Depreciation Rates As per Companies Act , 1956

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Depreciation Rates

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HIGHLIGHTS OF NEW COMPANIES BILL

HIGHLIGHTS OF NEW COMPANIES BILL

1.Companies are required to spend atleast two percent(2%) of their net profit for the three immediately preceding financial years on CSR,Corporate Social Responsibility. This is applicable to companies with a net worth of Rs500 crore or more,or Rs1,000 crore turnover or Rs 5crore net profits, who have to set up a corporate social responsibility committee.The companies will also have to give preference to the local area sof their operation for such spending.
2.To help in curbing a major source of corporate delinquency,introduces punishment for
falsely inducing a person to enter in to any agreement with bank or financial institution,
with a view to obtaining credit facilities.
3.The limit in respect of maximum number of companies in which a person may be appointed as an auditor has been proposed as 20.
4.Independent directors' shall be excluded for the purpose of computing' one third of retiring directors‘.
5.Appointment of auditors for 5 years shall be subject to ratification by members at every Annual General Meeting.
6.'Whole-timedirector'has been included in the definition of the term' key managerial
personnel'.
7.Maximum number of directors in a private company increased from 12 to 15 which can be increased further by special resolution.
8.Financial Year of any company can end only on March 31 and only exception is for
companies,which are holding/subsidiaryof a foreign entity requiring consolidation outside
India,can have a different financial year with the approval of Tribunal.
9.The concept of One Person Company has been introduced in the new company law.
10.The bill increased the number of members of private companies from50 to 200.This
allows companies access to large pool of capital without going public.
11.The new bill gives recognition to transfer restrictions on inter-se shareholders–‘Right of First Refusal’ will been forceable.This would clear existing ambiguity on legal
enforceability on transfer restrictions under JV / shareholder agreements.
12.While the old bill only permitted merger of a foreign company with an Indian company, the new bill allows merger of Indian companies into foreign companies which would aid in consolidation of cross-border businesses/assets.
13.The new bill permits merger of a listed company with an unlisted one, subject to exit
opportunity being offered to shareholders of the listed company.
14.While the old bill depended on precedents for merger of a subsidiary with aparent (or
between two small companies),the new bill provides a separate and simplified regime for
this without any approval from High Court.
15.The new bill also gives rights for objections to schemes to only creditors who owed over 5 per cent and minority shareholders with over 10 percent stake against no thresholds earlier.
16.The new bill also has a detailed mechanism for acquisition of shares by majority
shareholder from minority shareholders.
17.The bill restricts creation of multi-layered holding structures, prohibiting making
investments through more than two layer so finvestment companies.
18.The new bill bans holding ‘TreasuryStock’, which is often used by companies to increase shareholding or future monetization after consolidation.
19.The new bill asks that listed companies and other specified companies will have to change individual auditor after five years and audit firm after10 years.The old bill had no
provisions for this.
20.The new bill also requires companies to appoint one woman director.

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you can set up a one person company

Now, you can set up a one person company
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Till recently, if you wanted to set up a private company, you needed at least one other person because the law mandated a minimum of two shareholders. So, for the person wanting to venture alone, the only option was proprietorship, an onerous task since it is not legally recognised as a separate entity. Now, after the recent passing of the much-hyped Companies Bill, 2012, by the RajyaSabha, there may be hope for the budding entrepreneur. The bill that aims to bring in sweeping changes in the corporate world, has also opened the doors for the entrepreneur looking to set up a company all by himself. This has been made possible by bringing in the concept of One Person Company (OPC).

Though this concept is new in India, it has been very popular abroad, including in Singapore, USA, even Europe. "Currently, it is a grey area, and only time will tell how well this works in India," says Neerav Mainkar, founder of law firm, M Neerav & Associates. However, other experts differ. According to a research paper on the New Companies Bill by law firm Nishith Desai Associates, "A one person company is a paradigm shift in the Indian corporate regime, bringing it at par with global standards." The report also states that it will provide a significant fillip to micro and small-scale businesses.

How to set up an OPC
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As the name suggests, a one person company has only one shareholder, who may also be the director. However, it can have more than one director, and up to a maximum of 15.

The process of setting up an OPC is the same as that for a private limited company. To begin with, check with the registrar of companies for the availability of a name for your company. The name will carry a suffix, 'OPC', similar to the manner in which a private company uses the suffix 'pvt ltd'.

