Take care EMI payers- CTS 2010 cheques needed now

The advent of CTS-2010 compliant cheques will make the existing cheques invalid from 31 July 2013. The customers who have deposited non-CTS cheques as post-dated cheques (PDCs) for EMIs to a finance company, or bank for repayment of a loan, will have to replace these with the compliant ones for instalments after 31 July. The non-compliant cheques will not be honoured by banks and will amount to non-payment and default on the part of the customer.

Compliance: The RBI has issued standards for the CTS-2010 cheque book, which can be accessed at http://tinyurl.com/c5aqc95.

ECS debit mandate: If the cheques are not CTS-2010 compliant, the customer will have to provide an ECS instruction to debit his bank account for the loan instalment. For this, ECS form has to be filled and submitted to the loan institution.

Documents: The signed ECS form, a copy of a cancelled cheque of the account from which the person wants the EMI instalment to be debited, and CTScompliant EMI cheques for 2-3 instalments (till the instruction is processed ) must be submitted.

Processing: The loan institution will accept the ECS instruction and the CTS-compliant PDC cheques, and will destroy the old non-compliant cheques.

Points to note

> A default on account of non-compliance will affect the credit score of the individual.

> In places where ECS facility is not available, the CTS-2010 compliant EMI cheques will have to be issued to the loan institution to replace the old cheques.

The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Sunita Abraham, Girija Gadre and Arti Bhargava.

INTERESTED TO KNOW YOUR ACCOUNT BALANCE IN EPF

Every month, a fixed amount is deducted from an employee’s salary and deposited in the employee provident fund by the employer, who contributes the same amount. This sum earns an interest, which is also credited to the employee’s account. The Employee Providend Fund (EPFO) website offers an online service, which helps the employees know the balance in their accounts.

Access: The information can be accessed at http://www.epfindia.com/MembBal.html. The details of the account have to be provided as required.

Information: From the dropdown menu, the member needs to select the EPFO office state and EPFO office where the employee’s account is maintained by the employer.

Account number: The member needs to enter his EPF number, which can be obtained from the employer. If the account does not have an extension number, the field can be left blank.

Text on mobile: Once personal details like name and mobile number are submitted, the EPF account balance information is sent to the member by a text message on the mobile number.

Points to note

* The name and EPF account number in the form should be accurate and exactly as they appear in the records.

* It shows the balance in the EPF account up to the date till which the accounts have been updated.

* The balance also reveals the latest approved transactions related to settlements/ advances/ EPF balance transfer, if any.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Sunita Abraham, Girija Gadre and Arti Bhargava. And economic times.)
Circulated for the benefit of wide readership

Small Savings Schemes – Post office – Interest rate revision w.e.f.1.4.2013

Savings Scheme Existing Rate of Interest w.e.f. 1.12.2012 New Rate of Interest w.e.f. 1.4.2013
Savings Deposit 4.0 4.0
1 year Time Deposit 8.2 8.2
2 year Time Deposit 8.3 8.2
3 year Time Deposit 8.4 8.3
5 year Time Deposit 8.5 8.4
5 year Recurring Deposit 8.4 8.3
5 year SCSS 9.3 9.2
5 year MIS 8.5 8.4
5 year NSC 8.6 8.5
10 year NSC 8.9 8.8
PPF 8.8 8.7

Except for savings deposit and 1 year time deposit, other deposit rates are reduced by 0.1%.

C.R. Venkata Ramani

Cost Inflation Index for calculating capital gains (Upto F.Y.2012-13)

S. No. F.Y. Cost Inflation Index

1.  1981-82 100
2. 1982-83 109
3. 1983-84 116
4. 1984-85 125
5. 1985-86 133
6. 1986-87 140
7. 1987-88 150
8. 1988-89 161
9. 1989-90 172
10. 1990-91 182
11. 1991-92 199
12. 1992-93 223
13. 1993-94 244
14. 1994-95 259
15. 1995-96 281
16. 1996-97 305
17. 1997-98 331
18. 1998-99 351
19. 1999-00 389
20. 2000-01 406
21. 2001-02 426
22. 2002-03 447
23. 2003-04 463
24. 2004-05 480
25. 2005-06 497
26. 2006-07 519
27. 2007-08 551
28. 2008-09 582
29. 2009-10 632
30. 2010-11 711
31. 2011-12 785
32. 2012-13 852

C.R. Venkata Ramani

Indian Tax proposals 2013-14 Buy back of shares beneficial or dividend distribution?

Many companies avoided payment of heavy income tax by using the buy back of shares from market avoiding dividend distribution tax thus paying nominal capital gains tax on buy back. Now in the present income tax proposals, Mr. Chidambaram plugged this hole . Please read:

Buyback of shares by an unlisted company will become less attractive after Budget proposed to levy tax on it, while dividend distribution will be more preferred.

A company with distributable reserves has two options to offer the same to its shareholders. It can be done either by paying dividends to shareholders or through buyback of shares. In case of distributing the reserves through dividend, the company has to pay Dividend Distribution Tax (DDT) at 15%, which becomes 17% along with 10% surcharge and 3% education cess. In case of distribution the reserves through share buyback , the company needs to pay no tax under the existing norms.

Under the existing provisions , amount received by shareholders via buyback of shares is not treated as dividend and is taxable as capital gains. The finance ministry noted that unlisted companies, as part of tax avoidance scheme, are resorting to buy back of shares instead of payment of dividends in order to avoid paying Dividend Distribution Tax (DDT), particularly where the capital gains of shareholders are either not chargeable to tax or are taxed at lower rate.

