Saturday, July 31, 2010

An SIP or One-Time Investment?

If I continuously invest Rs 5,000 per month in an equity fund, is it possible to build a corpus over 15 years? Would I not make much more by investing it all at one go and holding on for that long? Would I need to change funds to keep the growth going?
Regarding the possibility of building a corpus over 15 years, it certainly is plausible. Even if you invest just Rs 5,000/month and earn an annual return of 12 per cent, you would end up with Rs 25.20 lakh at the end of 15 years.
Alright, that's theoretical. So let's look at some actual funds to see if this thesis holds up. I have taken a 15-year time frame and looked at a Systematic Investment Plan (SIP) of Rs 5,000/month over this entire period. The diverse line up includes some superstars as well as dogs. That's deliberate. It will convey a more realistic picture. As you can see, there is no arguing with the numbers. And even though the worst performing fund made money, the difference between the best and the worst is nothing short of glaring.
Your second question is interesting, and you may even be right, but look at the table below for a reality check. If you are looking at a one-time investment, you would first of all need to be in possession of capital, in this case Rs 9 lakh, that too 15 years ago. Once you overcome this hurdle, you would end up being a hostage to market timing. What if you had invested the money at the peak of the market cycle, say January 2008 when the Sensex was at around 21,000. Can you imagine the worth of your investment by December 2008 when the Sensex dipped to an abysmally low 8,500? Psychologically, the impact of seeing your investment reduce to half can be disastrous. The good thing about a systematic investment plan (SIP) is that it helps you ride the market upheavals to your advantage. And it does what you want, which is accumulate wealth over the years in a low-cost, transparent fashion without a strain on your finances.
Schemes   Return per annum over 15 years (%)   Value of investment (Rs)   Value of lumpsum investment(Rs)
Taurus Discovery 10.80 21,31,190 15,03,771
LIC MF Equity 11.09 21,83,562 19,84,711
JM Equity 12.58 24,78,042 32,22,665
UTI Equity 17.29 37,15,251 49,27,771
Morgan Stanley Growth 18.41 40,95,826 84,63,828
Tata Growth 19.83 46,37,703 49,53,895
Magnum Multiplier Plus 21.03 51,56,455 75,85,140
Franklin India Bluechip 27.95 94,87,199 223,45,626
HDFC Equity 30.63 120,17,370 247,71,497
Monthly SIP = Rs 5,000 for 15 years and Principal Amount Invested over 15 years = Rs 9 lakh
Returns as on May 31, 2010

Posted By: S Rahul

Too Much of a Good Thing

The government's recent move requiring all listed companies to maintain at least 25 per cent public shareholding has elicited both positive and negative responses from market participants. On the one hand, the decision has been praised as higher public shareholding will enhance liquidity, increase the depth of the equity market, widen stock ownership, promote greater disclosures and improve corporate governance standards. On the other hand, fears have been voiced that the oversupply of equities, which this measure will result in, could cause prices of many stocks to sink lower.
According to the norm, existing listed companies with less than 25 per cent public holding will have to reach this mark through an annual addition of not less than 5 per cent to public holding. In the case of new listings, if the post-issue capital of the company calculated at offer price is more than Rs 40 billion, the company will be allowed to go public with 10 per cent public shareholding. It will subsequently have to comply with the 25 per cent public shareholding requirement by increasing it by at least 5 per cent per annum.
The consequences
According to an Edelweiss report, assuming that dilution will happen through the sale of existing equities, public issues worth Rs 1.5 trillion will come into the market over the next five years, if the annual dilution target of 5 per cent is to be met. The minimum issuance in the first year alone will be of around Rs 615 billion.

Expediting PSU disinvestment. According to the report, 156 companies have promoter holding of more than 75 per cent. Around Rs 1 trillion will be contributed by just eight public sector companies. Thus, PSUs will dominate the issuances that occur on account of the new norms. The measure is expected to fast-track PSUs disinvestments and help the government reduce its fiscal deficit.
Increase in free-float market capitalisation. This measure will also increase the free-float market capitalisation, which is the product of current market price and the number of shares held by non-promoters. It is also expected to result in higher foreign inflows due to an increase in India's weightage in the emerging market indices.
MNCs may choose to delist. According to a research report by SMC Capital, 22 MNCs listed in India have public shareholding of less than 25 per cent. After the government's announcement, they could offload a part of their foreign parents' holdings and bring them down to 75 per cent through any of the following routes: follow-on-public-offers, qualified institutional placements, American Depository Receipts (ADR), Global Depository Receipts (GDR), a stake sale in the open market, or a combination of these.
Foreign parents of MNCs may not be willing to offload their stakes. Instead, they may prefer to delist. Lotte India, Fresenius Kabi Oncology, Astrazeneca Pharma, BOC India, and Alfa Laval are some of the prominent companies on this list. If MNCs choose to delist, they may come out with attractive buy-back offers that could bring temporary gains. But the market will be deprived of quality scrips.
Lower stock prices. Existing investors could feel the pinch as high supply could lead to lower prices.
Buy into quality stocks. In case of stocks where prices are expected to decline due to large issuances, investors could increase their exposure if the stocks are of high quality.
The big question
Since the beginning of 2010, the benchmark Sensex has registered a meagre 1.2 per cent gain. May alone saw outflows worth Rs 9,175 crore from equities. Will the market be able to absorb such large volumes of issuances when it is in such a fragile condition?