Next, assign a 'director identification number' to each director and apply for digital signatures for all of them. You then need to draft the memorandum of association and articles of association, which embody the objectives of the company. These are to be filed with the registrar.

Since the company is owned by a single person, he must nominate someone to take charge of it in case of his death or disability. The nominee must give his consent in writing, which has to be filed with the registrar. Of course, the owner can change the nominee any time he wants to, but he will have to inform the registrar. The nominee, too, can back off at a later stage, in which case the owner will have to make a fresh nomination. Once the paperwork is complete, the registrar will issue a certificate of incorporation within seven days of receiving the documents, after which you can start the business.

An OPC is exempt from certain procedural formalities, such as conducting annual general meetings, general meetings and extraordinary general meetings. No provisions have been prescribed on holding board meetings if there is only one director, but two meetings need to be organised every year if there is more than one director. Any resolution passed by the sole member must be communicated to the company and entered in the minutes book. There is, however, no relief from the provisions on audits, financial statements and accounts, which are applicable to private companies.

Benefits & drawbacks of an OPC 
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The biggest advantage of a one person company is that its identity is distinct from that of its owner. Therefore, if the firm is embroiled in a legal controversy, the owner will not be sued, only the company will.

Another advantage is limited liability.

Since the company is distinct from that of its owner, the personal assets of the shareholders and directors remain protected in case of a credit default. However, a proprietorship offers no such advantage.

On the other hand, an OPC is not easy to set up. For one, it requires a lot of paperwork and is a time-consuming process. You also need to factor in the cost of establishing such a firm. For instance, you need to get a lawyer or company secretary to help you draft the memorandum and articles of association.

Though you can draft them yourself, it is advisable to take professional help as these are the by-laws that govern your company. The process may cost upwards of Rs 2 lakh.

Apart from this, you need to consider the tax implications. Your company will be taxed at 30%, which may be higher than the 10-30% for a business that is not incorporated. Other types of taxes, such as the minimum alternate tax and dividend distribution tax, may also be applicable.

Is sole proprietorship better?
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Despite the advantages that a one person company offers, it may not be a viable option for everyone. In contrast to a company, a proprietorship is easy to set up. The paperwork involved is minimal since it is limited to a few business-specific approvals. Of course, the risk in a proprietorship is higher as the owner is personally responsible for the business.

As far as the taxation is concerned, the income generated from the business is clubbed with the personal income. Therefore, the tax liability would depend on the slabs in which it falls. "In some cases, a proprietorship can be a tax-inefficient way of doing business. Hence, you must carefully analyse all aspects before choosing the business structure," says Vaibhav Sankla, director, H&R Block.

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Prosecution and interest on late deposit of TDS

Prosecution and interest on late deposit
of TDS:
_______________________________________

TDS under income tax is main source of tax collection by the Government. However
many times the tax Deductors,after deducting TDS from specified payments, are
deliberately not depositing the taxes so deducted in Government account and
continue to deploy the funds so retained for business purposes or for personal use. CBDT is stressing on compliance of the due date of deposit of TDS by the Deductor.
Interest on late deposit of TDS is applicable @ 1.5 % per month or part thereof .The
period for delay is taken from date of deduction to date of deposit ,so in specific
cases a delay of one day may lead to pay Interest @ 3 % .Yes, it is true.
Interest on Late deposit of TDS @ 3 % for delay of one Day!

Suppose:
TDS deducted on 01.08.13
In this case Due date will be 07.09.13
If we deposit tax on 08.09.13 one day delay.
Interest will be applicable for 2 months from 01.08.13 (date of deduction ) to 08.09.13(date
of deposit) for two months @1.5 % p.m =3%

CBDT has released following press release in this regards:
It has come to the notice of Income Tax Department that many times the tax deductors,
after deducting TDS from specified payments, are deliberately not depositing the taxes so
deducted in Government account and continue to deploy the funds so retained for business
purposes or for personal use. Such retention of Government dues beyond the due date is an
offence liable for prosecution under Section 276B of the Income Tax Act, 1961. The
defaulter, if convicted, can be sentenced to Rigorous Imprisonment (RI) for a term which can
extend up to seven years.
The TDS units of Income Tax Department have been taking up prosecution proceedings in
suitable cases where TDS has been retained beyond the due date. The Central Board of
Direct Taxes has partly modified existing guidelines for identification of cases for launching
prosecution. As per the revised guidelines, the criterion of minimum retention period of 12
months has been dispensed with.
For the benefit of public at large, it is now clarified that defaulters, who have retained the
TDS deducted and failed to deposit the same in Government account within due date, shall
be liable for prosecution, irrespective of the period of retention.
However, the offence u/s 276B of the Income Tax Act can be compounded by Chief
Commissioner having jurisdiction on the case, either before or after the launching of
prosecution proceedings. In the recent past, several defaulters have submitted petitions for
compounding of such offences and compounding orders have also been passed by competent authority in suitable cases.

