Monthly Archives: September 2015

How to get CA Articleship Transfer done

A big headsuman goswamiache!! That’s what most of us think at the very first instance. But it is not that troublesome if we follow certain procedures. I have passed through the articleship transfer process and hence felt like sharing my views on how can this be fast tracked and convenient for my fellow CA students.

CA Articleship transfer:

  • In the First Year of Articleship: No Issues as such
  • In the Second / Third Year of Articleship : Wherein oneself needs to get the consent of ICAI first by satisfying any one or more of the conditions as stated below:-
  • Medical grounds requiring discontinuance of articles for a minimum period of three months (on production of a Medical Certificate issued by a Government Hospital).
  • Transfer of a working parent to another city involving a distance of minimum 50 kms (on production of a certified copy of the transfer order and the proof of relocation to another City).
  • Misconduct involving moral turpitude.
  • Other justifiable circumstances / reasons: –
  • Grounds already permissible in the Chartered Accountants Regulations, 1988 (on submission of requisite proof of the act warranting transfer/termination of articleship): –
  • Industrial Training (Regulation 51)
  • Secondment of articles (Regulation 54)
  • Conversion from PCC to IPCC (for termination of articles only. Re-registration of articles to be allowed only after passing Group-I of IPCC)
  • Death of Principal [Regulation 57(1)(c)]
  • Ceasing of practice by the Principal [Regulation 57(1)(a)]
  • Removal of name of the Principal from the Register of Member due to any reason [Regulation 57(1)(b)]
  • Marriage basis (only if there is relocation to another city involving distance of 50 kms).
  • Irregular payment or non payment of stipend with reference to Regulation 67.
  • Articled assistant desires to serve balance period of training outside India.
  • Shifting by the Principal to another city involving distance more than 50 kms.

The articled assistants are required, in the first instance, to get the consent of the Institute before getting Form 109 signed by the Principal, in their own interest.The request, on any one or more of the aforesaid grounds, of an articled assistant on a plain paper with recommendations of the Principal for transfer / termination of articleship accompanied by evidence/proof (self-attested by the articled assistant) to the satisfaction of the Institute be made.

Note :- Download the Form 109- http://220.227.161.86/7512form109_std.pdf
CA Articleship Transfer Procedure 

Below is the Procedure For CA Articleship Transfer

First Year Articleship – There are No Restriction For Articleship Transfer/ Termination. Simply You can Submit Form 109 to Respected Region.

Second or Third Year of Articleship Training

First Step :- You Will Write An Application to Yours Respected Region With Mention of any valid reasons. With This Application Also Enclosed Your principal Letter For No Issue of Transfer/Termination of Your Articleship.

Second Step :- Institute will Review Your Application and Send Approval Letter

Third Step :- If You Receive Approval Letter Than You Will Submit Form 109 to Institute.

So, apply with  form 109 for the articleship transfer for valid reasons only after getting Approval of ICAI.

Now, the door is wide open to join a new firm. Kindly bear the following points in mind while you are on the verge of joining the new CA firm.

  • Firstly get the Form 102 (Deed of Articleship) franked as soon as possible. I would suggest the moment you get the Institute’s consent get the Franking done . Submit the Form 109 .
  • After submitting the Form 109 make sure that you have the time limit of 30 days to submit the form 103 (can be purchased from any regional council of ICAI for Rs. 50/-) to the Institute. Now here if you have already got your Form 102 franked so without any wastage of time your articleship date will get counted from that date even if you submit the same at a later date (within 30 days) .
  • Also you can do your articleship training in the new CA Firm without any headache as such.

Conclusion:

Proactive followup, Study and followup would help you resolve this one quickly. It’s a great idea to go personally to the student section at the ICAI and talk to someone if you find yourself stuck badly. I hope I am able to give the right solution for those who are in need of.

