[aaykarbhavan] Business standard news updates 9-2-2014

Relief from stringent PAN norms may be temporary

VRISHTI BENIWAL New Delhi, 8 February The relief given to permanent account number (PAN) applicants from furnishing original documents may be temporary. After putting the decision in abeyance within a week after notifying it, the tax department is planning to enforce it again, albeit with some relaxation. The Directorate of Income Tax ( Systems) has written to the finance ministry, conveying its concern about the misuse of PAN cards, and asking it to make the verification process fool- proof. " The decision had to be put on hold because there were a lot of representations from people saying the requirement to show originals along with self- attested documents would slow down the process and make it cumbersome. We have put out I- T department's concerns to the finance ministry," said an official involved in the process, who did not wish to be identified. At present, it takes about 15 days to get a new PAN allotted. However, PAN can be obtained in around five days if application is made through Internet and processing fee paid through credit card. The new verification norms may delay the process. The Central Board of Direct Taxes ( CBDT) is now re- looking at the procedure of PAN allotment and would come up with asolution, which helps address the concerns of the I- T department as well as genuine applicants of PAN. It is considering various options, including making it optional for some category of applicants to furnish the hard copy of original documents. There are about 160 million PAN card holders in India. UTI Infrastructure Technology and Services Ltd ( UTIITSL) and National Securities Depository Limited ( NSDL) are two providers of the PAN card. However, with more than 14 million of new PAN cards issued every year, these agencies are not able to verify details of everyone despite having a huge country- wide network. Officials said the stringent PAN application norms on January 24 were introduced to check false documents, particularly by foreign national and non- resident Indians. Ironically, the decision had to be put on hold on January 30 mainly because of the concerns raised by this very category of people. Since elections are due in a couple of months, the government doesn't want to annoy anyone. So, the new norms may come after the new government takes over after the polls. "There is a lot of resistance. NRIs are asking to whom they would send their original documents. People in the country also have problem in appearing in person as they cannot leave original documents with consultants," said an executive with UTIITSL. PAN cards allotted to a person is a unique identification number that helps tax authorities track compliance by linking all transactions of an individual such as tax payments, tax credits, return of income, wealth, gift and various specified transactions. It works as a proof of identity and helps at places such as opening a bank account. Duplicate PANs help people evade taxes. This prompted the ministry to come out with new PAN norms. To compensate the PAN card providers for the increased workload in view of the new verification norms, the government had increased the processing fee by ₹ 9. At present, if the communication address is within India, the processing fee is ₹ 96 (₹ 85 plus 12.36 per cent service tax). It was increased to ₹ 105 before the decision was put in abeyance. If the communication address is outside India, the fee is ₹ 962plus dispatch charges. The proposed fee is ₹ 971. Income- tax department plans to re- enforce these after elections At present, it takes about 15 days to get a new PAN card

 

