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Cost INDEX S. No. Topic 1. NSC and Tax Benefit 2. Highlights of Budget 2017 3. Rs. 3,700 Crore Noida Fake Like Scam: How Lakhs Lost Their Money 4. Service Tax Exemption to Educational Institutions Curtailed 5. New Paradigm in IFRS - 9
NSC and Tax Benefits Highlights: What is NSC Investment Limit Tax benefits Other considerable factors CA Chandan and Amit Gupta
NSC and Tax Benefit What is National Savings Certificate National Savings Certificate (NSC) is an Investment alternative developed by Government of India with an intention to induce persons to a saving habit and to develop National Savings. National Savings Certificate is issued through Post Offices; they are the nodal agency which makes it available to the common public. National Saving Certificates in India is ranked as highly secured in the class of Investments. It is an Investment which has Tax Advantage while (i) Investing, (ii) during the life and (iii) at the time of maturity of the Investment. Investment limit There is no Limit for Investment in NSC. Tax treatment Deposits up to Rs. 1.50 lakh in NSC qualify for Deduction Section 80C of the Income Tax Act. Accrued interest on NSC also qualifies for deduction u/s. 80C. NSC interest is taxable. However, as it is a cumulative scheme (e.g. interest is not paid to the investor but instead accumulates in the account), each year s interest is considered reinvested in the NSC. Since it is deemed reinvested, it qualifies for a fresh deduction under Sec 80C, thereby making it tax-free. Only the final year s interest, when the NSC matures, does not receive a tax deduction as it does not get reinvested, but is paid back to the investor along with the interest of the earlier years and the capital amount. What you must ensure while filing tax return To benefit from this feature of reinvested interest and its deduction, it is important to declare the accrued interest on NSC on a yearly basis in your tax return under the head Income from Other Sources. Under deductions, you will claim accrued interest for all the years except the last year under Sec 80C as reinvested NSC interest. Both cancel each other out, making the interest in effect tax-free. Non-Resident Cannot Invest Denominations in which certificates shall be issued Non-Resident Indians are not eligible to purchase the National Savings Certificates. The National Savings Certificates (IX Issue) shall be issued in denominations of Rs. 100, Rs. 500, Rs. 1000, Rs. 5000, Rs. 10000.
Can be Purchased Jointly and on behalf of minor NSC can be purchased in joint name or on behalf of the minor Types of Certificates and Issue thereof (1) The certificates shall be of the following types, namely: (a) Single Holder Type certificates; (b) Joint A Type Certificates; and (c) Joint B Type Certificates; (2) (a) A Single Holder Type certificate may be issued to an adult for himself or on behalf of a minor or to a minor; (b) A Joint A Type certificate may be issued jointly to two adults payable to both the holders jointly or to the survivor, (c) A Joint B Type certificate may be issued jointly to two adults payable to either of the holders or to the survivor; Where to Purchase National Savings Certificates (NSC) are certificates issued by Department of the post, Government of India and are available at most post offices in the country. This Certificate can be transferred from a post office where it is registered to any other post office and it can be pledged as a security. Main Features of NSC VIII Issue Scheme specially designed for Government employees, Businessmen and other salaried classes who are Income Tax assesses. No maximum limit for investment. No Tax deduction at source. Certificates can be kept as collateral security to get the loan from banks. Investment up to INR 1,50,000/- per annum qualifies for IT Rebate under section 80C of Income Tax Act. Trust and HUF cannot invest. Main Features of NSC IX Issue No maximum limit for investment. Minimum Investment Rs. 100 Available in denominations of INR. 100/-, 500/-, 1000/-, 5000/- & INR. 10,000/- A single holder type certificate can be purchased by an adult for himself or on behalf of a minor or to a minor. Buy National Savings Certificates (NSCs) every month for Five years Re-invest on maturity and relax On retirement, it will fetch you monthly pension as the NSC matures.