For any Queries /feedback you can write me @ [email protected] / [email protected]

What to expect from GST

We meet a lot of people asking about How is GST? Will it complicate or simplify tax regime? What will change with GST? What will be the rate of Tax in GST regime? Will Octroi stay after GST arrives? When can we expect GST to launch? Also whether the cross regime credit will available? As per recommendations by Joint Working Group appointed by Empowered Committee in 2007, the GST in India may have four components in its tax structure as –

  1. Central Tax on Goods
  2. Central Tax on Services
  3. State VAT on Goods
  4. State VAT on services

As far as the administration of the GST is concerned, it’s proposed that, the state shall administer the State GST and the Centre shall administer the State GST. So the complications around the duplicate administration and softer conflict of interest on what’s state’s prerogative v/s. what’s centre’s prerogative tend to continue.

Now the point which is top of the mind issue as to which taxes will subsume or stop to exist post GST regime. Let’s do a table for easy understanding as to what will subsume in which one?

Proposed to be subsumed in Central GST Proposed to be Subsumed in State GST
Central Excise Duty (CENVAT) Value Added Tax (VAT)
Additional Duty of Excise Purchase tax if any
Additional Customs Duty in Nature of Excise Duties (Countervailing Duty) State Excise Duty except liquor
Cesses Levied by the Union Entertainment Tax (Unless levied by Local Body)
Service Tax Luxury Tax
Central Sales Tax Octroi and Entry Tax
Surcharges Levied by the Union Taxes on Lottery, Betting and Gambling

Some other highlight clarifications which may be of use for understanding the Goods and Services Tax i.e., GST in India are:

  • Broadly GST is proposed to be having two components Central and State GST.
  • Taxable event is proposed to shifted to sale of goods rather than on manufacture currently.
  • Exports will be zero rated or free from all duties and taxes. Certain products will be kept out of GST net and the taxes may be levied by the local bodies.
  • Cross utilization of between central and state GST may NOT be allowed.

All in all GST seems to be complicated to start with although it has engulfed multiple indirect taxes into one as of now. Only more understanding the unfoldment will make things clearer.

Not for profit (NPO) entity selection

It’s very typical to be confused between what’s ideal entity for an NPO. What’s good and not so good about various options available.

One can consider a Trust, Co-operative society, a Section 8 Company. All can work like an NPO.

It’s a situational decision as to what suits best for your NPO which can be an NGO or an association. Now let’s look at (evaluate) each entity model….

1. Trust : – trust is simpler to register. Just make a deed of trust. Have more than two or three trustees. There is a state trust Act almost in each state wherein one can register. Like in Mumbai imfact for whole of Maharashtra and Gujarat there is a Mumbai public trust Act.

Cons:
1. Different trust Acts across the country for being registered. State managed model of governance.
2. Complicated formalities for managing the changes, rotations and so on.

Pros:
1. Best for charity organization like hospitals, food distribution, relief to poor, etc. Also religious organization can form trust.
2. Formation easier. Only a deed between trustees needs to executed and registered.
3. Compulsory formalities of charity commissioner.

2. Cooperative Society:– Just create a bylaw with minimum seven members. It gets registered under the cooperative societies Act 1860. Exception to this is Maharashtra state wherein it has to formed and registered with Charity commissioner of Maharashtra. Few other states also have this compulsion of registering with local charity office.

Governance of the same through bylaws. Governing body should be rotating by election model.

Pros
1. Good for Credit societies, Public Gymkhana or Clubs, promotion of culture, education, Music and Art promotion.
2. No stamp paper required for registration of society. That means society is exempt from Stamp Duty as far as registration goes.

Cons:
1. Complete Offline process for registration, change in members, etc. Very painful to manage.
2. Compulsory periodical Rotation of governing body is a hassle.

Section 8 Company under Companies Act 2013 (section 25 company under companies Act 1956). This is central Act with registrars in all the states. It’s governed by the board of director generally elected by voting for governance:-

Pros:
1. Good for associations, professional bodies, art promotion societies, science Laboratories, public libraries
2. Complete online upload from registration to changes to submission of annual accounts.
3. Not compulsory to register under the local charity commissioner.
4. No stamp duty payment for registration.

Cons:
1. Audit under Companies Act
2. Complications with respect to new companies Act 2013 apply
3. Higher penalties for delays in compliance

All above models can be registered for exemptions with income tax and also the donors can get tax deduction for their contribution. Non of above are permitted to distribute surplus of any kind to the trustees.

