Highlights of Budget 2015-16

 

Ease of doing business – Minimum Government Maximum Governance

• Simplification of tax procedures.

· Penalty provision in indirect taxes are being rationalised to encourage compliance and early dispute resolution.

· Central excise/Service tax assesses to be allowed to use digitally signed invoices and maintain record electronically.

· Tax Administration Reform Commission (TARC) recommendations to be appropriately implemented during the course of the year.

· Online central excise and service tax registration to be done in two working days.

· Time limit for taking CENVAT credit on inputs and input services increased from 6 months to 1 year.

· Service-tax plus education cesses increased from 12.36% to 14% to facilitate transition to GST.

Tax Proposal

· Efforts on various fronts to implement GST from next year.

· Proposal to reduce corporate tax from 30% to 25% over the next four years, starting from next financial year.

· Rationalisation and removal of various tax exemptions and incentives to reduce tax disputes and improve administration.

Funding the Unfunded

· MUDRA Bank will be responsible for refinancing all Micro-finance Institutions which are in the business of lending to such small entities of business through a Pradhan Mantri Mudra Yojana.

· A Trade Receivables discounting System (TReDS) which will be an electronic platform for facilitating financing of trade receivables of MSMEs to be established.

· Comprehensive Bankruptcy Code of global standards to be brought in fiscal 2015-16 towards ease of doing business.

· Postal network with 1,54,000 points of presence spread across villages to be used for increasing access of the people to the formal financial system

Infrastructure

· Ports in public sector will be encouraged, to corporatize, and become companies under the Companies Act to attract investment and leverage the huge land resources.

· An expert committee to examine the possibility and prepare a draft legislation where the need for multiple prior permission can be replaced by a pre-existing regulatory mechanism. This will facilitate India becoming an investment destination.

Financial Market

• Forward Markets commission to be merged with SEBI

· Section-6 of FEMA to be amended through Finance Bill to provide control on capital flows as equity will be exercised by Government in consultation with RBI.

· India Financial Code to be introduced soon in Parliament for consideration.

· Vision of putting in place a direct tax regime, which is internationally competitive on rates, without exemptions.

· Government to bring enabling legislation to allow employee to opt for EPF or New Pension Scheme. For employee’s below a certain threshold of monthly income, contribution to EPF to be option, without affecting employer’s contribution.

Tourism

· Visas on arrival to be increased to 150 countries in stages.

Skill India

· Less than 5% of our potential work force gets formal skill training to be employable. A national skill mission to consolidate skill initiatives spread across several ministries to be launched.

· An autonomous Bank Board Bureau to be set up to improve the governance of public sector bank.

Broad themes:

Ø Job creation through revival of growth and investment and promotion of domestic manufacturing – “Make in India”.

Ø Improve ease of doing business - Minimum Government and maximum governance. 

Make in India

· Revival of growth and investment and promotion of domestic manufacturing for job creation.

· Basic Custom duty on certain inputs, raw materials, inter mediates and components in 22 items, reduced to minimise the impact of duty inversion.

Swachh Bharat

· Services by common affluent treatment plant exempt from Service-tax.

Others

• Service-tax exemption:

Ø Transport of goods for export by road from factory to land customs station.

Ø Enabling provision made to exclude all services provided by the Government or local authority to a business entity from the negative list.

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Tax Planning continue ...

Tax Planning continue ...

8. Prepare physical tally of your assets

• During the year 2015 I would like to suggest each and every person whether a small investor or a big investor or whether a serviceman or a retired person, it is time now to have a physical tally of all your assets during the year 2015.
• Once the tally is made, you will be sure of all your bank FDR or Mutual Funds or Shares and all your gold and diamond jewellery.
• Both husband and wife should prepare a physical tally of all the assets and this must be done at least once in a year.
• In the year 2015 think of having a physical tally of all your assets.

9. Tax Planning for Real Estate in the year 2015

I feel that Real Estate should be a good investment for you in the year 2015 and here are some of the important points which you may keep in mind while making your investment in the Real Estate.

