PF withdrawal not taxed if worked for 5 continuous years

I worked for company X for four years and nine months, and then worked for company Y for a period of three years. I did not transfer my provident fund (PF) balance in company X when I moved to company Y. Recently, I resigned from company Y and want to start my own business. If I withdraw my PF balance from company X (more than seven years since the last contribution was made), would the sum be taxable? —Vipul The withdrawal of the accumulated balance from a recognized PF triggers tax implications if the employee has not rendered continuous services for five years or more to the employer. While computing the continuous services of five years, the period of previous employment is also included, if the accumulated balance maintained with the old employer is transferred to the PF account of the new or current employer. We have assumed that your job with company X was your first job. As the total number of years of service with company X are less than five years (i.e. four years and nine months), withdrawal of the accumulated PF balance shall be taxed in the financial year (FY) in which the money was withdrawn. Merely holding the PF balance for more than five years will not take away the tax implications. The total of employer’s contribution and the interest thereon will be taxed as salary. Further, the amount of tax benefit claimed under section 80C on account of your contribution to the recognized PF shall be taxed. Moreover, the interest on your own contribution shall be taxed as “income from other sources”. The tax rate would depend upon your applicable income slab in each of the financial years during which the PF contributions were made. Further, the surcharge (as applicable) and education cess shall be applicable for each year and will also be payable in addition to the basic income tax. We have assumed that you have also contributed to the recognized PF maintained with company Y. In case, you transfer the accumulated PF balance maintained with company X to the PF account maintained with company Y and then withdraw the accumulated balance, while computing the period of continuous service with company Y, the period of service rendered with company X will also be included. As the cumulative years of service with both the companies shall be more than five years, there will not be any tax implications on PF withdrawal. In addition to these factors, you should also note that the withdrawal of the PF will be as per the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, which requires you to have a cooling period of two months.

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Give proof for tax benefit on long-term gains on house sale

I am an American citizen. I plan to sell my house in India and then buy another one using that money. What documents are required to compute long-term capital gains on this transaction? Also, will I be required to pay tax in India or in the US? —G. Chhadha Gains from transfer of a capital asset being a house is computed by deducting the cost of acquisition of the asset, cost of improvement and any expenditure incurred wholly and exclusively in connection with the transfer from the sale consideration. In this regard, you will need the following documents to substantiate the gains arising from the transfer of the house: a) Sale deed b) Deed of purchase providing details of the cost of acquisition. In case of construction, you should have supporting documents to substantiate the cost incurred c) If you have incurred any cost towards improvement (renovation, repairs, or others), supporting documents to substantiate the cost incurred d) Documents to substantiate the expenditure incurred (such as brokers commission) wholly and exclusively in connection with the transfer Long-term capital gains arising from the transfer of your house would be taxable in India at the rate of 20% (plus applicable surcharge and education cess) irrespective of whether you are a resident or a non-resident for Indian income-tax purposes. The gains may also be taxed in the US according to the local tax laws. However, as per the India-US double taxation avoidance agreement (DTAA), you should be eligible to claim the credit of taxes paid in India against those paid in the US. But if you invest such capital gains in acquiring or constructing another residential house property in India, then such gains as appropriated towards the new acquisition or construction would be exempt from tax. To claim the exemption, you would need to purchase the new house within a period of one year before or two years after the transfer takes place, or construct a residential house within three years of the date of transfer.The amount of capital gains that are not appropriated towards purchase or construction of the new residential house before the due date for furnishing of return of income can be deposited in a bank account under the Capital Gains Accounts Scheme, 1988, without any tax incidence. Such an amount would have to be utilized for the purchase or construction of the new asset within the prescribed time period. Unutilized amounts would be taxable as income of the previous year in which the period of three years from the date of the transfer of the original asset expires.

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RBI to launch plastic notes next year: Raghuram Rajan

Plastic notes have an average life span of about five years, are difficult to imitate and last longer than paper notes. Photo: Priyanka Parashar/MintShimla: Plastic currency notes would be launched in the country in 2015 after field trials, Reserve Bank of India (RBI) governor Raghuram Rajan said on Thursday. “Plastic notes are coming. Tender bids have come for one billion notes. In five cities, pilot testing would be done, including Shimla. In 2015, it would be launched based on the results of pilot testing,” he told reporters. He was talking to reporters after a board meeting of the RBI in Shimla. The government in February had informed Parliament that one billion plastic notes of Rs10 denomination will be introduced in a field trial in five cities selected for their geographical and climatic diversity. The other four selected cities are Kochi, Mysore, Jaipur, and Bhubaneswar. The field trial is expected to be launched in the second half of 2014.Plastic notes have an average life span of about five years and are difficult to imitate. Also, currency notes made of plastic are cleaner than paper notes. Plastic notes were first introduced in Australia to safeguard against counterfeiting of currency. Several countries in the West have introduced plastic notes for their advantage over normal notes. To a query on black money, Rajan said the RBI is not directly involved in curbing the menace and it was primarily a function of the government. “We can detect some of these activities as a result of monitoring of foreign exchange transactions. We do certainly work with the government. But in terms of bringing back black money that is really primarily a function of government,” he said.

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Forex reserves up $1.97 bn to $313.83 bn

 The foreign exchange reserves rose by $1.97 billion to $313.83 billion in the week ended May 9, on higher currency assets.

Previous week, the total reserves rose by $1.94 billion to $311.86 billion.

Foreign currency assets (FCAs), a major part of the overall reserves, increased by $1.978 billion to $286.549 billion in the period, RBI said.

FCAs, expressed in dollar terms, include the effect of appreciation/depreciation of the non-US currencies such as the euro, pound and yen held in its reserves.

The gold reserves remained unchanged at $20.965 billion, as per the RBI data.

The special drawing rights declined by $3.6 million to $4.476 billion, and the country’s reserve position with the IMF dipped $1.7 million to $1.838 billion in the period, the RBI weekly data showed.

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Bank deposits rise 14.8%, credit up 13.8%

Demand deposit rose 16.04 per cent to Rs 7,48,231 crore from Rs 6,44,764 crore in the year ago period. Mumbai, May 18:   Bank deposits grew 14.8 per cent year-on-year to Rs 78,88,416 crore as of May 2, faster than credit growth, according to the RBI data.

Deposits of commercial banks stood at Rs 68,68,811 crore during the same period last year, according to the RBI’s fortnightly data.

Bank credit grew at 13.8 per cent year-on--year to Rs 60,67,459 crore in the reporting fortnight, as against Rs 53,29,812 crore last year.

During the period, the time deposit grew 14.71 per cent at Rs 71,40,184 crore as against Rs 62,24,047 crore in the previous year.

Demand deposit rose 16.04 per cent to Rs 7,48,231 crore from Rs 6,44,764 crore in the year ago period.

On a fortnightly basis, deposits rose marginally by 0.23 per cent to Rs 78,88,416 crore as against Rs 78,69,967 crore in the week ended April 18.

Credit growth was up at Rs 60,67,459 crore from Rs 60,36,083 crore.

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Foreign Investors Pour in Rs 1-Lakh Crore Since Modi Declared BJP PM Candidate

Foreign investors have pumped in over Rs 1 lakh crore in the Indian securities market since Narendra Modi was announced as the prime ministerial candidate by Bhartiya Janta Party (BJP) in September last year.

As per latest data compiled by capital markets regulator Sebi, the net investments by FIIs into Indian equity markets stood at Rs 88,772 crore since the announcement. The same for debt markets was at Rs 13,399 crore -- taking the total to Rs 1,02,171 crore.

Mr Modi was anointed as PM-candidate by BJP on September 13 last year.

Market analysts believe that FIIs have been betting on the Indian market mainly on hopes of a stable and reforms-oriented government. The inflows are expected to surge further as the verdict met overseas investors' expectations in the Lok Sabha Polls.

"FII investments may pick up in a hurry," Karvy Capital CIO, Swapnil Pawar said as Mr Modi is set to lead the next government at the Centre after the BJP crossed the 272 mark comfortably on its own, without allies, winning 282 seats.

FIIs, the main driver of the equity market, have helped pushed up the benchmark BSE Sensex by over 22 per cent since September 13.

In 2014 alone, FIIs have infused a net amount of over Rs 74,000 crore in the domestic market, which included more than Rs 41,000 crore in equities and nearly Rs 33,000 crore in the debt.

Currently, there are 1,700 registered FIIs in the country, while the number of sub-accounts stood at 6,408.

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Global Gold, Silver Production to Achieve New Highs in 2014: Report

More From Commodities Gold Jewellery Exports Rise Again in April Gold Falls by Rs 60 to Rs 29,540 on Weak Global Cues Indian Gold Refiner Set to Receive Global Quality Tag History of India's Moves to Curb Iron Ore Mining, Exports Bharat Petroleum Signs Crude Import Deals with UAE, Kuwait Government Hikes Import Tariff Value on Gold, Silver Mumbai:

Global gold and silver mine output are set to achieve record highs in 2014, a report has said.

International gold mine supply continued to rise in 2013, achieving new highs of 96.7 Moz (over 4 per cent y-o-y), says the Gold and Silver Mining Focus 2014 report by Metals Focus, a precious metals consultancy.