Pros and cons
• The ruling is expected to increase the depth of the Indian equity market
• By increasing weightage of Indian markets in international indexes, this could lead to more FII inflows into India
• But will market absorb Rs 1.5 trillion of paper over five years?
Posted By : S Rahul

Thursday, July 29, 2010

Find TAN number

To Find the TAN of the Tax deductor

Follow this link 

Fill in the required information 

In the Search row- check the Name option

In the  Name Row - enter the name of the of the person whose TAN you want to know

Then Hit Submit


AN OLD joke on passing CA examinations goes like this: There was a writing in a church that read, "Jesus never fails". A CA student added below that, "Then let him try the CA examination"!
Passing the CA exam is not as difficult as it is made out to be. Several students clear it in the first attempt and even secure ranks. Why, then, are others unable to crack it? The reasons are several.
Capabilities of the students - There is no CAT-like entrance test to join the course. The course costs less than school education. There are two streams of students joining the course one that joins after the intermediate or plus-two stage, and the other that joins after graduation. The stage at which one joins the course can be crucial. The inherent ability of a student can be an important factor. A bright student chooses the course by choice and not by chance. Such students take the PE I examination route.
Medium of instruction-A second major contributing factor is the medium of instruction. Those who study in regional-medium schools, face a lot of difficulty in comprehending the subject.
Exposure-A third factor is the exposure to the business world, terminologies, and so on. Students from rural and semi-urban areas face difficulty in understanding the subject due to inadequate exposure. Another drawback could be the lack of access to reading material, non-availability of textbooks, Internet facilities, so on. While these students are sincere, they may lack the right guidance.
Students can overcome the fear of the examination by following a regular and systematic study routine.
General study-Start preparing for the examination immediately on joining the course. Study regularly and conscientiously. It does not matter how many hours you study, but how much you understand. Qualitative study is important. In addition to the student journal, subscribe to the journal of the Institute. It helps to keep yourself updated. Keep track of the latest in all the subjects: accounting standards (new standards, revision of old ones, interpretations, etc.) auditing and assurance standards, amendments to company law and other laws, Finance Act and Income-Tax law. Contribute and subscribe to a good business newspaper. Essays on capital markets, tax matters and other subjects will be helpful.
Study material-Your study material is the most important. Supplement it with a good standard textbook. A good student does not require tuition. Tuitions certainly are helpful, but only when you have it in you to use them. For a professional, self-study and getting to the root of the subject is essential.
Attitude-Subjects such as law require repeated reading. Candidates often complain of not being able to remember the provisions/sections. Now, this is a matter of attitude. When one can remember film songs, sequences, dialogues, phone numbers, why not the section numbers? Students tend to read out of compulsion. Examinations are imposed on them. If it were not for examinations, would students have studied? Apply the attitude you have towards play to studies. The world will begin look different.
Strategies-Follow a strategy of study. Remember, you cannot study accounts independent of company law. Income-tax cannot be studied independent of accounting. Thus, these subjects are inter-related. You have to study all the subjects for the examination. Take, for example, the issue of shares by a company. Read provisions of company law from S. 55 onwards prospectus, contents, liabilities for misstatements, and so on till S.108. You would have grasped the legal requirements. Then work out problems in accounting on issue of shares at par, premium, discount, for consideration in other than cash, etc. Follow it up with audit of issue of share capital, resolutions to be passed, documents to verify, and so on.
Study the tax provisions for allowability of share issue expenses, etc. Thus, you would have covered the issue from all points of view. This may look cumbersome in the beginning, but once you get used to it, things become interesting. This way you will have covered a part of company law, a part of income-tax, part of auditing, as well as a part of accounting.
Group study-Group study can be helpful too. Form yourselves into groups of six. Thus six friends can cover six subjects. Rotate them among yourselves. Engage in group discussions. Subjects like tax, law, etc., can be tackled better this way. Use a marker to highlight the material items as and when you study it for the first time. When you read the second time, you can concentrate only on the highlighted part. Grammar is, of course, to be built in into the answer.
All subjects are important
One should realise that the candidate should pass in all subjects and secure 50 per cent in the aggregate to clear the examination. Scoring 90 per cent in one and 10 per cent in another, will lead you nowhere. Distribute time judiciously for all subjects.

Other activities-Each of us has hobbies. Spare some time for that. This will help you unwind. It increases productivity. Develop certain hobbies and pursue them. A light game, for instance, or a crossword puzzle. At the same time, know when to stop. Get your priorities right. A student should be physically fit, spiritually sound and mentally alert. Also, spare some time for fitness. You should be strong enough to withstand the stress and strain of hard work. Endurance is important.
Writing-Practise writing. What you read will prove futile if you cannot reproduce it on the D-day.
Eligibility tests
Eligibility tests are conducted by the ICAI to orient students for the exam. But students tend to circulate the question papers among themselves and write only those papers. Such a practice is not advisable. A student can write as many papers as he wishes to. This will add to his or her confidence. The student should take the eligibility tests seriously. This will help you know your pitfalls.
The final charge-Generally, the pressure valve is turned on only after the candidate pays the examination fees. There is a lot anxiety, nervousness, and tension. If a candidate is well prepared, last minute blues can be avoided. The candidates should learn how to tackle each subject and perform accordingly. One should know which accounts need to be opened and how to reach the goal in the shortest possible route and quickly. Saying that you should pass 36 journal entries for amalgamation, 16 entries for issue of shares, etc., is unjustified. You should learn to play according to the wicket. Passing the CA examination should become a routine, much like other examinations. Passing in the first attempt should be the rule and not an exception.