1. Expected creation of 100 smart cities. Hence, invest and make profit.
2. Buy and sell property only with Circle Rate or else big tax problem coming to you.
3. When you buy the property, have a clear cut demarcation of the same.
4. For bright future buy the property jointly in the name of husband and wife with their individual funds and let both of them take the benefit of tax deduction.
5. Tax advantage of the upcoming affordable housing scheme which are being planned in different towns of India. Invest and make big profit.
6. Don’t sell your Real Estate before holding it for a minimum period of three years.

10. Gold, Silver and Diamond investments

• I would like to recommend to our viewers that when the prices of the gold and silver further fall, at that time it would be a good idea to think of making a small little investment in the year 2015 in gold and silver and in raw diamonds.
• I am not in favour of buying more and more jewellery because the resale value will be lower and more particularly when you want to make investment in gold and if you want no wealth tax liability to come to you and also you want to take care of the theft of the gold, then it is time for you now from the year 2015 on-wards think of buying not raw gold but of buying gold in Demat Account through Mutual Fund and also invest in gold bees.

11. New business in the year 2015

• For those who are thinking of starting a new business it is time for them to encash the growing economy of the country and at least start one new business venture in the year 2015.
• Most important from tax planning point of view when you are thinking of starting a new business venture then first find out the tax entity in which your business should be started.

12. Investing in Stock Market in the year 2015

In the year 2015 I will see a blooming Stock Market. It is time now for the investor to think of making investment in the Stock Market and reaping the fruits in the year 2016 on-wards. For those interested to invest in the Stock Market, the following tips are important :-

1. Think of investing and forgetting the sale of the same for a minimum period of one year so that the profit you get becomes tax free.
2. If you do not know where to invest in equity market, then think of investing through the Equity Mutual Fund only.
3. Do not make investment in Debt and other investment options of the Mutual Fund investment.
4. I expect in the year 2015 new investment proposals being made available by the Government of big investment in Government company shares. I feel it should be a good time to make investment in those shares.

13. Surplus money in buying second house or a commercial property

• From tax point of view buying a second house property not for self occupation but only for getting rental income is a good idea.
• Similarly, making investment in commercial property for the purpose of getting rental income is also a good idea.
• The main important feature is that when you buy the property for letting it out, you get a deduction in respect of interest on loan without any upper limit.
• Hence, it is really a good idea.

14. Wait for Budget 2015

• Yes, the Finance Minister will be presenting the budget on 28th February and I would suggest all my viewers that please keep your eyes and ears on your Budget so that you are able to get the plus point and the minus point of the budget 2015-16 and you can gear and plan your strategy of investment and tax saving based on the exemptions and deductions which are available as per the Finance Bill.

15. Miscellaneous points from Tax and Investment Planning point of view

Some of the small point to be taken care are as under :-

1. Plan for Succession Planning. Prepare Wills. Revise Wills.
2. Think of making investment in Tax Free Bonds issued by the Government.
3. Invest in KVP that is Kisan Vikas Patra particularly in the names of all those family members having income below the exemption limit or in the name of your parents who do not have taxable income. For you it is not advisable to invest in KVP but for family members, yes, you can invest.
4. Now relax and think of having on your agenda the first item as Health Care Management with peace, happiness, bliss at your command and then the money will be made available to you by tax and investment planning and finally do remember to adopt tax planning but not tax evasion.

Tax Planning

Tax Planning

• Well, the year 2015 has just started and for the benefit of our readers we will like to share with them Fifteen important tips for Tax and Investment Planning.
• These tips will surely help every tax payer to save some portion of his income-tax and also proper planning for his investment.
• Here are these fifteen tips:-

1. Cut down your tax payments

• The first theme for the year 2015 should be to cut down all your tax payment and this is possible through two vistas.
• First is taking advantage of all exemptions and deduction and second is ensuring Income-tax file for every member in the family.
• If you are able to take care of these two vistas only then surely your year 2015 would be a wonderful year bringing lot of money for you as a result of tax planning and also making money grow for you by proper planning of investment based on the changes made by the Government relating to investment strategy in whole of year 2015.