So depending on what you want to do and where you want do in NGO or an NPO, you may look up to the above options.

How to deal with issues Related to TDS Default Notice

 

How to deal with issues Related to TDS Default Notice

Quarterly TDS Returns are filed and the same is processed by the CPC E-TDS about the authentication of each and every contents mentioned in the TDS Return.

If any default is found in the TDS Return, then such defaults are put on the CPC E-TDS Website or TDS Default Notice is dispatch to the deductors to rectify the same.

In this article, we will examine the major reason for such defaults and how to resolve such issues.

What are the major reasons for TDS Defaults?

Major reason for E-TDS Defaults consists of “Defaults for Short Deduction of TDS” or “Defaults for Short Payment of TDS”.

1. Reason for Defaults for Short Deduction of TDS:- Short deduction of TDS arises due to below mentioned error happened at the time of TDS Return filing:

  a)      PAN Error:- This is one of the important reasons for short deduction defaults notice. One has to be very careful while quoting PAN in TDS Return otherwise it leads to demand of TDS at the rate of 20% by the TDS Department. Apart from this, deductee will not get any TDS Credit whose TDS deducted by the deductor. Deductor has to take care while quoting PAN in TDS Return.

 

  b)     Non / Wrong Quotation of Lower Deduction Certificate No. issues u/s 197 of Income Tax Act, 1956:- This is the another reason for short deduction defaults notice. In this case, deductor either quote the wrong Lower deduction certificate no. or forget to mention lower deduction certificate no.

 

Further Lower deduction certificates have limit for amount of transaction to be done for the period with particular deductee. If the transaction for the period between deductor & deductee exceeds total amount mentioned in the lower deduction certificate, then deductor has to made TDS at normal rate of TDS as applicable to the class of deductee. In most of the cases, Deductor does not have tracking system to have the control over the limit of amount mentioned in the Lower Deduction Certificate.

Following points should be correctly quoted or taken care in TDS Return:

  •       Lower Deduction Certificate No.
  •       Validity of Certificate
  •       Limit of Amount of Transaction
  •       Rate mentioned in the certificate
  •       Section mentioned in the certificate

 

  c)      Deduction of Tax at Source at wrong rate:- These kind of issues mostly arises u/s 194C as the TDS rate is 1% or 2% and that too for making mistake in identification of class of person between Proprietor and Partnership Firm. In case such confusion, one has to be very careful to check fourth alphabet of PAN. If it is “F”, the it is Partnership firm and TDS rate shall be 2%. These kind of issues lead to not only Short Deduction of TDS but also short payment of TDS.

2. Reason for Defaults for Short Payment of TDS:- Defaults for Short Payment of TDS arises due to below mentioned error happened at the time of TDS Return filing:

 

a)      Challan Mismatch Errors:- Short Payment of TDS Defaults arise due to wrong particulars mentioned for paid challan which are used to make payment of TDS. A wrong particular of challan mentioned in the TDS Return is as good as non payment of TDS. Hence, one need to be very careful while quoting particulars of paid challans in TDS Return.

Now the question arises how to get the comprehensive details to know the errors for each component of Short Payment of TDS or Short Deduction of TDS and how to correct the error  as the default notice consists only total amount to be paid on account of short payment or short deduction.

To get comprehensive details, one need to login at www.tdscpc.gov.in and make an application for “Justification Report”. It will be available for download after 8-10 hours of application. Justification Report shall give the details for each and every components of short payment or short deduction of TDS Deductee wise. After getting details, correction statement (i.e. E-TDS Revision) needs to be processed to rectify the error.

I have witnessed to the many cases of E-TDS Defaults. In one of the cases where TDS defaults were amounting to Rs. 80 Lakhs (approx). The main reason for such huge defaults were PAN Error, Non / wrong lower deduction certificate no., challan mismatch, short deduction of TDS etc. The same has been rectified by paying not more than Rs. 1,50,000/- which is the actual liability of TDS as the TDS is deducted at lower rate. Hence, we can say that 95% (approx) TDS demands can be sorted out without paying a single penny. The rest will be genuine TDS demand along with interest which was either due to short payment or short deduction of TDS.

