Govt forecasts 7% growth in mid-year review report

The Government on Tuesday painted a sombre picture of the economy, holding out the hope of another interest rate cut while peering into the prospect of national income growth slipping below 7 per cent. Worse, the fiscal deficit is yawning, curbing the government’s elbowroom to spend its way out of the slowdown. “It is difficult to make a precise forecast about growth prospects for the whole year at this stage because of uncertainty, though the expectation is that it would be in the range of 7 to 8 per cent,” the mid-year review of the economy that was tabled in Parliament on Tuesday stated. “We have to be prepared, however, for growth to be around 7 per cent in 2008-09 as a whole.” Gross domestic product (GDP) has grown by 7.8 per cent during the first six months of current fiscal year, but the review cautioned that it will be “significantly slower” in the second half as the impact of slower export growth and weaker domestic demand, including a possible dampening of private investment, begin to be felt. India’s industrial output in October contracted by 0.4 per cent, exports plunged by 12 per cent, while excise duty collections — the tax imposed as products travel from the factory to the final retail selling point — fell by 15 per cent in November, mirroring the seriousness of the slowdown. In a mini-budget of sorts, the government had announced a series of measures in the first package on December 7 that included an across-the-board cut in the central value added tax (Cenvat or the key indirect tax imposed at various stages of the manufacturing process). Chief economic advisor Arvind Virmani said fiscal deficit for 2008-09 could exceed 5 per cent due to the extra spending reflecting widening disparity between current expenditure and revenues earned by the government. The International Monetary Fund has projected that India's GDP growth is likely to slow down to 6.3 per cent in 2009, while the Reserve Bank of India has revised GDP growth forecast for 2008-09 to a range of 7.5-8.0 per cent.

Accountants get tips from the tiffin man

The men who ensure workers in India’s financial capital of Mumbai get their food on time credit their success to simple principles: stick to time and work is worship.
Last week the secrets of ubiquitous dabbawalas, as they are known, were presented at a conference of chartered accountants in Dubai.
The conference which heard presentations on topics like wealth structuring crisis, India’s cost competitiveness, Middle East equity markets and commodities cycle, was perked up by a presentation on the men who transport lunch boxes.
Invited by the Dubai chapter of the Institute of Chartered Accountants of India, Manish Tripathi, honorary director of Mumbai’s dabbawalas, gave a presentation on the trade wearing a now globally recognizable dabbawala white cap and swearing with his hand on a tiffin box that he would "say the truth and nothing but truth" about his trade.
"Believe me, I will give you so much knowledge about dabbawalas that any of you can come to Mumbai and start working as a dabbawala," he told more than 1,000 people in the audience.
"Our work revolves around a few beliefs – the most important ones of which are sticking to time and believing that work is worship," he said.
"Annadan is mahadan (giving food is the greatest charity). We dabbawalas have a strong belief in god. But you don’t see god, do you? So, whom do you worship? People – after all, they are creations of god. You worship god by ensuring that people get to eat their food on time," he said.
"Time," Tripathi said, "is the first thing any dabbawala has to stick to if he has to succeed in the trade."
He explained that every dabbawala believes they are descended form the great Maratha leader Shivaji, and came from the same community.
"Our forefathers fought under Shivaji against powerful enemies. Today, we wage our war against time," he said, adding that this is what ensures that an office-goer in Mumbai gets his or her homemade food for lunch precisely at 12:30 p.m. every working day of the week.
There are about 5,000 dabbawalas in Mumbai who deliver some 200,000 tiffin-boxes. That means 400,000 transactions every day – first delivering the full tiffin boxes and then delivering the empty ones back home.
Every dabbawala has to report for duty at their designated locations at precisely 9:30 a.m.
For three hours – "We call this war time" – the dabbawalas work in a high pressure environment in traffic-congested Mumbai, moving dabbas on foot, carts and local trains to deliver the food to their customers across India’s commercial capital.
"We ensure that all our customers, too, stick to time. A dabbawala waits at a household to collect a dabba for half-a-minute to two minutes and not more," Tripathi said.
For three hours, the dabbawalas work on war footing to cover around 60 to 70 kilometres.
"Red lights, traffic jams, pedestrian crossings cannot stop us. Even policemen in Mumbai let us go when they see our trademark white cap," he said.
So what is the motivating factor for the dabbawalas?
"Every dabbawala is a stakeholder in the system. That is the single most motivating factor. Nobody is an employee, which is why there has not been a single record of strike in our business," he said.
This is what goes into the dabbawalas’ supply chain management – much studied by management gurus and schools – which has ensured a now globally renowned error rate of one in 16 million transactions.
That and the coding system are key factors in the success of their supply chain management.
"We cannot afford to have a mistake. Imagine what trust people will have on our services if a customer having orthodox vegetarian Jain food gets someone else’s chicken curry," Tripathi said.
As for the educational qualifications of the dabbawalas, Tripathi put his thumb up to mean most are illiterate. "Maybe 15 percent of us reach Class 8. More than that and we will start having problems. Educated people have many questions – why, how – which can act as hindrances in our strictly time-based trade," he said.

