Here's how start-ups in India are getting sound financial help!
Start-ups are on a great start in India. As they climb up the ladder gradually, their need for a sound financial advisor
becomes imperative. It is generally then that the company starts scouting for a Chief Financial Officer (CFO), which is crucial but a very expensive task.And that is when advisory firms such ALAMAK Capital, SuperCFOs step in and send virtual CFO to the rescue.
"Start-ups that are rapidly growing require CFOs to look after the financial functions of their company. However, a full-time CFO is expensive. New companies initially do not require a CFO," said Rajesh Mittal, chairman and founder of ALAMAK Capital.
Bhairav Kothari, the founder and managing director of SuperCFO, an advisory firm that specializes in virtual CFOs, added that the virtual CFOs look after just the financial functions of the company but are also responsible for meeting the strategic requirement of the start-up.
"We also make business
plans, corporate planning, budgeting and forecasting among others for our clients," noted Kothari. The company also caters to companies in the small and medium enterprises segment. It should be noted that typically in a start-up, e-CFOs help the companies prepare their books and business plans for raising funds from the investors.
So, what drives
the rapid increase in demand for a virtual CFO over a full time CFO. Mittal pointed out that a full time CFO demands a higher package in terms of remuneration while an e-CFO or shared CFO is paid as per the assignment."The charges can range from Rs 25,000 to Rs 2 lakh or Rs 3 lakh a month while a CFO on payroll generally draws a salary of Rs 5-6 lakh per month. A start-up cannot afford a full-time budget and hence go for shared CFOs," he explained.
Besides, the fact that identifying a good CFO who can understand the company and its goals is also a tedious task and hence it is best considered to outsource this top job to experts. "We only hire
people who have worked in the capacity of a CFO for a good number of years and of course have the requisite qualifications," said Kothari. While this may be the story from the demand side, the supply side story is also pretty interesting. Increasingly, experienced CFOs prefer to quit their blue-collared jobs in
one particular organisation in order to cater different companies from different sector at a time. Generally a single CFO manages about five clients at any given time.So, what future do we see for virtual CFOs? As far as our reading is concerned, with the start-up culture on a ride and young entrepreneurs coming up with new ventures, virtual CFOs will one of the most demanded services in the market.
Image credit: Indiatimes.com
Sebi busts billion-dollar 'tax evasion shops' in stock market
By PTI | 22 Jul, 2015, 06.16PM IST
READ MORE ON » uk sinha | sebi | money laundering | insider trading | Income Tax Department | Central Board of Direct Taxes | Capital markets
MUMBAI: Suspecting tax evasion of at least Rs 5,000-6,000 crore, regulator Sebi has clamped down on a large number of organised syndicates who had set up 'shops' to convert black money into legitimate-looking funds through the stock market platform.
While more than 900 entities have been banned from capital markets by the Securities and Exchange Board of India (Sebi), it has also referred these cases to the Income Tax Department for further investigations.
"We have banned more than 900 entities and my guess is that the tax avoidance that has happened in these cases is more than Rs 5000-6,000 crore," Sebi Chairman U K Sinha said.
"We have given all the details to the CBDT ( Central Board of Direct Taxes) and we have told them that they should probe them," Sinha told PTI in an interview here.
Talking about the menace of money laundering and other market-related manipulations, Sinha said the regulator is trying to curb such cases one-by-one very successfully.
"As far as markets are concerned, one by one we are trying to curb the manipulation very successfully -- be it IPO markets, GDR markets or secondary markets. But I must also say that this is an ongoing battle and I cannot say that we have controlled every thing," he said.
Giving a "complete picture" on this menace, the Sebi chief said, "In any country or in any market, there are always people who are trying to find loopholes and take advantage.
"These are the people who have criminal intent. They are not here to help in the growth of the country. They work with a desire to corner money with criminal intentions."
Giving example of the IPO market, Sinha said Sebi found "some people had virtually set up shops" there.
"If you want to raise Rs 200 crore, come to me, I will provide you the buyers, I will provide you the platform and I will provide you with a mechanism on how to go for the listing. They were manipulating the market after listing," Sinha said, while adding that Sebi was able to crack this.
Sinha further said similar activities were taking place in the GDR market also, where Sebi passed some orders which have now been upheld by the Supreme Court as well.
"So, segment-wise, we have been able to control it -- first in IPO market and then in the GDR market. Now let us come to the secondary market.
"Here our insider trading regulations have been strengthened now. In addition, we found that there is a need for very active surveillance and therefore we strengthened our surveillance systems," Sinha said.
These measures helped Sebi crack a major organised and syndicated financial crime that was taking place in the stock market, he added.
"We found that there are these companies where the price has gone up by 10-times, 20-times and even more in some cases. Our surveillance systems caught this signal and we started probing. We started asking if your share price has gone up ten times, has your business also grown. Has your profit, turnover, order book, etc grown?