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Understanding Tax Benefits On Home Loan

Understanding Tax Benefits On Home Loan
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Most people would tend to agree with Einstein, as tax related calculations & rules are complex, intimidating and difficult to understand. At the same time, it is imperative to understand the essentials of tax law to claim all possible benefits.

Many of you may already know that any loan should be repaid to the bank in equated monthly installments (EMIs). Each EMI consists of both principal and interest parts. i.e., EMI goes towards paying the principal and the interest amount. You can claim deductions on the amount paid towards principal component up to Rs. 1 lakh under Section 80C and on the interest component up to Rs.1.5 lakh under Section 24(1) for a self occupied house.

For those who are planning to buy a home this year, tax exemption on home loan interest payment has been increased by ₹ 1 lakh in the recent budget. This is in addition to the existing exemption of ₹ 1.5 lakhs. In total, this year you can claim a deduction of ₹ 2.5 lakh for interest paid on your home loan.

Pre-requisite to get tax deduction
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First and foremost, in order to claim the tax benefits, you will need to be the owner of the house. If your spouse is a co-borrower of the loan, then he / she can also claim tax benefits.

If you purchase an ‘under construction’ property, then you cannot claim the benefits until the construction is complete and you get the possession certificate.

Tax deduction on pre-EMI
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EMI paid until the completion of construction is considered pre-EMI. Once you get the possession certificate, the interest component of the pre-EMI is aggregated and deduction is allowed in five equal installments beginning from the year in which the construction is completed.

Stamp duty, registration charges and processing fee
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Stamp duty and registration charges are deductible but only in the year of purchase. Processing fee paid to bank is not tax deductible.

Selling the house within 5 years
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Many borrowers who zealously buy a house for investment purpose may not know the fact that they do not get any tax benefit on principal component if they sell the home within 5 years of purchase. In short, selling the house within 5 years from possession will reverse the tax benefit claimed on principal amount. However, benefits claimed on interest part will remain intact.

Loans taken from friends and relatives
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If you borrow a loan from your friends and family members i.e., somebody other than banks and financial institutions, then you cannot claim any benefit on the principal component of the loan; however, you can claim the benefits on the interest component which is up to 1.5 lakhs per year.

Loan taken for extension or renovation of the house
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If a loan is taken for extension or renovation of your own home, then you cannot claim any benefit on principal component under Section 80c. You are still eligible to claim the deductions for interest amount upto only Rs. 30,000 per year for a self occupied property. However, there is no such limit for tax deduction on a house that is not self occupied.

Pre-payment fees
----------------------
In a recent ruling, Mumbai bench of the Income Tax Appellate Tribunal stated that taxpayers can claim prepayment charges on their home loan as deductible under the head ‘income from house property’ and could set it off against salary income. It noted that prepayment charges were similar to interest paid on the loan and allowable as deduction from house property income.

And more…
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Apart from the above cases, tax deductions vary based on when you get possession of your house, whether the house is self occupied or not, whether the owner lives in the same city or not, whether its his / her first or second house etc. Spend necessary time to understand different aspects of taxation that pertain to you and consult a tax professional before borrowing a home loan. When you incur a debt, every penny saved is a penny earned. Tax evasion is a social evil, but claiming tax benefits is a skill.

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Time is coming near to lock money in tax-free bonds for long-term

Time is coming near to lock money in tax-free bonds for long-term
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The market will soon be flooded with tax-free bonds. Even as the government has allowed several PSUs to raise up to Rs 48,000 crore during the financial year 2013-14
The yields on these bonds are linked to the average yield ofgovernment securities of similar maturity in the previous 15 days

Tax advantage
------------------

The biggest draw for the investor is the taxfree advantage that these bonds offer. Unlike fixed deposits, NSCs and other bonds, the interest earned from these bonds is tax free. Assuming a tax-free coupon yield of 8.2%, the implied pre-tax rate will be to the tune of 11.79% for investors in the 30% tax bracket (those earning more than Rs 10 lakh a year). Since the recent spike in the bond yield was largely due to the RBI's short-term efforts to prop up the rupee, the yield is likely to fall once the currency stabilises. If the yield falls, the value of these bonds will shoot up in the secondary market.