Silver mine supply also rose in 2013, achieving a new high of 818.1 Moz (over five per cent y-o-y).

Both the precious metals continued to benefit from the ramp-up and start-up of projects conceived earlier.

For gold, significant growth emerged in China (the world's largest producer), while there was significant gains in the Dominican Republic, Canada and Russia.

Silver production was boosted due to a number of additions in several of the world's largest silver producing countries, including Peru, Mexico and China.

The gold mine supply is expected to again rise this year, however, post-2014 it appears uncertain, the report said.

"From 2015, gold production could enter a period of secular decline," it added.

In contrast, silver supply is expected to be positive as further gains are expected until 2016, at least, albeit at a slower pace than in recent years.

Talking about prices, the report said that following a poor 2013, the beginning in this year suggests that attitudes towards gold and silver, among investors, have been shifting away from the one-sided selling to a more balanced perspective.

"We see 2014 as a year broadly of consolidation for gold and silver. We believe the high for the year is already behind us, while on the downside, further price weakness from current levels is possible," it said.

For gold, therefore, a brief drop to around $1,100 could not be ruled out, the report said.

For silver too, in part governed by gold's moves, it is expected that full year average may fall just short of $20.

Physical demand of gold is likely to moderate in many key consuming markets this year, it said. "We expect overall volumes to remain at elevated levels. As such, the gold market is projected to record another structural deficit in 2014, providing some support for prices for the rest of the year."

For 2014, last year's improvements in silver's supply-demand balance could be reversed slightly, as global supply continues to rise while total demand slips back.

The most significant change, on either side of the market, is expected in physical investment. Physical investment is forecast to drop by around 11 per cent, which is likely to be responsible for the increasingly range-bound price outlook for the remainder of 2014, the report said

Story first published on: May 18, 2014 15:28 (IST)

Tags: global gold production, global silver production, gold and silver

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Sebi to Finance Ministry: Consider Tax Sops for Mutual Funds

In a bid to boost the mutual fund industry, market regulator Sebi has requested the Finance Ministry to consider various tax sops and other measures for investors and a final decision in this regard would be taken by the new government.

These are part of Sebi's efforts to incentivise and channelise household savings into long-term investment products.

The Securities and Exchange Board of India (Sebi) had already approved these measures and has now written to the Finance Ministry about the proposals. The regulator would push for implementation of these measures with the new government, official sources said.

One of the proposals includes creation of a long-term investment product, Mutual Fund Linked Retirement Plan, with an additional tax incentive of Rs 50,000.

Alternatively, Sebi wants the government to enhance the tax exemption limit under Section 80C of the Income Tax Act from Rs 1 lakh to Rs 2 lakh to help make various mutual fund schemes eligible for such tax benefits.

The regulator also wants the Rajiv Gandhi Equity Savings Scheme to be brought under the enhanced limit.

At present, Section 80C provides tax exemptions on investments totalling Rs 1 lakh in various products, including certain mutual funds, insurance plans and provident fund.

However, there is no restriction on pension products launched by mutual funds but lack of tax benefits makes them unattractive.

At present, the mutual fund industry has got two retirement plans which have got tax exemptions, floated by UTI and Fidelity.

There are about 45 fund houses present in the country with total assets worth over Rs 9 lakh crore, but fund mobilisation has been tough in the past couple of years.

Under the new long-term mutual fund policy finalised by Sebi, the regulator has also asked the government to pave way for a part of Employees Provident Fund Organisation (EPFO) corpus being invested in mutual fund schemes, while the state-run companies would be encouraged to park their surplus funds with various MFs.

Sebi has asked the government that EPFO be allowed to invest up to 15 per cent of their corpus in equities and mutual funds.

Further, the members of EPFO who are earning more than Rs 6,500 per month be offered an option for a part of their corpus be invested in a MF product of their choice.

Besides, Sebi wants all Central Public Sector Enterprises (CPSEs) be permitted to invest their surplus funds in mutual fund schemes. Currently, only navratana and miniratna CPSEs are allowed to invest in such schemes

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Adani Group Gets Rs 5,500 Crore Tax Notice: Report

The Directorate of Revenue Intelligence (DRI) has slapped a Rs 5,500-crore show-cause notice on Adani group for alleged over-valuation of capital equipment imports.

The show-cause notice was issued by the Mumbai office of DRI late last week, and agency sources said the notices were issued against three companies of the Ahmedabad-based Adani Group for alleged over-valuation by Rs 2,000 crore of capital equipments for its power projects.

"We have issued show-cause notices to three Adani group power companies and are expecting their replies soon," a DRI source told PTI here today.

With over 10,000 MW of generation, Adani Power is the largest private power producer in the country and also the largest ports operator in the country with its Kandla Port overtaking the state-run JNPT last fiscal.

The DRI notices were issued to the Gautam Adani-promoted three group companies--Adani Power Maharashtra, Adani Power Rajasthan, Maharashtra Eastern Grid Power Transmission Company--and a contractor to the last entity, said the agency sources.

When contacted, a spokesman of Adani group confirmed receiving the notice from the DRI and said that they are evaluating the same and "will decide further course of action based on legal advice."

According to DRI officials, the notice followed the investigation by the agency, wherein they were probing over-valuation of import of machinery and equipment by various Adani Group firms from a UAE-based company.

It can be recalled that last November, the Central Board of Excise & Customs had reminded the Directorate General of Foreign Trade to cancel import duty benefits issued to the Adani Group in 2004.

Adani Group on May 16 announced the purchase of the Dhamra Port in Odisha from Tata Steel, L&T for Rs 5,500 crore.

Yesterday, the group flagship Adani Enterprises had reported a sixfold rise in March quarter net income at Rs 2,847.82 crore, boosted by gains from compensatory tariff for its arm Adani Power while its income increased to Rs 16,171 crore as against Rs 11,512.9 crore in the corresponding period the previous fiscal.

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Budget will address Shome panel's tax concerns: FinMin

The finance ministry might address some taxation-related concerns of industry identified by the Parthasarathi Shome-headed forum in the coming Budget of the new government.

The forum for exchange of views between industry groups and government, constituted in July 2013, identified 29 issues in direct taxes and 47 matters in indirect taxes that merited removal of the obstacles and the issue of clarifications or amendment of procedures.

“Several circulars and notifications have been issued by the Central Board of Direct Taxes and Central Board of Excise & Customs, pursuant to these decisions. Some others are in the process of being issued. Some other issues that require changes in law are expected to be addressed in the coming Union Budget,” the ministry stated on Tuesday.

The forum held 18 meetings in August-September 2013 and discussed taxation issues concerning an industry group or sector but did not entertain grievances of any individual taxpayer.

During the two-month period, the forum met every Wednesday with repr%esentatives of various industry groups and associations and covered matters relating to the information technology sector, manufacturing, infrastructure, services, including financial services, THE insurance sector including reinsurance, the export sector, and issues in international taxation.

In order to have structured and meaningful discussions, a format was devised for receiving memoranda from industry groups so as to clearly highlight the tax issue or tax dispute sought to be discussed.

The forum has helped taxpayers in resolving several long-standing issues, the ministry said, adding such consultations bring to the notice of government a tax-related issue or dispute at a preliminary stage, resulting in its resolution much before it snowballs into a greater difficultly for the taxpayer.

Issues pertaining to service tax refunds, Cenvat credit, excise duty levy on sale of goods at loss have already been addressed by the finance ministry based on the forum’s recommendations.

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How rupee depreciation will impact your investments and budget

He recent, sharp decline in the rupee will impact not just your planned vacation abroad or studies in a foreign country, but also your investments and budget. Find out how to counter its debilitating effect.

A - Monthly budget

THE IMPACT: Imported commodities like fuel or medicines, or products that depend on imported inputs for their manufacturing, will become expensive.

These can include FMCG products like soaps and detergents, which use crude oil as the base, as well as cars and electronic goods, which depend on components from abroad.

YOUR STRATEGY: Rationalise your spending by slashing discretionary spends like those on entertainment and travel, and it may help cushion the hike in prices of essential items.

B - Salary

THE IMPACT: The rupee's fall may also result in shrinking pay cheques for some, especially in industries that are dependent on imports since it results in an increase in production and operation costs.

To keep their margins intact, these companies could cut costs, one of which is human resources. Hence, doling out lower increments and a freeze on hiring may be an option.

YOUR STRATEGY: IF your skill sets are aligned only to the sector you are in, a job switch may lead to an above-average hike.

C - Investments

1. EQUITY

THE IMPACT:

- It may result in an FII exodus, both from equity and debt markets.

- It could raise inflation and the RBI may not cut rates.

- A depreciation of Rs 1 against the USD increases oil underrecoveries by Rs 9,000 crore. It's a negative for oil marketing companies(OMCs) and worsens the fiscal deficit.

- While the exporters benefit, importers suffer.

- The companies with foreign debt may find it difficult to service it.

YOUR STRATEGY

- Stay with defensive sectors like IT, pharma and FMCG for now.

- Since the RBI is not expected to cut rates soon, avoid high-beta, rate-sensitive sectors like real estate and infrastructure for now.

