New Direct Tax Code from April 1, 2012

New Direct Tax Code from April 1, 2012

The government on Monday introduced Direct Taxes Code (DTC), offering much lower benefits than in the original proposal.

The new code would now be applicable from April 1, 2012, instead of next year as proposed earlier by the finance minister.

The Bill seeks to increase tax exemption on income from Rs. 1.6 lakh to Rs. 2 lakh and fix the corporate tax at a flat 30 per cent.

As per the Bill, income from Rs. 2-5 lakh will be taxed at 10 per cent; Rs. 5-10 lakh at 20 per cent and 30 per cent thereafter.

The changes, when they take effect, will help save up to Rs. 41,040 for people earning more than Rs. 10 lakh a year. The exemption on savings and payment of interest up to Rs. 1.5 lakh on housing loan have been retained in the proposed DTC Bill.

Finance Minister Pranab Mukherjee tabled the Bill in the Lok Sabha and it has been referred to select committee of Parliament for scrutiny. Similarly, the exemption limit for senior citizens, is sought to be raised marginally to Rs. 2.5 lakh from Rs. 2.40 lakh now.

Currently, income from Rs. 1.6-5 lakh attracts 10 per cent tax; from Rs. 5-8 lakh, 20 per cent and beyond Rs. 8 lakh, 30 per cent. The proposed tax slabs are much lower than originally suggested in the draft DTC bill -- 10 per cent for Rs. 1.6 lakh to Rs. 10 lakh, 20 per cent from Rs. 10-25 lakh and 30 per cent for income above Rs. 30 lakh.

According to estimates, an individual tax payer earning more than Rs. 10 lakh would save up to Rs. 41,040 annually. The legislation also proposes to increase MAT from 18 per cent to 20 per cent of book profit of a company. It seeks to levy dividend distribution tax at 15 per cent. When enacted, DTC will replace archaic Income Tax Act.

Posted By: Ankitha Singhvi

Source: NDTV Profit

Summary of Examiners’ Comments on the Performance of Candidates [Final (Old) Course and Final (New) Course, May 2010 Examination

In a move to facilitate the students, the Board of Studies has compiled the comments of the examiners on all the subjects of the Final (Old) Course and Final (New) Course examinations held in May, 2010. The group-wise general comments of the examiners on the performance of the students have been summarised, which are followed by the question-wise specific comments on the mistakes committed by the students in different subjects.


Students are advised to go through the general and specific comments very carefully to be aware of the areas in which they are lacking, the mistakes committed, etc. which would help them to overcome their shortcomings in the forthcoming examinations.

The summary of examiners' comments on the performance of candidates is available at

» Final Course [Old] – GR-I May 2010
» Final Course [Old] – GR-II May 2010
» Final Course [New] – GR-I May 2010
» Final Course [New] – GR-II May 2010

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Regards
Ankitha Singhvi

Tamil Nadu Professional Tax Amendment

Tamil Nadu Professional Tax Amendment

Click here to view/download

The Indian Warren Buffett - Mr Rakesh Jhunjunwala

Rakesh Jhunjhunwala is an Indian Chartered Accountant by qualification but an investor / trader by profession. In 2010, Forbes rated him as India's 51st and the world's #1062 richest man with wealth of $1.0 billion. He is one of the most famous and respected equity investors in India and manages his own portfolio as a partner in his asset management firm, Rare Enterprises. A large man in his late 40s, Jhunjhunwala was described earlier this year in a magazine as the "pin-up boy of the current bull run" and by another as "Pied Piper of Indian bourses". He is tagged by the media as 'India's Warren Buffett'.

Mr Jhunjhunwala stays at Malabar Hill and works from his office at Nariman Point in South Mumbai. He regularly appears on various business channels on television to share his ideas and opinions on the Indian markets. He is well known among the investing circles as 'Rocky' and among his close associates as 'Bhaiyya'. He considers Mr Radhakrishnan Damani as his guru (mentor) and best friend

Son of an income tax officer, he started dabbling in stocks while in Sydenham college and plunged into investing as a full time profession soon after completing his education. He started his career with $100 in 1985 when the BSE Sensex was at 150. He made his first big profit of Rs 0.5 million in 1986 when he sold 5,000 shares of Tata Tea at a price of Rs 143 which he had purchased for Rs 43 a share just 3 months prior. Between 1986 and 1989 he earned Rs 20-25 lakhs. His first major successful bet was iron ore mining company Sesa Goa. He bought 4 lakh shares of Sesa Goa in forward trading, worth Rs 1 crore and sold about 2-2.5 lakh shares at Rs 60-65 and another 1 lakh at Rs 150-175. The prices then went up to Rs 2200 and he sold some shares.

But he credits Madhu Dandavate's Union budget of 1990 as the inflection point for his investing career which quintupled his net worth. His privately owned stock trading firm Rare Enterprises, derives its name from the first two initials of his name and wife Rekha's name.

Under the guidance of Mr Radhakrishna Damani, he made a lot of money shorting stocks at the time of Harshad Mehta scam post 1992.

"My decision to aggressively invest in the asset class of Indian equities at the right time was a very important determinant of my success," said Rakesh Jhunjhunwala.

Jhunjhunwala's portfolio of stocks is tracked religiously. His latest stock portfolio is the subject of many debates and analysis. Like Warren Buffett, Jhunjhunwala is a long term investor, however he acknowledges that it was 'trading' income which helped him built his initial capital base and continues to remain an active trader as he believes it keeps one alert and always on your feet.

Mr. Jhunjhunwala is the Chairman of Aptech Limited and Hungama Digital Media Entertainment Pvt. Ltd and also sits on the Board of Directors of various Indian listed/ unlisted companies like Prime Focus Limited, Geojit Financial Services Limited, Bilcare Limited, Praj Industries Limited, Provogue India Limited, Concord Biotech Limited, Innovasynth Technologies (I) Limited, Mid Day Multimedia Limited, Nagarjuna Construction Company Limited, Viceroy Hotels Limited, CRISIL & Tops Security Limited

Investment Philosophy

Although he claims to put only a minuscule of his networth on the table for trading activity, he has often leveraged his own capital and managed to make a fortune from his calls, more often than not. His stock picking strategy is influenced by the lessons from Mr George Soros's trading strategies and Dr Marc Faber's analysis of economic history. He endorses the thumb rule of 'trend is my best friend'.

He is the poster boy of the Indian bull run but admits to have been a bear in the Harshad Mehta days and believes that a person in the market should be like a chameleon. He calls the markets as temples of capitalism and believes that they are the ultimate arbitrators.

