How Can I Save My Tax…

As the financial year end is approaching, everyone is worried about saving maximum tax possible. One can legitimately save tax by utilising the deductions available under the Income Tax Act, 1961 to its full. As the year end is very close, there is a good chance that you may end up picking wrong investments in a rush to avoid missing the March deadline. Here’s a quick reckoner for you to avoid such situations and make an informed smart investment decision.

Before purchasing any tax saving product, consider whether it is appropriate for you. Chose the investment option that suits your need and not just for the sake of tax saving. There is a maximum deduction cap fixed for each section under the Income Tax Act, for example, deduction for section 80C, 80CCC and 80CCD investments together cannot exceed Rs.1 lac. First and foremost, compute the deductions you are already eligible for on account for statutory deductions and other mandatory payments like employee’s contribution to PF, life insurance premium etc. Then you can arrive at the amount that you need to further invest in order to maximise your tax saving.

Keep all the investment documents handy so that you do not miss out deduction on any investment you have made. If you are planning to purchase a new life insurance policy, it’s better to purchase it before March end as the premium paid shall be eligible for deduction only if it is paid by March.

There is a whole lot of investment options available for deduction u/s 80C, some of which are listed below:

• Public Provident Fund – It can be invested for self, spouse and children. The interest on PPF is exempt from tax and lock-in period is 15 years.
• Life Insurance Premium – Premium paid for self, spouse and children is eligible for deduction. Insurance is an expense, however, plans like endowment and ULIP are a combination of insurance and investment. Do not judge life insurance policies only on the basis of return it provides. Also consider the insurance cover it offers to you in case of any mishap.
• 5-Year Fixed Deposit – A long term fixed deposit with a minimum tenure of 5 years is eligible for deduction. The interest on this FD, however, is taxable.
• National Savings Certificate (NSC) – Investment in NSC is eligible for deduction. The interest on NSC is taxable, but as the same is reinvested, it is also eligible for deduction u/s 80C.
• Pension plans – Deduction can be availed for premium paid for pension plans u/s 80CCC.
• Principal component of home loan repayment.
• Stamp duty paid on purchase of new house.
• Tuition fee paid for two children for full time education in India.
• National Pension System (NPS) (Section 80CCD) – Amount contributed by a person in NPS is eligible for tax deduction subject to maximum of:

(i)             10% of salary (Basic + Dearness Allowance) in the case of an employee;

(ii)            10% of gross total income in any other case.

This is however subject to the overall cap of Rs.1 lac. Parallel to this, the employer’s contribution to NPS upto 10% of salary (Basic + Dearness Allowance) is eligible for deduction over and above the limit of Rs.1 lac.

Apart from deductions under section 80C, there are some more avenues where you can save tax:

• Medical Insurance Premium (Section 80D) – Premium paid for medical insurance for self, spouse and children is eligible for deduction upto Rs.15,000 (Rs.20,000 for senior citizens). The same amount is eligible for deduction if premium is paid for medical insurance of parents. The amount paid for preventive health check-up upto Rs.5000 for self, spouse, children or parents can also be claimed under this section, subject to the overall cap of 15k / 20k, as applicable.
• Interest paid on education loan for self, spouse or children is eligible for deduction under section 80E.
• Interest component of home loan repayment (Section 24) – Tax deduction of upto Rs.1.5 lacs can be availed on interest you paid on home loan if the property is self-occupied. In case of let out property, there is no upper cap for this deduction.
• Rajiv Gandhi Equity Savings Scheme (Section 80CCG) – New investors having an annual income less than Rs.10 lacs can take deduction by investing in equity market under Rajiv Gandhi Equity Savings scheme. Maximum of Rs.50,000/- can be invested in this scheme and deduction can be availed of 50% of the amount invested.
• Donations to charitable organisations (Section 80G) – Donations to certain charitable institutions or organisations are eligible for deduction. The amount of deduction can be 50% or 100% of the donation amount depending on the institution you are donating to.

Now, knowing the various investment options available to you for tax saving, you can chose among them those that are best suitable for you and don’t fall prey to last minute mis-sellings. Plan before you invest as tax saving instruments are long term investments and long term decisions are never taken in a hurry.