Undertake mock tests-Try doing practical problems in examination conditions
1.         Try practical problems (solved illustrations) without seeing solutions and then compare answers to evaluate your performance and take steps to remove shortcomings.
2.         Note the important catch points which you think are important on a separate paper to revise at the final revision time before the exams.
3.         Identify some problems which you want to practice on the last day before exam because it is not possible to revise all the problems on the last day
4.         List out what you want to revise on the last day and make sure to revise them
5.         For clarifications you may refer to Cost Accounting Text and problems by Dr N.K. Agrawal and study material of the Institute of Chartered Accountants of India.
6.         General Guidelines while attempting the paper to get better results.
i.          Read full question paper before attempting the answers.
ii.         Identify & attempt the question which in your opinion can be done comfortably as your first answer which should be your best attempt.. This will give you confidence and good impression to the examiner.
iii.        Divide your time for the questions as per the marks scheme say if the time allotted is 3 hours (i.e 180 minutes) for 100 marks. You need 5-10 minutes to read full question paper, 5-10 minutes to check the answer at the end when you have finished. So time available is say 170-160 minutes for the full paper. So for each mark you have only 1.70 to 1.60 minutes i.e. for 20 marks you have only 34 to 32 minutes. So plan your answers as per time schedule and take care to give each mark its due time. In case you are able to save time on some questions that can be used in other questions.

Get one good calculator and practise on the same calculator; this will make you to comfortably use the calculator and your speed will also increase

Posted By:  Ankitha Singhvi

Wednesday, July 28, 2010

New Bill to replace existing ULIP ordinance

Allaying RBI’s fears, the government on Tuesday proposed to elevate its governor’s post in the proposed joint mechanism to address the differences among financial regulators over hybrid products. The legislation, Securities and Insurance Laws (Amendment) and Validation, Bill 2010, presented in the Lok Sabha to replace the ULIP Ordinance, also seeks to have a joint committee to resolve the differences among the financial regulators – SEBI, IRDA, RBI and PFRDA. The committee will be headed by Finance Minister Pranab Mukherjee.
The Ordinance on Unit Linked Insurance Products had given the power of regulating ULIP to insurance regulator IRDA.
The Ordinance also mandated the government to set up a committee to decide on the jurisdiction issues between regulators over hybrid products, which contain features that fall under the regime of different watchdogs.
However, RBI had raised certain objections to the proposed joint committee, saying autonomy of regulators will be affected.
The bill, presented by Mukherjee in the Lok Sabha, sought to address concerns by Reserve Bank of India (RBI)by elevating its Governor as Vice-Chairman of the joint commission.
Currently, the inter-regulatory body, called the High Level Coordination Committee on financial sector, is headed by RBI.
The ordinance had treated RBI at a par with other regulators but governor D Subbarao had expressed his reservations, saying parity would dilute the central bank’s authority.
When asked whether the bill has addressed the concerns of RBI, Subbarao said, “No comments.”
The bill retained PFRDA, IRDA and SEBI Chairmen as members of the proposed body.
Stock Market and Insurance regulators SEBI and IRDA were at loggerheads over the jurisdiction ULIPs.
In the midst of a deadlock, the government came out with an Ordinance giving the jurisdiction to IRDA.
Making another deviation from the Ordinance, the bill proposes that in case of future differences among the regulators, the reference shall be made to the joint commission only by the respective regulators and not by the government.
“As both Houses of Parliament were not in session and immediate action was required to be taken, the President promulgated the Securities and Insurance Laws (Amendment and Validation) Ordinance, 2010 on 18th June, 2010,” to resolve differences between the two regulators, SEBI and IRDA, Finance Minister Pranab Mukherjee said while introducing the Bill.

Source :

Ulip Controversy continued

On 18th June, the President signed an ordinance that would settle the recent spat between SEBI and IRDA over unit linked insurance plans ("ULIPs"). The ordinance makes it clear that ULIPs cannot be regulated by SEBI and places them within the jurisdiction of IRDA. The ordinance also tries to prevent further disputes by setting up a joint committee to address future conflicts. But this is not all there is to the matter. The ordinance also amends 4 major acts of parliament governing financial markets in the country (the RBI Act, the Insurance Act, the Securities Contract Regulation Act and the SEBI Act) with minimal consultation. The language of the ordinance also raises a wide range of questions about regulatory arbitrage, misselling, what issues the joint committee would actually consider, the very effectiveness of the proposed solutions, good governance and the structure of financial sector regulation. This is not a small list.

Looking at these matters in turn, the ordinance raises serious concerns about regulatory arbitrage. Today, ULIPs act as 'endowment policies' where the premium paid by the insured on a what is nominally a life insurance contract is invested in the stock market. Under these contracts, if the insured dies before the maturity of the policy, there is an insurance payout. After a fixed period or maturity, the investments in the stock market are liquidated and returned to the insured minus charges. Under these conditions, insurance companies cover the risk of premature death for only a short period of time (between entering into a contract and maturity). As such, the insurance component of these policies (the money which the insurance company must keep with itself to meet its contingent liability) is very low. The rest of the money can easily be invested and payouts depend upon the stock market.