2. Planning for elder family members

• The next step in tax planning is to plan for a separate independent income-tax file of your Dada, Dadi, father and mother. This can be done through gift by you.
• Likewise, you can think of taking out Mediclaim Policy for your aged parents and this can help you to cut down your income-tax because you can enjoy additional deduction under section 80D amounting to Rs. 20000.

3. Tax Planning for the couple

In the year 2015 think of innovative ideas for tax planning for the couple and here are some of the important points which should be taken into consideration by you :-

1. A separate income-tax file of the spouse.
2. Taking care of non-clubbing provisions.
3. Maximizing tax deduction under section 80C for you and your spouse separately.
4. How a residential house for you and your spouse jointly owned by you would get you best deduction and maximum deduction of Rs. 2 lakhs per annum for each of you.
5. Make payment of Mediclaim Policy Premium for you and enjoy tax deduction up to Rs. 15000.

4. Tax Planning for your Children

Three types of Children Tax Planning to be done :-

1. For Married children
   • Plan for creating a separate income-tax file for your daughter in law if not already done. Avoiding transactions which cause clubbing of income.
   • Create a new HUF file for your married children so that a new tax entity can be created.
2. For major unmarried children
   • Take education loan If the Income-tax file is not yet created of major unmarried children who are students, think of creating a separate Income-tax File through gift. No clubbing of income will arise.
3. For minor children
   • Plan right now some funds for your minor children so that growth is high, tax is nil for long term perspective.
   • The income of the minor child is clubbed with the income of the parents and only a deduction up to Rs. 1500 per annum is available. Hence, if you make a gift to your minor child, make the investment in such a manner that the income does not become taxable in the hands of the parents. Think of buying Mutual Fund and Direct investment in the name of the minor child in the stock Market so that at least after one year the income received becomes tax free. Also think of creating a Special Hundred Percent Welfare Trust for the minor child so that the income-tax file of your minor child can be started without attracting the clubbing provisions.

5. Tax Planning for your Spouse and new year gift from husband to wife

• If we think of making a gift or a big gift to the spouse, the income thereof will be clubbed with the income of the husband.
• Hence, what is recommended is that as far as possible try to avoid making of the gift to the spouse but in the new year some gift and some memorable gift is definitely required to be given to your spouse specially when you want to stay peaceful in the family and I would like to suggest you to make a gift in the form of a Big No No.
• What is this No No ? This No No from tax planning is B B Not.
• Well the meaning of B B Not is Bank Balance Not. That is touch me not. Says the bank balance of your spouse.
• Don’t withdraw from the bank balance of your wife either for day to day household expenses or for travel or for children education expenses or for shopping.
• All these expenses in 90 per cent of the cases should only be met from tax planning angle by the poor husband.
• This is because if you don’t withdraw the money from the bank balance of your wife, then her balance accumulates and she is able to invest the money because all household expenses etc. etc. are taken care of by you.
• At least Mr. Husband if you cannot think of making a big gift for the year 2015 to your wife, at least think of this idea to provide B B Not formula i.e. touch me not formula of the bank balance of your wife.

6. Your Investment in Life Insurance Policies.

• Make it a point that it is time now that one Sunday morning take out time to spend 2/3 hours on finding out whether you are adequately insured or not.
• Unfortunately when I meet tax payers, I find that in most cases their insurance coverage is limited to the investment which they are required to make in terms of section 80C of the Income-tax Act, 1961.
• May I suggest at this time now that looking in particular the fast life you live, you must devote sometime to access the actual need of insurance in your family and go beyond the tax deduction of 80C for making insurance premium payment for the family members.
• If you have taken a big loan either for car or for house or for big education loan for your children, then it is also time now to think and adopt the theme of getting a Term Policy equivalent at least to the total amount of the loan on your head.
• Hence, think and think and take out new investment for insurance policy during the year 2015.