"We found that there was no correlation in the price and the business of these companies. Then we went to the next step and started getting into who were the buyers and sellers of these shares and from which bank account the money was coming.
"Then we realised that there was a racket going on. The same set of people were at play at all the levels and their intention was not just to manipulate the market, but their intention was actually to make the black money white.
"But they were doing it through our stock market mechanism. We caught then and we have banned more than 900 entities and my guess is that the tax avoidance that has happened in these cases is more than Rs 5000-6,000 crore," he added.
platform. While more than 900 entities have been banned from capital markets by the Securities
and Exchange Board of India (Sebi), it has also referred these cases to the Income Tax Department for further investigations. "We have banned more than 900 entities and my guess is that the tax avoidance that has happened in these cases is more than Rs 5000-6,000 crore," Sebi Chairman U K Sinha said.
"We have given all the details to the CBDT ( Central Board of Direct Taxes) and we have told them that they should probe them," Sinha told PTI in an interview here.
Talking about the menace of money laundering and other market-related manipulations, Sinha said the regulator is trying to curb such cases one-by-one very successfully
. "As far as markets are concerned, one by one we are trying to curb the manipulation very successfully
-- be it IPO markets, GDR markets or secondary markets. But I must also say that this is an ongoing battle and I cannot say that we have controlled every thing," he said. Giving a "complete picture" on this menace, the Sebi chief said, "In any country or in any market, there are always people who are trying to find loopholes and take advantage.
"These are the people who have criminal intent. They are not here to help in the growth of the country. They work with a desire to corner money with criminal intentions."
Giving example of the IPO market, Sinha said Sebi found "some people had virtually set up shops" there.
"If you want to raise Rs 200 crore, come to me, I will provide you the buyers, I will provide you the platform and I will provide you with a mechanism on how to go for the listing. They were manipulating the market after listing," Sinha said, while adding that Sebi was able to crack this.
Sinha further said similar activities were taking place in the GDR market also, where Sebi passed some orders which have now been upheld by the Supreme Court as well.
"So, segment-wise, we have been able to control it -- first in IPO market and then in the GDR market. Now let us come to the secondary market.
"Here our insider trading regulations have been strengthened now. In addition, we found that there is a need for very active surveillance and therefore we strengthened our surveillance systems," Sinha said.
These measures helped Sebi crack a major organised and syndicated financial crime that was taking place in the stock market, he added.
"We found that there are these companies where the price has gone up by 10-times, 20-times and even more in some cases. Our surveillance systems caught this signal and we started probing. We started asking if your share price
has gone up ten times, has your business also grown. Has your profit, turnover, order book, etc grown? "We found that there was no correlation in the price and the business of these companies. Then we went to the next step and started getting into who were the buyers and sellers of these shares and from which bank
account the money was coming. "Then we realised that there was a racket going on. The same set of people were at play at all the levels and their intention was not just to manipulate the market, but their intention was actually to make the black money white.
"But they were doing it through our stock market mechanism. We caught then and we have banned more than 900 entities and my guess is that the tax avoidance that has happened in these cases is more than Rs 5000-6,000 crore," he added.
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I-T department launches investigation against 90 companies for money laundering
By Sidhartha & Surojit Gupta, TNN | 16 Jul, 2015, 09.03AM IST
The tax department has launched an investigation against 90 companies for possible evasion, money laundering and for converting black money into "white" through a series of transactions in little-known shares, commonly called penny stocks.
Sources said this is a massive scam which the department is probing and is the latest element of the government's drive against black money.
Over the past few months, market regulator Sebi passed orders related to around 10 companies, resulting into suspension of 36 companies that were involved in irregular trades and banning of 900 en tities. Sources said the money involved in the 36 companies could add up to close to Rs 20,000 crore. In his orders, Sebi member Rajiv Agarwal had said that the cases should be investigated by the tax department, the enforcement directorate as well as the Financial Intelligence Unit. On December 22 last year, TOI had reported that Sebi was investigating around 50 companies.
The tax department had started the probe much before, which has turned out to be wider and is monitored at the level of revenue secretary Shaktikanta Das after the authorities stumbled upon evidence suggesting money laundering and use of black money .
Sources said the transactions were all done by "entry operators", who would collect cash from "investors" and buy shares of unknown companies, which largely existed on paper. In most cases, preferential allotment of shares was done at a premium. Then a group of traders would trade among themselves to ramp up the share price.
After raising the price significantly , they would issue bonus shares to the investors or go for a stock split. And, despite all this, the share price would rise further. Typically , the "investors" would exit after 14-15 months or two years to avoid paying capital gains tax on the transactions. In the final settlement, the person who had routed cash through the operators would be paid in cheque, helping convert his black money into legitimate funds on payment of 8-10 per cent commission. Sources in the I-T department and Sebi said the crackdown by the tax authorities and regulators has resulted in this kind of business coming to a near halt over the past few months.