Mutual funds are similar in all aspects to ULIPs except for the small component of insurance that an ULIP carries. However, mutual funds must comply with tough regulations imposed by SEBI and are severely limited in the forms of fees they can charge. Financial firms faced with the choice of registering as a mutual fund and complying with SEBIs regulatory framework or providing a small component of insurance in their product structures, registering as a ULIP, and charging open-ended fees, will rationally choose the latter.

Second, as many others have commented, the ordinance does not address misselling. (See recent articles by Monika Halan, Deepak Shenoy and Jayant Thakur). The ordinance does not include any provisions to deal with misselling. The ordinance also does not address IRDAs lack of enforcement capabilities vis a vis SEBI. The ordinance does active harm and removes provisions that previously protected investors. By amending the Securities Contract Regulation Act, insurance instruments are now not considered securities for the purposes of the Act. Section 27 A and B were one of the few statutes in the country addressing misselling. These two sections gave investors in collective investment schemes and mutual funds limited investment protection, namely rights to income under collective investment scheme. These small provisions will now not apply to insurance products, weakening investor protection for the time being.

Third, the provisions of the ordinance raise concerns about what matters the joint committee would actually consider. The dispute settlement mechanism in the ordinance specifies the securities which can be referred to the joint committee. We wonder: could the ULIP controversy have been the first matter submitted to the joint committee? In any case, since new types of securities are constantly being developed by financial firms, the joint committee would need frequent legislative interventions to be operable. For example, the joint committee in its current form, does not include the Forwards Markets Commission (FMC). If a product were to be launched which consisted of a hybrid of steel futures and steel companies futures (not an absurd proposition to the extent that steel prices play a significant role in the profits of the steel industry), the FMC would not be allowed to approach the joint committee as the Commission is not a recognised regulator under the ordinance.

To take up a different example, the joint committee is also limited in its jurisdiction to ``hybrid" or ``composite" instruments. Certainly many disputes could arise between regulators that do not involve an underlying hybrid or composite instrument. An instrument governed by one regulator that has a negative effect on the market regulated by another regulator, as with the regulatory arbitrage hypothesis suggested above, could not be referred to the joint committee. Neither could issues which bring instability to multiple markets, unless, of course the underlying instrument is hybrid or composite.

Fourth, the structure of the joint committee points to problems of institutional design. The ordinance is largely silent about the procedures the joint committee would follow. This is not simply a technical matter. How would differences of opinion in the board be settled? By majority vote? Consensus? Would there be staffing? Who would be responsible for expenses? No doubt, to a significant extent disputes would be settled by reference to soft norms and existing hierarchies in government. The culture of deference by IAS officers to other IAS officers of a senior class provides one example. The unlikely possibility of agency regulators going against the deeply held preferences of a strong finance minister provide another. Yet these are not simply mundane questions and impact, materially, how extensively the committee could study and resolve matters before it.

Fifth, the process by which the ordinance was passed is worrisome. As suggested by the Economic Times, regulators were not consulted on a ordinance that amends 4 major acts of parliament. What does this say for consultativeness and democratic process? What does this say for the legitimacy of the proposed solution? Is the failure to consult and rush to promulgate this solution reflected in the drafting and policy flaws of the instrument suggested above?

Sixth, the ULIP dispute has been presented as a contest between SEBI and IRDA. Implicitly, one regulator had to win, and the other, lose. This is misleading. One scenario would have each regulator govern the portion of ULIPs which fall within their domain. IRDA would govern the insurance component of these instruments and SEBI would govern the investment component. Some might suggest that this would lead to too much complexity. Yet, we are more used to dealing with complexity than we realize. A person driving a vehicle who causes damage to property could be liable for damages under rules of the Motor Vehicle Act, tort law and possibly the Indian Penal Code. That the net zone of freedom of action in driving a car would be limited to the conjunction of the areas prescribed by these laws seems hardly remarkable. The government would never declare that all motor vehicle drivers are immune from civil or criminal laws. The more complex the transaction, the more regulation might apply. Financial firms are as well-equipped as any actor in society to handle this complexity.

Another scenario would involve crafting a mechanism for joint regulation of ULIPs. As Monika Halan suggests, this proposal has precedent in the arrangements between the banking and capital markets regulators and could lead to the harmonisation of regulation to the benefit of investors and the marketplace.

Yet another scenario would involve actively fostering or allowing some measure of regulatory competition. The heightened regulation of ULIPs as a result of this controversy is itself a salutary case in point. We do not suggest that the government allow this issue to fester but feel confident that serious scholars and practitioners of administrative law and institutional design could develop interesting ways of promoting regulatory competition given time and a mandate.

Hurried solutions lead to poor law with implications that will be felt by investors and markets down the line. Ordinances are intended for use when Parliament is out of session and the President perceives a need for immediate legislation. Ordinances may be amended. The conflict between SEBI and IRDA is also only one small piece of a larger problem of financial sector legislation that is fragmented, at times duplicative and at times inadequate. We can only hope that Parliament revisits this matter in a more thorough fashion, either independently or through the efforts of the Financial Sector Legislative Reforms Commission (FSLRC) proposed in the Finance Ministers budget speech of 2010-11.

 by Bikku Kuruvila and Shubho Roy.


