4D) – belated returns but before completion of assessment year
    Compulsory E-filing of Returns with or without digital signature – Previous Year 12-13 / Assessment Year 13-14

    ITR1, ITR2, ITR3, ITR4, ITR4S, ITR5 is mandated for compulsory e-filing (with or without digital signature) if income exceed Rs.5 lacs.  Income below Rs.5 lacs can go in for manual filing.
     
    Compulsory E-filing of Returns with digital signature – Previous Year 12-13 / Assessment Year 13-14
     
    ITR4 & ITR5 is mandatory for e-filing with digital signature if section 44AB is applicable (audit of accounts)
     
    ITR6 is mandatory for e-filing with digital signature
     
    How to file returns

    Visit site https://incometaxindiaefiling.gov.in/ and download the relevant ITR in excel format.
     
    View your 26AS following this link https://services.tdscpc.gov.in/serv/tapn/welcome26AS.xhtml. If you have not registered in income tax website, there will be a promt to register using your PAN.  After registration or login this site provides you all details of your tax deducted by your employer or any other person like your banker on interest income. Also it provides details of advance tax paid & details of high value transactions reported in your name. Cross check the tax deducted & advance tax, ensure that these figures are reflected in your ITR returns. If there is a mismatch then there will be query from income tax as to the mismatch. If there are any discrepancies take it up immediately with the TDS deducing authorities to correct if discrepancy is in TDS or take it up with your banker if discrepancy is in advance tax payment.

    Once you have filled in the ITR, convert into an XML file and go to site https://incometaxindiaefiling.gov.in/e-Filing/MyAccount/UploadReturnsHome.html?ID=1707942105  to upload your returns. If you would wish to digitally sign your returns register your token in the “Profile settings” menu or follow this link https://incometaxindiaefiling.gov.in/e-Filing/MyAccount/UpdateDscDetailsLink.html?ID=579614307.  Upload the returns.
     
    Download the acknowledgement and forward it to CPC Bengaluru, if you have digitally signed the return you need not forward to CPC Bengaluru.

    Sunday, March 10, 2013

    Reform Tax Administration

    In the budget estimates presented by our Honorable Finance Minister, shortfall on account of Corporation tax, Customs Duty and Excise Duty was projected to be around 58k crores.  A huge shortfall indeed.

    Now the question raised is how do we correct this shortfall or how to stop further shortfall in the above revenues?  The following "novel" actions are being taken by our tax authorities.

    Corporation Tax

    Novel Method 1

    Stop all refunds.  No refund orders to be passed, if for an assessment year order under section 143(3) comes up for finalisation the officer ensures that the order does not have any refund (even if eligible).  So what to do?  Simple, Omit an advance tax challan!!  If a company has paid Rs.10 crores with Rs.2.5 crore in each quarter miss out one quarter payment and show only Rs.7.5 crores and negate any refund or claim an additional tax.  If in case the company immediately goes to the officer and requests for rectification of mistake the officer "off the record" says, Sir, I will pass your refund order in the next financial year, just file a Petition under Section 154, I will take it up next year!!

    Novel Method 2

    Send letters to companies asking them to appear before the authority asking as to why there is a shortfall in payment of advance tax.  Is there a provision in Income tax law for this?  Tax experts please guide me!!

    Customs Duty

    Novel Method 1

    Delay assessment of bills filed under DFIA or any duty benefit schemes.  Either the assessments for these bills are taken up once a week or only 1 hour per day.  Priority given to bills filled with full payment of duty.   This is to coerce companies to pay duties, if they want their consignments to be cleared immediately.

    Question : Why give benefit at all and make people run around to claim it!!

    Novel Method 2

    Delay refunds.  Either issue a letter seeking clarification or issue a notice demanding more details, if all fails call up the assessee or the clearing agent requesting them to pursue the refund in the next financial year.  This is an age old and time tested method, time and again adopted!!

    Excise Duty

    Call up the companies in January / February or March requesting them not to use CENVAT credit for payment of duty instead pay all taxes through PLA.  Is there a provision in law for this?

    Imagine what would happen if in case a company official calls up the Assistant Commissioner of Central Excise and says, "Sir, I have a shortfall in my revenue can I pay my taxes later by 15 days?", will he get this opportunity?  I am sure he will be greeted with a Show Cause Notice, which will carry Interest and Penalty


    Mr.Finance Minister, Is this the way to meet tax targets?  Come on Stop it we are in 21st Century and we are not idiots

    When a company is at a default or "seemingly default" there is a raid, show cause notice, hearing called for and grilled.  On top of this there is interest, penalty and in some cases Jail terms also.  But what happens to our tax officers who do not pass refund orders on time, take up assessment on time and pass order denying genuine refunds on a silly ground?  I have seen so many innumerable cases getting quashed at Tribunal levels because of trivial orders passed by Quasi Judicial tax authorities, is this the way it should be?  

    To clarify I will not suggest we should spare companies who are at default or who fail to comply with law, they should be prosecuted according to legal provisions, but rather I would also suggest the same should happen to tax authorities also to ensure that they are responsible enough and there is no hardship for companies in tax compliance.