- Since the rupee depreciation will compound asset quality issues, it is better to concentrate on private-sector banks or some PSU banks with high asset quality.

- The government may not allow OMCs to pass on the additional import costs before elections, so avoid these till there is clarity.

- The companies with high foreign debt are in a precarious situation, so steer clear of these for the time being.

- To reduce gold consumption, the government is trying to create bottlenecks for jewellers and gold loan companies. So, this is another segment worth avoiding now.

2. DEBT

THE IMPACT

- There is bound to be a delay the expected interest rate cuts by the RBI.

- The FII outflow from the debt market due to depreciation fears can raise yields; the 10-year yield has gone up in the past few days.

YOUR STRATEGY

- Do not resort to a knee-jerk strategy shift.

- Since the interest rates are expected to come down in the medium to long term, continue to hold on to long-term debt papers and debt/gilt funds.

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State beats TN in direct tax mop-up

This is Rs 16,500 crore more than taxes collected by the neighbouring southern State of Tamil Nadu.

In financial year 2012-13, Karnataka collected Rs 49,682 as direct taxes against Rs 37,266 crore collected by Tamil Nadu.
A Central Board of Direct Tax official said tax collection from Karnataka region was improving mainly on the back of better performance of information technology firms.

IT firms professionals are increasingly opting Karnataka to be their headquarters than Chennai because of better software development in the State.

“Besides, the number of top tax paying individuals in Bangalore is increasing,” he said, adding software development in Karnataka region can be attributed better tax management.

The official, however, said that a detailed tax collection figure in individual states was not available with CBDT yet but in direct tax segment, the government has been able to collect about Rs 5,500 crore more that the revised estimate of Rs 6,41,835 crore in 2013-14.

“Since the Centre has been able to achieve the pan India direct tax collection target, we have assumed that all states have achieved their target,” the official said. Direct taxes include personal income tax, corporate tax and wealth tax.

According to a Centre-sponsored study, Karnataka has been amongst first states to take up computerisation of the core processes to improve service delivery to citizens across government departments.

IT officials in Bangalore said Bangalore Circle, which also covers Goa, has been ahead of Chennai for last six years.

“The emergence of IT and BT sector and subsequent rise of service sector too contributed a lot to IT collection. This is despite the fact that the revenue from mining in Bellary has come down drastically,” an IT officer said.

Although Goa is part of Karnataka Circle and was supposed to contribute Rs 1,500 crore of the target set by the Centre, ban on mining activities resulted in its insignificant share to Karnataka's IT revenue.

“Despite Goa's little contribution, Karnataka alone could achieve 99.5 per cent of Rs 60,000 crore target. When mining activities in Karnataka were at the peak, IT collection was beyond 100 per cent of target,” another IT official said.

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Tax board spanner in outgoing govt�s appointment plans

Senior-level appointments in income tax, customs and excise departments have been stalled for the time being after the Central Board of Direct Taxes (CBDT), the cadre controlling authority of I-T, refused to submit a list of its annual general transfers to the revenue secretary.

Sources said revenue secretary Rajiv Takru had asked the chairmen of the two revenue boards — CBDT and Central Board of Excise and Customs (CBEC) — to place lists of all commissioner-level and other senior postings in the two departments by May 7. This was objected by the CBDT as it maintained that preparing an exhaustive list would take time as the process was yet to begin.

The insistence of the revenue secretary for high-level postings had come at a time when the BJP had objected to any senior-level appointments days before the formation of a new government.

Meanwhile, the CBDT has sent a list of 1991-92 batch I-T officers, promoted to the rank of commissioners, to the finance minister for his approval while it is still in the process of finalizing list of annual general transfers.

The CBEC, the cadre controlling authority of the Customs and Excise officials, is also believed to have forwarded a list of senior officials for their transfers but the Revenue Board has not taken any decision on the two lists yet.

Sources said the revenue secretary had insisted that all Indian Revenue Service officers posted in Delhi for more than five years be shifted out of the capital to field formations.

"This was reversing the existing transfer rules where an officer depending on his place of postings could remain in the Delhi region for up to 15 years," a senior official pointed out.

Takru, a 1979 batch IAS of the Gujarat cadre, had taken over as revenue secretary after Sumit Bose retired on March 31. Takru was earlier secretary, department of financial services.

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CBDT ask officials to ensure M&As do not defraud revenue

Worried over corporates defrauding revenue by mergers and acquisitions, the Finance Ministry has asked its officials to ensure that such deals do not result in loss to the exchequer.

The revenue officials, CBDT said in a communication to Chief Commissioners, should raise concerns on tax issues while submitting their comments on mergers and acquisition deals to the Ministry of Corporate Affairs (MCA) so that they could be incorporated in reports to the high court.

The communication issued by the Central Board of Direct Taxes (CBDT) said officials should "object to the scheme of amalgamation if the same is found prejudicial to interest of revenue".

As per the procedure, M&As are required to be vetted by the high court concerned.

Commenting on the CBDT communication, Amit Maheshwari, Partner, Ashok Maheshwary & Associates, said: "This is a very welcome step as both the ministries would now work together to ensure that there is no leakage of revenue."

Going forward, a close coordination between various government departments would be required to effectively monitor increasingly complex arrangements, he added.

The MCA is required to incorporate "comments and inputs from the Income Tax Department...So as to ensure that the proposed scheme of reconstruction or amalgamation has not been designed in such a way to defraud the revenue and consequently...Prejudicial to public interest".

Under the current rules, Regional Directors of MCA are required to obtain specific comments from the I-T Department within 15 days of the receipt of notice before filing response to the court on mergers and acquisitions.

The CBDT has issued the instructions after a high court rejected its intervention application in a case of amalgamation saying the tax department has no locus standi in the matter as the Regional Director, MCA enjoys that power.

In this particular case, the CBDT tried to intervene at a later stage after it realised that the amalgamation, which was with retrospective dates, was "designed" to set off losses of loss making companies against the profits of the profit making companies of the group to the detriment of the exchequer.

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Government likely to sort out tax dispute with software companies

The government may be on the verge of bringing to an end a long-running and high-stakes tax dispute with software companies, causing consternation in the income-tax department, which believes it will lose out on revenue.

Tax officials believe that the outgoing government will soon clearly spell out the conditions under which revenue earned at client locations onsite can be taxed, putting at risk several hundred crore rupees the department has already collected.

At issue is the establishment of a "direct and intimate nexus" between software developed overseas and the India unit eligible for the tax break under the STPI scheme that ran for a decade until 2011. If the government accepts the idea put forward by software industry group Nasscom, the nexus will be established if the eligible unit in India has control and supervision, besides bearing all the expenses of offshore unit.

Further, it will apply when software developed offshore is also exported from the eligible unit to the same customers.

"A fresh circular with retrospective effect would result in government paying hundreds of crores as refunds leading to substantial loss of revenue," said a senior tax official who is directly involved in preparing a report on the tax benefits given to Indian IT companies' offshore units.

Such a report, which the Central Board of Direct Taxes sought on April 29 and wants by May 15, will establish the basis for a rule change which will allow the tax break to software companies, officials fear.

A number of large software companies, among them Infosys and IBM, are being investigated by the income tax authorities.

A Nasscom representative told ET that refunds to companies that are anyway eligible for the tax benefits that could not be claimed because of lacunae in implementation cannot be termed as revenue loss to the government. "We have been raising the issue for last two years and it would be difficult to comment on why the government has initiated the process now," the person said.

The STPI, or Software Technology Parks of India, programme is for 100 per cent export-oriented units to help boost the country's foreign exchange revenue.

Under this, IT companies are eligible for full tax exemption on income generated from software exports if they are located in special economic zones. But the rules weren't clear on revenue generated by the offshore units of Indian IT companies registered under STPI.

Following the industry's repeated request, the CBDT in January 2013 issued a circular stating that the software developed by an Indian IT company's offshore unit would amount to "deemed exports" and would be eligible for tax benefits. It also said there must exist a "direct and intimate nexus" of development of software developed abroad with the eligible units in India.

But, after the department issued tax notices to several IT companies, Nasscom approached the CBDT again and requested for further amendment, claiming confusion in the interpretation of the earlier circular.

Officials objecting to the move said the points suggested by Nasscom to establish the direct connection between the Indian business and the offshore unit aren't enough as assessments differ from case to case. "There are many companies that are not able to establish direct connection between their India and offshore units and if this circular is implemented, most of the IT companies would become eligible for tax exemptions saving them from further investigation into their revenue," said the officer.

"I don't have any specific information on companies being investigated by the I-T department," said the Nasscom spokesperson. The tax department did not respond to queries sent by ET.

The law is very clear with regard to the objection raised by Nasscom, and if at all there is any confusion, there are multiple forums to interpret the law, an income tax officer privy to the matter said.

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Contribution of direct taxes rises significantly, Senate body told

The government today said it has clarified on 76 issues related with direct and indirect taxes based on suggestions of Parthasarathi Shome panel that was set up to address the grievances of the industry.

Finance Minister P Chidambaram has discussed these issues and has taken final decisions to remove difficulties faced by tax payers, an official release said.