The Budget proposes that a company, which is buying back its shares, has to pay tax at 23% including 10% surcharge and 3% education cess on net consideration (amount) received by shareholders. The net consideration is equal to the value at which the company bought the shares minus the price at which it issued the same to its shareholders .

Executive director of PWC Hemal Uchat said the new proposed tax is like DDT. It is paid by the company over and above the normal tax liability and cannot be claimed as a credit. However , income received by the shareholder with respect to such buyback will be exempt from tax.

Reference: Economic times of India

Impact of Budget proposals F.Y.2013-14 announcements on Indian individual tax payers:

Rajiv Gandhi Equity Scheme (RGESS)
With an intention to liberalise the RGESS, it is proposed to allow deduction for investments made under RGESS for a period of up to three consecutive years, instead of the initial year only. Further, individuals having an income up to Rs 12,00,000 per annum would be eligible for deduction under RGESS. Listed units of equity oriented funds have also been added to the eligible investment under the RGESS. These measures would encourage channelizing savings of small taxpayers into the capital markets.
This is applicable only for first time investors.

Interest on housing loan
Currently, the deduction available towards interest on loan for a self-occupied house is only Rs 1.5 lakh per annum. The FM has, albeit for one year only, allowed an additional deduction of up to Rs 1 lakh for interest payable to a specified financial institution. The loan should be sanctioned in FY 2013-14 and should be up to Rs 25 lakh. Also, the property value should be up to Rs 40 lakh and the individual must not own another residential house on the sanction date. Unused deduction of interest in FY 2013-14 can be claimed in FY 2014-15. Based on the income of the individual, this would result in additional tax savings ranging from Rs 10,300 to Rs 30,900 per annum. This would boost the real estate and allied sectors.

Tax rates
With the focus on a stable tax regime, no change has been proposed in tax slabs or rates. However, a small relief in the form of a tax rebate up to Rs 2,000 per annum, has been provided to resident income-earners with income up to Rs 5 lakh per annum. As indicated by the FM, this should generate tax savings of aggregate Rs 3,600 crore approximately to 1.8 crore tax payers.

Taxes for the high income earners
As a measure to garner more revenue, a surcharge of 10 percent on tax has been introduced for individuals whose total income exceeds Rs 1 crore, though only for FY 2013-14.

While as per the FM this would impact only the 42,800 who have declared income above the said limit, even expatriate employees working in India may be impacted on account of this surcharge. In cases where such expatriates have agreed on net of tax packages and, hence, tax is paid by the employer on a grossed up basis, the surcharge could increase the salary cost substantially.

On the indirect tax side as well the high income earners may be impacted by the proposed enhancement of customs duty on certain imported luxury goods such as high-end motor vehicles, bikes, yachts and so on.

Insurance
It has been indicated that more health schemes will be notified to widen the scope of deduction towards health insurance premium under the overall limit of Rs 15,000 per annum.

Deduction towards premium paid on life insurance policies, for persons with prescribed disability or specified disease is proposed to be increased to 15 per cent of capital sum assured from 10 per cent (within the overall limit of Rs 1 lakh per annum), for policies issued on or after 1 April 2013. Maturity proceeds of such policies are also proposed to be exempt.

Most of the Keyman insurance policies were assigned to the keyman before maturity as life insurance policy and accordingly the tax exemptions were being claimed on maturity. The maturity proceeds would now be taxable.

Transfer of immovable property
With a view to improving tax reporting in property transactions, it has been proposed that the buyer of an immovable property (not being agricultural land) will now have to deduct tax at source at the rate of 1 per cent on the sale price, provided the value of property is Rs 50 lakh or more. In cases where such capital gains are exempt for the seller, this may lead to a refund situation for him which can only be claimed by him at the time of filing his personal tax return. Also, the buyer who was otherwise not required to deduct tax on any other payments will have to comply with procedural requirements of obtaining a Tax Deduction Account Number (TAN), filing of returns, and so on.

Any transfer of an immovable property for inadequate consideration (as compared to the stamp duty value), where such inadequacy is more than Rs 50,000, will also now attract tax in the hands of the buyer.

Also, effective service tax rate has been proposed on residential units above 2,000 square feet or where amount charged from buyer towards property exceeds Rs 1 crore. This would increase the cost of acquisition.

Other taxes impacting individuals Surcharge on Dividend Distribution Tax (DDT) for domestic companies has been increased to 10 per cent from five per cent, only for FY 2013-14.

The rate of DDT on all non-equity funds for distributions to an individual or HUF has been increased to 25 per cent to 12.5 per cent. This could shift the investment focus from dividend funds to growth funds (where the gains are capitalised) and also mobilise savings into bank deposits.

The FM has proposed to reduce securities transaction tax (STT) for securities such as equity futures, mutual funds and so on. At the same time, a new Commodities Transaction Tax has also been introduced on non- agricultural commodity derivatives traded in recognised associations.

E-filing
It has been proposed to move toward the e-filing for wealth tax returns as well, which is welcome step towards technological integration.

To summarise, for an average Indian household, the impact of the Budget is fairly neutral.

Reference: Taken from Business-standard

2012 in review

The WordPress.com stats helper monkeys prepared a 2012 annual report for this blog.

Here’s an excerpt:

4,329 films were submitted to the 2012 Cannes Film Festival. This blog had 32,000 views in 2012. If each view were a film, this blog would power 7 Film Festivals

Click here to see the complete report.