Much like Mr Warren Buffet, he buys into the business model of a company and for judging the longevity and growth potential, he gives top priority to 'competitive ability', 'scalability' and 'management quality' of the enterprise. The 'entrepreneur', according to Mr Jhunjhunwala is what makes an invaluable difference to his expected investment returns. According to Mr Jhunjhunwala, believing in the vision and the beliefs of the entrepreneur and validating the risks that may not be perceived by the entrepreneur are the key success factors for an investor.

Mr Jhunjhunwala has managed to identify numerous multi-baggers in the past decade, notable being Karur Vysya Bank, Praj Industries, Crisil, Titan, Nagarjuna, HOEL and PSUs like BEML and Bharat Electronics, among others. The typical traits to look for while identifying potential multi-baggers, according to Mr Jhunjhunwala are - low institutional holding, under-researched and general pessimism about the stock.

A good time to sell a stock, according to Mr Jhunjhunwala, is not based on any 'price' targets, but when the 'earnings' expectations have peaked or the business model has peaked or the valuations appear ridiculously unreasonable.
 
 Holdings

His current holdings (that is, where he has more than 1% holdings) are spread across as many as 27 stocks, mostly mid-caps, and across sectors such as oil exploration, IT, hotels, pharma, entertainment, engineering, construction, retail and auto ancillaries. His investment in Titan Industries (TITAN.NS : 2898.2 -46.05) alone is worth over Rs 1,000 crore.

During the June quarter, he increased his holding in VIP Industries to 5.81% from 4.47% as compared to the previous quarter, according to CapitalLinePlus data. In the same period, he reduced his stake in Titan Industries to 8.58% from 8.62% and in Praj Industries to 7.73% from 7.83%.

Interestingly, there are hardly any cyclical or commodity stocks in his portfolio.

Jhunjhunwala prefers investing in a large amount in a small number of companies - which is against the usual investment style of diversifying across stocks. In fact, his top 5 picks - investments in companies such as Titan Industries, Lupin, Crisil, Nagarjuna Construction and Karur Vysya Bank - account for about 60% of his portfolio.

Going by his sizeable investments, you'd expect Jhunjhunwala to develop some kind of emotional attachment to the scrips he invests in. But that's not him. "I hold on to a stock because it will give me returns and not because I'm emotionally attached to it," insists Jhunjhunwala, who manages his own portfolio as a partner in his asset management firm, Rare Enterprises. And for all the intrigue and attention surrounding his trading activities, his investment philosophy remains simple: 'buy right and hold tight'. Jhunjhunwala admits to being a long-term investor, but clarifies that he's not an inveterate bull: "I have been a bear many times, including in 1992 when the market (Sensex (^BSESN : 18111.42 +62.57)) fell from 4,300 to 2,100 levels. Incidentally, this was the time Harshad Mehta, India's first bull, was at the helm of market affairs.

Like many big investors, he too made mistakes which he is candid about. "I was cautious and went short sometimes in the period between October 2007 and October 2008." In fact, he regrets not having sold as much as he should have in October 2007.

That said, Jhunjhunwala is very much bullish on the India growth story at the moment. Recently, in an interview to a news channel, he reiterated that the market will touch new highs by the end of this financial year. "He has an unshakable conviction in the India story. That's his greatness," says Shankar Sharma, vice chairman & joint MD of First Global, who has locked horns with Jhunjhunwala on several forums and panel discussions.

At 50, he may hold on to his convictions a little more tightly but that doesn't mean Jhunjhunwala frowns upon new ideas. "I read a lot and am constantly learning from others," he reveals. The walls of his office in Nariman Point - dotted with line drawings of legendary investors such as Warren Buffett, George Soros, John Templeton and Peter Lynch - in a way bears testimony to that. And though he has no role models as such, he admits to admiring George Soros because of the "kind of success he has achieved, his understanding of the markets and his charitable activities."

His investment style may bear some semblance to that of these gurus but a lot of top stock traders believe he is simply incomparable. "He is not a copy of anybody. He is Rakesh Jhunjhunwala," says Raamdeo Agrawal, co-founder and joint managing director at Motilal Oswal Financial Services. "He is intelligent, passionate and an independent thinker. Besides, he has the ability to take measured risks and leverage his portfolio, something very few investors can do successfully."

According to Parag Parikh, founder and chairman of PPFAS, an investment advisory firm, Jhunjhunwala differs from Buffett in some ways: "For example, unlike Buffett, he has made some money from trading and does track market movements actively." That said, as someone who has been an early bird in identifying good businesses like Crisil and Titan, Parikh says Jhunjhunwala's investment acumen is top-notch. And unlike his contemporary Harshad Mehta, Parikh says Jhunjhunwala is "Mr Clean who pays all his taxes."

But more than paying taxes, perhaps it's Jhunjhunwala's charitable activities that might endear him to many. Like Buffett and Soros, he plans to get more involved in philanthropy. "I believe that wealth is a gift from God and has to be used for the good of society. I hope to expand my charitable activities substantially in the next few years," he says, without revealing a definite time-frame or the exact amount he intends to spend.

 
 
Posted By: S Rahul
Source: Wikipedia And Yahoo Finance

SEBI asks brokers to return idle cash to investors

Concerned over brokers misusing the funds lying in investors' trading accounts, market watchdog SEBI has asked the brokerage entities to return the clients' un-utilised cash at the end of every month or quarter.

Although some brokers are resisting the move citing high costs associated with such frequent transfers of funds to and from the clients' accounts, the SEBI has also asked them to transfer within a day the funds withdrawn by the investors.

The Securities and Exchange Board of India (SEBI) has asked the stock exchanges to ensure compliance from their broking members and the bourses have in turn sought these regulations to be implemented by all the brokers in true spirit, a senior official at a leading brokerage said.

As per the SEBI directive, the brokers would need to settle the accounts of their clients at the end of every month or quarter, whatever is desired by the customer.

Pursuant to this, brokers would need to transfer the funds lying in a client's trading account to the attached bank account electronically, or through cheques if no internet banking account is attached.

Besides, the brokerage would also have to send out a monthly or quarterly statement of funds, as per the client's choice, so that the investor is well-versed with the status of cash or securities lying in the trading accounts and can get back to the broker in seven days if any discrepancy is found.

Generally, investors also tend to keep some cash, whether fresh or those from sale of shares, in their trading accounts for instant access to funds needed for future buy orders.

At the time of opening the trading accounts, brokers ask the investors to give them 'Running Account Authorisation', which makes the funds readily available for future buy orders.

However, there have been cases when the brokers use these funds for market dealings without the knowledge of the client and then return the funds back into accounts whenever the customer needs it. The new norms are mainly aimed at checking these kinds of fraudulent activities, sources said.