"The forum identified 29 issues in direct taxes and 47 issues in indirect taxes that merited removal of the obstacles and issue of clarifications or amendment of procedures. These issues were sent to the respective boards for further examination," it said.

The release, however, did not elaborate on the issues that were clarified by the panel.

Further, CBDT and CBEC have also issued several circulars and notifications to pursuant to these decisions, while some others are in the process of being issued.

Some other issues that require changes in law are expected to be addressed in the forthcoming Union Budget, it said.

In July 2013, Finance Ministry had formed the panel under Shome to exchange views between industry groups and government on tax related issues and disputes.

The forum heard views of industry groups and associations and provided the government an opportunity to explain its stand on tax related matters to the industry, the release said.

In its meetings, the forum covered matters related with information technology, manufacturing, infrastructure, services sector including financial services, insurance sector including reinsurance, export sector, international taxation.

clarity in taxation laws, stable tax regime, non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary to provide assurance to investors.

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Budget focuses on construction, renovation

 

The Shivaji University, Kolhapur (SUK) declared its budget for the upcoming academic year 2014-15 on Thursday in its annual senate meeting. The budget estimates expenditure worth Rs 278.68 crore compared to deposits worth Rs 274.34 crore.

The estimated expenditure has increased by Rs 24 crore compared to that in last year's budget. Last year, the university spent Rs 254 crore compared to deposits worth Rs 249 crore.

Management council member D T Shirke while presenting the budget said the deficit would be covered through research and development funds and remaining funds from the depreciation cost.

The university budget for the upcoming academic year focuses more on construction and renovation of the academic and administrative buildings across the campus. "Provision of Rs 1 crore has been made in the budget for construction of a new hostel at the SUK campus that would accomodate as many as 1,000 students," said Shirke.

Currently, there are four boys' and two girls' hostels, which accomodates around 1,000 students. "With the rising number of courses as well as students and insufficient hostel buildings to accomodate more students, the decision to construct the new hostel was taken for which preliminary provision of Rs 1 crore has been made. The amount will be increased according to the progress of the work in coming years," Shirke added.

Apart from the new hostel, the department of chemistry too would get a new building and provision of Rs 80 lakh has been made for its construction. Also, the computer science department would be shifted to the additional floor of the department of technology building for which funds worth Rs 2.20 crore have been granted.

The budget has also proposed a whopping Rs 3 crore for the work of extension of the library building. "The construction, which was started last year, is still under progress and the current budgetary allocation would only speed up the work. We hope to get the first floor ready by the end of the upcoming academic year, which would help to start a reading room for 400 students," added Shirke.

A provision of Rs 50 lakh has been made for the continuation of construction of a compound wall, which has been marked as an important issue by SUK. "The university is facing legal hurdles involving the southern side of the campus near Rajendranagar, which is hampering the work," he said.

An amount of Rs 35 lakh has been granted for renovation of the university guest house. While the examination department has been granted Rs 25 lakh for its development, provision of Rs 13 lakh has been made for the department of foreign languages.

Members of the Shivaji University Teachers' Association said, "Despite being granted financial help, irregularities in the examination department continues to a matter of concern."

Senate member S A Bojgar said, "The budget does not provide any new sports initiatives."

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Finance ministry gets on with Budget work, seeks tax inputs from industry

The finance ministry has started the exercise of making the full year Budget for 2014-15 even though it is for the next government to take a call on whether the policy directions would change.

An entrenched policy on taxation in recent years has been that of widening the tax base, phasing out profit-linked incentives and correcting inverted duty structures.

The ministry has sought inputs from the industry specifying that suggestions have to be in line with these broad policy objectives. Changes in both direct and indirect taxes will be considered to broaden the tax base and to simplify the tax structure. “As regards direct taxes, the government’s policy is to phase out profit linked deductions and minimize exemptions,” the ministry said in a note inviting suggestions on the budget.

While the new government that comes into power after the elections will not have enough time to take up the proposed Direct Tax Code (DTC) in the full budget for 2014-15, it could decide whether to continue with the 10% surcharge on personal income above Rs 1 crore introduced in Finance Act 2013-14. If retained, it would mean continuation of the higher tax liability for affluent tax payers without adopting the super rich tax proposals in the DTC. The 10% surcharge takes the total tax liability of those coming under the top 30% slab to 33%, very close to the fourth slab of 35% proposed in the revised DTC.

The government has been gradually phasing out the profit-linked deductions in favour of introducing investment-linked deductions. The policy is expected to continue in the new government as well. Most of the profit-linked tax deductions for businesses such as oil and gas exploration, refining and power generation already have terminal dates in the existing Income Tax Act.

The benefit of phasing out profit-linked deductions will come to exchequer only after 2016-17 as those who started businesses just before the terminal dates specified in the Act would get the benefit for the specified number of years. In indirect tax, the focus is likely to be to improve administrative efficiency and to enhance tax collection using IT tools.

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Chidambaram flays Swiss stand on tax dodgers

In a strongly worded reply to his Swiss counterpart, Finance Minister P Chidambaram accused Switzerland of protecting tax evaders whose names appeared in the HSBC Bank list.

"Refusal to provide assistance in cases where evidence has been collected by the Indian tax authorities, for the reason that the names of the persons concerned existed in the HSBC bank data, amounts to Switzerland providing protection to taxpayers found to have evaded Indian taxes, and seriously undermines India's efforts in tackling offshore tax evasion and stashing of unaccounted income abroad," he said in a recent letter to Swiss Finance Minister Eveline Widmer Schlumpf.

Reiterating India's position that the data was legally obtained from France under Indo-French tax treaty, Chidambaram said India's views were shared by other members of the global forum and unless the issue was addressed India would continue to take position at the global forum that the legal and regulatory framework for an effective exchange of information was not in place in Switzerland.

A disgruntled employee of HSBC Geneva has stolen the data from the bank branch. The French government got hold of the data and shared it with India through the legal channel.

The finance minister said that the interpretation made by Switzerland that it could not share the stolen information as per India's request was not in accordance with international standards.

Chidambaram warned that an effective exchange of tax-related information was extremely important for economic co-operation between the two countries and Switzerland must honour its rights and duties agreed to in their bilateral Direct Tax Avoidance Convention (DTAC).

In a meeting with Swiss delegation in February, India had demonstrated that in many of the cases mentioned in the HSBC list tax authorities had gathered incriminating evidence of tax evasion through their own investigation and actions. Thus India wanted Swiss authorities to consider its request for information independently of the stolen data.

"However, the Swiss delegation insisted on a pre-condition that India needs to demonstrate that the investigation carried out in these cases was initiated independently of the HSBC data and was based on information already available with the India authorities prior to receiving the HSBC data from France. These are unusual preconditions and are intended to refuse assistance," Chidambaram said.

In its last letter to India, Switzerland informed that its Parliament approved amendment to a law that seeks to make exceptions to the requirement of prior notification of account holder and assured that the legislation would come into effect from July. The finance minister expressed satisfaction over this.

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DTC may result in higher tax-GDP ratio and discourage corruption

Most readers must be aware that over the past few years there has been a proposal in the works to replace the current Income Tax Act, 1961 by the Direct Tax Code (DTC). Actually, it was way back in August 2009 that the first draft of the DTC was released. Thereafter, after considering inputs from various stakeholders, a revised DTC was introduced in the Lok Sabha on 30th August, 2010. Subsequently it was referred to the Standing Committee on Finance (SCF) which presented its report on the DTC to the Speaker in March 2012. A number of suggestions made by the SCF were accepted while some were rejected and a fresh DTC Bill was drafted. The following is what we could reasonably expect to be our new tax rules as and when the DTC Bill is passed into an Act.

SCF Recommendations that are proposed to be accepted

Some of the recommendations of the SCF which are proposed to be accepted are as under:-

(1) Tax rates to be moderated for individual taxpayers to encourage voluntary compliance.

(2) Tax deductions to be oriented more towards long term needs like social security.

(3) The age for senior citizens to be lowered from 65 years to 60 years (this has already been done).

(4) The law to be framed such that a smooth transition to investment linked incentives takes place.

(5) ‘Grandfathering’ provisions to be instituted so that the existing tax benefits are phased out in a uniform and non-discriminatory manner ensuring smooth transition to DTC provisions.

(6) A distinction to be made between commercial and non-commercial renting of properties while taxing Income from House Property.

(7) Currently, interest on loan given by employer is not an allowable deduction in respect of self occupied house property. This anomaly to be corrected in the DTC.

(8) Where compensation is received on compulsory acquisition of an investment asset, the period for acquiring the new asset for the purpose of relief from capital gains should be reckoned from the date of receipt of such compensation.

Currently, the dividend distribution tax is to be levied at the rate of 15%. This creates a tax arbitrage and benefits those high net worth taxpayers whose primary income is through dividend from shares

And those that are not to be accepted:

Only those recommendations of the SCF which were not in broad harmony with the taxation and fiscal policy of the government have not been accepted. The key provisions not to be accepted are:

(1) The SCF has recommended revised tax slabs as (a) 0-3 lakhs – Nil; (b) 3-10 lakh – 10%; (c) 10-20 lakh – 20%; (d) beyond 20 lakh – 30%: This suggestion would have resulted in approximate revenue losses of Rs. 60,000 crore. Hence it was decided to keep this proposal in abeyance for the time being.