The investors will have the opportunity to book profits by selling these bonds. While shortterm capital gains from such a sale will be taxed as normal income, long-term capital gains will be taxed at 10%. The bonds must be held for at least 12 months for the profits to be treated as long-term gains. Unfortunately for investors, the long-term capital gains from these bonds are not eligible for indexation benefit which could have cut tax.

What to look for
--------------------

Besides the coupon rates offered on the bonds, investors should also examine other details before putting in their money. The most important factor is the rating. The REC has been assigned a AAA rating by agencies. While it is better to go with the AAA-rated companies, experts are advising investors not to follow this rule mechanically. Even AA+ companies, such as Hudco, can be a good investment. The companies with a lower rating typically offer a higher coupon rate compared to AAA entities. "Since all of them are government enterprises, there is no default risk. So investors can take advantage of the yield difference by putting money in AA+ companies," says Gajendra Kothari, managing director and CEO, Etica Wealth Management.

Liquidity is the next important thing. Some investors may be getting in with the intention of booking profits once the yields fall. Liquidity is critical even for the longterm investors who plan to hold these bonds till maturity. What if they have to liquidate these instruments due to unforeseen circumstances? These are all primary issues and, therefore, it is impossible to predict the exact liquidity after they list. However, you should give preference to companies that are planning to list on both the BSE and the NSE.

The size of the issue is another indicator. The larger the amount, the higher the probability of good volume after listing. You can also get an idea about the possible volume by looking at the existing volumes of previous issues of the company.

Choose the right tenure
-----------------------------

Unlike the previous issues, the latest offerings will have the option of a 20-year term. This means that a 40-year-old putting in money in this option will get it after he retires. There are no put or call options for these bonds, so you must decide the time period for which you want to remain invested. Base your choice on your cash-flow requirements. However, experts are advising investors to go for long duration bonds. This is because they offer higher coupon rates compared to the 10-year bonds. Long duration bonds also reduce the reinvestment risk.

"Since the interest rates are expected to come down in the long term, you may not get the high interest rates after 10 years," says Kothari. The price volatility will also be higher for long duration bonds and, therefore, the potential to earn capital gains will also be higher.

One also needs to consider the gap between the rates offered to retail and other investors. The former will get the higher yield only till they hold these bonds in their own name. In other words, secondary market purchasers are not treated as retail investors and, therefore, they will get only the lower coupon rate. Due to this, the market price will be based on these stepped down coupon rates. So go with the issues with the lowest gap.

Secondary market route
-----------------------------

With the prospects of new issues hitting the market with higher coupon rates, the existing tax-free bonds have started correcting. Market forces will not allow a difference in yields of the existing and new bonds. This means investors can get good deals in the secondary market, but their tenures will not be as long as those for the new issues.

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All About Exchange Earner's Foreign Currency (EEFC) Account

All About Exchange Earner's Foreign Currency (EEFC) Account 
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Q 1. What is an EEFC Account and what are its benefits?

Ans. Exchange Earners' Foreign Currency Account (EEFC) is an account maintained in foreign currency with an Authorised Dealer i.e. a bank dealing in foreign exchange. It is a facility provided to the foreign exchange earners, including exporters, to credit 100 per cent of their foreign exchange earnings to the account, so that the account holders do not have to convert foreign exchange into Rupees and vice versa, thereby minimizing the transaction costs.

Q 2. Who can open an EEFC account?

Ans. All categories of foreign exchange earners, such as individuals, companies, etc. who are resident in India, may open EEFC accounts.

Q 3. What are the different types of EEFC accounts? Can interest be paid on these accounts?

Ans. An EEFC account can be held only in the form of a current account. No interest is payable on EEFC accounts.

Q 4. How much of one’s foreign exchange earnings can be credited into an EEFC account?

Ans. 100% foreign exchange earnings can be credited to the EEFC account subject to the condition that the sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments. (A. P. (DIR. Series) Circular No. 12, dated July 31, 2012).