NEW LAW FOR REMOVING TIME LIMIT ON DIVIDEND CLAIM

The new company law proposes to remove the time limit for claiming dividend. The Companies Bill 2008 – recently cleared by the Cabinet and to be placed before Parliament soon – has removed the seven-year ceiling up to which unclaimed dividend remains safe in the government’s kitty. This means investors can claim their dividend even 10 years after declaration of dividend once the new Bill gets the approval of Parliament. Unclaimed dividend of investors is transferred to the Investor Education and Protection Fund (IEPF). The fund, which is maintained by the ministry of corporate affairs, allows claims only for seven years from the date of declaration of dividend. Officials in the ministry of corporate affairs say that the new law proposes to remove the time limit. This would mean that the rights of the investors to claim their unpaid dividend amounts credited to IEPF do not pass away. “The existing provisions on investor education and protection have been recast to ensure that the claim of an investor over a dividend not claimed for more than seven years is not extinguished,” an official in the ministry said. The idea, aimed at a safeguarding the interests of minority shareholders, would require the government to make statutory changes in the administration of IEPF. The new company law puts premium on the protection of investors rights. The ministry of corporate affairs is also known to have opposed the finance ministry’s stand that investor protection being the primary responsibility of market regulator Sebi, the investor protection fund should reside with the latter. Rejecting the finance ministry stand, the corporate affairs ministry had contended that investor protection was related to the corporate governance initiatives of the government and was necessary for safeguarding the interests of investors.
Tags : Source : -

How to Make Best Use of Section 80C

What to Check before investing for Section 80C
or
How to Make Best Use of Section 80C


Most of the Income Tax payee try to save tax by saving under Section 80C of the Income Tax Act. However, it is important to know the Section in toto so that one can make best use of the options available for exemption under income tax Act. One important point to note here is that one can not only save tax by undertaking the specified investments, but some expenditure which you normally incur can also give you the tax exemptions. Here are some tips for you : -
(1) Always Check YOUR FORCED SAVINGS / EXPENDITURE ELIGIBLE FOR DEDUCTION :
(A) Home Loan :
There is a provision that the payment made for repayment of the principal amount (not interest payment) of the Home Loan is eligible for a deduction under Section 80C if you have taken a home loan and you fulfill certain conditions.
(B) Payment towards Education Fee of the children :
Most of the young couples and middle aged income tax payee incur quite high payments
towards the education fees of their children. The expenditure incurred on education fees is also eligible for a deduction under Income Tax Act, Thus, if you are incurring expnediture towards educatin fee of your children, please check whether these are eligible for deduction under the IT Act.
(C) Payment towards Provident Fund :
Salaried income tax payee are usually have a forced saving which are eligible for deduction under section 80C. A fixed percentage of basic salary (ranges from 8.33% 12%) is deducted by your employer towards the Employees Provident Fund (EPF). Some employers allow higher deduction towards EPF. Thus, you should first of all check the total amount that is expected to be deducted towards EPF during the financial year. The total amount deducted from your salary will be eligible for investments under Section 80C.
(D) Interest on National Saving Certificates :
In case you have purchased NSCs during some earlier years, then the accrued interest as per the tables released by authorities is eligible for deductions under Section 80C.

(2) Always Check the Lock-In Period of the Investments
Tax saving investments have a minimum lock-in period i.e. the period during which withdrawals are usually not allowed. If the same are withdrawn, these will be taxable in the year of withdrawal. For example, National Savings Certificates (NSC) have a lock-in period of six years, Public Provident Fund (PPF) has a lock-in of 15 years, Equity Linked Saving Schemes (ELSS) have a lock-in period of three years. Insurance policies have even greater period of lock in.


(3) Always Check Whether the investment you intend to make will meet your goals :
You are saving every year and while saving you normally have some goal in mind, e.g. to meet the expenditure on education of children, purchase of a vehicle or house or marriage of your children. Therefore, you should always look at the investments from the angle whether it will meet your specific requirements on maturity. You should also try to diversify your savings in different instruments.
For instance, if you have already invested a fair portion of your money in equity (shares and mutual funds that invest in shares), avoid an ELSS. Opting for an ELSS means a huge portion of your investments will be in equity and that may not be what you want.

Source :

Professional tax may raise for Professionals

Doctors, lawyers and other professionals both salaried and self employed may now have to pay a higher professional tax. Acceding a long-pending demand of the state governments, the Centre has decided to raise the ceiling on professional tax from Rs 2,500 to Rs 7,500 per annum. The Union Cabinet is expected to take up the proposal on Thursday. Professional tax is levied by state governments or local bodies on professions, trades, callings and employment. The power to levy the tax flows from Article 276 of the Constitution that also caps the tax amount. The Centre will amend Article 276 to raise the limit. Although Delhi does not impose the tax, states such as Karnataka, Maharashtra, West Bengal, Andhra Pradesh, Tamil Nadu and Gujarat do so. The limit was fixed in 1998 at Rs 2,500 per annum. Increase in tax has been a long-pending demand of the states, pointing at rise in income levels in the past few years. The Centre’s reluctance to state governments’ demand for a hike in the limit is borne out of the fact that taxpayers who pay professional tax are eligible for a deduction under the Income-Tax Act. So, while the state governments’ revenues grow, the Centre loses tax on this count. However, with the direct tax collections witnessing stupendous growth, state governments had intensified pressure on the Centre. Their argument is that the tax does not have a substantial impact on Centre’s total kitty as the collection under this head by states was only Rs 3,500 crore. Some state governments wanted the limit to be increased to Rs 10,000 per annum, but the Centre has agreed to raise it to Rs 7,500.