Highlights of Budget 2017 Highlights: Agriculture Sector Financial Sector Fiscal Situation Income Tax And Tax Proposals CA Jitin Girdhar and Aarushi Goel
Highlights of Budget 2017 2017 The 2017 Union Budget, presented by Finance Minister Arun Jaitley, was broadly focused on 10 themes the farming sector, the rural population, the youth, the poor and underprivileged health care, infrastructure, the financial sector for stronger institutions, speedy accountability, public services, prudent fiscal management and tax administration for the honest. Highlights of Finance bill 2017 Agriculture Sector:- A sum of Rs. 10 Lakh Crore is allocated as credit to Farmers, with 60 days of Interest waiver. NABARD fund will be increased to Rs. 40,000 crore Government will set up mini labs in Krishi vigyan kendars for soil testing. A dedicated micro irrigation fund will be set up for NABARD with Rs. 5,000/- crores initial corpus. Irrigation Corpus fund increased to 40,000 crores from 20,000 crores. Rural Population:- The Government target to bring 1 crore householdes out of poverty by 2019. Over 3 lakh crore will be spent for Rural India. MGNREGA to double farmers Income. Will take steps to ensure participation of women in MGNREGA up to 55%. Will allocate Rs. 19,000 crore for Pradhan Mantri Gram Sadak Yojana in 2017-18. Swachh Bharat mission has made tremendous progress; sanitation coverage has gone up from 42% in Oct 2013 to 60% now. The country well on way to achieve 100% rural electrification by March 2018.
Financial Sector:- FDI policy reforms - more than 90% of FDI inflows are now automated. Shares of Railway PSE like IRCTC will be listed on stock exchanges. Bill on resolution of financial firms will be introduced in this session of Parliament. Foreign Investment Promotion Board will be abolished. Revised mechanism to ensure timebound listing of CPSEs. Computer emergency response team for financial sector will be formed. Pradhan Mantri Mudra Yojana lending target fixed at Rs 2.44 lakh crore for 2017-18. Negotiable Instruments Act might be amended. Fiscal Situation:- Total expenditure is Rs. 21, 47,000 crore. Plan, non-plan expenditure to be abolished; focus will be on capital expenditure, which will be 25.4 %. Rs. 3,000 crore under the department of Economic Affairs for implementing the Budget announcements. Expenditure for science and technology is Rs. 37,435 crore. Total resources transferred to States and Union Territories is Rs 4.11 lakh crore. Recommended 3% fiscal deficit for three years with a deviation of 0.5% of the GDP. Revenue deficit is 1.9 % Fiscal deficit of 2017-18 pegged at 3.2% of the GDP. Will remain committed to achieving 3% in the next year.
Income Tax and Tax Proposals Existing rate of tax for individuals between Rs. 2.5- Rs 5 lakh is reduced to 5% from 10%. All other categories of tax payers in subsequent brackets will get a benefit of Rs 12,500. Simple one page return for people with an Annual Income of Rs. 5 lakh other than business income. People filing I-T returns for the first time will not come under any government scrutiny. 10% Surcharge on Individual Income above Rs. 50 lakh and up to Rs 1 crore to make up for Rs 15,000 crore loss due to cut in personal I-T rate. 15% surcharge on individual income above Rs. 1 crore to remain the same. Income Tax Rate Individual Tax Payers Up to Rs 2,50,000 No Tax Rs 2,50,000 to 5,00,000 5% Rs 5,00,000 to 10,00,000 20% Rs 10,00,000 Above 30%
Rs.3,700 Crore Noida Fake Like Scam: How Lakhs Lost Their Money Highlights: How were so many lured? How it worked? Investigation CA Anubhav Jain and Sakshi
Rs 3,700 Crore Noida Fake Like Scam: How Lakhs Lost Their Money At Rs 3,700 scam, it's turning out into one of India's biggest online scams. Noida Police have charged a company called Ablaze Info Solutions with duping tens of thousands of gullible subscribers by adding them into a money-chain like business model. The modus operandi was this: People were made to pay to get a subscription and then made to click 'like' on false links for handsome returns. They were also incentivized to add more members as subscribers. As it happens in any Ponzi scheme the ones at the top made a bit of money. The ones at the middle and bottom lost a bit of their 'investments.' Uttar Pradesh Special Task Force which unearthed the scam said seven lakh people were swindled. The company's website that it used to attract people is still accessible at socialtrade.biz. Here, according to the UP police, was how it operated. How were so many lured? The company's business model was to earn while at home. All one had to do was to pay money for the membership and earn by clicking on the links. There were many members who had not only got membership for themselves but for the entire family. "I am going to my wife's home in Chandigarh on Sunday. I had got everyone from my in-law s side enrolled in this company. Now everyone's money is at stake and my reputation too," said a consultant who works in Sector 63, Noida. Many college students and job seekers had enrolled in the company to earn some quick money. Shikha, an engineering graduate even deferred joining a company because of the scheme. "It is embarrassing to ask for money from home. For the last three months, I was earning money from this company. Suddenly I got to know through the media that it's a fraud company," she said.