.Sources said this is a massive scam which the department is probing and is the latest element of the government's
drive against black money.Over the past few months, market regulator Sebi passed orders related to around 10 companies, resulting into suspension of 36 companies that were involved in irregular trades
and banning of 900 en tities. Sources said the money involved in the 36 companies could add up to close to Rs 20,000 crore. In his orders, Sebi member Rajiv Agarwal had said that the cases should be investigated by the tax department, the enforcement directorate as well as the Financial Intelligence Unit. On December 22 last year, TOI had reported that Sebi was investigating around 50 companies.The tax department had started the probe much before, which has turned out to be wider and is monitored at the level of revenue secretary Shaktikanta Das after the authorities stumbled upon evidence suggesting money laundering and use of black money .
Sources said the transactions were all done by "entry operators", who would collect cash from "investors" and buy shares of unknown companies, which largely existed on paper. In most cases, preferential allotment of shares was done at a premium. Then a group of traders would trade among themselves to ramp up the share price
.After raising the price significantly , they would issue bonus shares to the investors or go for a stock split. And, despite all this, the share price
would rise further. Typically , the "investors" would exit after 14-15 months or two years to avoid paying capital gains tax on the transactions. In the final settlement, the person who had routed cash through the operators would be paid in cheque, helping convert his black money into legitimate funds on payment of 8-10 per cent commission. Sources in the I-T department and Sebi said the crackdown by the tax authorities and regulators has resulted in this kind of business coming to a near halt over the past few months.Check out these lesser known deductions before filing your tax return
By Preeti Kulkarni, ET Bureau | 20 Jul, 2015, 08.53AM IST
READ MORE ON » Taxes | Tax return | tax deductions | Section 80G | personal loan | house rent | Home loan
Most taxpayers are familiar with the tax deductions under Sec 80C and 80D. But there are several other deductions that a taxpayer can avail. We list out a few.
Home loan processing fee and other charges
Home loan customers are aware of the tax benefits on the loan interest and principal repayment. But even the processing fees qualifies for deduction under Section 24. "The processing fees and other charges are considered as interest and can be claimed as a deduction," says Vaibhav Sankla, Director, H&R Block. This even includes the prepayment charges.
Interest on personal loan for down payment
Section 24 covers more than just interest on the home loan. It also includes the interest paid on any loan taken for the purchase, renovation or reconstruction of a house. "The tax laws do not specify that only interest on a 'housing loan' would be eligible for deduction," says Sankla.
Even loans taken from friends or family members are eligible for deduction under Section 24. But the taxman may want to see a loan agreement between the two parties and the interest earned by the lender will be taxed as his income.
Tax deduction for disabilities
If a taxpayer suffers from 40% disability (as certified by a government hospital), he can claim deduction of Rs 50,000 under Sec 80U. For a disabled dependent, he can claim a deduction of Rs 50,000 under Sec 80DD. In both cases, if the disability is severe (80% or above), the deduction is Rs 1 lakh.
This is a flat deduction and does not depend on actual amount spent. However, the disabled person should be wholly or mainly dependent on the taxpayer for maintenance, and should not have claimed deduction for disability under Section 80U separately.
Clubbing income of disabled child
If you invest in the name of your spouse or minor child, the income from the investment will be clubbed with your income under Sec 64 and taxed accordingly. However, if the child is disabled, the income from investments made in his name will not be clubbed with the income of parents. Parents can use this provision to invest in taxable instruments like fixed deposits and debt funds.
Deduction for specified illnesses
A deduction of up to Rs 40,000 can be claimed if a taxpayer suffers from any ailment specified under Sec 80DDB or has a dependent who is a patient. For senior citizens, the deduction is higher at Rs 60,000. The diseases include certain neurological ailments, cancers, AIDS, kidney failure and haematological disorders.
However, if the amount spent is reimbursed by the employer or insurance, the taxpayer is not eligible for deduction. If he gets partial reimbursement of the expenses, the balance can be claimed as deduction.
of exemption. Up to Rs 10,000 interest earned on savings banks account is exempt under Sec 80TTA. Also, up to Rs 3,500 interest from a post office savings account is exempt from tax under Sec 10(15)(i).
If you hold a joint account, the exemption is higher at Rs 7,000. "Since both provisions are separate, one can claim the benefits under both sections," says Suresh Surana, Founder, RSM Astute Consulting.
House rent exemption without HRA
Many pay house rent but cannot avail exemption because there is no HRA component in their salary. Under Sec 80GG, you can claim a deduction for the rent even if you don't get HRA. However, the taxpayer should not be drawing any housing benefit.
