Tuesday, 30 March 2010


he facilities to get the PAN has extended . UTITSL and NSDL are providing facilities for allotment of PAN. The Federal Bank has now jumped to this and providing the same fascilities. According to its website , this facilities are not restricted to its existing customer , but even non cutomer can avail the facilities. Read what its website states in this regard
* You can collect the application form from any of our branches or can be downloaded from ourwebsite.(take me there)
* Complete the application form, affix a photo and submit it to your nearest Federal Bank Branch.
* If you are a resident customer only a Pass Sheet with minimum two customer-induced transactions in the last six months signed by the Bank Official is sufficient.
* If the account is not having customer induced transactions in the last six months, the you can submit copy of any other Identity Proof/Address proof (list of documents given in Page No.4 ofApplication Form).
* If you are an NRI, the copy of passport duly verified and certified to that effect or certified by any regulatory authority should be attached as a proof of identity in addition to the Pass Sheet
* We will be accepting application for PAN from non-customers also, provided they can submit a copy of Identity Proof/Address proof along with the application (list of documents given in Page No.4 of Application Form).
* Submit the completed application form to your Branch. All relevant fields should be filled up.
* The Branch will verify the address given in the application and match it with that is registered in our system.
* Instructions for filling up the application are available in the application form itself. (Pages 3 & 4)
* Remit an amount of Rs.94/- at the time of submission of the application. You can give a cheque favouring the bank for this amount.
* You will be provided a signed acknowledgement. The Processing Fee Coupon number will be intimated separately wherever mobile numbers are available.
* When the PAN Cards are ready they will be despatched to you direct. If you are an NRI, please collect the PAN Card from your branch, next time you are in India. Your account will be updated with the details as soon as PAN is issued in your name. However form 15H/15G as applicable shall be submitted to the branch as usual, for exemption from TDS.


One very important change regarding Deposit in PPF(Public Provident Fund FAQ) has been notified on 29.03.2010.Its Normally assumed that whenever we deposit a Local cheque or demand draft to a tax saving scheme and cheque is cleared then saving date is counted from the tender Date (submission of the cheque).But this is not as simple as it looks.All the schemes has its own rules regarding date of deposit in case of cheque and demand draft.

At present when a subscriber makes a deposit in to PPF through cheque /demand draft then date of tender of cheque is considered as date of deposit subject to cheque/demand draft is realised (not dishonoured) .but from 29.03.2010 the rules has been changed and now date of realisation of cheque/draft will be deemed date of deposit of PPF.

Monday, 29 March 2010

Its time to convert our small companies into Limited liability partnership. Budget 2010