7. Are you planning to become a Non-Resident Indian.

• Your uncle has gone abroad. Your brother has gone abroad and so now it is your desire that you also want to go abroad for studies or for doing business.
• Well from tax angle the decision should be taken in the year 2015 that if you are interested to become a Non-Resident Indian, in that situation leave the country in the year 2015 not in January 2015 itself but think and plan to go abroad from the point of income-tax astrology between 1st April 2015 up to 30th September 2015.
• Well this is a tax astrological answer befitting this theme and that is that if you leave India during the above period, you would become a Non-Resident Indian and by chance if you leave India in October 2015 on-wards, then it is not possible to become a Non-Resident Indian during the coming financial year.
• Hence, from tax planning point of view leave India and leave your friends and family members between 1st of April 2015 till 30th September 2015 and move anywhere in the world.
• Earn money. Bring money back and happy news no income-tax planning at all and this is because of the fact that non-Resident Indian is not required to pay income-tax for his foreign income. He will pay income-tax only on Indian income.

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REITS

Finance Minister Arun Jaitley, while presenting the budget for 2014-2015, said that Real Estate Investment Trusts (REITs) would soon be allowed. To support the idea  Securities and Exchange Board of India (Sebi) in the month of August  firmed up regulations that will govern real estate investment trusts, or REITs, and so-called infrastructure investment trusts (InvITs) that the market regulator decided to allow. A move that will enable easier access to funds for cash-strapped developers and create a new investment avenue for institutions and high net worth individuals, and ultimately ordinary investors

But how REITs will be a game-changer for Indian real estate and before that we also need to know what actually is REITS all about.

It is a security that sells like a STOCK on the major exchanges and invests in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of INVESTING in real estate. The concept Real estate INVESTMENT trusts (REITs) was originated in the USA in 1960s. REITs were created by US Congress to give all individuals the opportunity to benefit from INVESTING in income-producing real estate. Just as mutual funds do with equity and debt, REITs will pool money from investors and INVEST them in income-generating (rental assets) offering them a way to diversify their portfolios by investing in property.

There are internationally three types of REITS:

a)     Equity REITs: Equity REITs invest in and own properties ( thus responsible for the equity or value of their real estate assets). Their revenues come principally from their properties rents.

b)     Mortgage REITs: Mortgage REITs deal in investment and ownership of property mortgage. Their revenues are generated primarily by the interest that they earn on the mortgage loans.

c)     Hybrid REITs: Hybrid REITs combine the investment strategies of equity REITs and mortgage REITs by investing in both properties and mortgages.

Few insights for REITS in India: The minimum public holding in REITs should be 25 per cent while the total number of outstanding units at all times as well as the number of unit holders — who are part of the public — should be 200.

Key benefits

1) Portfolio diversification: For small investors and institutions, REITs provide an opportunity to invest in largescale commercial real estate

2) A compulsory dividend payout (typically >80% globally and >90% in India) makes the underlying asset similar to a bond, with a growth component built-in through price appreciation.

3)  Tax concessions ensure that dividend payouts are healthy and less impacted by changes in central tax laws.

4)  Improved transparency and less volatile markets: REITs improve transparency in the real estate markets as information is periodically disclosed on average rents, occupancy levels, tenant profile, renewal profile, etc.

Further I would like to add more points to support this REITs term:

Nearly 30% of the country’s population is living in cities and urban areas and this figure is projected to reach 50% in 2030 based on which the present urban housing shortage is 1.87 crore units.

Overall housing shortage is of almost 6.3 crore units and the demand for houses are expected to increase by another 2.63 crore units in the next 3 years due to population growth at the current rate of growth.

With the above factors and nature of this new instrument we can conclude the things will become more prospective to bring/infuse more liquidity in the market.

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Tax Saving Instruments (2)

In the last post we have discussed the Housing loan under the head of Tax saving instruments:

We would like to discuss more instruments of Tax savings under 80C.