A large number of housewives too were members of the company. On condition of anonymity one of them, who had come to enquire about the company in Noida, said she was earning money through its click system. "This was my savings which my husband was unaware of. I did not know it was a fraud. I got money till January," she said. How it worked? Socialtrade.biz was launched in 2015 by Ablaze Info Solutions. The social media trading had four kinds of membership - Rs 5,700, Rs 11,500, Rs 2,8750, Rs 57,500. On the basis of which kind of membership, you paid for, your username id was generated. Each member had to add two more members. And that was how the chain built. Members had to deposit the amount in company's the account. On the basis of the membership, users were given number of clicks in a particular day. The company would in return pay Rs 5 for per click. For people opting for a membership of Rs 5,700, only 25 'likes' were allowed in a day which meant that person would earn Rs 125 per day. Similarly, for membership of Rs 11,500, 50 'likes' were allowed, for Rs 28,750, 75 'likes' and for Rs 57500, 125 'likes' were allowed. The company's revenue model was such that the ad company would give Rs 6 to the company for each like out of which Rs 5 will be given to the member and Re 1 will go the company. Investigation: Police had received several complaints about this company. During the investigation, they found that their business model was faulty. When a member logged in on their page, the ad URL sent to them was incorrect. Sometimes the members would be clicking on the same URL without realizing. The company also kept changing its names online from socialtrade.biz to freehub.com, intmaart.com, frenzzup.com and 3w.com. This also created suspicion among investigators. The company had changed its name to throw enforcement agencies of its trail. The plan, according to the investigators was to show loss in the coming two months.
While the company was showing TDS, the balance sheet was completely faulty, said a senior police officer. The company's server was taken on rent in Ghaziabad. A senior police officer said around one lakh people have complained of non-payment by the company. Current status: Many investors had got refund. But still there are thousands of investors whose money is stuck in the company. A STF official said. Now we have submitted evidence against the accused in the court, the court will decide how the money can be refunded to the investors.
Service Tax Exemption to Educational Institutions Curtailed Highlights: Present Situation Meaning of Educational Institution Amendment Impact of GST CA Neeraj Jain and Shubhi
Service Tax Exemption to Educational Institutions Curtailed Present Situation According to present clause 9(b) of exemption Notification No. 25/2012-ST dated 20-06-2012, exemption is provided from the levy of Service Tax in relation to services provided to an educational institution, by way of: (i) transportation of students, faculty and staff; (ii) catering, including any mid-day meals scheme sponsored by the Government; (iii) security or cleaning or house-keeping services performed in such educational institution; and (iv) services relating to admission to, or conduct of examination by, such institution. Meaning of Educational Institution educational institution means an institution providing services by way of: (i) pre-school education and education up to higher secondary school or equivalent; (ii) education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force; (iii) education as a part of an approved vocational education course. All the aforementioned services provided to any educational institution Amendment Central Government has recently issued a Notification No. 10/2017-ST dated 08.03.2017 wherein clause 9(b) of the above notification has been amended to curtail this exemption w.e.f. 01-04-2017. Provided that nothing contained in clause (b) of this entry shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent. Accordingly, exemptions provided therein shall be applicable only to the institutions which provide services by way of pre-school education and education up to higher secondary or equivalent. Thus, institutions other than these will not be eligible for the exemption and all their services falling under above services shall become taxable w.e.f. 1.4.2017, i.e., services related to