Ulip Controversy

Government – Finance Ministry
August ‘09
Abolished entry loads for mutual fund schemes
December ‘09
Issued show-cause notices to some life insurers asking why action should not be taken against them for selling ULIPs without its approval
January ‘10
Again questioned Insurers about not seeking Sebi’s permission over issuance of Ulips
February ‘10
“ULIPs are broadly similar to the mutual funds, except that they are required to segregate a certain part of the premium towards the life insurance of the plan holder.”
March ‘10
“Ulips globally are managed by insurance regulators, and under no circumstance will we let Ulips to be taken over by Sebi.”
Issued order to ban 14 private insurance companies from issuing/servicing Ulips
“…they (Insurers) shall continue to carry out insurance business as usual including offering, marketing and servicing ULIPs in accordance with the Insurance Act, 1938, Rules, Regulations and Guidelines issued there under by the IRDA.”
Finance Secretary Ashok Chawla said that it was an issue between the two regulators and they should resolve it among themselves
Talks to order ban on 9 more insurers including, state owned LIC
Finmin interved and status quo was restored. Matter to be settled in court.
Asked Irda and Sebi — to “jointly seek a binding legal mandate from an appropriate court.”
Issued second order that exempted existing Ulips from the ban, but said its nod was must for issuing new Ulips.
“It could take another one or two days to arrive at a decision” – on future course of legal action.
“We need to look at both the orders internally and discuss it”
“There is no fresh clarification. The earlier one stands good.” – on ban on issuance of new Ulip products.
Moved the Supreme Court and some high courts (including
high courts of Delhi, Bombay and Hyderabad) to guard against any ex parte decision.
Supports Sebi’s April 13 order; says directions issued were in keeping with the agreement worked out with the insurance regulator.
 Source :

About ULIP

ULIP Unit Linked Insurance Plan gives life insurance in such a way that the value of the insurance policy at any given time would vary in accordance with the value of the underlying assets at that given point of time. ULIP is that kind of life insurance solution which would be providing benefits of protection and also flexibility in the investment. The investment is indicated as units and it is shown by the value that it has achieved which is called as Net Asset Value (NAV).
ULIP has been introduced by the insurance companies in many countries in the 1960s and is famous in a lot of countries of the globe. With the progress of time these plans were even mapped along with the necessity of life insurance to have retirement planning quiet successfully. In the times that we are facing now-a-days ULIP are capable of providing solutions for the planning of insurance, monetary necessities and various other kinds of financial planning like even planning of a child’s marriage.
Unit Linked Insurance Plan is such a monetary product which would provide you with life insurance and also investment just like a mutual fund. Certain percentage of the premium paid by you would go for the amount promised in the life insurance policy and the remaining amount will be invested in any investments that you would like to go for, be it equity, fixed return or even a mixture of these two investments also. ULIP in India are covered under section 80C of the Income Tax Act.
This ideology of grouping together the investment options and insurance under a single instrument was however challenged by the market regulator SEBI which took up this issue to the Supreme Court of India. The government of India curtailed this issue which was becoming a big tussle in the courts where arguments between the regulators were taking place for more than two months by ruling that Unit lined insurance products should be placed under the Insurance Regulatory and Development Authority (IRDA).
ULIP are being sold well in the recent years. ULIP offers a transparent choice for the customers enabling them to plan the necessities of the various stages of their life via market – led investments when compared to the regular traditional investment plans. These also provide a lot of variety when compared to traditional life insurance plans. These are normally presented in three broad types. Aggressive ULIP in which 80% – 100% is put in equities and the remaining in counted as debt. Balanced ULIP is one in which 40% – 60% is invested in equities and conservative ULIP is where only 20% of the premium is invested in equities.
Though ULIP variants are generally classified in this pattern, the exact debt/equity assorting might differ from one insurance company to the other. ULIP policy holder can choose to invest in a variety of funds which would be based upon the kind of risk he is willing to take. The policy holders can also enjoy the flexibility of ULIP and switch from one type to other type of ULIP when they want.

Source :

Processing of returns of Assessment Year 2009‐10 ‐ Steps to clear backlog

Instruction No. 5/2010 [F.No.225/25/2010‐ITA‐II], dated 21‐7‐2010
The issue of processing of returns for Asst. year 2009‐10 and giving credit for TDS has been considered by the Board. In order to clear the backlog of returns, the following decisions have been taken:

(i) In all the returns filed in ITR‐1 and ITR‐2, for the Asst. Year 2009‐10, where the
aggregate TDS claim does not exceed Rs. Three lakh (3 lacs) and where the refund computed
does not exceed Rs. 25,000; the TDS claim of the tax payer shall be accepted at the time of
processing of the return.

(ii) In all the returns filed in forms other than ITR‐1 and ITR ‐2, for the Asst. Year
2009‐10, where the aggregate TDS claim does not exceed Rs. Three lakh (3 lacs) and the
refund computed does not exceed Rs. 25,000 and there is 10% matching of TDS amount
claimed, the TDS claim shall be accepted at the time of processing of the return.

(iii) In all remaining cases, TDS credit shall be given after due verification

All about payment of Payment of Gratuity Act 1972 in brief including the recent amendments

The Payment of Gratuity Act 1972:- Gratuity is a voluntary Payment made by the employer to the employee in recognition of continuous, meritorious services and sincere efforts by the employee towards the organization.It is governed under the Payment of Gratuity Act 1972.It  is  an  Act  to  provide  for  a  scheme  for  the  payment  of gratuity  to  employees  engaged  in  factoriesmines, Oilfields, plantations, ports, railway companies, and shops or other establishments.