Earn sufficient income from inheritance ANIL REGO While all of us would like a big inheritance, very few of us actually know how to manage one prudently. Those who inherit a large sum of money are often tempted to make one big purchase, such as a cherished sports car, or take a world tour. But this can make the inheritance disappear as quickly as it arrived. Most people see inheritance as money that can be spent without a care in the world. But inherited assets can go a long way in taking one nearer to financial independence and, therefore, investors should use such big assets in a way that can enhance financial freedom. Hence, at the very outset you should chalk out an appropriate strategy that will help you preserve your inheritance first. As a very first step, those who inherit large sums of money must avoid thinking about it for some time at least. Or else you could be tempted to spend it. For the first few months, make plans of how you would like to use that inheritance, which may also include spending such as the much- needed refurbishing of your house, but take time to ponder over such decisions before you execute them. No tax on inheritance According to the present Indian income- tax law, no tax is applicable on inheriting property in India. However, tax is applicable when one sells it. For instance, if you sell inherited property, capital- gains tax is applicable on the same. In order to arrive at the amount of the gains, one deducts the cost/ expenditure incurred when purchasing/ acquiring a property and any cost incurred directly on selling it. If the property was acquired before April 1, 1981, you have the option to consider the original purchase cost or the market value on April 1, 1981. If the property had been purchased three years before, one can avail of the indexation benefit in order to reduce the capitalgains tax on the property. This is similar to how one would have calculated taxes for a selfowned property. When determining whether assets are long term or short term, the holding period of the previous owner is to be considered. If the inheritor is an NRI, the purchaser of the property is required to hold back the tax amount " Tax at Source". However this can be avoided if either the purchaser of the property makes an application u/ s 195 ( 2) or the seller ( the NRI inheritor) submits an application u/ s 197. Proceeds from the sale of the property are credited to the NRO A/ c, which can be repatriated. If an individual inherits any financial assets in India, no tax has to be paid on them. However, if these assets lead to generation of income/ gains, tax has to be paid accordingly. Such financial assets include mutual funds, shares, debentures, fixed deposits, unlisted shares or even a majority stake in a private limited company. The rules pertaining to distribution of financial assets are based on whether an individual has made a proper will. If an individual dies intestate ( without making a will), inheritance is primarily based on the law of inheritance in place for individuals based on their religion. For example, if a Hindu male passes away without a will, the Hindu Succession Act will come into the picture. In this Act, Class 1 and Class 2 heirs have been clearly defined. In case of Muslim Law, an individual can distribute one- third of his assets through a will and the rest inherited according to his religious laws. You would require documents such as death certificate of the deceased, a court order if no will exists, or a copy of the probate that determines a court has certified the authenticity of the will. Once assets are inherited by any lineal descendant/ ascendant, no taxes are to be paid since no inheritance tax is in force in India. Wealth tax According to Indian tax Laws, no tax is applicable on the value of inherited property. However, wealth tax would be applicable if one possesses more than one property and the value of the holdings is more than ₹ 30 lakh. In such a case, wealth tax at the rate of 1 per cent is applicable on the value of assets exceeding ₹ 30 lakh. Incomes are taxed There are two forms of income which can arise on any inherited assets, either capital gains or regular income such as rental income, income from dividends, etc. Capital gain is subject to capital- gains tax as seen earlier. If a person has inherited a property and resides in it and has only one house, rental income will not applicable as this house will be considered as self- occupied property. However, where an inheritor has more than one property, the second will be deemed let out and rental income will be considered on it. The rental income will be added to the income in the hands of the owner and will be charged according to the incometax slab. If the inherited asset is in the form of shares/ mutual funds, the income received ( or dividend) is tax free ( according to Indian income- tax law, dividends are tax free). The author is CEO, Right Horizons How to make your inheritance last a lifetime and pass it on to the next generation |Make sure you have all the required documents with respect to the transfer of assets, along with a copy of the will |Design a strategy to handle the assets received |Consider applicable tax rates if any regular income or capital gains on sale are applicable MAKE THE WINDFALLWORK   FINANCIAL PLANNING   Saving alone is not enough;link it to your financial goals Reduce expenses to make up for low returns from investments SAVE MORE EFFECTIVELY SURESH SADAGOPAN Amonthly saving of around ₹ 25,000- 30,000 is a good amount, right? Well, it depends. While this can add up to over ₹ 1 lakh savings per year, it should be looked at in the context of what is required for achieving your financial goals and other needs. You also need to look at the savings in the context of your expenses. Take the case of S Vidyasagar, a senior- level manager in a multinational firm. His monthly income is about ₹ 2 lakh and he is able to save about ₹ 30,000 per month. This means he is spending about ₹ 1.70 lakh per month, which includes ₹ 46,000 as Equated Monthly Instalment ( EMI) for his house and ₹ 7,000 as EMI for his car. He has savings in bank fixed deposits and in equity mutual funds. Despite saving regularly, he was not happy with his corpus. He decided to consult his financial planner to see how he could improve the returns from his investments. Maybe, his advisor would suggest some new financial instruments. Vidyasagars predicament is not surprising considering that the equity markets have returned barely over 7 per cent in the last one year. The posttax returns from bank FDs have also been around the same levels. But with inflation close to 10 per cent, prices of all essential commodities have been high, making it difficult for families to save money. To his surprise, Vidyasagars advisor told him to cut down on expenses. Money being spent on entertainment and personal expenses was about ₹ 10,000 per month. The family regularly went out for dining, movies and on some weekends, they used to drive out to nearby places on daylong picnics. These and some other items were impacting the accumulation of savings. His advisor explained how despite putting aside a fairly high amount every month, the high inflation and volatile equity markets were impacting the returns. The only way to improve this was by cutting expenses. Many families face this problem where expenses completely overwhelm future planning itself, cutting off funds needed for a well- funded future. In such cases it is advisable to tone down expenses. Incidentally, Vidyasagar and his family were able to tighten their belt and release another ₹ 15,000 towards savings. Calculate your savings- toexpenses ratio Savings need to be seen in the context of one's spends. You need to calculate what percentage of your expenses can be covered by your savings. In fact, even low level of savings can work if the expenses are in check. For instance, someone spending ₹ 40,000 a month and saving ₹ 30,000 a month is actually doing quite well. That is because the money being saved will cover 75 per cent of the expenses for a month. In Vidyasagar's case, his saving of ₹ 30,000 can cover only 26 per cent of expenses without EMI (₹ 1.17 lakh) and under 18 per cent of expenses including EMI (₹ 1.70 lakh). The savings- to- expenses ratio, shows the even though both are saving the same amount, the former is better off than Vidyasagar. Hence, this ratio is an important indicator of how someone is managing their finances. A high ratio is good and would indicate that savings are healthy enough. While regular expenses may not pose problems, a low ratio could have an impact on future goals. Goals are future expenses Some families have very ambitious goals. For instance, some parents want a lavish wedding for their children which would be an expensive proposition. Goals are future expenses. If these future expenses are very high then the savings required in the run- up to the goal will also be high. It is hence important to do a reality check on the future goals too and see if they are in line with what one can reasonably expect to save. Know your expenses Many do not really know what they are spending. And that could be a big problem. Since they earn a good amount, they keep withdrawing money from time to time, till the money gets exhausted. This problem needs to be tackled in two ways. Estimate the amount of savings required and put that away before starting to spend. That way even if your were to spend the entire balance amount, it would be only after putting aside the required savings amount. The second aspect is to seriously look at expenses. Unwittingly, one may be overspending in some areas. Only when they get down to it and calculate how much they are spending would they become aware of the problem. This is necessary to tailor the necessary course correction. Account for inflation The other problem faced by people today is inflation. Expenses are ballooning even though they are essentially consuming what they used to consume before. Consumer Price Index ( CPI) inflation has been in double digits in three out of five years, since 2009. But investments have not kept pace. The investment returns post- tax are lower than the inflation figures, which means that one needs to spend much more for the same value. This is even more reason to be aware about one's expenses and see how to keep it in check. It is important to first understand how much you are spending, what you are spending on and whether it is possible to pare it down, what your future goals are, whether the goals are realistic and whether you are saving enough in relation to the expenses. Also, you need to understand the impact of inflation on your savings. So, expenses are an area which you need to look at carefully more than even savings — for that can make or mar your future. The author is founder, Ladder7 Financial Advisors [1]Many families face this problem where expenses completely overwhelm future planning itself, cutting off funds needed for a well- funded future [1]In such cases it is advisable to tone down expenses and release more money towards savings [1]Savings need to be seen in the context of one's spends. You need to calculate what percentage of your expenses can be covered by your savings. In fact, even low level of savings can work if the expenses are in check [1]The savings- to- expenses ratio is an important indicator of how someone is managing their finances. [1]A high ratio is good and would indicate that savings are healthy enough. While regular expenses may not pose problems, a low ratio could have an impact on future goals [1]Goals are future expenses. If these future expenses are very high then the savings required in the run- up to the goal will also be high. It is hence important to do a reality check on the future goals too and see if they are in line with what one can reasonably expect to save [1]It is important to first understand how much you are spending, what you are spending on and whether it is possible to pare it down, what your future goals are, whether the goals are realistic and whether you are saving enough in relation to the expenses