(2) The SCF had also proposed to link the basic exemption limit for income tax to the consumer price index: However, this suggestion was not accepted as complications could arise if the base of the index or the commodity basket changes. Second, it would lead to changes which are not multiples of whole numbers. Third, indexing the slabs to inflation index is not a comprehensive approach as the slab structure is dependent on a number of factors including other reliefs given to a taxpayer, potential revenue loss to the Government, number of taxpayers who would go out of the tax net etc.

Abolition of Securities Transaction Tax (STT): STT is required to regulate day trading. Further, the rate of STT has already been reduced significantly – hence the proposal was not accepted.

Levy of Dividend Distribution Tax (DDT) on insurance policies: This suggestion was made with a view to provide parity in treatment of equity based insurance and mutual fund products., As this would negatively impact the insurance industry, this proposal was not accepted.

Some other amendments brought in through the Code

Wealth-tax: The current Income Tax Act so also the earlier DTC Bill sought to tax only unproductive assets for levy of wealth-tax. This substantially reduced the base for wealth-tax. The revised Bill captures all assets for wealth-tax, whether physical or financial, thereby removing the distinction between physical and financial assets. Wealth-tax is proposed to be levied on individuals, HUFs and private discretionary trusts at the rate of 0.25%. The threshold for levy of wealth-tax in the case of individual and HUF is currently proposed to be Rs.50 crores unless changed later.

Additional Dividend Distribution Tax

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Karnataka overtakes Tamil Nadu in income-tax collections

Tamil Nadu, including Puducherry region, ended the year with collections of Rs.42,500 crore, marking an increase of 14 per cent over the corresponding period last year. This is the first time that collections have crossed the Rs.40,000 crore-mark and this excludes tax refund of Rs.4,500 crore. Last year, Tamil Nadu region failed to achieve its budget target collection of Rs.40,528 crore, and ended the year at Rs.37,271 crore.

Talking to The Hindu, a senior official said Karnataka, with collections of Rs.59,000 crore, overtook Tamil Nadu due to the presence of a large number of information technology firms and banks that were doing well. But Tamil Nadu suffered due to poor performances of manufacturing, automobile, leather and textile sectors. “We could easily topple Karnataka, when these sectors register higher growth volume,” he added.

According to him, Tamil Nadu region has 24 lakh assessees, of which 20.85 lakh are individuals, 1.65 lakh firms and 22,000 companies. A sum of Rs.20,000 crore was collected through tax deducted at source (TDS) and 36,000 assesses filed e-returns since January.

The official said that they had started collating information about high-value transactions from various sources, and these were cross-checked with the income-tax returns that were filed later by assesses.

He asked assessees to quote their Permanent Account Numbers (PAN) in each transaction, and mention the transaction details.

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Direct taxes favoured: think tank floats Rs 200 billion taxation proposals

Institute for Policy Reforms (IPR), a policy think tank on Wednesday floated Rs 200 billion taxation proposals for upcoming budget (2014-15) with almost 55 percent of the additional revenues accrued through direct taxes.

Sharing the budget proposals of the IPR at an event on Wednesday, top economist and managing director IPR Dr Hafiz Pasha said that the proposed revenue target for the FBR in 2014-15 is Rs 2,700 billion representing a growth rate of 20 percent. With normal growth, FBR revenue is likely to reach Rs 2500 billion. Therefore, taxation proposals are required which could yield Rs 200 billion in 2014-15.

Almost 55 percent of the additional revenues accrue from proposals in direct taxes. This will make the tax system more progressive and convey the right signals to the people. Pasha said that the estimated tax expenditure of income tax has been worked out at Rs 260 billion including Rs 110.1 billion income tax exemptions; tax deductions and allowances Rs 98.3 billion and concessionary tax rates Rs 37.7 billion.

Proposing Rs 200 billion taxation proposals for 2014-15, the renowned economist said that 55 percent of the additional revenue would come from direct taxes. He focused on rationalisation of tax expenditure in income tax. In the next Finance Bill of 2014-15, it has been proposed to tackle the issue of under taxation of Capital Gains on Securities. This will involve enhancement in the withholding tax on shares/securities traded in the stock exchanges, in lieu of capital gains. The proposal is to introduce Securities Transaction Tax, of the type that exists already in India. The suggested rate is 0.5 percent of the traded value of a share. Suitable arrangements will have to be made by FBR to ensure that this tax is fully collected. Exemption of income of certain trusts, NGOs, etc: This will only become applicable if the business income exceeds 50 percent of the total income (including charitable contributions). The taxable business income may be taxed at the reduced rate of 20 percent.

Tax deduction on provisioning of banks: This provision is contained in the Seventh Schedule of the ITO. The proposal is to restrict this benefit only to bad loans to SMEs, agriculture and exports. Tax deduction on pensions: Pension contributions already enjoy tax deductibility. The present system of also exempting pension income, in effect, provides a double benefit. As such, the second benefit is proposed to be withdrawn, especially in the case of retired corporate executives, for annual pension income in excess of Rs 750, 000.

Concessionary rate of sales tax: There is a tax rebate of 2.5 percent if sales are made only to registered persons. This is proposed to be withdrawn, as some buyers may be genuine small tax payers. Concessionary rate on dividends: All dividends may be subject to the standard rate of 10 percent. Concessionary rate on teachers: The partial concession currently available may be withdrawn.

He said that currently, different forms of unearned capital income are taxed as separate blocks of income. The proposal is to make a transition from scheduler to comprehensive income taxation. As such we recommend the withdrawal of the presumptive and final tax of 10 percent on dividends, interest from bank deposits, profit on government securities and prize bonds.

This may be replaced by a minimum withholding tax of 10 percent, which will make the tax system more progressive and also raise additional revenues. He was of the view that capital gains on property is more in the nature of income and should be within the fiscal powers of the Federal government. However, the focus should be on taxation of real, net nominal gains. Overall, the above three sets of proposals will signal the more towards progressive taxation, especially through broadening of tax to more effectively cover capital gains and unearned incomes.

Dr Pasha said that the 'big move' expected this year is the large-scale withdrawal of SROs, providing for special exemptions or concessions, in import duties and the GST. This is in the form of a Structural Benchmark in the IMF Program, to be implemented by June 2014.

The major Chapters of the Harmonised System which enjoy the largest tax breaks due to SROs are mostly either intermediate or capital goods, with the exception of automobiles which fall largely in the consumer good category. The impact of SROs, consequently, is an enhancement in effective rates of protection (ERPs) to domestic industry. For example, the ERP of the automotive sector is as high as 116%, according to Pasha (2012), due largely to SROs.

While many of the SROs represent the lobbying efforts of influential industrial groups, an indiscriminate and large-scale withdrawal could constitute a big 'negative shock' and lead to some displacement of domestic industry. Therefore, two basic principles need to be observed in the rationalisation of import duty SROs as follows:

Principle 1: No withdrawal of SROs on basic food items falling in Chapters 1 to 23.

Principle 2: Cascading down the statutory rate of import duties as follows: Rate of import duty on raw materials 5 percent, machinery 5 percent, intermediate goods 15 percent finished goods be subjected to 25 percent.

Simultaneous withdrawal of SROs and scaling down of import tariffs will enable industry to absorb the big move, while leading to a simpler and more transparent import tariff regime.

On the withdrawal of sales tax SROs, he said that the principal imports benefiting from SROs are capital goods (41 percent) and intermediate goods (38 percent). Bulk of the sales tax paid on these goods will be tax invoiced away as inputs into domestic production. Therefore, while the removal of these SROs may remove distortions, it will not contribute as much to additional revenues as is generally anticipated. SROs in the domestic component of the GST are limited. Excluding items in the Sixth Schedule, there is a case for withdrawal of SROs.

As proposed in the Finance Bill of 2013-14, reduction in the corporate income tax rate by 1 percent each year to 30 percent finally. As such, the rate for 2014-15 will be 33 percent. Scheduled banks have been excluded from this benefit. It is proposed that they may also be included, subject to the condition that 25 percent or more of incremental advances during a year are to micro finance, SMEs and agriculture combined. It has been proposed to increase in the tax credit for balancing and modernisation from 10 percent to 20 percent. It further proposed ten year tax holiday for power sector. The initial depreciation allowance has been reduced from 50 percent to 25 percent in the Finance Bill of 2013-14. It is proposed that from the second year onwards the rate of depreciation admissible may be increased from 10 percent to 15 percent.

The IPR proposed to bring down the rate of withholding tax in telecommunications from 15 percent to 10 percent. On the sales tax side, it proposed to raise the threshold level in GST from turnover of Rs 5 million to Rs 7.5 million, in line with past inflation. Allow input tax invoicing of machinery in line with the accelerated depreciation allowance in income tax.

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New direct tax debt collection powers will not put taxpayers into financial difficulty

According to a consultation setting out the details of the proposed new power, around half of the expected 17,000 affected cases a year would involve debtors with more than £20,000 in their bank or building society accounts; while the average debt that would be collected was £5,800. The proposals are intended to allow the recovery of tax and tax credit debts from businesses and individuals that are able but that have actively refused to pay what they owe, the government said.