Besides, brokers generally take 2-3 days to transfer the funds withdrawn by the clients from their trading accounts. However, the SEBI has now made it mandatory to return of such funds within one working day or 24 hours.

Following the rap from SEBI and stock exchanges, the brokerages are now informing their respective customers about the changes in their "running account authorisation", giving them the option to get back the un-utilised funds at the end of every month or quarter.

The brokers would need to get these "running account authorisation" from their clients every year and the client would have a right to revoke such authorisation at any point. However, the brokers are allowed to retain the outstanding pay-in obligations of funds from the clients as on the date of settlement.

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Regards

Ankitha Singhvi

Source: Tax Guru

Requirement to mention the firm registration number allotted by ICAI in all reports issued, including certificates, by members of the ICAI

Announcement on – Requirement to mention the firm registration number allotted by ICAI in all reports issued, including certificates, by members of the ICAI – (16-08-2010).

Attention of the members is invited to the announcement regarding requirement relating to mentioning the firm registration number in the audit reports and resolution passed by the company for appointment of statutory auditors, published on page 1312 of the February 2010 issue of the Journal.

The Council of the Institute of Chartered Accountants of India, in terms of the decision taken at the 296th meeting held in June 2010 has decided to extend the requirement to mention the firm registration number to all reports issued pursuant to any attestation engagement, including certificates, issued by the members as proprietor of/ partner in the said firm. The requirement shall apply where such firm registration number has been allotted by the Institute of Chartered Accountants of India.

The Council further decided to make this requirement effective for all attestation reports/ certificates issued on or after 1st October, 2010.

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Regards
Ankitha Singhvi

Source: Tax Guru

Criteria / Guidelines for selection of cases for Income tax Scrutiny for Assessment year 2010-11 or Financial Year 2009-2010

 

Guidelines for selection of cases for Scrutiny During 2010-11

1.       Selection of cases for scrutiny during the financial year 2010-11 will be done primarily through CASS this year. Manual Selection for scrutiny this year will be limited only to a few cases listed below.

2.       List of cases selected during each month in accordance with selection criteria mentioned below shall be submitted by the Assessing officers to their respective Range heads by the 15^th of the following month and also displayed on the notice Board of their offices .

3.       These guidelines are meant only for the use of officers of the Income Tax Department .These are not to be disclosed even if a request is made under Right to Information Act, In view of the decision of the Central Information Commission in the case of Shri Kamal Vs Director (ITA-II), CBDT (order no CIC/AT/2007/00617 dated 21.02.2008)

Selection criteria Applicable to all return at all stations

a)      Value of International transaction as defined in 92B exceeds 15 Crore.

b)      Cases involving addition in an earlier assessment year in excess of Rs 10 lacs on a substantial and recurring question of law or fact which is confirmed in appeal or is pending before on appellate authority.

c)       Cases involving addition in an earlier assessment year on the issue of transfer pricing in excess of Rs 10 Lakh or more.

d)      Assessment in survey cases for the financial year in which survey was carried out. This criteria will not apply if all of the following conditions are fulfilled:

i.            There are no impounded books or documents.

ii.            There is no retraction of disclosure, if any, made during the survey.

iii.            Declared income, excluding any disclosure made during the survey, is not less than the declared income of the preceding year.

e)      Assessment in search & Seizure cases to be made under section 158B, 158BC, 158BD, 153A,  153C & 143(3) of the IT Act.

f)       Assessment Initiated under section 147/148 of the IT Act.

g)      Assessing officer may select any return for scrutiny after recording he reason and obtaining approval of the CCIT/DGIT. The cases under this category should be selected if, there are compelling reasons and the case is not selected through CASS. These cases should be watched by CCIT/CIT in respect of the quality of assessment.

(F.NO.225/93/2009/ITA.II)

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Regards
Ankitha Singhvi

Soon Just one Application for Getting Trademark in more then one Countries

Rajya Sabha on Tuesday passed the Trademarks (amendment) Bill of 2009, which enables a person or an enterprise to seek registration of a trademark in any of the 84 member countries  of the Madrid Protocol through a single application. The amendment bill, which provides for a simplified trademark registration process, was passed by Lok Sabha in December last year. It facilitates Indian and foreign nationals to secure simultaneous protection of trademarks in other countries. At present, an applicant has to approach different countries in different languages with separate fee.

 

"The amendment has been done just to align with the international practice. An Indian firm wishing to register in other countries can do so by filing a single application and one time fee," said commerce minister Anand Sharma.

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Regards

Ankitha Singhvi

Regulatory experiment on Retail Investors - A Sucessful Move

The past three months have seen a regulatory experiment of sorts in the Indian capital markets. The purpose was to bring back retail investors' interest in initial public offers (IPOs). The experiment has already shown some signs of success.

The Securities and Exchange Board of India (SEBI) has allowed IPO-issuing companies to keep their issues open for retail investor for an extra day after the subscription period has been closed for larger and institutional investors. It seems to have worked, at least in case of Engineers India, SKS Microfinance, and Bajaj Corp.

The idea is very simple. Retail investors follow cues from institutional investors. If the big boys are showing interest in any particular issue, retail investors also invest in that issue. However, since institutions like to wait till the last moment before investing, IPO subscription remains muted until the last day.

Extending IPOs by a day solves this problem. If the issues get a good response from institutional investors, the news will be in papers next day and retail investors will still have a day to put in their money.

However, the apparent success of this move (even though the volume of evidence is quite small yet) raises some uncomfortable questions about retail investors' behaviour in India. At the end of the day, this is essentially a micro-level attempt to manipulate retail investors, basically, a sort of a game between promoters and retail investors. Retail investors who are lured by these tricks are the ones, who are focused purely on getting out on day one, which is why they need to pre-judge the demand for the stock. And this cat and-mouse game is facilitated by a deeply-held ideological belief in India that by hook or by crook, retail investors must be made to invest in IPOs. As I have written earlier, we need to step back and re-examine this idea. IPOs are not inherently suitable for retail investors. If anything, IPOs have a higher degree of uncertainty and poorer quality of information. The whole idea is a mutated descendant of the old CCI days, when an IPO allotment was like picking a lottery ticket. Nowadays, you can be sure that as soon as a handful of issues list with good gains (a few have, recently), promoters will start pricing upcoming ones to the limit. All in all, IPOs are not a great investment option for retail investors, and it's time we stop trying to manipulate them into investing

Posted by: S Rahul

Source: Value Research Online

Transfer of shares by a foreign company to its wholly owned Indian subsidiary not taxable in India

Praxair Pacific Limited (PPL ), a company incorporated in Mauritius, proposes to transfer its 74% equity stake in Jindal Praxair Oxygen Company Private Limited (JPOCPL) to its wholly owned subsidiary in India, Praxair India Private Limited (Praxair India). The consideration for the proposed transfer is stated to be determined on the basis of cost, unless a higher consideration is required under the pricing guidelines prescribed by the Reserve Bank of India as applicable for transfer of shares.

