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.