Applicability:-As per the Gratuity Act, the scheme for the payment of gratuity is available to:

  • Employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental with.
  • Every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months;
  • Such other establishments or class of establishments, in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government may, by notification, specify in this behalf.

Employee :-The term "employee" is defined in Section 2(e) of the Act as any person (other than an apprentice) who is employed for wages, whether the terms of such employment are express or implied, in any kind of work, manual or otherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port, railway company, shop or other establishment to which this Act applies, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity;'.

Gratuity Entitlement :-Gratuity is payable to an employee (nominee – in case of death of employee) who has rendered continuous service of five years or more on his termination of employment, superannuation, retirement or resignation. Completion of continuous service of five years is not necessary where the termination of employment is due to death or disablement due to accident or disease.

Exceptions:-Forfeiture of gratuity amount wholly or partially or to the extent of Damage /loss in case of an employee whose service has been terminated for:

  • Any act, willful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer; or
  • Act of riotous or disorderly conduct or any other act of violence on part of employee; or
  • Any act which constitutes an of­fence involving moral turpitude, in the course of his employment.

Nomination:-In case of death, the gratuity is payable to any of the following persons:

  • Nominee
  • Heirs (in absence of nomination)
  • In case nominee/ heir is a minor, such amount will be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.

The Gratuity limit has been raised from 3.5 lakhs to 10 lakhs:-There  has  been  amendment  in  the Payment  of  Gratuity  Act  1972,    following  proposal  of  Labor  and Employment  Ministry,  demands from  trade  unions  and  others  to remove  the  ceiling  or  increase the maximum  payable  amount,  which was fixed in 1997. It shall come into force on 24 May 2010 as  per  the  Notification  in the Official Gazette.

Maximum Limit :-The Gratuity limit as per Section 4(3) has been raised from 3.5 lakhs to 10 lakhs. This will give advantage to both private and public sector employees. According to this new amendment, the maximum gratuity exemption as per IT Act also increases to Rs. 10,00,000.

Determination of Gratuity Amount

  • For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned.
  • The Gratuity calculation is done as per the last average remuneration drawn and time in years served by an employee.
  • The amount of gratuity payable to an employee shall not exceed Rs. 10,00,000 (increased from Rs. 3,50,000).
  • In order to compute the gratuity payable in case of employees em­ployed in seasonal establishments, daily wages, or piece rated employ­ees. Computation will be as per the provision of the Act.
  • It can be formulated as follows: Basic + DA (Wages Last drawn)* 15days 126 * number of years of continuous service (six months or less to be ignored and more than six months to be counted as full year).

Posted By : Ankitha Singhvi

Tuesday, July 20, 2010

Saturday, July 17, 2010

The Gods cannot play the stock markets.

That's the upshot of a verdict handed down today by Bombay High Court which threw out a petition seeking to open demat trading accounts in the names of Lord Ganesh — the popular god of wealth and prosperity — and four avatars of lesser deities.

The petition was moved by a Sangli-based private religious trust named Ganpati Panchayatam Sansthan. The other four deities are Chintamaneshwardev, Chintamaneshwaridevi, Suryanarayandev and Laxminarayandev.
The trust had contended that if the deities could be granted PAN cards — a key tax-filing requirement for the large assets that temples and trusts own in the name of the ruling deities — they could not be barred from trading on the bourses. A PAN card is a basic requirement for opening a demat account.
The National Securities Depository Ltd (NSDL) had rejected the private religious trust's request to open demat accounts in the name of the deities, sparking the unusual case where the gods — or at least the mortals who manage their considerable assets — started showing an undue interest in playing the markets.
"Trading in shares on the stock markets requires certain skills and expertise and to expect this from deities would not be proper," said Justice P.B. Majumdar and Rajendra Sawant while tossing out the petition that challenged NSDL's refusal to open demat accounts in the names of the five deities.
The trust, which belongs to the Patwardhan family (the former royals from Sangli), had obtained PAN cards in the names of the deities in 2008. They reckoned that trading on the local stock markets — which saw the sensex yield 76 per cent returns in calendar year 2009 — would be a breeze for the gods.
The trust had applied for the five demat accounts in the names of the deities through a private bank.
In its petition, the trust maintained that verdicts handed down by the Supreme Court and several high courts had upheld the right of deities to own property.
Uday Varunjkar, the counsel for the trust, said that shares, debentures and mutual fund units were also regarded as property under income-tax laws and, therefore, the deities could not be barred from placing their celestial bets on stocks.
NSDL chose to rely on a legal quibble to fob off the Patwardhans and their pantheon of deities.
S. Ganesh, a senior officer of NSLD, filed an affidavit in court saying only deities of registered public trusts could acquire property.
He argued that the Sangli-based trust was a private religious trust that was not registered under the Bombay Public Trust Act. Therefore, it could not acquire property in the name of the deities.
The NSDL official said private trusts could own or acquire property, including shares and debentures, in the name of trustees but not in the name of gods.
It is not known whether the deity of any public trust has ever applied for a demat account to trade in shares.
To open a demat account, the prospective account holder needs to show proof of identity (passport, driving licence, ID card issued by a central or state government, membership of professional bodies or credit cards), proof of address, passport size photograph and a copy of the PAN card.
It is not known how many of these documents the trust was able to submit along with its application for opening demat accounts on behalf of the gods.
A couple of years ago, NSDL was sucked into a controversy when it was accused of conniving with several banks and unscrupulous people to open bogus accounts to help certain people corner share allotments arising from initial public offerings (IPOs).
The racket was unearthed in 2005 and had run unchecked for two years. Over 40,000 fake demat accounts had been opened by the banks and the two depositories — NSDL and Central Depository Services (India) Ltd.
Both depositories were indicted in two interim reports that were produced during former Sebi chairman M. Damodaran's tenure. NSDL was cleared of all charges after C.B. Bhave took over as Sebi chairman.