Issues before the AAR

• Whether the investment held by PPL in equity shares of JPOCPL would be considered as "capital asset" under section 2(14) of the Income-tax Act, 1961 ("ITA")?
• Whether transfer of JPOCPL from PPL to its wholly owned subsidiary Praxair India would be liable to tax in India in view of the exemption under section 47(iv) of the ITA?

Exemption under section 47(iv) of the ITA is available if the capital asset is transferred by a holding company to its wholly owned Indian subsidiary.

• Whether PPL would be entitled to the benefits of the India – Mauritius Tax Treaty ("Treaty") and whether the gain arising to PPL would be liable to tax in India having regard to the provisions of Article 13 of the Treaty?
• Whether the gains arising to PPL from the sale of equity shares of JPOCPL would be taxable in India in the absence of Permanent Establishment ("PE") of PPL in India in light of the provisions of Article 7 read with Article 5 of the Treaty?
• Whether PPL would be liable to Minimum Alternate tax under the ITA?
• Where the gains arising to PPL on account of the proposed transfer is not taxable in India under the Act or the Treaty, whether Praxair India, the transferee company, is required to withhold tax in accordance with the provisions of section 195 of the ITA?
• If the gains are not taxable in India, whether PPL is required to file any return of income of income under section 139 of the ITA? This question was not pressed by PPL.
• Whether the proposed transfer of equity shares by PPL to Praxair India attracts the transfer pricing provisions of section 92 to 92F of the ITA?

Contention of the applicant

• The shares held by PPL in JPOCPL are not held as stock-in-trade but represent investments and thus should be classified as a capital asset.
• As PPL proposes to transfer its equity shareholding in JPOCPL to Praxair India, its wholly owned subsidiary in India, the provisions of section 47(iv) of the ITA are fulfilled. Gains, if any, on the transfer of equity shares in JPOCPL would not be taxable in India.
• PPL would not be liable to tax book profits or Minimum Alternate tax under the ITA as the provisions of section 11 5JB would be applicable only to domestic companies and not to foreign companies.
• The gains from the proposed transfer of shares in JPOCPL by the Applicant would not be taxable in India as capital gains or business income in the light of the treaty.
• In case the proposed gains are not considered as capital gains but as business income, such business income will not be taxable in India since PPL does not have a PE in India.

Observations / Rulings of the AAR

• The shares in JPOCPL have been held as "Non-current assets – investment in subsidiaries" since 1995 and were never a subject matter of any transaction till date. As the shares were not held as stock in trade, the nature of the investment in these shares is held to be a "capital asset" as defined in section 2(14) of the ITA.
• As PPL proposes to transfer its equity share holding in JPOCPL to Praxair India which is its wholly owned subsidiary in India, the conditions under section 47(iv) of the ITA are fulfilled and hence the gains if any arising on transfer would not be taxable in India.
• As PPL is tax resident of Mauritius and has been issued Tax Residency Certificate by the Mauritius Revenue Authority, it would not be subjected to tax in India on the capital gains arising from the proposed transaction in India under the Treaty.
• The annual accounts of the applicant cannot be prepared in accordance with Schedule VI of the Companies Act 1956. The provision under the ITA relating to Book Profits Tax is not designed to be applicable to a foreign company which has no presence or PE in India. The AAR relied on its ruling in the case of Timken USA (AAR 836 of 2009) where it was held that under the Companies Act 1956 only such foreign companies who have established a place of business within India are required to make out a Balance Sheet and Profit and Loss account as required under the said Act.
• Sections 11 5JB of the ITA is not attracted in the case of PPL.
• The transfer pricing provisions of section 92 to 92F of the ITA would not be attracted in the absence of liability to pay tax on the capital gain.

Conclusion:-Gains from the transfer of shares by a Mauritius company to its wholly owned subsidiary in India would not be taxable in India either under the ITA. The AAR has also reiterated the benefit of the India- Mauritius tax treaty would be available to PPL as it had adequate tax residency certificate issued by the Mauritius Revenue Authority. Further, the gains from such transfer would not be subject to Minimum Alternate Tax as the provisions under the ITA governing such tax do not apply to a foreign company that has no presence or PE in India

Source: M/s. Praxair Pacific Limited (A.A.R. No. 855/2009 dated 23 July 2010)


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Regards

Ankitha Singhvi

FEMA – Change in Pricing Guidelines for issue of shares to non-residents

 

 

 

Background

• The Pricing Guidelines for the issue of shares by an Indian Company to a non resident is governed by the Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations 2000.
• As per the aforesaid regulations, pricing norms for issue of shares by an Indian Company to non-resident were as under:

-           In case of listed shares – as per Securities and Exchange Board of India (SEBI) guidelines

-           In case of unlisted shares – at fair valuation done by a Chartered Accountant as per the erstwhile Controller of Capital Issues (CCI) guidelines

• The pricing norms for rights issue of shares by an Indian Company to non-resident shareholders were as under:

-         At a price not lower than the price at which such shares are offered to resident shareholders.

Changes in pricing guidelines

Reserve Bank of India (RBI) has, by a notification dated 7 April 2010 amended the FDI Regulation with regard to pricing guidelines. The amendments are made effective from 21 April 2010. The highlights of the amendments are as under:

• Pricing norms for issue of shares by an Indian Company to non-resident are as under:

-           In case the shares of a company are listed on a recognized stock exchange in India, the price would need to be worked out in accordance with the SEBI guidelines as applicable.

-           In case the shares of a company are not listed on a recognized stock exchange in India, the fair valuation of shares would be undertaken by a SEBI registered Merchant banker or a Chartered Accountant as per the Discounted Free Cash Flow (DCF) method.

-           Where the issue of shares is on a preferential allotment basis, the price as applicable to transfer of shares from resident to non-resident as per the pricing guidelines laid down by RBI from time to time.

• Pricing norms for rights issue of shares by an Indian Company to non-resident shareholders are as under:

-                  In case of the shares of a company listed on a recognized stock exchange in India, at a price determined by the company

-                  In case of the shares of a company not listed on a recognized stock exchange in India, at a price which is not less than the price at which offer on right basis is made to resident shareholders.