Source : - caclubindia.com

Professionals cannot claim Sec 32 tax benefit

NEW DELHI: The Supreme Court said on Tuesday professionals cannot claim depreciation under Section 32 of the Income Tax Act. The Section is applicable to an assessee carrying on business and not to a professional, the apex court said, dismissing an appeal of a chartered accountants firm which had sought deduction under this provision. The appellant, GK Choksi & Company, an Ahmedabad-based chartered accountants firm, had claimed depreciation for the assessment year 1984-85. During the year, the appellant constructed a residential building for its low-paid employees and claimed initial depreciation of 40% under Section 32(1)(iv) of the Act, amounting to Rs 43,505, on the actual cost of the building that stood at Rs 1,08,757. The I-T department, on January 15, 1985, rejected the claim on the ground that the said provision was applicable to an assessee carrying on business and it was not available to a professional. On the plea of the assessee, the commissioner of income tax (appeals) reversed the order of the income tax officer dealing with the case. The revenue department then filed an appeal before the Income Tax Appellate Tribunal which overturned CIT (A) order and restored the order passed by the ITO. The matter then came to Gujarat high court which upheld the tribunal order. The assessee then appealed at the apex court. An SC bench comprising Justices Ashok Bhan, HS Bedi and VS Sirpurkar said: The word ˜business occurring in clause (iv) of Section 32(1), by no stretch of imagination, can be said to include ˜profession’ as well. There is nothing in Section 32(1)(iv) which envisages the scope of word business to include in it ˜profession as well.

ONE PERSON COMPANY MAY APPEAR SOON

The draft Companies Bill, 2007, has proposed a new entity called a one-person company (OPC) as a measure to provide start-up entrepreneurs and professionals the much- needed flexibility in setting up a business in India. The onerous compliance requirements that apply to large widely-held companies will not be imposed on such entities. Officials told Business Standard that a proposal to this effect has been included in the Bill, which has been sent for inter-ministerial consultation. The ministry of corporate affairs had said the Bill may be put up for legislative approval in the winter session of Parliament, but officials now say it is unlikely. “We are waiting for comments from other ministries. After that we will have to seek Cabinet approval and then take it to Parliament,” the official said. The move to permit OPCs in India was recommended by the J J Irani expert committee on revising India's company laws in May 2005. Various countries permit this kind of a corporate entity (China introduced it in October 2005) in which the promoting individual is both the director and the shareholder. The principal forms of business organisations permitted in India are sole proprietorship firms (in which only one person runs the business), partnerships (between two or more people) and companies (both private and public where it is possible for many individuals to own the business by subscribing to its shares). The fundamental difference between a sole proprietorship and an OPC is the way liability is treated in the latter. A one-person company is different from a sole proprietorship because it is a separate legal entity that distinguishes between the promoter and his company, said Rajiv Luthra, founder and managing partner, Luthra & Luthra. Luthra added that the promoter’s liability is limited in an OPC in the event of a default or legal issues. On the other hand, in sole proprietorships, the liability is not restricted and extends to the individual and his or her entire assets. For instance, if a sole proprietorship firm is sued, the promoter also gets sued automatically. In the case of companies, liability is restricted to the shares of a company, except for criminal matters. “It is a good and highly desirable move, especially as it reduces the level of compliance for OPC's vis-à-vis companies,” he said. The move is expected to ease start-up formalities for prospective entrepreneurs. Similarly, small entrepreneurs who are running their businesses under the proprietorship model could convert to OPCs, with the benefit of limited liability and none of the cumbersome compliance requirements, said corporate law expert Naveen Goel.

SAVE TAX ON LOSS FROM SHARE

By reading the title of the post you will be thinking that there is no tax on long term capital gain on shares then what is the relation between tax saving and long term capital loss?

But after reading the next few lines you will definitely understand the trick(tax planning tip).The trick is legitimate method to save the tax.


Brief Provision of Tax on LTCG on shares

To understand this tip first of all I would like to discuss the taxabilty provisions on Long term capital Gain/Loss From shares and securities

From 1.10.2004 onwards sale of a long term security (means where holding period is more than 12 month) ,on which STT paid (Securities Transaction Tax) is not liable for tax and fully exempted from Income Tax.
As the long term capital gain from the sale of securities is exempted from tax ,loss from such deals can not be adjusted from the other capital gain and can not be carry forward either.
Securities Transaction tax (stt) is payable for transaction made through stock exchanges.

what is the trick/tip

if you are planning to sell the shares on which you will have long term capital loss ,then sell them out of the exchange without paying STT and save tax .lets study with a example.