1)      PPF:

It is an all-time favourite INVESTMENT option and 2014-15 Budget has made it more attractive by enhancing the annual INVESTMENT limit to Rs 1.5 lakh. For PPF you can open an account in a post office branch or a bank. The maximum INVESTMENT of Rs1.5 lakh in a year can be done as a lump sum or as installments on any working day of the year. Just make sure you invest the minimum Rs 500 in your PPF account in a year, otherwise you will be slapped with a nominal, but irksome, penalty of Rs 50. Though the PPF account matures in 15 years, you can extend it in blocks of five years each.

2)      Equity-linked saving schemes (ELSS):

a)     Shortest Lock in period

b)    Minimum investment as low as Rs.500/-

c)     Unlike ULIP, PPF, insurance plan, no compulsion for continuity in investments over the years.

d)    It is also equity funds provide good returns over a long maturity period.

3)      SCSS: This assured return scheme is the best tax-saving avenue for senior citizens. However, the Rs 15 lakh investment limit somewhat curtails its utility. The interest rate is 100 basis points above the 5-year government bond yield. The interest is paid on 31 March, 30 June, 30 September and 31 December, irrespective of when you start INVESTING.

4)      Bank FDs and NSCs: Remember always that interest on FDs is taxable.

5)      Life Insurance Plans: Costliest Tax saving instruments, we always would like to suggest that Life Insurances should always be covered as per their genuine purpose instead of investing point of view.

6)      ULIPS: Keep in mind that a Ulip yields good results only if held for at least 10-12 years. A small charge levied for risk coverage.

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SSI/MSME registration

Since our foray into SSI/MSME registration, we have been flooded with calls and orders. Here is this blog enlightening some registration and importance of MSME registration.

Government, in order to mark impactful governance, is providing online platform to register MSME though all the documents are required to be submitted.

This registration opens up gates for various government scheme for MSMEs under the Ministry of MSME development. Entities registered under MSME are given special treatment in all government tenders. MSMEs are also allowed to negotiate even after submission of bids.All the PSUs and government departments have been instructed to get certain quota of work done only by MSMEs.
Thus MSME registration comes with great advantage with almost zero annual filings.

Process to register under MSME.

1. Registration can be awarded to manufacturer and service providers falling under MSME criteria which is as follows:

For Manufacturers
          Investment                          Category
  A) less than Rs 25 Lacs.           Micro
  B) Rs 25 lacs to Rs 5 crore.      Small
  C) Rs 5 crore to Rs 10 crore.    Medium

For Service Providers
           Investment.                        Category
  A) less than Rs 10 lacs.             Micro
  B) Rs 10 lacs to Rs 2 crore.       Small
  C) Rs 2 crore to Rs 5 crore.       Medium

2. Applicant needs to keep the copies of certificates depicting value of land and land agreement, Board Resolution for the authorized signatories, Turnover details, list of products, Certificate of Incorporation.

3. The applicant needs to fill the registration form for state MSME.

4. The form is to be completed in all aspects.

5. The completely filled form is required to be signed by the authorized signatory (Director or 

Proprietor  preferred).

6. The documents are required to be submitted along with.

7. After the processing of the form and document the DC state will provide the SSI/MSME registration no.

Hurray your registration is complete, now you can quite your number in all government tenders, MDA activities etc to avail the benfits.

For more details or help in registration process, don't hesitate to visit or contact us.

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Registration with Export Promotion Council

As in previous blog we have discussed the importance,  role and benefits of registration with export promotion councils (EPC), in this blog we will discuss the registration process of EPC.

1. Each EPC represents a different fraternity of business with different markets. Thus, you need to first know which EPC to register for so as to reduce the wastage of efforts and time. After, identification of the related EPC the applicant need to fill up the form for the EPC. It is to be kept in mind that no area to be left blank, if the information asked is not related please write Not Applicable or NA.

2. The applicant can register with EPC as a merchant exporter or manufacturer exporter. Depending upon the operations one should register accordingly. If registering as a Manufacturer Exporter the EPC will ask for factory licence/ registration with concerned DC or MSME or any state authority certifying the manufacturing. For registration as Merchant Exporter no document is required.