transportation, catering, security, conduct of exams etc. provided to educational institutions, which are providing education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force and education as a part of an approved vocational education course will not be eligible for exemption provided under clause 9(b) of N. No. 25/2012-ST dated 20.06.2012. The service providers of these services shall charge service tax on their invoices w.e.f. 1.4.2017 which implies that cost of such services will go up by 15 percent flat. This will impact cost increase by educational institutions except (schools). These institutions will also not be able to take input credit set off as education services are not liable to Service Tax. Since cost will go up, such institutions may increase the fees which will directly affect students and parents. Impact of GST It would have been desirable not to withdraw this exemption in view of GST being introduced soon. On one hand, it was announced on Budget speech that because of GST, no changes are proposed in Service Tax but within a month of Budget which is before Parliament, this exemption has been withdrawn. It may be counter-productive as revenue benefit may only accrue for three months as GST is proposed from July, 2017. It is likely that such services may be taxed in GST regime also. All educational institutions may have to restructure their service contracts in view of this withdrawal of exemption.
New Paradigm in IFRS - 9 Highlights: Introduction Solely Payment of Principal & Interest Occurrence Impact Conclusion CA Rashi Goel and Rishabh Jain
New Paradigm in IFRS - 9 Introduction The revised Reporting Standard IFRS - 9 has introduced two fresh paradigms for financial instruments: Solely Payments of Principal and Interest (SPPI) Test Three-stage Expected Credit Loss Model Solely Payments of Principal and Interest (SPPI) Test SPPI Test is the assessment of contractual cash flow features contained in a financial asset. The standard says that the contractual cash flows need to be Solely Payments of Principal and Interest (SPPI), so that the financial asset s classification qualifies as either Amortised Cost or Fair Value through Other Comprehensive Income (FVOCI). If it fails to meet SPPI test criterion, such financial asset will be classified as Fair Value through Profit or Loss (FVTPL). For instance, cash flows from equity instruments and derivatives do not contain principal or interest elements and hence are mostly classified as FVTPL.
Occurrence When the global financial crisis happened around 2007-08 leading to great recession and European sovereign-debt crisis spoiling financial institutions in the world economy, increasing liquidity and credit adversities around the globe, concerns were raised about delay in practice of loss provisioning on loans and other financial instruments. The less provisioning of losses used to provide less impact on the Profit or Loss of the banks, but alongside did not show the current financial position. To deal with such concerns IASB stepped for these major changes, accurate loss provisioning has been standardised through covering recognition of some future expected losses along with already incurred losses in impairment mechanism. And to convey the fair balance sheet view, preventing to even look for impairment at first, the changes to classification of financial instruments included SPPI Test. Impact of SPPI Test If the loan involves contractual terms like prepayment before maturity which may change the timing, risk associated or amount of contractual cash flows in future, then both the cash flows before change and after change have to satisfy the SPPI test criterion to qualify loan for Amortised Cost classification. Also, if there is no penalty or premium to compensate for premature termination of the loan contract, prepayment will become significant and encouraged feature of the loan changing the fair value as soon as the market rates of interest fluctuate, and thus failing SPPI Test the loan will be classified at fair value. Therefore it is necessary to carefully assess the features of contractual cash flows to avoid extravagant SPPI Test failures, because such failures could lead to higher profit or loss volatility and could thereby influence the financial position and regulatory capital levels of the organization. Conclusion IFRS - 9 aims to provide fair reporting of financial instruments through Amortised Cost as long as the contractual cash flows have limited credit or lending risk, and are in consistent with a basic lending arrangement. A basic lending arrangement primarily looks for earning to cover time value of money invested and lending risk associated. Henceforth, SPPI Test completes this aim by screening out financial assets with high variability and risk features and routing such variation to P&L Statement using FVTPL, which was earlier missing. Possibly a useful obligation, future will reveal more
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