Example:Rajiv has sold a shares for 300000 which he has purchased for 500000 ,13 months back.similarly he has also sold a land for 600000 which he has purchased for 100000 four year ago.Rajiv has also salary income for Financial year 2008-09.

calculate tax in two situations

shares has been sold through stock exchange means stt paid.
shares has been sold to friend out of exchange.
Ans:Case -1:Calculation of tax Case one(through stock exchange)
income from salary =300000

Income from capital gain on capital gain =400000

(600000-100000)

tax liability=on 150000-300000 @ 10%=15000

20% on 400000 LTCG =80000

Net tax liability=15000+80000=95000

long term loss from shares sold through exchange being exempted income can not be adjusted from LTCG on land,and not not be carry forward either.

Case-2:(shares sold to friend out of stock exchange ) no stt paid

Income from salary =300000

Income from Long term capital gain

LTCG from land =400000

Less:LTCL from Shares=200000

net LTCG =200000

tax liability

salary=10% on 300000-150000=15000

Ltcg=20% on 200000 =40000

net tax liabilty =55000

so in First case Tax Liability is 95000 where as in second case the tax liability is 55000 means saving of 40000 tax by not selling shares through exchange !!!

Further if we have sold share out of exchange this year and made a loss and have no other long term capital gain then we can carry forward the loss for next eight years and adjust the loss from other long term gain,means the benefit is definite if we adjust it in this year or next eight year.

Note:


1. To avoid complication in calculation Indexation on cost of capital assets has not been done.
2. Shares and securities word has been used interchangeable though differently defined under the act.so read accordingly.
3. Sucharge and Cess on tax has also not shown to avoid complications.
4. You can also save tax from short term capital loss from same trick.



please comment

Under section 10 (13A) of the Income Tax Act, you can claim a deduction on the rent you pay

Aam aurat and aam aadmi just moved into the city of dreams. Aam aurat managed to get a good job with a big multinational company. Aam aadmi, never the one to discourage his wife, moved with her, hoping to find a better job in the city of dreams.
They managed to rent a one-room-kitchen house at Rs 15,000 per month from Boodhi Tai, affectionately called BT, who lived in the same building.
Aam aurat had just returned from her first day in the new office and told her husband over a cup of tea he made for her, "You know, one of my colleagues in office today told me I could take a tax deduction on the rent I pay."
"Ah, really?" replied aam aadmi.
"Yes. But he didn't explain everything. There are so many people who live in this building. Can you just ask around and find out?"
"Sure, I'll do that."
With that, aam aadmi stepped into the common passage and went looking for BT. "Can you tell me about the tax deductions allowed for rent?" he asked her as soon as he found her. "Beta. I don't understand any of these things. Why don't you ask Sri Sri Sri Baba Taxdev. He lives next to you. Baba handles all these things for me," she replied.
Aam aadmi went and knocked on Baba's door. "Hi. I am aam aadmi. Just moved into the next room. BT told me you could help me with some details I need," he said when Baba opened the door.
Baba twirled his long beard and replied, "Tell me. How can I help you?"
Aam aadmi parroted what his wife told him.
"The first thing I need to know is how much rent you are paying," Baba asked.
"Rs 15,000 per month."
The reply sent Baba into peals of laughter. "You know how much I pay? Rs 100. Rent Control Act, you see. Been staying here for ages. So somebody's got to bear the cost," he guffawed.
Immediately, aam aadmi regretted his parents' decision to buy a house in the capital and not in the city of dreams.
"Anyway, how much house rent allowance (HRA) do you get?" Baba asked.
"I am the house husband right now. Looking for a job. My wife is working. She gets Rs 16,000 per month as HRA. Her basic plus dearness allowance comes to around Rs 40,000 per month. I guess you would need to know that as well," aam aadmi said.
"So you want to know how much deduction your wife can get."
"Yes."
"The deduction is allowed under section 10 (13A) of the Income Tax Act. I like to discuss sections when talking about the Income Tax Act. The deduction is restricted to a minimum of:
a) The actual HRA that she gets
b) The actual rent paid less 10% of her salary, where salary includes the basic salary plus the dearness allowance
c) 50% of her salary if the rented house is in Mumbai, Chennai, Kolkata and Delhi and 40% of the salary in any other case," Baba explained. "The HRA that an individual receives over and above this is included in taxable income," he continued.
Looking confused, aam aadmi whined, "That went over my head...."
With his calm intact, Baba replied, "Ok, let me explain. Your wife gets an HRA of Rs 16,000 per month and pays a rent of Rs 15,000 per month. Her basic plus dearness allowance is Rs 40,000 per month. So the actual rent paid, less 10% of the salary, would equal Rs 11,000 per month (Rs 15,000 - 10% of Rs 40,000). Since she lives in the city of dreams, a k a Mumbai, for calculating her deduction, we would be considering 50% of her salary. This comes to Rs 20,000 (50% of Rs 40,000)."
In the same vein, he continued, "As we can see from the calculation, the minimum amount from the three specified conditions is Rs 11,000. And so, she would be allowed a total deduction of Rs 1.32 lakh (Rs 11,000 x 12) from her taxable income per year. For the remaining amount of HRA-Rs 4,000 per month or Rs 48,000 for the year-tax will have to be paid."
At that point, Baba's cell phone started ringing. "Arre Netaji. How much black to white will you do? Thoda to apni janta par reham karo," he loudly laughed into the phone. After a few minutes of conversation, he hung up.
"Sorry, that was Netaji calling. To claim this deduction, she would have to submit a rent receipt issued by the landlady or a copy of the house lease agreement to the company she works for. A proof of rent paid is required only if the rent being paid is higher than Rs 3,000 per month," Baba explained.
The explanation wasn't to aam aadmi's liking. "That's funny. Why can't we claim the entire rent paid as deduction?" he asked.
"Well, the Income Tax Act is funny sometimes. Come to one of my pravachan whenever you get some time. I will give you more examples of how funny the Income Tax Act can be," Baba said.
He ran a hand over his beard and then smiled cattily, "Don't forgot to bring some dakshina. You can get a deduction on donations made for an approved charitable cause under section 80G of the Income Tax Act." Aam aadmi smiled despite his disappointment with the HRA deduction allowed and thanked the Baba, then walked out the door.