Do multiple directorships matter?

PRATIP KAR Recent media reports suggest that the Securities and Exchange Board of India ( Sebi) may limit the maximum number of companies in which a person could serve as an independent director to five, which is below the limit of ten permitted in the yet- to- be- in- force Section 165 of the Companies Act 2013. The extent to which the measure would materialise depends on the view the Sebi board takes on the matter; but the media reports have certainly discountenanced the corporate sector and understandably ruffled more than a few feathers. The disagreements have been on all- toofamiliar grounds like ' the proposal being contrary to the provisions of the Companies Act 2013', ' the companies would face difficulties in finding good directors on account of their supposed paucity', ' a case of overregulation', 'leave it to the directors and companies to decide because they are rational and professional', and so and so forth. Bemusing as the arguments may be, collectively these articulate somewhat imprecise concerns about board governance — and, on a close examination, seem to embed cognitive biases which often lead to systematic and predictable errors. The more pertinent concerns are: do multiple directorships matter? And, if so, what should the limit be — and should that limit be set externally or left to individual judgement? The responsibility of independent directorship is demanding. Good managers who take this responsibility seriously will tell you that to do their job well they have to read the board papers diligently, come well prepared for meetings, do their own research, interact from time to time with senior executives and the CEO outside board meetings, bring their experience, expertise and integrity to bear upon the board discussions, make their voices heard in the meetings and know how to ask ' why' without being confrontational. Analysis of the current director databases in India leaves an impression that such 'serious' directors are vastly outnumbered by ' not- so- serious directors', many of whom have held directorships close to the limit of 20 or 15 as permitted under the Companies Act 1956 at different points of time. Considerable amount of international research is available on multiple directorships. There is one view that claims that directors who serve on multiple boards improve board decision making ability as they have better experience and business connections. But there is an overwhelmingly strong opposite view which says "that directors who overstretch themselves and accept additional seats due to the extra available personal perquisites, tend to spend less time on each individual board, compromise their responsibilities and neglect their duties". Several researchers have argued that in many companies " multiple directors are unable to effectively monitor management because they are overcommitted" and " directors with multiple seats are too busy to mind the business", which creates serious agency problems. They have also found an inverse relationship between the company's performance and the board's busyness. There has also been research on how multiple directors are chosen globally on the boards of companies. For example, Gerald F Davis observes in his paper, ' The Economy of Multiple Board Membership', that " the results overall suggest that success in the market for directors is determined by social connections and to some degree by compliance with management". The Hungarian physicist Albert- László Barabási, who has revolutionised thinking on how realworld networks work, observes in his book, Linked: The New Science of Networks, that " a sparse network of afew powerful directors control all major appointments in the Fortune 1000 companies". It would be reasonable to conclude from these discussions that first, multiple directorships in companies is a subject of debate globally; second, the efficacy of too- busy directors who are overcommitted has been called into question; third, directors take up multiple directorships largely in self- interest; and fourth, in several countries there are moves towards restricting the number of directorships. For example, a Consultation Paper of the Prudential Regulatory Authority on Strengthening Capital Standards for Implementing CRD IV has suggested that by July 1, 2014, directors of firms which are significant in terms of their size, internal organisation and the nature, scope and complexity of their activities should not hold more than one executive directorship with two non- executive directorships; or four non- executive directorships. Some European governments are implementing, albeit reluctantly, European Union rules from July this year, to restrict the number of board positions people in systemically important financial companies. Seen in this perspective, Sebi's proposal to restrict the number of independent directorships cannot be easily dismissed. In India we still have a commandcontrol mindset and are largely rule- driven, so prescription works and may often be desirable. If nothing else, it should weed out the not- so- serious directors and force at least some companies to actively and meaningfully search for serious directors which, contrary to popular understanding, there is no dearth of. Besides, the Standing Committee on Finance on the Companies Bill has, in its 21st Report, observed that Sebi as a sector regulator can set " more detailed or stringent provisions for sectoral companies under their jurisdiction". But is there a magic number for the maximum number of directorships? Possibly not. To get the correct number, one would have to pull a rabbit out of the hat. Globally, even five to seven directorships are being frowned on and data shows that there are very few directors who hold seven directorships or more. Prof Barabási says in his book Linked that Fortune 1000 companies have 10,100 directorships and 7,682 directors, and 79 per cent of them sat on one board, 14 per cent on two boards and only seven per cent on three or more boards. Two caveats are contextually apposite. Governance reforms generally tend to pin responsibilities on independent directors to help achieve higher standards of governance. But this may not always work and is especially difficult in family ownership of businesses or large state ownership (which is the case in India), because it may not be easy for the boards to resolve the conflict between the dominant shareholder and minority shareholders. Academic literature does not conclusively demonstrate a strong relationship between board independence and firm performance, indeed there is often either negative or no relationship between the two in empirical studies. This is possibly because it is unbeknown how boards perform as boards, how the decision making process in the board room works, and the impact of board- room biases. The writer is a former executive director of Sebi. pratipkar21@ gmail. com Overstretched and overcommitted directors may compromise responsibilities and cease to be effective ILLUSTRATION: BINAY SINHA Sebi's proposal to restrict the number of independent directorships may force at least some companies to search for serious directors, of which there is no dearth

 

 

--

 

CS A Rengarajan

9381011200

CS Benevolent Fund is a collective effort towards extending the much needed financial support to the community of Company Secretaries in times of distress  Let us lend support and join for noble cause.

SHARING KNOWLEDGE SKY IS THE LIMIT

This mail and its attachments (if any) are confidential information intended for persons to whom the email is planned for delivery by the sender. If you have received this mail in error please notify the sender of the error by forwarding the email and its attachments (if any) and then deleting the mail received in error and the relevant email trail in this connection without making any copies or taking any prints.

__._,_.___

receive alert on mobile, subscribe to SMS Channel named "aaykarbhavan"
[COST FREE]
SEND "on aaykarbhavan" TO 9870807070 FROM YOUR MOBILE.

To receive the mails from this group send message to aaykarbhavan-subscribe@yahoogroups.com

Your email settings: Individual Email|Traditional
Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch to Fully Featured
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe

__,_._,___