    Tax payments and legal compliance should be a pleasure, but unfortunately in India it is getting more and more of a pain.  Imagine attending a Transfer Pricing Hearing, Hearing under section 143(1) of Income tax, Assessment under VAT rules or a Hearing for clarification on refunds with customs.  The amount of documents demanded by the officers, the amount of clarifications demanded by them, most of the times, defy logic and in most cases I am sure the innumerable documents given by us land up in shelves unread and subsequently scrapped!!  What a waste of time and resource!!

    Tax reforms should not only be in the written law but also in tax administration, this will ensure a tax friendly environment and attract more investments, unfortunately, currently our tax administration distracts investments.

    Friday, December 28, 2012

    Do it Yourself - come on, Bend your Back - Result Corruption free India

    One of my best friend, my bike, a Bajaj 4S bought by me in December 1992 needed a re-registration as he has turned 20.  I had my bike neatly painted, changed worn out parts and made it look brand new, and he is sure sparkling and to my surprise he passed the mandatory pollution test with flying colours meaning his engine is absolutely fantastic even after 20 years at work.

    Painting, changing parts, pollution test were all easy as at the best what I had to do was find a good mechanic and sure he did a good job.  The next challenge is how do I get the re-registration done.  The mechanic told me Sir, that is going to be difficult for you to handle, you go to a driving school they will charge around Rs.2,500 but official receipt may be only for a portion of the amount, as you know the people in Regional Transport Office (RTO) are highly corrupt and they will all take money, moreover they will make you run pillar to post and sir, you have better job to do and it is below your standard to deal with the people in RTO. 

    But I was adamant that I will not pay a dime extra than the official fees, so I decided I will go directly to RTO.  I went into the internet read about the procedure and noted down the points.  The applications were available in the internet, but I did not download, but went to a xerox shop near the RTO office one Saturday and asked them what are the forms for re-registration and address change they immediately gave me 2 forms for Rs.10 each, these forms exactly tallied with the forms found in internet by me.  I brought those forms which were quite easy to fill, in fact the details in the form for re-registration were almost all copied from the RC book available with me. 

    It was a Wednesday morning (26.12.2012) I decided to go to the RTO.  I filled up the forms had all the originals and copies as mentioned in the form.  I was at the RTO sharp at 10am.  There was an enquiry counter, I asked them what to do?  He looked at my completed forms, Oh! this looks good pay the fees and come.  So I went into the queue for payment of fees where another 2 people were in front of me.  I waited for about 10 minutes when my turn came the cashier looked at me surprisingly and looked at my form turning all the pages.  Then he asked me a question Sir, did you pay the taxes?  I said my bike is under Life Time Tax and now I have to pay only Rs.500 towards Green Tax, he looked at me puzzled, because he became aware that he cannot take me for a ride as I new something of the procedure.  He quickly typed the details on his computer and said this will cost you Rs.630, Rs.500 for Green Tax, Rs.100 for Address Change and Rs.30 for service charge.  I said fine and paid the fees.  He gave me 4 challans.  Three of the challans I have to staple in my RC book and one is my copy, which I did and had it checked with a gentleman standing there who is from a driving school and doing this job for ages.  I again went to the enquiry counter and showed him my payment challans, he said sir, the inspector will come and inspect your vehicle around 12 noon as currently he doing the LLR licence now, you wait near such and such spot.  The time then was 10.30 am.  Being a doubting Thomas myself I thought it appropriate to check with the inspector himself because if I wait till 12 noon and the inspector did not turn up what to do?  So I went up to the inspector room it was fully crowded with LLR applicants and the inspector was busy checking their papers.  One good thing was there was a queue, so I joined the queue at the end, and when my turn came I told the inspector why I came for, he looked at me and said sir this is queue for LLR you go and wait near your bike I will come around 12 noon.  Now I was happy that I have the confirmation. 

    In the queue for verification by Inspector there were all new vehicles and had the company representatives (bike dealer representatives), I was the odd man out because I had an old vehicle and I am the owner.  To my surprise the Inspector was at the inspection place around 11.30 am, first he was inspecting the vans / buses for their re-registration, when the turn for bikes came mine was around 6th in the queue.  He came to my bike looked at me and had a small smile in the face asked me for the papers and I gave him all.  He checked my application, the annexures, original Registration book, checked the Engine Number, Chassis number, and nodded in satisfaction.  He then turned the page in my application to the space where he needed to sign and signed it.  He returned the application to me and said Sir, give it to the enquiry counter and they will do the needful, your re-registration is over, he moved on to the next vehicle.  I thanked him and pushed my vehicle out of that place and when I was about 20 metres away one of the dealer representative who had a new bike for registration walked up to me and asked rather slowly "Sir, how much did you pay the Inspector for this?", I said "I paid the fees at the counter".  "No Sir, I understand but how much to the Inspector"?  I said "nothing, so what"?  He looked puzzled.  I just left him there staring at me, and moved away to the enquiry counter, where I handed over the application and original RC book.  The officer there looked at the Inspector's sign and smiled back again, sir come on friday and collect the RC book.  It was over, and the time was 12.30pm.