TAX HOLIDAY FOR INDUSTRIAL UNITS IN FREE TRADE ZONES ETC. [SECTION

Section 10A of the Income-tax Act relates to special provision in respect of newly established
industrial undertakings in free trade zones, export processing zones, electronic hardware
technology parks, software technology parks or special economic zones notified by the Central
Government. The section exempts the profits and gains of such undertakings derived from
the export of articles or things or computer software.


(1) Assessees who are eligible to claim exemption

The benefit of exemption under this section is available to all categories of assessees who
derive any profits or gains from an undertaking engaged in export of articles or things or
computer software. The profits and gains derived from on-site development of computer
software (including services for development of software) outside India shall be deemed to be
the profits and gains derived from the export of computer software outside India.

(2) Conditions to be satisfied for claiming exemption

This section applies to any undertaking which fulfills the following conditions:

(i) It has begun manufacture or production (include the cutting and polishing of precious and
semi-precious stones) of articles, things or computer software during the previous year
relevant to the:
(a) A.Y.1981-82 or thereafter in any FTZ; or
(b) A.Y.1994-95 or thereafter in any electronic hardware technology park (EHTP) or
software technology park (STP); or
(c) A.Y.2001-2002 or thereafter in any SEZ.

(ii) It is not formed by the splitting up, or reconstruction, of a business already in existence.
However, this condition shall not apply to an undertaking which is formed as a result of
re-establishment, reconstruction or revival of the business of any undertaking falling
under section 33B.

(iii) It is not formed by the transfer of machinery or plant previously used for any purpose. For
the purposes of this clause, any machinery or plant used outside India by any person
other than the assessee shall not be regarded as machinery or plant previously used for
any purpose, if the following conditions are fulfilled:
(a) such machinery or plant was not, at any time previous to the date of installation by
the assessee, used in India;
(b) such machinery or plant is imported into India from any country outside India; and
(c) no deduction on account of depreciation in respect of such machinery or plant has
been allowed or is allowable under the provisions of this Act in computing the total
income of any person prior to the date of installation of the machinery or plant by
the assessee.
(d) Further, where in the case of an industrial undertaking, any machinery or plant or
any part thereof previously used for any purpose is transferred to a new business,
and the total value of the machinery, etc. transferred does not exceed 20% of the
total value of the machinery and plant used for the business.


(iv) The sale proceeds of articles, things or computer software exported out of India must be
brought into India in convertible foreign exchange within six months from the end of the
previous year, or such further period as the competent authority may allow. For this
purpose, "competent authority" means the RBI or such other authority as is authorised for
regulating payments and dealings in foreign exchange.
Further, where the sale proceeds are credited to a separate account maintained by the
assessee with any bank outside India with the approval of the RBI, such sale proceeds
shall be deemed to have been received in India.


(v) In order to claim deduction under this section, the assessee should furnish an audit
report from a chartered accountant in Form No.56F, along with the return of income,
certifying that the deduction has been correctly claimed. However, no deduction u/s 10A
shall be allowed to an assessee who does not furnish a return of his income on or before
the due date specified under section 139(1).