The concept of limited liability partnership came into existence by the introduction of the Limited Liability Act, 2008. LLP enjoys both the advantages of a private limited company and also a partnership. Similarly, as compared to partnership, for LLP conditions for claiming deduction of remuneration paid to partners of LLP would be as per section 40(b). Interest and profit sharing ratio should be defined in the agreement evidencing the LLP in order to claim deduction from the profits of LLP.
Finance Act, 2009, introduced several provisions in the Act to treat LLP as a partnership firm for the tax purposes in all respects.
The Finance Bill, 2010, takes the process of amendment further, primarily for small companies having turnover of Rs. 60.00 lacs or less, by amending sections 32, 35DDA, 43, 47, 47A, 49, 72A and section 115JAA , primarily aimed at providing tax neutrality for conversion of the private limited companies and unlisted public companies into LLP.
Section 47 of the Act deals with transactions not regarded as transfer. Under the existing provisions there was no provision dealing with conversion of a company into a LLP. By introducing clause (xiiib) in section 47, it is proposed that the transfer of assets on conversion of a company (private or unlisted public company) into a LLP in accordance with section 56 and 57 of the LLP Act, 2008 shall not be considered as transfer for capital gains purposes u/s. 45 of the Act. No capital gain therefore would accrue to the company upon transfer of assets from company to the LLP, despite the fact that the assets of the company would become the assets of the LLP by virtue of section 58 (4)(b) of the LLP Act, 2008.
The tax neutrality is subject to the following conditions:
(i)          all the assets and liabilities of the company immediately before the conversion become the assets and liabilities of the LLP;
(ii)        all the shareholders of the company immediately before the conversion become the partners of the LLP and their capital contribution and profit
sharing ratio in the LLP are in the same proportion as their shareholding in the company on the date of conversion;
(iii)              the shareholders of the company do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of share in profit and capital contribution in the LLP;
(iv)               the aggregate of the profit sharing ratio of the shareholders of the company in the LLP shall not be less than 50 % at any time during the period of five years from the date of coversion;
(v)                 the total sales, turnover or gross receipts in business of the company in any of the three previous years preceding the previous year in which the conversion takes place does not exceed sixty lakh rupees; and
(vi)            no amount is paid, either directly or indirectly, to any partner out of balance of accumulated profit standing in the accounts of the company on the date of conversion for a period of three years from the date of conversion.
The conditions mentioned above are cumulative and each condition is required to be satisfied. Non-fulfillment of any one condition would render the transaction as transfer of assets and taxable as profits and gains of the successor LLP chargeable to tax in the previous year in which the requirements are not complied with.
The cost of acquisition of various assets acquired by the LLP upon conversion will be the cost of acquisition of these assets in the hands of the company prior to conversion and the written down value of the block of asset shall be the written down value of the block of asset for the company as on the date ofconversion.
Section 72A, is proposed to be amended to allow carry forward and set off of accumulated loss and unabsorbed depreciation allowance in the hands of the company upon conversion. It is further provided that such accumulated loss and unabsorbed depreciation will be treated as the loss and depreciation of the year in which such conversion takes place and accordingly, fresh period of 8 years will be available for set off of loss in the hands of LLP upon conversion.
Specific provisions have been made for allowing the deduction u/s. 35DDA for the VRS expenses incurred by the Company prior to conversion for the balance period in the hands of the firm upon conversion.
In the scheme of conversion of the Company into the LLP, the shares held by the shareholders of the Company will get extinguished and will be substituted by balance in their respective capital accounts. Unlike cases of amalgamation and demergers, the proposed amendment does not clarify the position of tax neutrality in the hands of the shareholders and that continues to be an open question. It is recommended that the said issue is clarified.
Non-eligibility for MAT Credit in case of conversion from Company to LLP
Under the Finance Bill, 2010, extensive provisions are made for providing tax neutrality to conversion of a private limited company or unlisted public company to Limited Liability Partnership (LLP). However, the provisions of section 115 JAA granting credit for MAT paid shall not apply upon conversion into LLP.

Friday, 26 March 2010

Income tax department releases common mistakes handout. Click below to download

Click Here to download


010 of the Sales Tax Department fixed at Rs. 31,346/- Crore has been achieved.
2.       Maharashtra has become the first State in the country to provide through Internet the electronic services like acceptance of registration application, filing of return and payment of taxes, application of refund, acceptance of audit report and application for declarations under Central Sales Tax Act.
3.         Proposal for allowing
a)     transaction wise assessment,
b)     provision for grant of part refunds,
c)      make intimation and some interest orders non appeallable,
d)    Amendment to provide quarterly return for newly registered dealers.
4.  E facility of filing electronic returns will also be provided under the Profession Tax Act and Luxury Tax Act.
5.       Penalty provision for non-issuance of bills made more stringent.
6.       For grant speedy refunds it would be mandatory to record the TIN of the purchaser on the Tax Invoice.
7.       A simple composition scheme for the builders and developers. Under this scheme, one percent VAT would be payable on the contract price of flats mentioned in the agreement of sale. However, such builders and developers will not be eligible for set off under the VAT Act. This scheme shall come into force for the agreements registered after 1st April 2010.
8. (a)         The  turnover  limit  for  audit  under  section  61  of VAT Act will be increased from      Rs. 40 lakhs to Rs. 60 lakhs.
8(b) It will also be mandatory for all the dealers covered by package scheme of incentives, to file the audit report.
9.       Small dealers filing six monthly returns  will now have to the tax within 30 days in lieu of 21 days.
10.     Tax exemption on specified grains and food items will continue till 31st March 2011.
11.     Raisins, currants and tea  to continue  the concessional VAT rate of 5% up to 31st March 2011.
12.     Blood Transfusion apparatus rate of tax reduced from 12.5% to 5%.
13.     Solar lanterns included under Non-conventional energy sources working on solar energy which are exempted from VAT.
14.     Solar or battery powered  vehicles rate of VAT reduced from 12.5% to 5%
15.     Camphor ,Dhoop,  lobhan and ‘pan Kath’ is exempted  them from levy of VAT.
16.     Rate of tax on hairpins reduced from 4% to 1%.
17.     Sabudana Chivada, Chana-chur and Khandvi have been included in the list entry of Farsan  attracting a lower rate of VAT.
16.     To encourage entrepreneurs who bring innovations to the agriculture sector, vermi compost beds made from HDPE fabrics are being exempted from tax.
18.     To reduce the economic burden on farmers to a certain extent,  Cotton seed oil cake have been made tax free.
19.     Tax on sales of hand made laundry soaps manufactured by KVIC units will be exempt from tax.
20.     One time tax proposed on Auto Rickshaws and black-yellow meter taxis.
Note: Wherever tax exemptions have been introduced, expanded they are applicable only up to 31st March 2011 and may come to an end if GST is introduced before that date which seems to be distant probability.