CA. Simarpreet Singh Gulati

simarpreetgulati@gmail.com

+91 9890495659

Economic Effects of the Consumers' Attraction towards Gold

History:

Gold has traditionally been used as a monetary exchange mechanism in most countries, however, by the 1930s, most countries left gold standard. The USA was the last country to issue gold coins in 1932. Recently, Switzerland which had tied its currency to gold reserve finally gave up when it joined IMF (International Monetary Fund) in 1999.

Consumption:

The current global consumption of new gold production is 50% in jewellery (including art work and other consumer products), 40% in investments and 10% in industries. India ranks Number One consumer of gold - a massive 25% of the world’s gold production (approx. 800 tonnes a year). India’s consumption is expected to increase to 965 tonnes this year. Approximately, 50% of India’s gold consumption is imported every year (approx. 400-450 tonnes a year).  Indian consumers hold approx. 18,000 tonnes of gold.

Gold culture:

The primary reason that the consumer demand for gold in India constantly increasing can be partly attributed to our culture – we use gold as a reward for everything right from birth, first birthday, success in school performance to wedding etc. It is a status symbol to display the amount of gold one has to command respect in the society in direct contrast to the western society.

Economic Impact:

Some of the economic impact of our excessive attraction to gold: 

1. One of the reasons for Indian Rupee depreciation in the recent periods (Rupee is at all-time low against USD, GBP and most other major currencies - above Rs 63/USD, above RS 99/GBP).

2. In March 2013, the Current Account Deficit hit a record high of 4.8% due primarily to substantial increase in the import of oil and gold.

3. Growth rate is falling faster than ever.  In the last 5 out of 8 years, India's growth rate (GDP) was at around 8.5% which has now fallen to mere 5% and there is no sign of improvement growth in the near future. Partly because the increased import of gold is not being used for increasing India’s growth instead stored away idle in consumer’s domestic locker. Consumer holding such large quantities of gold does not create growth in the economy.

4. Corruption.  Yes gold plays a significant role in corruption. If you look at history and analyse why most western countries exited gold in the 1930s, it is partly because of corruption. Controlling corruption in gold is difficult to manage (and it is a completely different topic to discuss).  Most corrupt people hold substantial amount of their corrupt wealth in gold.

5. Lack of willingness to effectively implement a number of existing anti-corruption measures, tax laws and other legislative measures provide opportunities for the corrupt to hide their undeclared wealth in gold.

6. Gold is also one of the root causes for some of the social problems like dowry in rural India.

Artificial Price Hike:

As India is the largest consumer of gold, the global gold producers and traders even artificially increase the gold price during Indian festive seasons like Diwali, wedding seasons etc – as the demand exceeds the supply.

Whether Gold is the safest asset? 

Even though, people think that gold is the safest asset, it is not. Gold is like any other material asset that can be stolen or lost. The value can go down as well as up. It is as volatile to market conditions as any other investment.

CA. Simarpreet Singh Gulati

simarpreetgulati@gmail.com

+91 9890495659

HIGHLIGHTS OF THE NEW COMPANIES BILL

The upper house of the Parliament passed the Companies Bill on August 8, 2013 after much delay. The bill replaces Companies Act, 1956, and had been passed by the Lok Sabha in December last year. Key highlights of the new Companies Bill are as under:

1. Incorporation of a One Person Company has been permitted.

2. Numbers of permissible members in private company has been raised to 200 as against existing limit of 50 members.

3. Listed companies shall have at least 1/3 rd of the total number of directors as Independent Directors and the Central Government may prescribe the minimum number of Independent Directors for any class of public companies.

4. Nominee director cannot be regarded as Independent Director.

5. Maximum term of Independent Director has been restricted to five years at once subject to a maximum of two such terms.

6. Appointment of at least one woman director on the board of prescribed classes of companies has been made mandatory.

7. Appointment of at least one director resident in India, i.e. a director who has stayed in India for at least 182 days in the previous calendar year, is made mandatory for all companies.

8. Maximum number of directors has been increased from twelve (12) to fifteen (15) directors, Further no Central Government approval is required to increase the maximum no. of directors beyond fifteen(15). Shareholders of companies may do so by passing a special resolution.

9. A person can hold directorship of up to 20 companies, of which not more than 10 can be public companies.

10. No listed companies shall appoint-

i. an individual as auditor for more than one term of five consecutive years, and

ii. an audit firm as auditor for more than two terms of five consecutive years.

11. Shareholders are at liberty to decide by passing resolution that audit partner and the audit team, be rotated every year.