3. The applicant need to provide the details of the export business for last 2/3 years. If not traded then write NA.

4. A DD or multi city cheque of the specified amount is required to be submitted to the main office or regional office (please confirm the acceptance of cheque from the EPC before applying)

5. The registration in any EPC is valid from 1st April  to 31st March of following year. That means even if registering in Feb the membership has to be renewed in next month with full renewal fees.

6. Depending upon the EPC, the time taken for registration after receiving correct application is somewhere around 15 to 30 days. Thus refrain from starting the registration process in the month of Feb as it would be an economical loss.

7. Fees once submitted whether with correct or incorrect application form is valid only till 31st March. This means if the process is initiated in January and fees submitted to the EPC and because of some reasons/ mistakes the registration could not be completed before 31st March (fault at applicant side), then the fees is required to be submitted again.

8. EPC would require a board resolution on the letter head of the company, approving application to the EPC and authorizing a representative to be the authorized signatory.

9. Two sets of self certified PAN, Certificate of Incorporation and MOA & AOA is required to be submitted.

10. The duly completed form signed by the director/prop and authorized signatory (wherever required) needs to be submitted either in person or  by post/courier.

11. Please be sure to that the application should be correct in all senses.

12. And lastly a cover letter letter listing all the documents enclosed and request to register with EPC.

Incase of any query or help or consultancy, please refer to our website or contact us directly

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Tax Saving Instruments (1)

We are heading now for the year end and everyone of us is looking for better prospects in this approaching year with our very well known lines “ acche din aane vale hai”.

And I hope each one of you is looking now for investments as the next agenda will be tax savings declarations. May be you are going for advises from your CAs or taking help from newspaper or other articles. But trust me, it would always be better to invest for long term.

Markets are booming with long jumps, in fact, BSE is establishing new highs almost on daily basis, which is an indication of more prosperous nature of markets in next 3-4 years to come. Gold has taken a leap of almost Rs.1000/- in the last week.

So, preparation should be to invest for next 3-4 years for heavy gains rather than saving taxes only. That would automatically be taken care once the direction for investment will be chosen carefully.

Still it depends upon individual, if only the tax saving is the motive; we are defining few of such schemes with our priority list   :

1)      Home Loans : the Repayment of Home Loan into 2 components:-

a)      Repayment of the Principal Amount

b)      Repayment of the Interest on Home Loan

The amount paid as Repayment of Principal Amount of Home Loan by an Individual/HUF is allowed as tax deduction under Section 80C of the Income Tax Act. The maximum tax deduction allowed under Section 80C is Rs. 1, 50,000. (Increased from 1 Lakh to Rs. 1.5 Lakh in Budget 2014)

This tax deduction is the total of the deduction allowed under Section 80C and includes amount INVESTED in PPF Account, Tax Saving Fixed Deposits, Equity Oriented Mutual funds, National Savings Certificate, Senior Citizens Saving Scheme etc.

This tax deduction under Section 80C is available on payment basis irrespective of the year for which the payment has been made. The Amount paid as Stamp Duty & Registration Fee is also allowed as tax deduction under Section 80C even if the Assessee has not taken Loan.

There is a catch in this also, tax benefit of home loan under this section for repayment of principal part of the home loan is allowed only after the construction is complete and the completion certificate has been awarded.

Tax Benefit on Home Loan for payment of Interest on Home Loan can be claimed as Deduction under Section 24 as well as under the newly inserted section 80EE.

The maximum tax deduction allowed under Section 24 of a self-occupied property is subject to a maximum limit of Rs. 2 Lakhs.

It is also important to note that this tax deduction of Interest on Home Loan under Section 24 is deductible on payable basis, i.e. on accrual basis. Hence, deduction under Section 24 should be claimed on yearly basis even if no payment has been made during the year as compared to Section 80C which allows for deduction only on payment basis. Moreover, if the property is not acquired/constructed completed within 3 years from the end of FINANCIAL year in which the loan was taken, the interest benefit in this case would be reduced from 2 Lakhs to Rs 30 thousand only.

We would be continuing this in our next blog, For further Consultation or Help regarding IEC registration/modification please write to us on contact@munim.in

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