Exchequer Secretary to the Treasury David Gauke said that HMRC's new direct recovery of debts (DRD) ability would help to "level the playing field" between "honest" taxpayers and "the minority that dodge their responsibilities".

"The government's long-term economic plan is to reduce the deficit so that we deal with our debts," he said. "It is therefore important that people pay the tax they owe, on time. Although the vast majority do this, there is still a minority that chooses not to pay, despite being able."

"Providing HMRC with the powers to directly recover tax debts will reduce the debt owed to HMRC in the most effective way so that the government can continue to fund vital public services. Making this change will align the UK with other countries whose tax authorities use similar powers," he said.

As part of March's Budget, the Chancellor of the Exchequer announced that HMRC would be given the power to take money directly from the personal bank accounts of tax debtors who owe more than £1,000 in tax or tax credits. According to the consultation paper, HMRC would be able to use this power to recover money from bank accounts, building society accounts and ISA accounts. It would be used to recover unpaid tax debts, overpaid tax credits, unpaid National Insurance contributions and unpaid fines.

Only those debtors owing more than £1,000 and who have repeatedly ignored a minimum of four attempts by HMRC to make contact would be targeted using the new power, according to the consultation. The department would proceed by placing a hold on debtors' accounts and giving them 14 days to contact HMRC and arrange payment before any money was taken. Only those with "established" debts and who are now time-barred from appealing against HMRC's decision would be targeted by the new procedure, according to the consultation.

HMRC said that it would continue to provide a "flexible range of support for those who would like to pay on time, but find it hard to do so" once the new power became available, which is expected to happen in time for tax year 2015/16. It currently allows taxpayers to request a 'time to pay' arrangement, which could include paying any tax owed in instalments.

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Discussion on fixed assets

In the previous article of this series, we took a look at one of the components of a balance sheet - 'Source of funds' and what its key constituents are. In the next few articles, we will take a look at the other component of the balance sheet - 'Application of funds' and some of its key constituents. As mentioned earlier, 'Sources of funds' indicates the total financing that a company has done. In simple terms it shows how a company has got the funds which it has used to purchase its assets.

As such, Total assets

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India, others need to wait till 2017 for automatic tax info

10 Google inventions that could change your life

With Ara, people can customise basically every aspect of their smartphone. And you can kiss expensive phone upgrades goodbye.

Sony Xperia Z2 smartphone: First ImpressionsSeven advanced watches that do more than just tell timeModi: The one man show

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Filing tax returns? Ways to avoid errors or invite a tax notice

Made huge profit selling your property & want to avoid paying tax? Form a political partyIndia, others need to wait till 2017 for automatic tax infoFiling income tax return? Here are changes in ITR form you must be aware ofChildcare plans give better returns than PPF, FDsMore »

News in Pics1/20Large scale sugar-coated sphinx in Brooklyn

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India Cheapest Major Economy, Australia Most Expensive: Survey

Notwithstanding its high inflation rate, India is found to be the cheapest major economy in the world, according to a survey by Deutsche Bank.
 
A weaker Indian rupee has allowed the country to remain the cheapest major economy in the world despite persistently suffering the highest inflation rate, the German banking giant said in its report.
 
"The fact that India still runs a large current account deficit illustrates that being competitive is more than just being cheap," said the report titled 'The Random Walk, Mapping the World's Prices 2014'.
 
Australia is overall the most expensive major economy, while the United States is the cheapest developed country.
 
Brazil remains very expensive for a developing country, the survey said, adding that China remains very cheap in some categories like car rentals, while for a number of branded goods, it is more expensive than the US.
 
In many categories China is steadily converging on US prices.
 
"For a number of branded goods like Levi's jeans, Adidas shoes and iPhones, we found it to be more expensive than the United States," the report added.
 
Singapore remains, by far, the most expensive place to buy a car and HK for renting office space.
 
Zurich was also found to be exceptionally expensive in many categories so much so that a haircut in Zurich can cost about fifteen times that in an Indian city.
 
Kuala Lumpur and Mumbai were termed the cheapest places for a weekend holiday while Sydney was found to be the most expensive, as per the report.
 
It is much cheaper to spend a weekend in Tokyo than in Sao Paulo or Moscow. Indian cities are the cheapest places for a movie-and-burger date, while Cape Town, Johannesburg, Manila and Mexico City are also affordable. London is the most expensive city for a date.
 
In terms of hiring and deployment of an MBA, Johannesburg is the cheapest place while we recognise the problem of comparing quality across countries and business schools, the US, UK and France are very expensive places to hire and deploy an MBA from a top school.
 
Interestingly, it is almost as expensive to deploy a graduate from a top school in Mumbai as it is in Singapore.      
 
The survey is an overview of prices and price indices of a wide array of goods and services from around the world.
 
The data was culled both by directly surveying prices posted on the Internet and from secondary sources that have collated such data.
 
"In order to ensure that prices are comparable across countries, we have tried to use products that are standard across countries or have close substitutes," the report said.


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Black Money: India, Others Sign Pact on Tax Information

India and a number of other countries, including Switzerland, have adopted a global declaration for automatic exchange of tax information, Finance Minister P Chidambaram said today.

The adoption of the Declaration on Automatic Exchange of Information in Tax Matters last week comes in the backdrop of India stepping up pressure on Switzerland to share information on alleged funds stashed away by its citizens in Swiss banks.

"The declaration recognises that investments kept offshore by taxpayers should not go untaxed. It stresses that a key aspect of cooperation between tax administrations is effective exchange of information on automatic basis subject to appropriate safeguards," Chidambaram said in a statement.

On May 6, 46 countries, including India, besides the European Union, meeting under the auspices of the OECD, adopted the declaration, Chidambaram said.

The Paris-based Organisation for Economic Cooperation and Development (OECD) sets the global tax standards and frames conventions against tax frauds, among others.

Noting that efforts made by India and other OECD/G-20 countries are bearing fruit, Chidambaram said, "I believe that the day is not far off when all major financial centres will be parties to an effective exchange of information on automatic basis".

"We intend to continue to pressure Switzerland to ratify the Multilateral Convention on Mutual Administrative Assistance in Tax Matters as well as abide by its obligations under the Declaration that it signed on May 6, 2014," Chidambaram said.

"Switzerland is a signatory to the convention but it is reported that Switzerland has not yet ratified the convention. The declaration called upon all countries to sign and ratify the multilateral convention," Chidambaram said.

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11 Tips to spend your annual Bonus

So, I am herewith .

Tips to spend your annual bonus effectively:-

Tip -1 Revisit your financial plan to fill gaps:-

Best time to review your financial plan is bonus time. Since you got something extra which can fill up gaps of your financial plan.

Revisit your portfolio and see if you could find some shortfall against your goals. Bonus can be used to fill this shortfall.

Tip -2 Repay your Loan:-

Another Best way to utilize extra money is by doing repayment of your loan. You can prepay home loan, personal loan, education loan etc. Remember prepayment of principal at earlier stage will give you higher benefit.

Also read:-  Prepayment of Home Loan Good Decision

Tip -3 Improve your Home:-

Improving your home facility by using bonus money is good idea. Your home is probably single largest investment and you can enhance value of your home by spending money on maintenance or upgrades. This will make your home a better place to live.

Tip-4 Party with your Family:-

Don’t blow off entire bonus on party. You can use portion of extra money (approximate 10%) to party with your family.  You can also plan to have holiday which you can’t afford on normal course.

Tip -5 Emergency Fund need:-

Bonus could be very good way to fill gaps of your emergency fund. It is advisable to keep 6-10 month of your monthly expense as emergency fund. If you have not build emergency fund yet it is time to look in to.

Tip -6 Tax Saving need

Running last minute to invest for tax saving need is not good idea. This time plan your tax saving need in advance utilize some portion of bonus money to fulfill your tax saving need.

Tip -7 Insurance need

Insurance is vital need today. If you are not insured or under-insured try to utilize bonus fund to fulfill your insurance need. Purchase good term plan. For your benefit Comparison of 27 Term plan is given here.

Tip – 8 Build passive income source

It is always better to keep some extra source of income. If you don’t have any extra source of income you can think of building extra source of income. You can read more about passive income here.

Tip – 9 Lay foundation for property ownership

If you are living in rented house it is time to utilize bonus amount to lay foundation for property ownership. You can use bonus amount for down payment for your property. Remember you can get home loan up to 85% & rest all you have to finance on your own.

Tip -10 Enhance your skills

It is good idea to spend 10% of your bonus on enhancing your skill. This could be either adopting some course or learning CD or books.

Remember skill enhancement can help not only on your current role but also make you future ready for next job role.

Tip – 11 Don’t forget to Share your Bonus

Last tip to spend your annual bonus is to share your bonus with needy people. Yes I am taking about doing some charity for the cause that is nearby your heart. Give charity and enjoy power of giving!

Do share your idea to spend your annual bonus!

If you like this post don’t forget to share it with your friends!