Posted By: Rahul
Source: Telegraph India

Procedure for conversion of Mutual Fund Units into dematerialised form through your Depository Participant (DP)

  • Obtain Conversion Request Form (CRF) from your DP.
  • Fill-up the CRF.
  • Submit the CRF alongwith the Statement of Account to your DP.
  • After due verification, the DP would sent the CRF and Statement of Account to the Asset Management Company (AMC) / Registrar and Transfer Agent (RTA).
  • The AMC / RTA will after due verification confirm the conversion request sent by your DP and credit the mutual fund units in your demat account.
Posted by:

Source Credits: Website of NSDL

Friday, July 16, 2010

Symbol for Indian Rupee approved

The Union Cabinet today approved the symbol for the Indian Rupee. This symbol will be used by all individuals/entities within and outside India after its incorporation in `Unicode Standard', 'ISO/IEC 10646' and 'IS 13194'.

A public competition was held amongst resident Indian citizens inviting entries for the symbol, which reflects and captures the Indian ethos and culture.  Over 3000 entries were received, which were evaluated by a Jury headed by the Deputy Governor, RBI, which also included experts from three reputed art and design Institutes.  The entries were presented to the Jury in such a manner that identity of the competitors was not revealed to the Jury members.  The Jury selected five final entries and also gave its evaluation of these five entries to the Government to take a final decision.
The symbol will standardize the expression for Indian Rupee in different languages, both within and outside the country.  It would better distinguish the Indian currency from those countries whose currencies are also designated as Rupee or Rupiah, such as Pakistan, Nepal, Sri Lanka and Indonesia.
The symbol will be included in the "Unicode Standard" for representation and processing of text, written in major scripts of the world to ensure that the Rupee symbol is easily displayed/printed in the electronic and print media as all the software companies provide support for this Standard.  Encoding in the Unicode Standard will also ensure encoding in the International standard ISO/IEC 10646 as both the organizations work closely with each other.
The symbol will also be included in the Indian Standards, viz. 13194:1991 – Indian Script Code for Information Interchange (ISCII) through an amendment to the existing list by the Bureau of Indian Standards (BIS).  The ISCII specifies various codes for Indian languages for processing on computers along with the key-board lay outs.
After encoding of the symbol in the Unicode Standard and National Standard, NASSCOM will approach software development companies for incorporating the Rupee symbol in their operative software, as a new programme or as an update, to enable the computer users worldwide to use the symbol even if it is not embedded on the keyboards (in a similar manner, we use the Euro symbol, which is not embedded in the keyboards in use in India).
For incorporating the symbol in the keyboards to be manufactured in India, the Manufacturers' Association for Information Technology (MAIT) will enjoin its membership to make requisite changes in the production processes once the symbol is notified as a keyboard standard by the Bureau of Indian Standards (BIS).
The State Governments would be impressed upon to encourage the use of the new Rupee symbol and proactively promote its use.
The encoding of the rupee symbol in the Indian Standards is estimated to take about six months while encoding in the Unicode and ISO/IEC 10646 will take about 18 months to two years.  It will be incorporated in software packages and keyboards in use in India.
The symbol for the Rupee would lend a distinctive character and identity to the currency and further highlight the strength and robustness of the Indian economy as also a favored destination for global investments.
BACKGROUND :  In view of the fact that the Indian economy has been expanding at a sustained high rate of growth, is steadily integrating with the global economy and India has emerged as a prime investment destination worldwide, it was decided to undertake an exercise for selecting a distinct and identifiable symbol for India Rupee (INR) like other major currencies such as US Dollar (USD), British Pound Sterling (GBP), the Japanese Yen (JPY) and the European Union (EU) Euro.
Finance Minister Expresses his Pleasure on India's Rupee Joining the Exclusive Club of International Currencies having their Own Distinct Symbols
Union Finance Minister Shri Pranab Mukherjee has said that we are happy that Indian currency, rupee has today joined the exclusive club of international currencies which have their own special symbols. He said that now India's currency will be having a distinct identity which will be internationally recognised at par with other international currencies like dollar, pound, and yen etc.

Shalini Haridoss Nair

Vat Forms

Income Tax (Sixth Amendment) Rules, 2010

Thursday, July 15, 2010

Procedure for transfer of shares held in physical form

FAQ's on Procedure for transfer of shares held in physical form

 I have purchased XXX shares. How do I get them registered? How long will it take?
The shares for transfer may be lodged with Registrar and Share Transfer Agent (RTA) or the Company at its Registered Office. All transfer requests are processed by the RTA within a period of 15 to 30 days from the date of receipt, if documents are in order in all respect. In case of non-receipt of response from the RTA within 30-35 days of lodging the transfer request, you may contact them with details of documents to find out the current status of shares.
I would like to gift some shares to my children/relatives. How do I get them registered in their names? Does it involve stamp duty?

The procedure of registration of shares gifted is same as the procedure for a normal transfer. The stamp duty is also applicable in case of gifted shares, and the duty is at 0.5% of the market value prevailing on the date of execution of the transfer deed by the transferee.