Maharashtra Government imposed 1% Vat on property sale from April 1, 2010 in its Budget for 2010-11

The Maharashtra Government has decided to levy one per cent Value-Added Tax on property sale from April 1, 2010 in its Budget for 2010-11. All sale agreements registered on or after April 1 will attract one per cent on the contract price of flats mentioned in the agreement of sale.
For deals closed before April 1, the old method of computation at five per cent would be followed, subject to the Bombay High Court stay on collection being lifted, according to a Sales Tax officer.
The officer pointed out, this time round, the State had brought in an amendment to VAT in the Assembly and hence there could be no further dispute on the matter.
With the court stay in force, builders were depositing the VAT component in an escrow account pending the outcome of the case. Some of them were even accepting post-dated cheques and indemnity bonds for the amount from buyers.
The Maharashtra Finance Minister, Mr Sunil Tatkare, said, while announcing the State Budget on Thursday, the levy was in accordance to the Supreme Court judgment which said “VAT becomes leviable on the sale of construction material used in the construction of flats,”
Mr Pranay Vakil, Chairman, Knight Frank India, said the decision though prospective, ended an issue that was unclear till now.

Thursday, 25 March 2010

The trick behind - Guarantees in unit-linked plans (Ulips)!

Equity investments are risky. Then how do life insurance companies offer investment guarantees in unit-linked plans (Ulips)? You got it right. There is a catch in Ulip offers that guarantee the payment of highest NAV in the first seven years.

Mutual funds are not allowed by the market regulator Sebi to provide any kind of guarantee to investors either on capital or on investment returns.

But insurance regulator IRDA allows life insurance companies to offer guarantees on their products, even when these are market-linked.

Regulator trouble

So when Sebi asked some life insurance companies why they did not seek its approval before offering market-linked insurance plans, IRDA fielded the question for them. IRDA said life insurance companies were regulated by it and it had approved their insurance plans that had an investment component linked to the equity markets.

Moreover, last week IRDA came out with an aggressive media campaign — “Be wise, Ulip-wise”. This is unprecedented for a regulator because the campaign is for a particular product of entities that it regulates and the product itself is much debated and criticised even by IRDA for mis-selling by agents and high charges.

Insurance companies say they are already selling a kind of guaranteed product in the form of annuities. “At the time of buying an annuity, policyholders are assured of a fixed monthly, quarterly, half-yearly or annual income according to their choice. They get the fixed payment at regular intervals till their death,” said Mayank Bathwal, chief financial officer of Birla Sun Life Insurance Company.

But then, annuities are debt products.

Fine print

Before we understand how life insurance companies provide “the highest NAV guarantees”, we should take note that these Ulips promise payment based on “highest NAV” and not “highest return”. Besides, insurers deduct additional charges from the premium paid for such guarantees.

