Investment Valuation in India

The Angel Tax imposed on start-ups has been the talk of the town lately. Various start-up founders have received demand notices from the tax authorities which plans to tax the capital receipts in the form of Income when the tax authorities believe that the amount is in excess of the value of the company. What is Angel Tax? In 2012, the then Finance Minister Pranab Mukherjee introduced a tax on unlisted companies which aimed at raising funds from investors (the 'angel investors") who invested in these companies with the objective of gaining significant returns. Since many companies used this route to launder money and raise funds at excessive valuations, the tax was imposed to arrest such money laundering. Angel Tax is a tax payable by the unlisted companies who raise funds via issue of shares where the share price is believed to be in excess of the fair market value of the shares sold. What is a Startup? An entity shall be considered as a Startup: (i). Upto a period o...

Finance Act 2013 introduced a concept of TDS on Real Estate transactions under Sec 194IA. Under this section, any person who purchases any immovable property (except agricultural land) for a consideration (Rs 50 lakh or more), shall be required to deduct tax at source (TDS) @ 1% of the amount paid to resident seller. The Buyer of the property is required to deduct tax, at the time of credit of consideration to the account of seller or at the time of payment by any mode (cash cheque, demand draft etc.). A simple one pager form (Form 26QB) has been introduced for compliance of this section. BUYER OF THE PROPERTY IS NOT REQUIRED TO OBTAIN TAIN NO. Buyer is required to furnish information in Form 26QB which includes: - Full Name, Address and PAN of buyer and seller - Address of the property - Value of property - Date of agreement / booking - Amount paid / credited, payment in instalments or lump sum - TDS etc. Subsequently, buyer can make the payment online or off...

Interim Budget 2014 Highlights Fiscal Deficit for 2013-14 at 4.6 percent of GDP Revenue Deficit for 2013-14 at 3.3 percent The current account deficit (CAD) projected to be at USD 45 billion in 2013-14 down from USD 88 billion in 2012-13. WPI inflation down to 5.05 percent and core inflation down to 3.0 percent in January 2014. Food inflation down to 6.2 percent from a high of 13.8 percent GDP growth Q3 and Q4 of FY 14 expected at 5.2 percent and that for FY 2013-14 estimated at 4.9 percent Through the Direct Benefit Transfer (DBT) Scheme, a total of Rs 628 crore (54,20,114 transactions) has been transferred directly to the beneficiaries till 31st January 2014 under 27 Schemes. Excise Duty Item Description Old Rate (Excise) New Rate (Excise) Notes Small Cars, Motorcycle, Scooters and commercial vehicles 12% 8% Applicable till 30-Jun-14 SUVs 30% 24% Applic...

Setting off of unabsorbed losses and unabsorbed depreciation during Amalgamation The setting off of unabsorbed losses and unabsorbed depreciation of the amalgamating company by the amalgamated company is allowed only in limited cases as envisaged in Sec 72(A) of Income Tax Act in order to encourage revival of sick units. The setting off, however, is allowed only if the following conditions are fulfilled: a) the amalgamated company was not a financially viable company immediately before amalgamation b) the amalgamation was in the public interest c) such other conditions as the central government may specify by notification in the official gazette to ensure that benefits under this section is available only to facilitate rehabilitation or revival of the business of the amalgamating company Carry forward of unabsorbed depreciation is allowed only if: a) during the previous year relevant to the assessment year, the business of the amalgamating company was carrie...

Imagine this, if you start investing Rs 2,000 per month at the age of 20, you could accumulate a massive Rs 1.08 crore (assuming 9.5% interest p.a.) when you retire at the age of 60. On the other hand, if you started investing the same amount at the age of 30, you would accumulate only Rs 40.66 lakhs. The investment decisions you make in the first 5-6 years of your career have the potential to transform your  financial future. The longer you stay invested, and the greater is the power of compounding. Life Insurance: Insurance is the first thing you should start investing into. The earlier you buy life insurance, the lower is the premium. If you wanted to buy a 20 year Term Policy for Rs 1 crore at the age of 35, the amount of premium you’d be required to pay is Rs 34,000, whereas if the same policy is taken at the age of 20, the amount of annual premium you’d have to pay is Rs 19,700 [the premium for 35 years term i.e. till you reach the age of 60 would still be lower at Rs 2...