 Where should I send the shares for transfer?

The Registrar and Share Transfer Agent only carry out Registration of Share Transfer. You will have to lodge the shares, either by personal delivery or through post/reputed courier. The address of the RTA would be available at the companies web site. 

What is the stamp duty on shares? Where do I get these stamps?

The stamp duty applicable on share transfer is at 0.5% on the market value on the date of execution of the transfer deed. Share Transfer Stamps can be obtained from the authorized stamp vendors. Your share broker can also help you in this regard.

  How do I ensure that the Transfer Deed is complete before sending it to the company?
Please fill in all the columns of the transfer deed, sign as transferee at appropriate places and affix share transfer stamps at 0.5% of the market value on the date of execution of the transfer deed. Please ensure that the transfer deed is duly filled in and executed as explained, to avoid any discrepancy/objection on lodgment.

  I want to add another joint-holder name to my shareholding. What is the procedure that I should follow?

You have to execute a transfer deed, duly stamped and submit the same to the Registrar and Share Transfer Agent for transfer. Please note that such addition of name amounts to change in ownership of shares and the procedure for transfer as defined in Q. No. 3 has to be followed.
S Rahul Vaid

Wednesday, July 14, 2010

Some useful Cases under Companies Act

  • Director of the company alone cannot commit anything on behalf of the company without the sanction of the Board of director. Shabh Shanti Services Ltd. v. Manula's Agarwalla & Ors. 2005 SCC (Cri) 993.

  • Conviction u/s 454(5) of the Act will be challenged in appeal before the Division Bench of the H.C. P. George Philip v. Official Liquidator, 2004(4) RCR (Crl.) 98 Kerala FB.

  • Flat allotted to the employee who died. The legal heirs can be prosecuted on non vacating the flat after due notice. Lalita Jalan v. Bombay Gas Co. Ltd., 2003(3) RCR(CRi. )76(SC) 2003 SCC(Cri) 1281 : AIR 2003 SC 3157 :2003 SC 3157 : 2003 Cri.L.I. 2514.

  • Defamation against the co. Every director of the co. can file the complaint. Johan Thomas v. Dr. K. Jagadeesam. JT 2001(5 (SC) 398 : 2001(3) RCR(Cri.) 381 : AIR 2001 SC 2657 : 2001 Cri.L.J. 3322.

  • Offence committed by an Indian in foreign country. The Indian Court will try the offence. A.V. Mohan Rao v. M. Kishan Rao, 2002 SSC(Cri.) 1281 : AIR 2002 SC 2653.

  • S.434 – Notice beyond the period of 15 days in case of dishonor of Cheque Is not valid. M/s. Uniplas India Ltd v. State, JT 2001 (5). (SC) 465 : 2001(3) RCR (Cri) 511 : AIR 2001 SC 2625 : 2001 Cri.l.j. 3326.

  • S 630 All members of an employee or an ex – employee of a company cannot be prosecuted for the offence. M/s. J.K. Ltd v. Mrs. Mata Mishar, JT 2001(2) (SC) 36 : 2001(1) RCR(Cri.) 561: AIR 2001 SC 649.

  • Registrar of the company can file the complaint when the offence is under section 113. Registrar of Companies v. Rajshree Sugar and Chemicals Ltd., 2002(2) Crimes 322 SC3( 2000) CCR 21 (SC) : 2000(2) RCR (Cri.) 874 : AIR 2000 SC 1643.

  •  Refusal to transfer shares has to be intimated to the applicant with in 2 monhts from the date of delivery. Unit Trust of India v. Jagdish Rai, 2(2000) CPj. 106 Chd. SCDRC..

  • Winding up order was passed by the High Court. Court's Leave has to be obtained for further proceedings against the company. Asia Pacific Investment Trust Ltd. v. Amod Juneja, 1(2000) CPJ. 239 Delhi, S.C.D.R.C. New Delhi

  • S 113 – Prosecution – Limitation under the Act is 6 months. The limitation shall be counted from the date of knowledge of the offence to the complainant. Registrar of Companies v. Rajshree Sugar and Chemicals Ltd., 2000(2) Crimes 322 (SC) : AIR 2000 SC 1643.

  • Company Court is not competent to take the cognizance of the offence U/S. 629 of the Act committed by the Managing Director of the Company. V. Sugandha Lal v. Boby Varghese, 2000 Cri.L.K. 4121 Kerala.

  • S 628 – Filing of flase statement in form 32 in an offence. K. Radha Krishana v. C.V. Mnaikandan, 1(1999) CCR 11 HC : 1998 Cri.LJ. 3583.

  • Default in Filing annual return and balance sheet of the company. The continuing offences U/Ss. 159, 162, 220 attracted. Anita Chadha v. Registrar of companies, 1999 Cri.L.J. 2433 Delhi.

  • S. 391, 393 – For the compromise & arrangement the sanction of the Court is to be obtained and the Court cannot work as an appellate Court for examination of the scheme. Miheer H, Mafatlal v. Mafatlal Industries Ltd., AIR 1997 SC 506.

  • The managing director is responsible for criminal liability for any offence committed by the employers/Company. 4(1996)CCR 163(SC).

  • S. 159/220 – the offences are continuing offences. Rani Joseph v. Registrar of Companies, Kerala, 1995 Cri.L.J. 3832 (Kerala).
    S Rahul Vaid