This guarantee of highest NAV, however, doesn’t offer you an option to choose among various investment funds, such as equity, balanced or money market fund.

Even the life cover and the tenure of such highest NAV guaranteed Ulips are not as beneficial to customers as in non-guaranteed insurance plans. The sum assured offered is generally five times the annual premium and the policy term is 10 years. So, these plans are not only giving you a smaller life insurance, they are covering a shorter span of your life.

What’s the plan?

The investment process followed in these “highest NAV guaranteed” Ulips is called Constant Proportion Portfolio Insurance — a trading strategy designed to ensure that a fixed minimum return is achieved at a set date in the future. This strategy involves a continuous re-balancing of the portfolio of investment between equity and debt — a mix of investment strategies followed by mutual funds in their dynamic asset allocation and fixed maturity plans.

Consider a Ulip guaranteeing payment of the highest NAV in the next seven years that starts today at a NAV of Rs 10. Let us assume that 100 per cent of the allocated premium is invested in equities.

Now, the market goes up and at the end of the first year the NAV increases to Rs 12. This is the highest NAV of the Ulip till now and the insurer has to make sure that the policyholder can be repaid at the end of the remaining six years on the basis of the Rs 12 NAV.

Game of shuffle

The insurer will shift a portion of the equity investment into debt instruments that ensure a return of Rs 12 after six years. If a debt paper maturing in six years is now available at a yield of, say, 8 per cent, the insurer can invest Rs 7.75 in that debt paper to ensure a return of Rs 12 after six years.

In the second year, the markets do down and the NAV declines to Rs 9 from Rs 12. However, the insurer doesn’t need to do anything as the return of highest NAV has been ensured by the debt investment of Rs 7.75.

While the insurer can take the risk of shifting investments from debt to equity to take advantage of the lower price levels in equity markets, he will not do so because the guarantee of “highest NAV” was given to the policyholder.

The investment process followed at the end of the first year will be followed in year three if markets go up and the NAV goes up to the previous highest level of Rs 12.

This reallocation of investment from equities to debt instruments keeps on and as the policy nears maturity, almost the entire investment goes to debt instruments.

Highest NAV guaranteed Ulips thus turn out to be primarily debt-oriented rather than equity-oriented plans — you can expect a gross return of between 8 per cent and 10 per cent on investment. But since there are various charges associated with a Ulip, your net return could be still lower at 5 to 7 per cent.

However, this return will be tax-free. Similarly, you can claim tax deduction on annual premium payments. So “highest NAV guaranteed” Ulips are suited for totally risk-averse people.

Given that the historical return of 12 to 15 per cent (annually compounded) from equity investments over a long enough period of 10 years assumes negligible risks, a non-guaranteed Ulip will give you a higher return.

Besides, guarantees come at a cost. The total cost of these guaranteed Ulips are higher than that in a non-guaranteed product. You get a lower return in a guaranteed Ulip and a higher return in a non-guaranteed Ulip given that both the categories yield the same gross return.

Hence must think about it before investing.

Corrigenda to TDS Rules – Amendment in IT (First Amendment) Rules, 2010

Notification No. 18/2010, New Delhi, the 23rd March, 2010, INCOME-TAX
S.O._____(E) In the notification of Government of IndiaMinistry of Finance, Department of Revenue (Central Board of Direct taxes), number 9/2010 dated 18-02-2010 bearing S.O. 424(E) and published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), dated 18th February, 2010 –
(i) at page 31 of the Gazette Notification, in fourth line of clause (i) of sub-rule (3), for “Form No.27B”, read “Form No. 27A”;
(ii) at page 32 of the Gazette Notification, in eighth line of Rule 37A, for “shall send within fourteen days from the end of the quarter”, read “shall send on or before the 15th July, the 15th October, the 15th January in respect of the first three quarters of the financial year and on or before the 15th June following the last quarter of the financial year”; and
(iii) At page 32 of the Gazette Notification, in Rule 37A, the proviso shall be omitted.
2. The other contents of the Gazette Notification shall remain unchanged.
Notification No. 18/2010/F.No.142/27/2009-SO(TPL)
Under Secretary (TPL-III)

Cleaner petrol, diesel to cost more from April 1

NEW DELHI: Cleaner, but costlier, Euro-IV standard petrol and diesel will be available from April 1 in 13 cities across the country, petroleum secretary S Sundareshan said in New Delhi on Wednesday.