Residential status of Individuals

Under section 6(1), an individual is said to be resident in India in any previous year, if he
satisfies any one of the following conditions:
(i) He has been in India during the previous year for a total period of 182 days or more,
or
(ii) He has been in India during the 4 years immediately preceding the previous year for
a total period of 365 days or more and has been in India for at least 60 days in the
previous year.
If the individual satisfies any one of the conditions mentioned above, he is a resident. If
both the above conditions are not satisfied, the individual is a non-resident.
Note:
(a) The term “stay in India” includes stay in the territorial waters of India (i.e. 12 nautical
miles into the sea from the Indian coastline). Even the stay in a ship or boat moored
in the territorial waters of India would be sufficient to make the individual resident in
India.
(b) It is not necessary that the period of stay must be continuous or active nor is it
essential that the stay should be at the usual place of residence, business or
employment of the individual.
(c) For the purpose of counting the number of days stayed in India, both the date of
departure as well as the date of arrival are considered to be in India.
(d) The residence of an individual for income-tax purpose has nothing to do with
citizenship, place of birth or domicile. An individual can, therefore, be resident in
more countries than one even though he can have only one domicile.
Exceptions:
The following categories of individuals will be treated as residents only if the period of
their stay during the relevant previous year amounts to 182 days. In other words even if
such persons were in India for 365 days during the 4 preceding years and 60 days in the
relevant previous year, they will not be treated as resident.
(1) Indian citizens, who leave India in any previous year as a member of the crew of an
Indian ship or for purposes of employment outside India, or
(2) Indian citizen or person of Indian origin* engaged outside India in an employment orany previous year
* A person is said to be of Indian origin if he or either of his parents or either of his
grandparents were born in undivided India.
Not-ordinarily resident - Only individuals and HUF can be resident but not ordinarily
resident in India. All other classes of assessees can be either a resident or non-resident.
A not-ordinarily resident person is one who satisfies any one of the conditions specified
under section 6(6).
(i) If such individual has been non-resident in India in any 9 out of the 10 previous years
preceding the relevant previous year, or
(ii) If such individual has during the 7 previous years preceding the relevant previous
year been in India for a period of 729 days or less.
Note: In simpler terms, an individual is said to be a resident and ordinarily resident
if he satisfies both the following conditions:
(i) He is a resident in any 2 out of the last 10 years preceding the relevant
previous year, and
(ii) His total stay in India in the last 7 years preceding the relevant previous year is
730 days or more.
If the individual satisfies both the conditions mentioned above, he is a resident and
ordinarily resident but if only one or none of the conditions are satisfied, the
individual is a resident but not ordinarily resident.

HISTORICAL BACKGROUND OF VALUE ADDED TAX

Ever since 1954, when the tax on value added was introduced in France it has spread to a
large number of countries. This tax was proposed for the first time by Dr. Wilhelm Von
Siemens for Germany in 1919 as an improved turnover tax. In 1921, VAT was suggested
by Professor Thomas S. Adams for the United States of America who recommended
"sales-tax with a credit or refund for taxes paid by the producer or dealer (as purchaser)
on goods bought for resale or for necessary use in the production of goods for sales."
VAT was also recommended by the Shoup Mission for the reconstruction of the Japanese
Economy in 1949. However, the tax was not introduced by any country till 1953. France
led the way in 1954 by adopting a VAT that covered the industrial sector alone and the tax
was limited up to the wholesale level. The tax was limited to the boundaries of France
until the fifties.
VAT has, however, been spreading rapidly since the sixties. The Ivory Coast followed
France by adopting VAT in 1960. The tax was introduced by Senegal in 1961 and by
Brazil and Denmark in 1967. The tax has gathered further momentum as it was made a
standard form of sales-tax required for the countries of the European Union (then
European Economic Community). In 1968, France extended VAT to the retail level while
the Federal Republic of Germany introduced it in its tax system. The Netherlands and
Sweden imposed this tax in 1969 while Luxembourg adopted it in 1970, Belgium in 1971,
Ireland in 1972, and Italy, the United Kingdom, and Austria in 1973. Of the other members
of the European Union, Portugal and Spain introduced VAT in 1986, Greece in 1987, while
this tax was adopted by Finland in 1994. Many other European countries have adopted
VAT. Similarly, many countries in the North and South America, Africa and Oceania have
introduced VAT.
VAT has been spreading in the Asian region as well. The Republic of Vietnam adopted
VAT briefly in 1973. (VAT was abolished soon but it was reintroduced in 1999 in Vietnam.)
South Korea introduced VAT in 1977, China in 1984, Indonesia in 1985, Taiwan in 1986,
Philippines in 1988, Japan in 1989, Thailand in 1992, and Singapore in 1994 while
Mongolia has been implementing this tax since 1998.
In the South Asian Association for Regional Cooperation (SMRC) region, VAT has been
considered in great depth in India. In 1986, India introduced VAT in a different way under
the name of Modified Value Added Tax (MODVAT). Unlike the VAT system of other
countries, the Indian MODVAT system was designed to cover manufacturing of goods by
giving credit of excise duty paid on inputs. The scope of MODVAT has been extended
over the years and has since been renamed as Central Value Added Tax (CENVAT),
which covers services also.
Pakistan adopted VAT in 1990, Bangladesh in 1991, and Nepal in 1997 while Sri Lanka
introduced VAT in 1998.
As VAT is less distortive and more revenue-productive, it has been spreading all over the
world. As on today, about 130 countries have adopted the same.

How to Confirm If Your TDS was deposited by Deductor?