Don't Miss:-

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7 Must Financial Products for Retirement Planning

Retirement planning is essential task. Especially in countries like India where we don’t have any social or financial security scheme by government.

Rising Inflation number, slow economic growth & mis-selling of financial products make this task even more complex and challenging.

In this article, we will discuss about .

7 Financial Products for Retirement PlanningEquitiesEquity is one of the best financial products in terms of returns. Probably none of the financial instrument can match it. You must invest in good stock for retirement point of view.

Select stock from long term prospective at least 10 year or more and keep your emotion under control during upward and downward movement of market.

If your stock is not performing well you may review and switch over to another good stock. If you are not good at selecting good stock invest in stock market through Mutual funds route.

Real EstateReal estate is another product from retirement prospective. Historically real estate has given good return & it is expected to give good return in future also.

Remember real estate is risky affair as it involves large amount of black money. You must consider few points before buying property for investment.

Gold ETFGold EFT is another financial product where you must park your money for retirement. Gold is good hedge against inflation. In Gold ETF you can purchase gold unit every month rather than buying gold in bulk. This will give you benefit of cost averaging

For more information about Gold ETF please visit:-  Smart way to invest in gold

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Stock and Real Estate can rock your retirement

Recently we have read about 7 must financial products for retirement planning; today we will discuss advantage and disadvantage of stock and real estate investment and how these assets can rock your retirement.

Stock and real estate investment is risky affair and very few people participate in these two assets but believe me these two assets can rock your retirement by providing highest returns.

Let me share real life example my friend has purchased 100 shares of Infosys in 1995 through IPO. Total investment done by him was 9500 Rs/-. With multiple split and bonus announcement today he is holding 12,800 infosys shares worth 4 Cr. (dividend extra). With this amount he is likely to live his retirement life easily.

Similar to this we have enough examples in stock market starting from Warren Buffet to Rakesh Jhunjhunwala who made their fortune because of stock market. Similarly in real estate you will find names like Donald Trump and Hirnandani who made their fortune. Before you start investing in stock market and real estate let’s look at advantage and disadvantage of both.

Advantage of Investing in Stock Market –

High liquidity:- Stock market investment offers good liquidity. You can quickly get into, and quickly get out of it.Easy Entry:-  It just take minute to invest in stock market however good amount of homework is required before investing in stock market.Capital Appreciation: – You can expect capital appreciation from good stock in shorter time.Tax Advantage:- Dividend income from stock is tax free and if you hold stock for longer duration capital gain from stock is also tax free.Cash flow:- It offers cash flow in terms of dividendDisadvantage of Investing in Stock market:-

No Control:- You have no control over stock market ups and down.High Risk:-  Stock investment is risky in nature you may end up by making loss.Volatility:- Stock prices can rise and fall dramatically, especially in uncertain economic times.No Leverage:- You cannot borrow capital for investing in stock market 

Real estate investment means buying property like land, apartment, flat, commercial property etc.

Advantage of Investing in Real estate

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Apply and Verify PAN card details online

PAN (Permanent account Number) is 10 digit alphanumeric identifier issued to individual and company under income tax act 1961. It is issued by Income tax department. PAN number is mandatory for doing any and every financial transaction in India.

Today we will discuss following:-

HOW TO APPLY FOR NEW PAN CARD ONLINEVERIFY PAN CARD DETAILSHOW TO GET DUPLICATE PANHOW TO CORRECT PAN CARD DETAILSHOW TO APPLY FOR NEW PAN CARD ONLINE

New PAN card can be issued by UTI or  NSDL.  For applying for PAN card one need to fill following form.

FORM 49A: - To be filled by Indian citizens including those who are located outside India.

FORM 49AA: - To be filled by foreign citizens.

An applicant will fill Form 49A online and submit the form.Online application for PAN card -NSDL click here.

Online application for PAN card -UTI click here.

A confirmation screen with all the data filled by the applicant will be displayed.On confirmation, an acknowledgement will be displayed. The acknowledgement will contain a unique 15-digit acknowledgement number.The applicant is requested to save and print this acknowledgement.Individual’ applicants should affix two recent color photographs with white background in the space provided in the acknowledgement.Apply Signature / Left Thumb Impression within the box provided in the acknowledgement.Fees of processing PAN card application is 105 Rs/- if communication address is within India and 971 Rs/- if communication address is outside India.This payment can be done online on successful credit card / debit card / net banking payment acknowledgement will be displayed. Applicant shall save and print the acknowledgement.Send application and acknowledgement to NSDL (‘Income Tax PAN Services Unit, NSDL e-Governance Infrastructure Limited, 5th floor, Mantri Sterling, Plot No. 341, Survey No. 997/8, Model Colony, Near Deep Bungalow Chowk, Pune

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3 Good News; RBI abolish prepayment penalty, minimum balance charges

Reserve Bank of India (RBI) has given good news to end customer. Keeping consumer protection in mind RBI release 3 major mandates to Banks.

1. NO Prepayment penalty charges for floating rate term LoanProviding major relief to borrowers RBI directed banks not to Levy of foreclosure charges/pre-payment penalty on Floating Rate Term Loans.

RBI notification  released today clearly says that

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5 Midcap Stocks to sell before election result

. Today we will discuss about 5 Midcap Stocks where you can book profit before election result.

Stock market is blooming because FII and domestic Investor are continuously buying stock. Everyone is assuming that country will get better government under leadership of Narendra Modi but what happen if election results are adverse. Adverse election result will adversely affect stock market & market may crash. If market crash on 16th may few midcap stocks will be badly affected we are herewith details of these stocks.

Adani Enterprise:-

Our first pick for profit booking is Modi Stock

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Jhunjhunwala became billionaire by not selling anything

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As the name of rakesh jhunjhunwala is involved I tried to find out how this book can help our readers. This book is work of fiction about entrepreneur who wanted to sell a product called NOTHING. He approached billionaire Rakesh Jhunjhunwala who dismissed his idea and gave Rs 1 lakh asking him to seek help of psychiatric. The Entrepreneur invested this money to manufacture nothing and assign some stake to Rakesh Jhunjhunwala in the company as a sign of gratitude. Stock of this company climbs high as filmstar, politician displays interest in nothing. At last company was sued by other company because of idea copy.

Learning from this book:-

Only invest in business that you understand.Entrepreneurs sees opportunity in everything even in

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Habits of the richest people

I have a dream to become one of the richest people like Bill Gates, Warren Buffet or Mukesh Ambani.   Do you follow same dream?  If yes you are at right place. In this post I will be sharing habit of top richest people in world.I have carried out research and found that world richest people comes from various backgrounds. There are, however certain traits that are common amongst them.:-Rich people have vastly different daily habits than poor people. Habit of rich will transform your life and bring financial success. So in order to become the richest people you must learn What The Rich Do… That The Poor Don’t

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File Your Income Tax Return from Desktop

Now you can . You need not to visit e-Filing site to upload your XML return file. Income Tax Department has released Java based utility by which allows you to file tax return by single mouse click. Visit to tax site is not required but Internet connectivity is mandatory for this utility. This utility is available for ITR1, ITR4S & ITR7.New ITR JAVA UTILITYThese utilities are developed using the latest in JAVA technology and effort has been made to make it user friendly, simpler and faster for preparation & submission of tax returns. Please make sure you're connected to the internet to get seamless experience while using this utility.

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10 Innovative startup business ideas

Want to start a business but don't have good startup ideas? Well today I am going to share .I am sure that these startup business ideas will give extra dimension to your thought on new business.10 Best Startup Business Ideas(1) Green & Clean technology Business:-Soon World is going to face scarcity on natural resources. This can bring very good business opportunity. Yes I am talking about green and clean technology business.

Business ideas based on Green & Clean technology areContinue Reading:- http://moneyexcel.com/5393/10-best-startup-business-ideasPosted byMoney Excelat20:22

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10 quick ways to double your money

Want to double your money in shortest duration, well you are at right place today we will share 10 quick way to double your money.Time required to double your money depends upon return given by investment option. However there is standard thumb rule called as “Thumb rule 72”.What is Thumb Rule 72?Rule 72 will gives you information about time require to double your money. This rule says that divide 72 by expected annualize return and it will give you time when your money will get double.E.g If you invest 100 Rs/- and expected annualize return is 10% than this money will get double in 72/10

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7 Easy ways to Increase your income

Today biggest worry of common man is inflation. Inflation effect adversely to common man by killing his/her purchasing power. To fight with inflation it is extremely important to increase your income..
Simplest way to increase your income is to develop second source of income. If you are good at teaching refresh your memory and start tutoring students in your society/ area. If you are good, word will spread and in no time will you have many students.If you have extra money lying idle in bank or at your home reutilize that money for investing in good investment avenues to increase your income.  This is called as making money by money.Try to become sleeping partner in small business to earn extra money. For example fast food chain and coffee shops always looks for such partner to expand their business.Invest your money in buying residential or commercial property. Once you get possession let out this property to get good return. Good source of passive income.Associate yourself in good network marketing or multilevel marketing company like Tupperware, Amway. If you are very good at marketing your income will touch the sky. This business does not even need big investments and can be started quickly.Continue Reading:- Posted byMoney Excelat15:53

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35% Tax Slab on Super Rich DTC Draft

Government is about to implement Direct Tax code. Revised draft of DTC is posted on finance ministry website today. As per new DTC draft exemption limit at Rs 2 lakh is kept as it is and forth slab is introduced for super rich. Draft said tax the super rich heavily.  Proposal is new tax slab of 35% for income exceeding Rs 10 crore.In our earlier post we have debated a lot on taxing super rich at higher rate.