At a function to mark the launch of the cleaner fuel, he said: "From April 1, Euro-IV standard fuel will be available in 13 cities in India". These cities will include Delhi, Mumbai, Kolkata, Chennai, Hyderabad and Bangalore.

Sundareshan noted that the oil firms had made an investment of over Rs 40,000 crore to upgrade their refineries to produce the cleaner grade of petrol and diesel. This was likely to be onpassed to the consumer, he indicated.

The secretary said the Euro-IV petrol will cost 46 paise per litre more than Euro-III, while Euro-IV diesel will be 26 paise costlier.

Sundareshan added that oil firms were already facing a loss of Rs.70,000 crore this year as auto fuels and cooking gas were sold at highly subsidized rates.

The obligation to deduct the TDS u/s 195 (1) arises only when the payment is chargeable to tax

In The Case of: Van Oord ACZ India (P) Ltd.   VERSUS Commissioner of Income TaxDecided By: High Court Of Delhi, Appeal No:  ITA No. 439 of 2008, Pronounced on:March 15, 2010
The assessee, an Indian company remitted mobilization & demobilization charges of Rs. 8.65 crs by way of reimbursement to its parent company, a company based in Netherlands. The assessee applied to the AO u/s 195 (2) for a Nil withholding rate though the AO held that tax had to be deducted at 11%. The assessee deducted tax on sums aggregating Rs. 6.98 crs. In the assessment order the AO took the view that as the assessee had failed to deduct tax at source u/s 195, the expenditure had to be disallowed u/s 40(a)(i). This was upheld by the CIT (A) and the Tribunal (effectively on the balance amount). The Tribunal followed the judgement of the Supreme Court in Transmission Corporation of AP 239 ITR 387 and held that the assessee was duty bound to deduct tax u/s 195 (1) and could not escape liability without obtaining a certificate u/s 195 (2). The Tribunal held that the assessee was not entitled to “step into the shoes of the AO” and examine “whether the receipt was income in the hands of the recipient or not”. On appeal by the assessee, HELD reversing the judgement of the Tribunal:
(i) The observations of the Supreme Court in Transmission Corporation of AP 239 ITR 387 have to be read in the context of the question before the Court i.e. whether tax was deductible on the gross trading receipts or only on the “pure income profits”. The Court was not concerned with a case where the receipt was not chargeable to tax in the hands of the recipient at all. On the other hand the observations of the Court make it clear that the liability to deduct tax at source arises only when the sum payable to the non-resident is chargeable to tax;
(ii) Even the plain language of s. 195 shows that the tax at source is to be deducted on the “sum chargeable under the provisions of the Act”. One can, therefore, reasonably say that the obligation to deduct tax at source is attracted only when the payment is chargeable to tax in India;
(iii) The determination by the AO under s.195(2) of the Act is tentative in nature. In case it is ultimately found in the assessment proceedings relating to the recipient that he was not liable to pay any tax on the sums received, the assessee cannot be treated in “default” inasmuch as s. 195(1) of the Act casts an obligation to deduct the tax at source on the sum ‘chargeable under the provisions of this Act’;
(iii) As regards Samsung Electronics 185 Taxman 313 (Kar), the context was different. The assessees wanted to show in their own assessment proceedings that the amount paid by them was not assessable to tax at the hands of recipientNo doubt, they would be precluded to do so. However, when in theassessment proceedings relating to recipient itself, it is opined by the income tax authorities that the tax is not payable at all on the amounts so received, provision of s. 195 would not be attracted. “Even otherwise, because of the analysis of what Transmission Corporation of AP decides, we, with due respect, are not in agreement with some of the observations made in the aforesaid judgment of the Karnataka High Court”.

Now Recover Your Bad Debts with Ease: IBC a boon to Industry.

If we take a look at current business scenario in India, more than 90% of the payments are made with delay. Few of the scenarios are as un...