Conclusion:-

The pricing in regard to issue and transfer of shares to non-residents were governed by the CCI guidelines. Theses have been replaced with the discounted cash flow method which is based on the future earnings. However, RBI has made a distinction in pricing with respect to issue of shares on preferential basis as compared to normal issue as the same would be covered by the RBI guidelines to be prescribed.

• The interplay between issue of valuation rules guiding the determination of fair value of unlisted shares for the purposes of section 56 (i.e. gifts) based on book value/ historic method and the pricing guidelines under FEMA based on DCF are bound to create some confusion for investors.

Source: Notification No. GSR 341 (E) FEMA 205 /2010 – RB dated 7 April, 2010 issued by RBI.

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Regards

Ankitha Singhvi

Amended DTAA with Switzerland will provide sharing of information on Indians having unaccounted wealth in secret Swiss bank accounts

The amended protocol will pave the way for Indian authorities to obtain from their Swiss counterparts details regarding illegal money and the ownership of those accounts in specific cases where there is a proper justification for such a request, they said.







Both the countries had recently completed the renegotiation of the DTAA. The amended DTAA will take effect only after it is notified in both the countries, sources said, adding that among other changes expected in the tax treaty include those on capital gains and shipping.






Earlier, the tax authorities in Switzerland had expressed reluctance to part with details about the Swiss bank accounts of Indians saying it was not an issue pertaining to the DTAA and that the agreement did not have provisions regarding such information exchange.






OECD norms




However, last year, Switzerland had decided to adopt the OECD norms on administrative assistance on the lines of the OECD Model Tax Convention, which means the request for any such information should be backed by evidence including on tax evasion. But the Swiss authorities need not entertain a ‘roving enquiry’ or just a ‘fishing expedition’ that will amount to violation of the privacy of individuals.






Following the bilateral discussions, which began in April 2009, the Swiss authorities agreed to include the amendments, particularly with regard to the Article on Exchange of Information, in the DTAA to allow Indian tax authorities to access information such as bank account details. The tax authorities, however, will have to get the required permission from higher authorities before seeking information from their counterparts in Switzerland, the sources said.






The Finance Minister, Mr Pranab Mukherjee, had recently informed the Lok Sabha about the conclusion of the DTAA renegotiation with Switzerland. He said the Government is actively pursuing the matter so that the amendments come into effect as soon as possible. However, he said there was no verifiable estimate of the amount of black money stashed away abroad. The Government is mulling revising tax treaties with many other countries, including Mauritius. A case regarding black money from India hidden in bank accounts in other countries is also being heard by the Supreme Court.







Posted By: S Rahul
Source: Taxguru

Soon service tax may be levied when the consideration is received or when the invoice is raised, whichever is earlier

According to the new rules on 'time of supply', service tax will also be levied at the point of raising invoice. At present, service tax is charged only when the amount is received. However, it has been proposed in the new rules that it be levied when the consideration is received or when the invoice is raised, whichever is earlier.

"There will be a change from cash system to accrual system. This is similar to taxation in case of goods and direct tax," a finance ministry official told Business Standard. The rules, approved by Finance Minister Pranab Mukherjee, wolud be put up for public comments very soon, he added.

'Time of supply' rules will also address the issues such as management services, leasing of equipment, and hiring of staff, which are in continuous supply of services. Such services are provided on an ongoing basis and, at times, it becomes difficult to compute service tax liability if service charges change at any point.

The rules will help identify the point at which new tax rate should be considered if the amount changes midway in a continuous service. For instance, if a tuition is continuous for 12 months and the fee or tax rate changes in between, the rules will explain till what point the existing tax rate would be paid.

The government is also working on 'place of supply' rules, which will clearly define what should be considered the place of supply for levying service tax. The rules, however, may be delayed as these are being considered in preparation of Goods and Services Tax (GST), which has not seen much progress.

Official sources said the rules did not hold relevance if GST was not there. In the exiting tax regime, service, being a federal issue, was taxed by the Centre and the place of levy did not affect its revenue receipts. In GST, the place of supply would be defined to avoid disputes among states in inter-state transactions.

"We are studying international practices. We have to see if the place of supply rules are actually required before GST is introduced," said the official.

The Task Force of 13th Finance Commission on GST had also given suggestions on 'place of supply' rules based on international tax practices, especially in the European Union.

Posted By: Ankitha Singhvi

Source: Taxguru

TODAY'S MARKET

Auto stocks lead markets higher

The Indian markets have started today's session on a positive note. The benchmark indices opened below the breakeven mark but soon moved into the positive territory. They have managed to stay firmly in the green since then. Other key Asian markets are in the green with Taiwan (up 0.2%) leading the pack of gainers. The US markets closed lower by 0.1% yesterday.

Currently in India, heavyweights from the BSE-Sensex are trading strong with auto majors finding investors' favour. The BSE-Sensex is trading higher by around 32 points, while the NSE-Nifty is up by about 11 points. Buying interest is also being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.8% and 0.7% respectively. The rupee is trading at 46.14 to the US dollar.

Real estate stocks have opened the day on a strong note. Gainers here include Godrej Properties and Unitech. Anant Raj announced its 1QFY11 results. The company's top line declined 2% YoY due to a 11% YoY decline in real estate sales during the quarter. However, rental income witnessed a significant jump and increased 98% YoY. The company's other business of ceramic tiles recorded a fall in sales of 13% YoY during the quarter. Its operating profits fell by 25% YoY due to the rise in raw material costs and other expenditure as a percentage of sales. The company's net profits declined by 34% YoY owing to the fall in operating profits and increase in interest expenses.

Energy stocks have opened the day on a positive note. Gainers here include Petronet LNG and HPCL. As per a leading business daily, Reliance Industries will acquire a 60% stake in Marcellus shale-gas acreages held by Carrizo Oil & Gas and its partner for US$ 392 m. The shale acreage in central and northeast Pennsylvania is a 50:50 joint venture between Carrizo and Avista Capital. Reliance Industries will acquire 100% of Avista's stake and 20% of Carrizo's stake. This will be its third shale-gas asset in the US in less than four months. Earlier, Reliance Industries had bought a 40% stake in Atlas Energy's Marcellus Shale acreage for US$ 1.7 bn. It had also picked up a 45% stake in Pioneer Natural Resources' Eagle Ford shale acreage for US$ 1.3 bn. Shale gas is natural gas stored in organic-rich sedimentary rocks. It accounts for 15% to 20% of US gas production, but is expected to increase in coming years leading to a rush of participation.