Thanks to online initiative taken by the government, now anyone whose tax has been deducted at source can VIEW if the tax deducted is deposited with the government . Do you want to view? This facility is being provided by NSDL through which Tax information network initiative is being implemented. Following is the excerpts of the "how to " given on NSDL website . Follow these steps and , you will be able to view tax deduction made in your case.This is important because many a time , tax is deducted by the deductor , but not deposited to the government in time. this leads to dis allowance of tax credit and further lose of interest etc. So here are the excerpts:TIN facilitates a PAN holder to view its Annual Tax Statement (Form 26AS) online. Form 26AS contains
details of tax deducted/collected on behalf of the taxpayer by deductors/collectors
advance tax/self assessment tax/regular assessment tax, etc. deposited by the taxpayers (PAN holders)
Steps for viewing Tax Credit
1. Online Registration of PAN by PAN holder
2. Verification of identity and authorisation by TIN-Facilitation Centre
3. View Tax Credit
Registration & authorisation is a one-time activity. This can happen in two ways:
a) PAN holder can personally visit any TIN-FC of its choice and get his PAN request authorised; or,
b) PAN holder can request any TIN-FC to visit him at an address specified by him and get his PAN authorised.
Registration FeeThere is no charge for viewing the Tax Credit online, however, the TIN-FC may charge for authorization of PAN as follows:
a) TIN-FC will charge Rs.17 (i.e. Rs.15 + service tax) for authorisation of PAN registration request, when the PAN holder personally visits the TIN-FC.
b) TIN-FC will charge Rs.110 (i.e. Rs.100 + service tax) for authorisation of PAN registration request in those cases where the PAN holder opts for the TIN-FC to visit him.

service tax on advertisement introduce on 1st nov 1996

ADVERTISING AGENCY SERVICES
Effective date: 1st November 1996.
Definitions:
“Advertisement” includes any notice, circular, label, wrapper, document, hoarding or any
other audio or visual representation made by means of light, sound, smoke or gas.
“Advertising agency” means any person engaged in providing any service connected
with the making, preparation, display or exhibition of advertisement and includes an
advertising consultant.
Scope of taxable service shall include any service provided or to be provided to a client,
by an advertising agency in relation to advertisement, in any manner.

♦ Activity of printing and publishing Telephone Directories, Yellow Pages or Business
Directories does not attract service tax since such activity is essentially of printing
readymade advertisement from the advertisers and publishing the same in the
directory which are similar to the activities carried out by newspapers or periodicals.
However, any activity relating to making or preparation of an advertisement, such as
designing, visualising, conceptualising, etc., will be liable to service tax.
♦ When the term ‘canvassing’ includes service of 'space selling' which merely involves
contacting potential advertisers and persuading them to give advertisement to a
particular newspaper/periodical/magazine, it would not be subject to service tax
because it does not entail any further activity relating to making and preparation of
the advertisement namely, drafting of the text etc. These tasks are left either to the
advertiser or to newspaper/periodical/magazine.
♦ The term 'canvassing' would fall within the phrase 'any service provided in any
manner connected to making preparing, displaying and exhibiting' and would be a
taxable service when it involves a space selling agency approaching a customer,
receiving the texts of the advertisement (including photographs, monograms etc. of
the customs), estimating the space that such advertisement would occupy in the
newspaper/periodical/magazine, negotiating the price, informing the general layout of
the advertisement that would finally appear in such newspaper etc.
♦ Cinema theatres cannot be treated as advertisement agencies as they project
advertisement only on behest of advertising agencies.

history of introduction of Gratuity act in india

this scheme was introduced in those establishments only where the employers
were so kind and generous to the workers or there was an agreement between the employers
and the workers. This scheme was confined to the particular establishments and even within
those establishments, to certain categories of staff. There was no general legislation for the
payment of Gratuity to all industrial workers. In due course of time, it was felt the workers

should get gratuity as a right in return of their long dedicated services to the industry.
Industrial Tribunals and Supreme Courts dealt with the disputes on the subject and their
awards and decisions brought the revolutionary changes in Social Security Legislations in
Indian industrial sector.
In the case of Delhi Cloth and General Mills Co. Ltd. Vs their workers (1968) 36 FJR 247.
Supreme Court held that the object of providing a gratuity scheme is to provide a retiring
benefit to the workman who have rendered long and unblemished service to the employer and
thereby contributed to the prosperity of the employer.
In the Working Journalists (Conditions of Service) & Miscellaneous Provisions Act, 1955, the
provision to pay the gratuity to the working journalists was made. After few years, the
Government of Kerala enacted the Kerala Industrial Employees Payment of Gratuity Act, 1970
making gratuity a statutory right of the employees. West Bengal Government enacted the
West Bengal Employees Payment of Gratuity Act, 1971 relating to the subject. The other
states were also thinking to legislate such enactments. Thus, it was felt that there should be
an uniform central legislation for the whole country instead of state legislations for each and
every separate states. The whole matter was discussed in the Labour Ministers’ Conference
held 24th and the August 1971 and thereafter in the Indian Labour Conference held on 22nd
and 23rd Oct., 1971 it was agreed that the central legislation on the payment of gratuity should
be undertaken. Accordingly, the payments of Gratuity Act, 1972 was enacted, largely based
on the West Bengal legislation, which was come into force on 16th September, 1972.

happiness mantra

1. if you want happiness for an hour take a nap.
2. if you want happiness for a day go for picnic.
3. if you want happiness for a week go for vacation.
4. if you want happiness for a month , get married.
5. if you want happiness for a year inhert wealth.
6. if you want happiness for life time love what you do.