The DTC Committee had proposed following:-
Continue Reading:-

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Black Money: Switzerland Says Info Requests Beyond Tax Pact Can't Be Entertained

With India stepping up pressure for data on alleged illicit funds parked in Swiss banks, Switzerland has asserted that it cannot positively respond to requests which are beyond the ambit of bilateral tax treaty.
 
Reiterating that it is committed to fighting tax evasion, Switzerland also said both nations should respect their national and international legal obligations.
 
The Swiss government's latest response comes against the backdrop of Finance Minister P Chidambaram shooting off another letter to his Swiss counterpart raising concerns about the Alpine nation denying information on alleged unaccounted money held by Indians in banks there.
 
In the letter, Mr Chidambaram had strongly objected to Switzerland's denial of information about account details of certain Indians at HSBC's Swiss bank branches, in whose cases "incriminating evidence of tax evasion" have been found.
 
"Like India, Switzerland is committed to fighting tax evasion and in this regard wishes to cooperate with India in the matter of administrative assistance within applicable law," a Swiss Federal Department of Finance spokesperson told PTI from Bern.
 
Cooperation on tax matters between the two countries are based on the Double Taxation Agreement (DTA), which was amended by a protocol in August 2010.
 
"This agreement, which is in line with the international standard, allows for the exchange of foreseeably relevant tax information related to fiscal years from 2011 on," the spokesperson said.
 
"On this basis, several requests have already received a positive response by Switzerland, including requests related to banking information. Requests that do not meet the provisions set out in the DTA cannot be answered positively."
 
Mr Chidambaram has written at least three letters to his Swiss counterpart Eveline Widmer Schlumpf within four months on the matter of sharing information about alleged illicit funds parked in banks there by Indians. 


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A Modi-Led Government Will Be Positive for Rupee

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A Reuters poll shows the rupee will likely trade near Thursday's rate of 60.0 over the next three months before falling to 62.30 in a year, slightly lower than last month's consensus.

While the outcome of national elections will likely have a positive impact on the rupee if the opposition Bharatiya Janata Party's pro-business leader Narendra Modi was to form a new government, analysts said the wide balance of payments gap coupled with a high current account deficit will prevent any sharp gains.

The yuan will reverse its recent weakening trend and strengthen over the next year due to the country's large trade surplus, while the rupee will likely dip a little, the poll showed on Thursday.

The yuan has weakened more than 3 per cent so far this year amid speculation the People's Bank of China was depressing the currency to deter speculators from betting on its continuous appreciation.

It was the most sustained depreciation since its de-pegging from the U.S. dollar in 2005 and wiped out all of its gains seen in 2013.

However, the poll of around 20 currency strategists taken this week showed the yuan will soon shrug off those losses and climb to 6.22 per U.S. dollar in a month, close to Thursday's rate of 6.23, 6.15 in six months and 6.07 in a year.

Indeed, only two strategists said it would reach close to the 6.27 level of April 30 at some point in the forecast horizon.

"China's external accounts (trade and current account) are still in surplus and that's going to necessitate the PBoC to intervene and stem a sharp appreciation but in the longer term, the yuan's fundamentals require a gradual strengthening," said Sacha Tihanyi, currency strategist at Scotiabank in Hong Kong.

China reported a 0.9 per cent year-on-year rise in exports for April on Thursday, from a 6.6 per cent decline in March and beating forecasts for a 1.7 per cent decline.

The trade surplus more than doubled to $18.45 billion from $7.71 billion in March.

While that may help lift growth expectations for the second quarter, ongoing reforms to reposition the economy and derive more growth from consumer demand rather than exports are expected to cool the pace of expansion.

Gross domestic product growth has averaged 7.7 per cent in 2013, a shadow of the double-digit growth rates of the last three decades.

Economists in a Reuters poll predict a 7.3 per cent average growth rate this year, which would be the slowest expansion since 1990, and a further cooling to 7.2 per cent in 2015.

Analysts said the PBoC will manage the currency in a tight band and allow for gradual appreciation from here on, but will also check speculation on one-way appreciation trades.

The central bank set its daily midpoint 0.02 per cent weaker at 6.1557 on Thursday.

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El Nino may impact India's GDP by 1.75%: Assocham

About 5 per cent deficit rains due to possible El Nino factor could have a bearing on economic growth by 1.75 per cent in the 2014-15 fiscal, an Assocham report said.

Deficiency in rains could also impact food inflation, it said.

India is expected to see below normal monsoon this year with Met department forecasting 95 per cent rainfall because of the El-Nino effect, which is generally associated with the warming of ocean water.

"The deficit rainfall of 5 per cent due to El Nino factor will cause loss to the GDP of about 1.75 per cent, i.e. Rs 1,80,000 crore, hurting lakhs jobs of unskilled sectors," the report said.

About 60 per cent of net sown area of the country is rain-fed. With every 1 per cent deficit in rains, the country's gross domestic produce (GDP) falls by 0.35 per cent, it said.

So, a good agricultural performance is a must for India to raise demand for services and industrial products, it said.

A rise in farm sector is estimated to raise demand for industrial goods and services, it added.

The study mentioned that about 30 per cent of the manufacturing sector is agriculture-based and a bumper crop ensures the supply of raw material for industry at relatively lower prices.

Highlighting the 12-point strategy submitted to the government to contain the drought-like situation, Assocham said the government must expand the farm insurance cover and advise financial institutions to settle crop insurance claims in drought-hit areas without delay.

It recommended that high quality seeds of alternate crops should be distributed among farmers in the drought-affected areas and the minimum support price (MSP) of alternative crops to be cultivated in drought-hit areas should be kept attractive.

The government should realistically assess the situation in order to estimate the shortfall of oilseeds and pulses and help the traders with market intelligence, the report said.

It also suggested the government to bring down the cereal inflation by liquidating the extra stock that the government is keeping over and above the buffer requirements.
 

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RuPay to Reduce Dependence on Cash Transactions: President

India today launched its own payment gateway 'RuPay', equivalent of Visa and MasterCard, which will work on ATMs and mechant outlets and help in reducing cash transactions.

President Pranab Mukherjee unveiled the indigenous card at a function in Rashtrapati Bhavan.

Dedicating it to the nation, he said India is one of the few countries in the world to have its own card payment gateway.

The RuPay platform - developed by National Payments Corporation of India (NPCI) - is being used by certain banks like ICICI, State Bank of India, Punjab National Bank, among others, for clearing and settlement.

RuPay, which works on three channels - ATMs, Point of Sales (POS) and online sales - is the seventh such payment gateway in the world.

A variant of pre-paid RuPay card would shortly be launched by IRCTC, which will help in booking railway tickets.

RuPay will not only reduce dependence on cash, but will offer users diverse set of payment option within the country, he said.

NPCI Chairman Balachandran M said it plans to take RuPay card overseas and is already in talks with Discover Financial Services in the US and JDC in Japan for partnership.

Speaking on the occasion, Financial Services Secretary G S Sandhu said RuPay would be available at a cost which is much less than those of international cards.

For clearing and settlement of each transactions, banks will have to pay 40 per cent lower fees in RuPay platform compared to other international platforms.

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Interest earned on tax refund is taxable

iStockPhotoBe it because of poor financial planning or poor tax planning, one may end paying more tax than what’s needed. Employers usually ask employees to declare the amount of tax-saving investments planned for the year at the beginning of the year to ensure that appropriate tax is deducted every month. However, this could be tricky and some people may end up under-reporting the amount. This leads to over-taxation and the person becomes eligible for a tax refund. The refund amount, under certain circumstances, becomes eligible for interest, and this interest is taxable. When does a refund earn interest? If the amount of refund is at least 10% of the actual tax liability before tax deducted at source (TDS), then the refund is eligible for simple interest. For example, the actual liability was Rs.50,000 but a total of Rs.75,000 was paid as tax. In this case, the excess tax paid Rs.75,000-Rs.50,000

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RBI tells banks not to levy prepayment charges on floating rate loans

In its first bi-monthly monetary policy review on 1 April, RBI had indicated that in the interest of their consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty. Photo: Pradeep Gaur/MintMumbai: The Reserve Bank of India (RBI) on Wednesday said banks cannot levy charges on individual customers if they choose to close their floating rate loans. Some banks charge a fee if an individual borrower chooses to close his or her loan. This fee varies from bank to bank, and is mostly in the range of 1-3%In its first bi-monthly monetary policy review on 1 April, RBI had indicated that in the interest of their consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty.“Accordingly, it is advised that banks will not be permitted to charge foreclosure charges/pre-payment penalties on all floating rate term loans sanctioned to individual borrowers, with immediate effect,” RBI said in a notification on Wednesday.

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