Posted By: Gayathri

Source: Equity Master

Disclosure of Fund flow statement may soon become mandatory for all companies

Disclosure of Fund flow statement may soon become mandatory for all companies

The government is considering to make it mandatory for all companies to disclose a fund flow statement, an indicator of utilization of financial resources by an entity, along with their annual financial reports. The provisions for mandatory disclosure of fund flow statement is likely to be included in the Companies Bill, which is pending with the Rajya Sabha.

The fund flow statements indicate whether companies are efficiently using financial resource available with them. "The unlisted companies will have to disclose the fund flow statement along with annual results to the Registrar of Companies," a Corporate Affairs Ministry official said. Under the existing laws, the unlisted companies are required to file annual statements with the RoC. The changes, sources said, will be incorporated in the Companies Bill, which has already been approved by Parliamentary Standing Committee and is likely to be taken up for consideration and passage in the current session of Parliament. Besides other things, the new Bill will be shorter and will try to harmonies the company law framework with sectoral regulations.


The proposed Bill will have 480 sections compared to over 600 sections in the Companies Act, 1956, in addition to providing for greater shareholder democracy and less government intervention. The new legislation will try to promote shareholders democracy with protection of rights of minority shareholders, responsible self-regulation with adequate disclosure and accountability and lesser government control over internal corporate processes, said the statement of objects and reasons of the new Bill. It will also make it mandatory for listed companies to have 33 per cent independent directors and provides for formation of One Person Company, while empowering the government to provide a simpler compliance regime for small companies.

The Bill also proposes to make stringent provisions for companies seeking raising money from the public. They would not be allowed to raise deposits from the public without obtaining permission from the relevant regulator. There will be a single forum for approval of mergers and acquisitions, whether domestic or with foreign entities. Also the procedure for merger of holding and wholly-owned subsidiaries would be shortened. The bill also seeks to prohibit insider trading by company directors or key managerial personnel. Such activities will be treated as a criminal offence.

Posted By: Ankitha Singhvi

Taxation of Banks – Press Release

Taxation of Banks – Press Release

 

India has not agreed to a "one size fits all" solution in the European Union Plan of taxing banks and has emphasized that such a tax is not appropriate for India, even though it may be appropriate for other countries e.g. in some European countries.

In the G20 meetings, India did not agree to the banking sector tax in India as our banks are strongly regulated, we did not have to bail out our banks using tax payers' money during the recent financial and economic crisis, and we already have other measures such as a statutory liquidity ratio (SLR) and the cash reserve ratio (CRR) that impose costs on the financial sector.  We have emphasized that we will persevere with a path of financial sector reforms to support rapid and inclusive growth in the real economy, and also increase systemic stability in the financial sector.

Several other countries inter-alia including Australia, Canada, and Brazil also held the view that "one size fits all" cannot be the solution.  The G-20 finally agreed on the principle that tax payers should not pay for the cost of rescue of financial sector.  However, it also agreed that there are a range of policy options to achieve that and the exact mechanism should be based on country circumstances.

This information was given by Minister of State for Finance, Shri Namo Narain Meena in a written reply to a Question in Lok Sabha today.

--
Regards

Ankitha Singhvi

Fee for software is NOT royalty & TDS u/s 195 not required

The assessee applied to the AO for a NOC u/s 195(2) for remittance of a fee to IXOS Software, Singapore, to acquire software. The assessee claimed that the fee was commercial profits and not taxable in the hands of the recipient under Article 7 of the India-Singapore DTAA as the recipient did not have a PE in India. The AO & CIT (A) took the view that as the software was a “copyright” / “secret process” and the assessee had merely acquired a ‘non-exclusive & non-transferable’ license to use the software and as the Singapore Company continued to be the owner of the software, the fee constituted “royalty” under s. 9(1)(vi) of the Act and Article 12 of the DTAA and that it was chargeable to tax in India. On appeal by the assessee, HELD allowing the appeal:



The effect of the judgements in Tata Consultancy Services vs. State of AP 271 ITR 401 (SC), Samsung Electronics Co 94 ITD 91 (Bang), Motorola Inc 95 ITD 269 (SB) & Dassault Systems 229 CTR 105 (AAR) is that the primary condition for coming within the definition of ‘royalty’ is that the payment must be received as consideration for the use of or right to use any copyright of a literary, artistic or scientific work etc. A ‘right to use the copyright’ is totally different from the ‘right to use the programme embedded in a CD’. In acquiring a ready made off-the-shelf computer programme, no right was granted to the assessee to utilize the copyright of the computer programme. The assessee had merely purchased a copy of the copyrighted article, namely, a computer programme which is called ‘software’. Computer software when put into a media and sold becomes goods like any other audio cassette or painting on canvas or book. Accordingly, the amount paid by the assessee towards purchase of the software cannot be treated as payment of “royalty” so as to be taxable in India under Article 12 of the DTAA and the assessee was not liable to deduct tax at source.


Note: The same view has been taken in Velankani Mauritius vs. DDIT (ITAT Bangalore) after considering CIT vs. Samsung Electronics 227 CTR 335 (Kar).


For Further Info Click Here


Regards
Ankitha Singhvi

Know Your Income Tax Refund Status online

The Centralised Processing Centre of the Income Tax Department here has processed over 26 lakh e-filed returns in Forms 1-4 for the assessment year 2009-10. It has determined refunds in over five lakh cases. A release said refunds are being sent through State Bank of India. The status of these refunds can be checked at CPC's call centre (080-43456700) or at www.tin-nsdl.com.

The department has been informed by the bank that a large number of refund cheques in respect of paper returns for 2008-09 have been returned by the postal authorities owing to change in address or for other similar reasons. Many refunds in ECS mode have not been successfully credited to taxpayers accounts because of incomplete/incorrect MICR and bank account details. Details of these returned intimations are available at www.incometax bangalore-.org. In respect of paper returns of salary ranges of Bangalore for 2008-09 processed at the CPC, taxpayers may contact the PRO, Income-tax Department at Ground Floor, Central Revenue Buildings, Queen's Road, Bangalore.

They may collect the returned intimation and update their details of address/bank accounts/MICR code by writing to CPC, Bangalore at CPC, Post Bag No. 1, Bangalore–560100. In case of updated bank account/MICR code, taxpayers should enclose a copy of a cancelled cheque while giving the details, the release added.

REFUND STATUS

The 'Refund Banker Scheme,' which commenced from 24th Jan 2007, is now operational for Non-corporate taxpayers assessed in Delhi, Mumbai, Kolkata, Chennai, Bangalore, Bhubaneswar, Ahmedabad, Hyderabad, Pune, Patna, Cochin, Trivandrum, Chandigarh, Allahabad, and Kanpur.

In the 'Refund Banker Scheme' the refunds generated on processing of Income tax Returns by the Assessing officers/ CPC-Bangalore are transmitted to State Bank of India, CMP branch, Mumbai (Refund Banker) on the next day of processing for further distribution to taxpayers.