Data Analytics for a small company

Data Analytics is a art and science of analyzing the data generated by the business and around the business for various benefits to the business.

Tremendous amount of data get’s generated while doing the transaction recording of the business at various levels in various systems while doing the business. Also there is a huge load of data that get churned around various aspects of the business externally. Data Analytics is a manner in which all this can be put to use proactively to make business decisions in right direction.

Many a times the results are astonishing and against the perception of the owner or promoter or the management but the same are fact based and hence reliable.

What is needed to do the analysis
Simple excel with analytical mind is sufficient for the small businesses. There are many reports even readily available in the softwares in which the transactions are recorded. All these reports with an analytical focus and knowledge of business model can throw disruptive insights.

Marketing and Sales:
Answers to the below question may be different if based on Data
What’s more interesting to the customer?
Who is real decision maker?
What’s the real USP of the business?
What’s paying faster Digtal marketing or the traditional one?

Operations
Answers to the below question may be different if based on Data
Who is the star performer?
What is the real test of quality for the product?
How Can we manage cost while keeping the quality constant?
What small thing can change the complete scale-ability of the business?
What’s critical to be controlled to stop leakages?

Small businesses and startups being more agile and flexible can do quick analysis and decide on course of actions to see immediate ROI. Believe me Data Analytics is even simpler to adopt for the smaller organization. Early Adoption to the basic technique can open doors to numerous possibilities.

Private Companies can accept deposits from a relative of a Director

MCA Update on Deposit From Relative of a Director By Private Limited Company:

Deposits rules are quickly getting aligned with old 58A exempted rules to private limited company.

Without any upper limit of amount, now a private company can  accept unsecured loans apart from director even from a relative (as per definition) of a director of the company with simple declaration saying the relative has not borrowed same from others. The relative need not be a shareholder of the company.

​http://www.mca.gov.in/Ministry/pdf/Amendement_Rules_15092015.pdf

It Your Turn Now

Basics for Setting up business in India

India being a hot destination for business and thereby investment world over, a lot of companies from US, UK, rest of Europe, China, Korea want to set shops in India.

What are the means to create presence in India for Businesses ?
1. Liaison office in India – most convenient option for Creating India presence. The issue with this is the same cannot trade or serve in India only liaison. This can be a good way to study market and establish contacts, scout for takeover or merger opportunities, etc. It can be formed with express permission from RBI through an authorized dealer which is a scheduled bank. The LO or liaison office needs registration in India as foreign company with Ministry of Company affairs MCA. Funds which come in India can be used only for spending on study and administration in India. It needs to comply With all laws as required by any other entity. It cannot enter into any revenue earning contract. Exit option is easier if you have liaison office setup with all compliance in place.

2. Having a 100% subsidiary in India. This is a great way to have full fledged and active presence. It is allowed to trade and serve from this entity without any restrictions once established. Apart from few exceptions in FEMA, 100% foreign subsidiary can be formed for most of the businesses. For restricted businesses FIPB approval is required to be taken. All infusion of funds call for FCGPR formality which is post facto except few exceptions. This companies need to have all VAT, Service tax and excise approvals based on its nature of business. An auditor needs to be appointed within one month of formation and audited accounts need to be submitted within stipulated time frame. Almost all the formalities are like any other Indian owned company. Only additional is having a compulsory Indian resident as director on the board. This model is suitable for those who have clear business plan and expect revenues to flow in a shorter time frame post formation. Exit becomes a bit difficult in this model and also costlier.

What are other crucial issues which need to be looked at to setup business in India?

Apart from the entity structure questions like tax impact on margins, pricing, capital introduction structure, etc are crucial for the incumbents.

How to calculate Advance tax

Advance Tax Provisions under the Income Tax Act’1961

1.  Advance Tax is applicable for all assesses whose Tax Liability exceeds Rs. 10,000/- during the financial year.

2.  Advance Tax is payable as follows:

Particulars

Up to 15th June of financial year 15% of Tax Payable for company.