While it is most useful to fill online forms to apply for PAN or for changing PAN, for those who want to apply manually, here are 2 files that can be used to fill up the forms easily.  PAN Application Form (Form 49A) - Excel Change in PAN Data - Excel Enjoy

As per Finance Act 2013, any person being a transferee responsible for paying to a resident transferor any sum by way of consideration for transfer of any immovable property other than  a) agricultural land or b) where consideration for such transfer is less than Rs 50,00,000 (Rupees Fifty Lakhs) shall deduct tax @ 1% Implications: 1. "Any person" implies even individuals or HUF whi are not covered under Sec 44AB for TDS deduction have a liability to deduct TDS. 2. In case the PAN is not quoted by seller, TDS to be deducted is 20% 3. TDS has to be deducted on the date of credit (e.g. transfer entry) or date of payment whichever is earlier 4. The tax deductor is not required to obtain TAN Number since these are considered to be rare / one time transactions.

It was only recently that the Central Board of Direct Taxes (CBDT) had required that salaries employees claiming HRA need to furnish the PAN details for their landlords in case the rent paid per month was Rs 15000 or more. The CBDT has found yet another means to increase the disclosure burden on salaried individuals by amending the requirements to Rs 100,000 per year, effectively decreasing the above limit to Rs 8,333 per month. Thus, for every employee whose total rent in a year exceeds of Rs 1 lakh per year, he will have to furnish the PAN of the landlord.  In case the landlord does not have a PAN, the assessee must submit a declaration to this effect from the landlord along with the name and address of the landlord. This should be filed by the employee. While this will put a check on the individuals claiming higher House Rent Allowance (HRA) exemption by showing fake receipts, it will unnecessarily increase the difficulties for honest tax payers as landlords are usually rel...

Keyman Insurance Policy has, for long been an easy way to pass on tax free benefits to the key managerial personnel of an organisation. Just as a company insures its lands, building and other assets, it can insure its human resources as well so that it can compensate itself for loss of human assets. Earlier the companies and senior management have misused the concept for personal tax free benefits. For Keyman Insurance Policies, the companies pay the premium and any sum received from the Insurance company on maturity or on the death of the employee including bonus, if any was considered to be taxable income in the hands of the employer under the head Income from Gains from Business / Profession (PGBP). However, most Insurance policies allow assigning the policies to the insured himself and the companies used to assign the policy to the managerial person himself. In this case, the policy did not remain a Keyman Insurance Policy and became a normal Life Insurance policy. The matur...

Given the financial crunch that most governments are going through, there is one thing that seems to be an easy route - imposing higher taxes on the richer people. Earn more pay more taxes. This has been hotly debated across the world and India is no exception. From the times of Robin Hood, squeezing the rich and passing on the benefits to the poor has had an emotional appeal - partly because they have it and so they can pay and partly because they are always a minority, so politicians can save their back by not adversely affecting the poor, usually their vote banks. However, there have been numerous studies that has shown that there are better alternatives than taxing the rich. Higher taxes for the richer is usually counter productive in the long run as it encourages tax evasion and is a disincentive to work. Also, usually it is ineffective since the rich can plan their taxes effectively and can often save taxes. As of 31s March 2011, the number of effective tax payers in India...

Hi, Check out this link on Accountants' Adda where in I explain about the Lock in period for Tax Saving SIPs in India. Accountants' Adda | Lock In Period for Tax Saving SIP

Accountants' Adda | Deduction at a lower rate or non-deduction of tax in case of salaries As per Section 192 of the Income Tax Act, an employer is required to deduct tax at source on the amount payable to the employee at the average rate of income tax. Unlike other payments, in case of salary, TDS is deducted only at the time of PAYMENT of salary.  This is to be computed on the basis of rates in force for the financial year in which payment is made. Section 197 enables a tax payer to make an application to his Assessing Officer for deduction of tax at a lower rate or non deduction of tax. The application has to be made in   Form No.13  (vide Rule 28(1)).    If the Assessing Officer is satisfied that the total income of a tax payer justifies the deduction of income tax at any lower rate or no deduction of income tax, he may issue a certificate in   Form No. 15AA   (relevant Rule 28AA) providing for deduc...

Key Features of Budget 2012-2013 APPROACH TO THE BUDGET  For Indian economy, recovery was interrupted this year due to intensification of debt crises in Euro zone, political turmoil in Middle East, rise in crude oil price and earthquake in Japan.  GDP is estimated to grow by 6.9 per cent in 2011-12, after having grown at 8.4 per cent in preceding two years.  India however remains front runner in economic growth in any cross-country comparison.  Monetary and fiscal policy response for better part of past 2 years aimed at taming domestic inflationary pressure.  Growth moderated and fiscal balance deteriorated due to tight monetary policy and expanded outlays.  Indicators suggest that economy is turning around as core sectors and manufacturing show signs of recovery.  At this juncture, it is necessary to take hard decision to improve macroeconomic environment and strengthen domestic growth drivers.  Twelfth Five Year Plan to be launched with the aim of “fa...