12. CSR has been made mandatory for a company having net worth of Rs. 500 crore or more, or turnover of Rs.1,000 crore or more or net profit of Rs. 5 crore or more during any financial year. Under the new bill, companies are required to spend at least 2 per cent of their average net profits for the three immediately preceeding financial years on CSR

13. The new bill bans holding ‘Treasury Stock’, which is often used by companies to increase shareholding or future monetisation after consolidation.

14. Financial Year of any company can end only on March 31 and only exception is for companies, which are holding / subsidiary of a foreign entity requiring consolidation outside India, can have a different financial year with the approval of Tribunal.

CA. Simarpreet Singh Gulati

simarpreetgulati@gmail.com

+91 9890495659

4 Reasons for the Depreciation of Indian Rupee

The Indian rupee has slid to a historic low against the dollar. Wonder what causes such movements? Read on....

Rupee has touched a historic all-time low by dropping below Rs 60 (against $1). There are several reasons which have led to this roller coaster fall in the value of Indian Rupee, of which the major ones are listed below:

Fundamental law of economics

If the demand for the dollar in India is more than its supply, the dollar appreciates and the rupee depreciates. Demand for dollars may be created by importers requiring more dollars to pay for their imports or by Foreign Institutional Investors (FII’s) withdrawing their investments and taking the dollars outside India, thus creating a shortage of dollar supply, which, in turn, can also increase the demand for the dollar.

Similarly, when the supply of dollars in India increases with respect to its demand, the value of the dollar decreases in terms of rupees. Supply can be created by exporters bringing in more dollars from their revenues or FIIs bringing more dollars in India to spur their investments.

Price of crude

The price of crude puts tremendous stress on the Indian Rupee. India has to import a bulk of her oil requirements to satisfy local demand, which is rising year-on-year. Globally, the price of oil is quoted in dollars. Therefore, as the domestic demand for oil increases or the price of oil increases in the international market, the demand for dollars also increases to pay our suppliers from whom we import oil. This increase in demand for the dollar (see earlier point) weakens the rupee further.

Dollar gaining strength against the other currencies

The central banks of Eurozone and Japan are printing excessive money due to which their currency is devalued. On the other hand, the US Federal Reserve has shown signs to end their stimulus making the dollar stronger against the other currencies including the Indian rupee, at least in the short term.

Volatile equity market

Our equity market has been volatile for some time now. So, the FII’s are in a dilemma whether to invest in India or not. Even though they have brought in record inflows to the country in this year, if they pull out, it will result in a decrease of inflow of dollars into the country. Therefore, the decrease in supply and increase in demand of dollars results in the weakening of the rupee against the dollar.

Business Today reported today that overseas investors pulled out a record Rs 44,162 crore (over $7.5 billion) from the Indian capital market in June 2013. The widening current account deficit and the depreciating rupee are definitely cause for concern. A weaker rupee further erodes the returns earned by the foreign investors in the Indian market. FIIs have turned net sellers of debt securities here for the first time in 13 months. Again, the June sell-off is attributed to the weakness in the Indian currency as the rising cost of hedging a volatile rupee hurts the yield differential that FIIs work with.

Mahesh Patil, Co-CIO, Birla Sun Life Mutual Fund, in a recent interview with Economic Times stated that the main reason for the decline of the rupee is the appreciation in the dollar. The latter has been rising since fear of the Federal Reserve tapering its quantitative easing (QE) has hit all asset classes. The currencies of all emerging markets, such as Indonesia, Thailand, Brazil and India have depreciated. Similarly, as in other countries, the Indian bond market has also seen withdrawals by FIIs. With a risk-off environment setting in globally, there have been redemptions from global exchange-traded funds (ETFs). This has led to selling by FIIs in the Indian equity market, compounding the rupee's woes.

CA. Simarpreet Singh Gulati

simarpreetgulati@gmail.com

+91 9890495659

Now Mandatory E-filing of return if Income exceeds Rs. 5 lacs

Income-tax (3rd Amendment) Rules, 2013 redefine the conditions and eligibility to choose from a variety of Income-tax return forms. In addition, certain important amendments have also been made in, which are as follows:

Form	Existing position	New Position
Form Sahaj (ITR 1)	Return in ITR 1 can’t be filed if assessee incurs losses under the head ‘Income from other sources’
	An individual if his total income includes: (a)  Salary and family pension; (b)  Income from one house property (excluding losses); (c)  Income from other sources but does not include: •  Winnings from lottery; and •  Winnings from horse races.	An individual if his total income includes: (a)  Salary and family pension; (b)  Income from one house property (excluding losses); (c)  Income from other sources but does not include: •  Winnings from lottery; •  Winnings from horse races; and •  Loss under this head.
Form Sahaj (ITR 1)	Return in ITR 1 can’t be filed if assessee claims tax relief or has any income which is exempt under Chapter III
	Return in ITR 1 cannot be filed by a resident person (other than not ordinarily resident in India), if he has: (a)  Any asset (including financial interest) located outside India; (b)  Signing authority in any account located outside India.	Return in ITR 1 cannot be filed by a resident person (other than not ordinarily resident in India), if he has: (a) Any asset (including financial interest) located outside India; (b) Signing authority in any account located outside India; (c) Claimed any relief of tax under Section 90, 90A or 91; (d) Incomme exceeding Rs. 5,000 which is not chargeable to tax. In other words, if assessee claims exemption in respect of any income under Section 10, 10A, 10AA, etc.
Form Sugam (ITR 4S)	Return in ITR 4S can’t be filed if assessee claims tax relief or has any income which is exempt under Chapter III
	Return in ITR 4S cannot be filed by an Individual or a HUF deriving income as referred to in Sections 44AD or 44AE, if it has: (a)  Any asset (including financial interest) located outside India; (b)  Signing authority in any account located outside India.	Return in ITR 4S cannot be filed by an Individual or a HUF deriving income as referred to in Sections 44AD or 44AE, if it has: (a)  Any asset (including financial interest) located outside India; (b)  Signing authority in any account located outside India; (c)  Claimed any tax relief under Section 90, 90A or 91; (d)  Income exceeding Rs. 5,000 which is not chargeable to tax. In other words, if assessee claims exemption in respect of any income under Section 10, 10A, 10AA, etc.
Audit Report	Mandatory e-filing of audit reports
	No such requirement	E-filing of following audit reports shall be mandatory in following cases: (a)  Audit report under Sec. 44AB in respect of books of account; (b)  Audit report under Sec. 92E in respect of international transaction; or (c)  Audit report under Sec. 115JB in respect of MAT computation.
Mandatory e-filing of return	Mandatory e-filing of return if income exceeds Rs. 5,00,000 or assessee claims tax relief
	It is mandatory for an individual or an HUF to e-file the return of income if its total income exceeds Rs. 10,00,000	(a)  It is mandatory for every person (not being a co. or a person filing return in ITR 7) to e-file the return of income if its total income exceeds Rs.5,00,000 (b)  Every person claiming tax relief under Section 90, 90A or 91 shall file return in electronic mode.

List of forms to be used by different persons for filing of return of income for the Assessment Year 2013-14

Individual and HUF
Nature of income	ITR 1 (Sahaj)	ITR 2	ITR 3	ITR 4	ITR 4S (Sugam)
Income from salary/ pension	Yes	Yes	Yes	Yes	-
Income from one house property (excluding losses)	Yes	Yes	Yes	Yes	-
Income or losses from more than one house property	-	Yes	Yes	Yes	-
Income not chargeable to tax which exceeds Rs. 5,000	-	Yes	Yes	Yes	-
Income from other sources (other than winnings from lottery and race horses or losses under this head)	Yes	Yes	Yes	Yes	-
Income from other sources (including winnings from lottery and race horses)	-	Yes	Yes	Yes	-
Capital gains/loss on sale of investments/ property	-	Yes	Yes	Yes	-
Share of profit of partner from a partnership firm	-	-	Yes	Yes	-
Income from proprietary business/ profession	-	-	-	Yes	-
Income from presumptive business	-	-	-	-	Yes
Details of foreign assets	-	Yes	Yes	Yes	-
Claiming relief of tax under sections 90, 90A or 91	-	Yes	Yes	Yes	-

Other Assesses
Nature of income	ITR 5	ITR 6	ITR 7
Firm	Yes	-	-
Association of persons (AOP)	Yes	-	-
Body of Individuals (BOI)	Yes	-	-
Companies other than companies claiming exemption under Sec. 11	-	Yes	-
Persons required to furnish return under: (1) Section 139(4A); (2) Section 139(4B); (3) Section 139(4C); and (4) Section 139(4D)	-	-	Yes

CA. Simarpreet Singh Gulati

simarpreetgulati@gmail.com

+918050577873; +919890495659