Not Applicable for Noncompany

Up to 15th September of financial year

45% of Tax Payable for company

30% of Tax Payable for noncompany

Up to 15th December of financial year

75% of Tax Payable for companies

60% of Tax Payable for noncompany

Up to 15th March of financial year

100% of Tax Payable

100% of Tax Payable

Points to remember:-

1. Advance Tax provisions are not applicable in case of assesses having income under head Profits & Gains from Business or Profession U/s 44AD and 44AE i.e presumptive income.
2. Advance Tax provisions are not applicable in case of senior citizens aged above 60 years, but if senior citizens have business income then Advance Tax provisions are applicable.
3. Note above points are applicable for residents only i.e exemptions are available only for residents. No exemption for senior citizens if such individual is Non-resident.
4. Advance Tax can be paid by challan ITNS 280 under the minor head code 100 and Major Head code is 0020 for tax on Companies and 0021 for Tax on other than Companies.
5. Tax can be paid by challan either by cheque, cash or by the online mode.

Interest on Late Payment of Advance Tax

If the Income Tax is not paid as per the above schedule, Interest is liable to be paid for late payment of tax as follows

1.     Interest under section 234B – Interest @ 1% is payable if 90% of the tax is not paid before the end of the financial year i.e. for Default in Payment of Advance Tax

2.     Interest under section 234C – Interest @ 1% per month is payable if the tax is not paid as per the above schedule i.e. for Deferment in Installments of Advance Tax.

It Your Turn Now

New circular on Concurrent Audit of the Banks

Attended a webcast with the ICAI. Here are the few notable snippets about the key changes in the recent RBI circular about the concurrent audit of the public sector banks.

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1. Quantity and quality of the banking has changed drastically. Huge jump in quantity of branches, transactions, types of transactions, etc in banking. Also the complex transactions like derivatives, foreign exchange, ATM, E-lobby, data center, etc need a different expertise.
2. Certification of transactions and things like LFAR is an issue. It’s like making concurrent auditor responsible for statutory part.
3. Circular calls for concurrent audit of functions apart from branches are concerned. Also the model seems to he moving from size to the risk models of the proposed subject. High risk like type of transactions, fraud prone branches, etc needs to be brought in. Even high deposits may be important parameter apart from advances to cover branches in the audit.
4. The expectation from concurrent auditor of the bank is to be eyes and years of the management. They have to act as extended arm of the bank. This also suggests that concurrent auditor needs to be value add not only to the adherence to the framework but also to challenge the framework.
5. Cooling period of the auditor with the same bank may go away. However the performance monitoring of the auditor may go up from basic documentation to the risk based smart review.
6. New exceptions are brought out like quick mortality in KYC and so on points out that the mindset should grow more fraud sensitive. Forensic audit mindset is becoming more important.
7. It’s the prime duty of the bankers to provide timely and complete information to the Auditors.
8. Banks should organize training and familiarization program for the auditors. This will help making the auditors equipped for better judgement and quality can go up.
9. Working post banking hours is NOT a desirable guideline. A representation to the RBI should be done on this. A computer and dedicated space is a basic minimum expectation while fulfilling huge responsibility of concurrent audit of the bank.
10. Renewal of loans without supporting documents being received in the system.

The members understanding on the IT side is the must to handle the banks concurrent audit now onward.

As conclusion, banks and concurrent auditors should work as a team to meet expectations of this New RBI circular for the concurrent Audits.

What’s is representation and Litigation at APD

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Chartered Accountant for a small client means someone who can help him handle tax Department with confidence.
Representation starts with documentation and slowly becomes knowledge driven. Articles joining us this may get exposed to various tax laws, burning issues, presentation and persuasion.

We do handling of various notices, scrutiny cases and appeals with complete hierarchy authorities under Income tax Act. We have gained edge in handling all kinds of issues and notice from Maharashtra VAT Act. (Mvat) & profession Tax. Apart from this, a specializes team handles show cause notices with respect to Service Tax and consultation related to complicated service tax matters for various types of clients. This is very knowledge intensive area wherein study about business facts visa Vis legal provisions both go hand in hand.

People good at litigation and representation can make their career as  tax counsel. Nowadays many Chartered Accountants are also getting a Law degree and practising in this field full time. Trained people in this area can also be great asset for tax Department of a corporate. In the mid sized CA firms, people with niche representation experience are valued a lot.