Refunds are being sent in following two modes:
1. RTGS / NECS: To enable credit of refund directly to the bank account, Taxpayer's Bank A/c (at least 10 digits), MICR code of bank branch and correct communication address is mandatory.
   
2. Paper Cheque: Bank Account No, Correct address is mandatory.

Taxpayers can view status of refund 10 days after their refund has been sent by the Assessing Officer to the Refund Banker – by entering 'PAN' and 'Assessment Year' below.

Other Refunds

Status of 'paid' refund, being paid other than through 'Refund Banker,' can also be viewed at www.tin-nsdl.com by entering the 'PAN' and 'Assessment Year' .

'Refund paid' status is also being reflected in the 'Tax Credit Statements' in Form 26AS.

Please enter your Permanent Account Number and Assessment Year for which status of refund is to be tracked at the link given below.

Click to Know Your Income Tax Refund Status

FAQ in respect of Income Tax Refund

Q. From which date the refund banker has been implemented?

A. The refund banker has been implemented from January 24, 2007.

Q. In which cities the refund banker has been implemented?

A. The refund banker facility is operational for non-corporate taxpayers assessed in Delhi, Mumbai, Kolkata, Chennai, Bangalore, Bhubneshwar, Ahmedabad, Hyderabad, Pune, Patna, Cochin, Trivandrum, Chandigarh, Allahabad, and Kanpur.

Q. Who will send the refund to me?

A. The State Bank of India (SBI) is the refund banker to the Income Tax Department (ITD). The Cash Management Product department of SBI (CMP SBI) processes the refunds under the refund banker scheme. Details of refunds are forwarded to CMP SBI by the ITD. CMP SBI processes the refunds and sends the refund intimation to the taxpayer.

Q. How will the refund be sent to me?

A. Refunds are generated in two modes i.e., ECS and paper . If the taxpayer has selected mode of refund as ECS (direct credit in the bank account of the taxpayer) at the time of submission of income return the taxpayer's bank A/c (at least 10 digits ) and MICR code of bank branch and communication address are mandatory .

For taxpayers who have not opted for ECS refund will be disbursed by cheque or demand draft. For generation of refund through paper cheque bank account no, correct address is mandatory.

From May 2008 refund is also effected by National Electronic Fund Transfer (NEFT).

Q. How can I know the status of my refund?

A. The taxpayer can track the status of its refund from the Departmental Website www.incometaxindia.gov.in / NSDL-TIN website www.tin-nsdl.com by clicking on "Status of Tax Refunds".

Refund status can be tracked by entering the PAN and Assessment Year for which refund is to be tracked.

Status of the refund can also be tracked by contacting the help desk of SBI's at toll free number: 18004259760 or email at: – itro@sbi.co.in.

Q. If I have shifted my residence whom should I contact for updating my correspondence address for receipt of refund?

A. The tax payer should contact its Assessing Officer and inform about the change in the correspondence address.

Q. If my bank account has been closed how will I get refund credit into the account?

A. In case of change or updation in the bank account number the taxpayer should provide the correct account number along with the MICR code where credit is to be effected to the Assessing Officer.

Q. Whom do I contact if the refund dispatched has not been received?

A. The tax payer can contact its local post office with the speed post ref no displayed at the NSDL-TIN website

Q. I have received the physical ECS refund advice and status of refund is "paid" on website of refund status track but my account has not been credited. Whom do I contact?

A. In case credit is not effected in the taxpayer account through ECS but the refund advice has been received by the taxpayer AND the status shown is "paid"- in that case, the tax payer should contact his bank or SBI. You should contact SBI at the following address.

Cash Management Product (CMP)

State Bank of India

SBIFAST

31, Mahal Industrial Estate

Off Mahakali Caves Road

Andheri (East)

Mumbai – 400 093.

Phone Number: 18004259760 or email at itro@sbi.co.in

Q. I have neither received the physical ECS refund advice and status of refund is "unpaid" on website track. Whom do I contact?

A. The tax payer should provide the correct account number and MICR code to concerned Assessing officer, where credit is to be effected. The Assessing Officer will inform SBI to send a fresh refund cheque to the taxpayer.

Q. If the date of encashing the refund cheque expires, whom should I contact?

A. The tax payer should contact their Assessing Officer as well as CMP SBI at the below address:

Cash Management Product (CMP)

State Bank of India

SBIFAST

31, Mahal Industrial Estate

Off Mahakali Caves Road

Andheri (East)

Mumbai – 400 093.

Phone Number: 18004259760 or email at itro@sbi.co.in

Q. How do I rectify any mistakes in the name, assessment year, PAN, account number printed on the refund cheque delivered to me?

A. In case of any mistakes on the refund cheque delivered to you, the following should be done:

i) Send the original refund cheque to CMP, State Bank of India at SBIFAST 31, Mahal Industrial Estate, Off Mahakali Caves Road, Andheri East, Mumbai – 400 093, Phone Number: 18004259760, along with a letter informing the mistakes on the refund cheque.

ii) Send a copy of the letter along with a copy of the refund cheque to your Assessing Officer.

iii) Retain a copy of the letter and refund cheque with you.

Q. If somebody else's refund cheque / advice is delivered to me what should I do?

A. You should contact SBI at the following address and return the refund cheque / advice.

Cash Management Product

State Bank of India

SBIFAST

31, Mahal Industrial Estate,

Off Mahakali Caves Road,

Andheri (East)

Mumbai – 400 093

Phone Number: 18004259760 or email at itro@sbi.co.in

Q. Is there any method available to know whether the refund record has been generated for the taxpayer?

A. The taxpayer can track the status of its refund from the NSDL-TIN website www.tin-nsdl.com by clicking on "Status of Tax Refunds".

Refund status can be tracked by entering the PAN and Assessment Year for which refund is to be tracked.

Status of the refund can also be tracked by contacting the help desk of SBI at 080-26599760.

Q. Whom do I contact for queries related to payment of refund which has been processed by ITD?

A. For any payment related query the taxpayer should contact SBI at 18004259760 or email at itro@sbi.co.in.

Q. Whom should I contact for refund related queries?

A. For any refund related query the tax payer should contact Aaykar Sampark Kendra at 0124 2438000 or email at refunds@incometaxindia.gov.in.

--
Regards

Ankitha Singhvi

Hope sees the invisible, feels the intangible and achieves the impossible :)

Using RTI to Get Income Tax Refund

There are many disputes regarding this tax refund many people have complaint about the tax refunds that the income tax administration is taking many years in refunding the money.