Nor should he or spouse or child be owning a house in the city where he stays. The exemption is limited to the least of the following: rent paid less 10% of total income; or Rs 2,000 a month; or 25% of total income.
Adjusting losses against gains
If you lost money in stocks or on other investments during the previous financial year, there is a silver lining. You can adjust some losses against capital gains from the sale of stocks, property, gold or debt funds. Shortterm capital losses can be set off against both short-term capital gains as well as taxable long-term capital gains.
However, long term capital losses can only be set off against taxable long-term capital gains. Long-term losses from stocks and equity funds cannot be adjusted against any gain.
Section 80G donations
Donations under Sec 80G are generally not included in Forms 16. "The CBDT circular on TDS does not clarify as to whether deduction under Sec 80G needs to be considered by employers," says Surana.
You will have to claim this deduction at the time of filing your return. Depending on the organisation or fund you have contributed to, you can claim a deduction of 50-100% of the donated amount. But the deduction cannot be more than 10% of your gross total income.
Home loan processing fee and other charges
Home loan customers are aware of the tax benefits on the loan interest and principal repayment. But even the processing fees qualifies for deduction under Section 24. "The processing fees and other charges are considered as interest and can be claimed as a deduction," says Vaibhav Sankla, Director, H&R Block. This even includes the prepayment charges.
Interest on personal loan for down payment
Section 24 covers more than just interest on the home loan
. It also includes the interest paid on any loan taken for the purchase, renovation or reconstruction of a house. "The tax laws do not specify that only interest on a 'housing loan' would be eligible for deduction," says Sankla.Even loans taken from friends or family members are eligible for deduction under Section 24. But the taxman may want to see a loan agreement between the two parties and the interest earned by the lender will be taxed as his income.
Tax deduction for disabilities
If a taxpayer suffers from 40% disability (as certified by a government hospital), he can claim deduction of Rs 50,000 under Sec 80U. For a disabled dependent, he can claim a deduction of Rs 50,000 under Sec 80DD. In both cases, if the disability is severe (80% or above), the deduction is Rs 1 lakh.
This is a flat deduction and does not depend on actual amount spent. However, the disabled person should be wholly or mainly dependent on the taxpayer for maintenance, and should not have claimed deduction for disability under Section 80U separately.
Clubbing income of disabled child
If you invest in the name of your spouse or minor child, the income from the investment will be clubbed with your income under Sec 64 and taxed accordingly. However, if the child is disabled, the income from investments made in his name will not be clubbed with the income of parents. Parents can use this provision to invest in taxable instruments like fixed deposits
and debt funds.Deduction for specified illnesses
A deduction of up to Rs 40,000 can be claimed if a taxpayer suffers from any ailment specified under Sec 80DDB or has a dependent who is a patient. For senior citizens, the deduction is higher at Rs 60,000. The diseases include certain neurological ailments, cancers, AIDS, kidney failure and haematological disorders.
However, if the amount spent is reimbursed by the employer or insurance, the taxpayer is not eligible for deduction. If he gets partial reimbursement of the expenses, the balance can be claimed as deduction.
Interest from savings accounts
The interest you earn is fully taxable but there is a small window of exemption. Up to Rs 10,000 interest earned on savings banks account is exempt under Sec 80TTA. Also, up to Rs 3,500 interest from a post office savings account is exempt from tax under Sec 10(15)(i).If you hold a joint account, the exemption is higher at Rs 7,000. "Since both provisions are separate, one can claim the benefits under both sections," says Suresh Surana, Founder, RSM Astute Consulting.
House rent exemption without HRA
Many pay house rent but cannot avail exemption because there is no HRA component in their salary. Under Sec 80GG, you can claim a deduction for the rent even if you don't get HRA. However, the taxpayer should not be drawing any housing benefit.
Nor should he or spouse or child be owning a house in the city where he stays. The exemption is limited to the least of the following: rent paid less 10% of total income; or Rs 2,000 a month; or 25% of total income.
Adjusting losses against gains
If you lost money in stocks or on other investments during the previous financial year, there is a silver lining. You can adjust some losses against capital gains from the sale of stocks, property, gold or debt funds. Shortterm capital losses can be set off against both short-term capital gains as well as taxable long-term capital gains.
However, long term capital losses can only be set off against taxable long-term capital gains. Long-term losses from stocks and equity funds cannot be adjusted against any gain.
Section 80G donations
Donations under Sec 80G are generally not included in Forms 16. "The CBDT circular on TDS does not clarify as to whether deduction under Sec 80G needs to be considered by employers," says Surana.
You will have to claim this deduction at the time of filing your return. Depending on the organisation or fund you have contributed to, you can claim a deduction of 50-100% of the donated amount. But the deduction cannot be more than 10% of your gross total income.
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