Q 5. Whether EEFC Account can be opened by Special Economic Zone (SEZ) Units?

Ans. No, SEZ Units cannot open EEFC Accounts.

However, a unit located in a Special Economic Zone can open a Foreign Currency Account with an authorised dealer in India subject to certain conditions. SEZ Developers can open EEFC Accounts.

Q 6. Is there any Cheque facility available?

Ans. Yes; Cheque facility is available for operation of the EEFC account.

Q 7. What are the permissible credits into this account?

Ans.

i) Inward remittance through normal banking channels, other than remittances received on account of foreign currency loan or investment received from abroad or received for meeting specific obligations by the account holder;

ii) Payments received in foreign exchange by a 100 per cent Export Oriented Unit or a unit in (a) Export Processing Zone or (b) Software Technology Park or (c) Electronic Hardware Technology Park for supply of goods to similar such units or to a unit in Domestic Tariff Area;

iii) Payments received in foreign exchange by a unit in the Domestic Tariff Area for supply of goods to a unit in the Special Economic Zone (SEZ);

iv) Payment received by an exporter from an account maintained with an authorised dealer for the purpose of counter trade. (Counter trade is an arrangement involving adjustment of value of goods imported into India against value of goods exported from India in terms of the Reserve Bank guidelines);

v) Advance remittance received by an exporter towards export of goods or services;

vi) Payment received for export of goods and services from India, out of funds representing repayment of State Credit in U.S. Dollar held in the account of Bank for Foreign Economic Affairs, Moscow, with an authorised dealer in India;

vii) Professional earnings including directors fees, consultancy fees, lecture fees, honorarium and similar other earnings received by a professional by rendering services in his individual capacity;

viii) Re-credit of unutilised foreign currency earlier withdrawn from the account;

ix) Amount representing repayment by the account holder's importer customer, of loan/advances granted, to the exporter holding such account; and

x) The disinvestment proceeds received by the resident account holder on conversion of shares held by him to ADRs/GDRs under the Sponsored ADR/GDR Scheme approved by the Foreign Investment Promotion Board of the Government of India.

Q 8. Can foreign exchange earnings received through an international credit card be credited to the EEFC account?

Ans. Yes, foreign exchange earnings received through an international credit card for which reimbursement has been made in foreign exchange may be regarded as a remittance through normal banking channel and the same can be credited to the EEFC account.

Q 9. What are the permissible debits into this account?

Ans. i) Payment outside India towards a permissible current account transaction [in accordance to the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000] and permissible capital account transaction [in accordance to the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000].

ii) Payment in foreign exchange towards cost of goods purchased from a 100 percent Export Oriented Unit or a Unit in (a) Export Processing Zone or (b) Software Technology Park or (c) Electronic Hardware Technology Park

iii) payment of customs duty in accordance with the provisions of the Foreign Trade Policy of the Central Government for the time being in force.

iv) Trade related loans/advances, extended by an exporter holding such account to his importer customer outside India, subject to compliance with the Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000.

v) Payment in foreign exchange to a person resident in India for supply of goods/services including payments for airfare and hotel expenditure.

Q 10. Is there any restriction on withdrawal in rupees of funds held in an EEFC account ?

Ans. No, there is no restriction on withdrawal in Rupees of funds held in an EEFC account. However, the amount withdrawn in Rupees shall not be eligible for conversion into foreign currency and for re-credit to the account.

Q 11. Are there any restrictions on accessing the forex market by the EEFC account holder ?

Ans. EEFC account holders are permitted to access the forex market for purchasing foreign exchange only after utilizing fully the available balances in the EEFC accounts . Accordingly ADs are required to obtain a declaration, while selling foreign exchange to their constituents.

Q. 12. Whether the EEFC balances can be covered against exchange risk?

Ans. Yes, the EEFC account balances can be hedged. The balances in the account sold forward by the account holders has to remain earmarked for delivery. However, the contracts can be rolled over.

Q. 13. Whether EEFC Account is permitted to be held jointly with a resident close relative?

Ans. Resident individuals have been permitted to include resident close relative (s) as defined in the Companies Act, 1956 as a joint holder (s) in this EEFC bank Account. However, they shall not be eligible to operate the account during the life time of the resident account holder (A. P. (DIR. Series) Circular No. 15, dated September 15, 2011).

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