The Right to Information Act (RTI) came into effect from October 12, 2005. The right to information Act helps many citizens to obtain information, which earlier was a not available, from various Govt Departments and other association like PSUs, Indian Railways, Reserve Bank of India and so on.

USING RTI TO GET INCOME TAX REFUND FAST

Right to Information Act is simple but it is very effective, So far, the achievement of Right to information applications in the income tax department is extraordinarily 100%. In every case, the right to information application gets attended to immediately and you get pending refunds within 30 days. It is a outstanding and for the most part effectual tool to get your income-tax refunds if they have been due since long. However, you have to be alert in framing the questions you ask in search of information.

The questions you ask should not be in a demanding manner you should never ask any questions like "why you did not send my tax refund". But try to ask in a pleasing, manner like "please give me the information regarding the overdue refunds. Because the questions you're asking a public information officer who is in a good authority and it's even your duty to respect him giving good honors

The Right to information Act (RTI) is so commanding that the results in a good number of the cases are remarkably outstanding. The right to information Act provides for a time-bound and definite process for citizens to access information

The best place to contact for any assistance you need to visit the right to information clinic run by Bombay chartered accountant's society foundation, the office is located at marine lines on 2^nd, 3^rd, and 4^th Saturdays and the timings would be 11.00am to 13.00pm on every month. If you would like to fix an appointment before in hand then you can contact his particular phone number 022 – 66595601.

The Income Tax Act 1961 lays down the frame work or the basis of charge and the computation of total income of a person. It also stipulates the manner in which it is to be brought to tax, defining in detail the exemptions, deductions, rebates and reliefs. In exercise of the powers conferred by section 295 of the Income Tax Act 1961 and Rule 15 of Part A, Rule 11 of Part B and Rule 9 of Part C of the Fourth Schedule to the Act, the CBDT has notified Income Tax Rules 1962. These Rules lay down limits, conditions, definitions, explanations, and forms of applications and procedures for the uniform application of the Income Tax Act.

DON'T FORGET THE FOLLOWING THINGS TO GET INCOME TAX REFUND FAST

• RTGS /NECS: to enable credit card refund directly to the bank account, tax payers bank A/C (should be latest 10 digits), micro code of bank branch and the correct communication addresses mandatory.
• Paper cheque: bank account no, and correct address should be given.

Shalini Haridoss Nair

Source: ETAXINDIA

Six Myths About the Indian IFRS Transition

Six Myths About the Indian IFRS Transition

1. 
   
    We have a comfortable transition deadline
2. 
   
    IFRS is limited to changes in accounting procedure
3. 
   
    We can rely solely on auditors and consultants
4. 
   
    Transition won't be very expensive
5. 
   
    Accountants are the only constituency we need to train
6. 
   
     We'll get it right the first time

MYTH 1

WE HAVE A COMFORTABLE TRANSITION DEADLINE

«      Ninety-five percent of companies in Australia and in the European Union took more than a year to the complete IFRS transition, with 40% taking more than two years. The ICAI requirement to publish 2010 comparative numbers in IFRS leaves Indian companies only eight months to be IFRS–ready.

«      In other countries, regulators released final interpretations two to three years in advance of IFRS deadline and provided step-by-step transition road maps for companies. In India, with just eight months to go, ICAI is yet to finalize the standard—increasing the confusion around standard interpretation.

«      Indian companies must begin assessing the impact of IFRS and start planning immediately, dedicating full-time resources to the project. Companies that delay the effort expose themselves to several risks including restatement, cost overrun, reputational damage, and market risk.

MYTH 2

IFRS IS LIMITED TO CHANGES IN ACCOUNTING PROCEDURES

«      Senior management at many companies view IFRS as a Finance priority because of the required changes in accounting practices. However, the impact of IFRS is truly cross-functional, spanning divisions and business units.

«      HR, Sales, Procurement, Legal, IT, and individual business unit (BU) owners often need to redesign key processes to accommodate IFRS. Critical third-party contracts, debt covenants, and key leadership metrics will change with the change in accounting policies.

«      Finance must convince stakeholders of cross-functional impact and enlist transition support. Companies that actively involved impacted functions and BUs early had 55% greater transition effectiveness than companies that did not, with Finance spending 90% less time on transition.

MYTH 3

WE CAN RELY SOLELY ON AUDITORS AND CONSULTANTS

«      While many companies believe that auditors and consultants can take on much of the transition load, a vast majority of adopters used consultants in only a minor way during the transition—mainly to identify accounting changes. The nature of transition activities requires most work to be done in house by the internal Finance team.

«      Given the need to have internal staff lead the transition team and efforts, companies need to invest in training the IFRS project team very early in the process.

«      At a very early stage, companies must determine the level of external support needed in different transition stages and auditor intervention/sign-off points. Not doing so can result in unnecessary consulting spend and mid-cycle corrections to the project plan.

MYTH 4

TRANSITION WON'T BE VERY EXPENSIVE

«      The IFRS transition is expected to cost Indian firms between Rs. 30 lakh and 1 crore1, with an average of 16 internal and three external full-time staff dedicated to the transition.

«      Fifty percent of adopters had to implement entirely new IT systems to accommodate IFRS; only 20% of companies did not implement systems changes

«      Costs such as auditor fees, systems changes, and reporting costs tend to overrun at the last minute. Companies can avoid this through robust planning, auditor sign-off on every accounting change, systems testing, and reporting dry runs.

MYTH 5

ACCOUNTANTS ARE THE ONLY CONSTITUENCY WE NEED TO TRAIN

«      Once companies realize the impact of IFRS on non-accounting functions, coordinating firm wide training for functional and BU staff becomes a daunting, costly task.

«      Sixty-five percent of controllers found it more difficult to train non-accounting staff and spent a quarter of IFRS training time on functions outside Finance.

«      Companies cannot save time and resources by using the same training modules for all constituencies, or learnings will be inapplicable and easily forgotten. The level and scope of training needs to be tailored to meet different segments' needs.

MYTH 6

WE'LL GET IT RIGHT THE FIRST TIME

«      Companies that undertake the transition without extensive project planning have 25% less effective transitions. These companies are also much more likely to face auditor sign-off conflicts, restatements, and stock price falls as they come closer to the deadline.

«      Not conducting internal and external reporting test runs has often caused companies to discover system bugs, process failures, and accounting errors too close to deadline to be fixed in time.

«      Given the scale of its impact across functions, companies must approach adoption from a project management perspective to increase the likelihood of having a successful transition.

Regards,

Shalini Haridoss Nair

Source : IFRSEXECUTIVEBOARD

             CORPORATEEXECUTIVEBOARD