    Honestly this is not the first time I did this, in fact this is the 4th time with the RTO I had this experience, once for renewal of my licence, once for my wife licence address change and once for my bike re-registration after 15 years.  In fact for all the 4 times I did not pay a paise more than the official fees, but I spent half a day everytime, but I was really proud that even though I spent my time I did not pay anything extra.  Same goes to the passport office, I did not have an agent for my passport, I applied online and I went into the queue and got the verification done, paid the fees and came out, passport came to me in 2 weeks.

    You can ask me why I am writing all this, I would request you all to contribute in a small way to avoid corruption.  What you have to do is quite simple and the following are the steps when you deal with Government departments.
    • Read and understand the procedures to be followed clearly, so that nobody tries to outsmart you.  If people find out that you are not aware of the procedures they will surely take you for a ride and it will cost you money.
    • Fill up the forms yourself and have the annexures done yourself - believe me this is not Rocket Science, we are so used to signing at the places marked "x" by the agent and allowing him to do everything please avoid it as much as possible
    • "Do it Yourself" - we have a common excuse "No time".  I do not believe this, we have to create time, when we can take holiday for our wife birthday, wedding day, children birthday I am sure we can take holiday for these reasons also as it an important matter concerning our society
    My humble request to you all, let's stop complaining "people in Government departments are corrupt and nothing moves without Vitamin-M".  To put it bluntly we are the reason for this, we do not want to "bend our back" we want an easy way out, which is through paying money we get our work done.  Corruption happens because we want it to happen, if every individual in this country takes responsibility for his tasks I am sure we can avoid corruption.  This is easy to say and I am sure easy to follow.

    Jai Hind.  Let us make India corruption free

    Saturday, September 29, 2012

    ST-3 Returns due on 25.10.2012

    Notification No.47/2012 Service tax has been notifified on 28.9.2012 under which it has been mandated that ST-3 returns due on 25.10.2012 will be covering transactions only for the period 1.4.2012 to 30.6.2012. 

    As there has been significant amendments to service tax act as on 1.7.2012, the ST-3 form is being modified to adopt to the changes for the period 1.7.2012 to 30.09.2012.  The revised form and due date will be announced soon.

    Monday, September 24, 2012

    Service Tax on Director Fees & Impact under Section 309/310 of Companies Act

    Section 65B(44) of Finance Act, 1994 as Amended by Finance Act 2012 defines Service as follows :

    "service" means any activity carried out by a person for another for consideration, and includes a declared service.
    This definition further goes on to exclude in clause (b)

    (b)  a provision of service by an employee to the employer in the course of or in relation to his employment

     This definition under 65B(44) and above exclusion makes it amply clear that :

    Services of a Director who is not an Employee of the Company (ie) Non Executive Directors are covered under the scope of Service tax.  Accordingly any  remuneration to Non Executive Directors both monetary and non monetary are subject to Service Tax from 1.7.2012.

    Valuation of Service

    All monetary benefits like Fees, Commission, bonus etc to be taken at the monetary value.  Non monetary benefits like Car, Phone, accommodation etc to be valued as per valuation Rules and subject to Service Tax

    Foreign Directors (Only Non Executive)

    Irrespective of Directors are within India or abroad Service tax is applicable on their monetary and non-monetary considerations for services rendered as Director

    Who Pays Service Tax

    From 1.7.2012 to 6.8.2012 for Non Executive Directors within India, liability is on the Directors to pay Service tax.  Hence they need to have registration under Service Tax and discharge their liability.  On their option they can choose to take the Rs.10 lakh exemption limit for discharge of their liability

    From 1.7.2012 for Directors outside India (Foreign Directors), the company has to pay Service tax on Reverse Charge Mechanism as a Representative Assessee.  Here there is no provision for Rs.10 lakh exemption.  For the full amount (irrespective of the quantum) service tax needs to be paid.

    On 7.8 2012 Notification No.45/2012 was introduced under which even for local Non Executive Directors service tax liability has to be discharged by the Company.  In this situation, the company has to get itself registered under Service Tax and discharge the Service tax liability.

    In short, the situation as on today is that for all Non Executive Directors the company has to discharge service tax liability under Reverse Charge Mechanism as per Notification No.45/2012.

    Implications under Company Law

    Due to the above changes in Service Tax and the Service Tax amount being 12.36% of the monetary and non monetary benefit of the Non Executive Directors the expenses on Directors to the company has increased to that extent, this in turn affects section 198, 309 & 310 of the Companies Act, 1956.  This would mean that some companies have to approch Central Government again if they breach the threshold limits specified in these sections.  To avoid this complication for the financial year 2012-13 the Ministry of Corporate Affairs have issued a Notification No.24/2012 dated 9.8.2012 wherein it exempts companies from applying to Central Government for approval for increase in remuneration of Directors only on account of Service Tax.  Note, this provision is only for the year 2012-13 and from next year onwards the companies have to apply for approval inclusive of service tax.