GUIDELINES FOR MANAGING ETHICS IN THE WORKPLACE

The focus on core values and sound ethics, the hallmark of ethical management, is being
recognized as an important way to ensure the long-term effectiveness of governance
structures and procedures, and avoid the need for whistle- blowing. Employers who
understands the importance of workplace ethics, provide their workforce with an effective
framework and guiding principles to identify and address ethical issues as they arise.
(1) Codes of Conduct and Ethics : A code of ethics specifies the ethical rules of operation in

an organization. Codes of conduct specify actions in the workplace and codes of ethics
are general guides to decisions about those actions, Examples of topics typically
addressed by codes of conduct include: preferred style of dress, avoiding illegal drugs,
following instructions of superiors, being reliable and prompt, maintaining confidentiality,
not accepting personal gifts and so on Codes are insufficient if intended only to ensure
that policies are legal. All staff must see the ethics program being driven by top
management.
(2) Establish Open Communication : Instead of just creating and distributing an ethics policy,
it is important that take the time to explain the reasons for the policy and review the
guidelines and conduct formal or informal training to further sensitise employees to
potential ethical issues. Many of the ethical problems arising in a business are not clearcut,
but involve "grey areas," where the proper course of action may be ambiguous and
uncertain. It is necessary to create a work environment where employees understand
that it is acceptable to have an ethical dilemma, and give workers the resources to help
resolve such situations.
(3) Make ethics decisions in groups, and make these decisions public. This usually produces
better quality decisions by including diverse interests and perspectives, and increases
the credibility of the decision process and outcome by reducing suspicion of unfair bias.
(4) Integrate ethics management with other management practices. When developing the
values statement during strategic planning, include ethical values preferred in the
workplace. When developing personnel policies, reflect on what ethical values you'd like
to be most prominent in the organization's culture and then design policies to produce
these behaviours.
(5) Use of cross-functional teams when developing and implementing the ethics
management program. It’s vital that the organization’s employees feel a sense of
participation and ownership in the program if they are to adhere to its ethical values.
Therefore, include employees in developing and operating the program.
(6) Appointing an ombudsperson: The ombudsperson is responsible to help coordinate
development of the policies and procedures to institutionalise moral values in the
workplace. This establishes a point of contact where employees can go to ask questions
in confidence about the work situations they confront and seek advice.
(7) Creating an atmosphere of trust is also critical in encouraging employees to report ethical
violations they observe This function might best be provided by an outside consultant,
e.g., lawyer, clergyperson, counsellor etc. Or, provide a “tip” box in which personnel can
report suspected unethical activities, and do so safely on an anonymous basis.
(8) Regularly update policies and procedures to produce behaviours preferred from the code

of conduct, job descriptions, performance appraisal forms, management-by-objectives
expectations, standard forms, checklists, budget report formats, and other relevant
control instruments to ensure conformance to the code of conduct. There are numerous
examples of how organizations manage values through use of policies and procedures.
For example, we are most familiar with the value of social responsibility. To instil
behaviours aligned with this value, organizations often institute policies such as recycling
waste, donating to charities or paying employees to participate in community events. In
another example, a high value on responsiveness to customers might be implemented by
instituting policies to return phone calls or to repair defective equipment within a certain
period of time.
(9) Include a grievance policy for employees to use to resolve disagreements with
supervisors and staff.
(10) Set an example from the top: Executives and managers not only need to endorse strict
standards of conduct, but should also ensure that they follow it themselves. They must
stress to employees that dishonest or unethical conduct will not be tolerated, and that
they are expected to report any wrongdoing they encounter; showing through actions as
well as words that the company relies on, rather than discriminates against, those who
come forward concerning ethical breaches.

NEED FOR A TAX ON SERVICES

In any Welfare State, it is the prime responsibility of the Government to fulfill the increasing
developmental needs of the country and its people by way of public expenditure. India, being
a developing economy, has been striving to fulfill the obligations of a Welfare State with its
limited resources. The Government's primary sources of revenue are direct and indirect taxes.
Central excise duty on the goods manufactured/produced in India and customs duties on
imported goods constitute the two major sources of indirect taxes in India. However, revenue
receipts from customs & excise have been declining due to World Trade Commitments and
rationalization of commodity duties.


On the other hand, service sector has been growing phenomenally all over the world, though it
may vary in degree and magnitude among the various countries. The growing importance of
this sector can be gauged from the ever increasing contribution made by the service sector to
GDP, thereby pushing back the contribution of traditional contributors like agriculture and
manufacturing sectors. India is also not an exception to this changed phenomenon. In 2002,
the service sector accounted for 49.2% of GDP while agriculture accounted for 25% and
industry 25.8% of GDP. Continued growth in GDP accompanied by higher rate of growth in
service sector promises new and wider avenues of taxation to the Government.