/ Foreign Exchange Management Act

COMPLIANCE WINDOW UNDER BLACK MONEY ACT

Compliance window under Black Money Act – An insight

The Hon’ble Finance Minister in his budget speech for 2015-16 had proposed introduction of Black Money Bill in the Parliament. The Bill was passed by the Parliament in its budget session. The Bill received the assent of the President on May 26, 2015 and it became the law. It is to be called as “The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015” (“the Black Money Act”). It has been clarified by the Government that such Black Money Act would be applicable from July 1, 2015.

The Black Money Act provides for 30% tax on the value of undisclosed foreign income or assets with a penalty equivalent to three times of tax so computed. It further provides for prosecution of up to 10 years in case of willful attempt to evade tax on foreign income or assets held outside India.

The Black Money Act provides for compliance window, i.e., one-time opportunity for taxpayers to voluntarily disclose the undisclosed foreign income or assets. Any person who opts for this compliance window shall be liable to pay reduced penalty of 100% of tax and would also get immunity from prosecution.

Recently, the Government has notified Rules for Black Money law and issued a circular explaining substance of provisions of compliance window.

Declaration under compliance window can be made during the period from July 1, 2015 to September 30, 2015. However, a person will not be eligible to obtain benefit of compliance window if any information regarding undisclosed foreign asset or income has been received by competent authority on or before June 30, 2015. Thus, taxpayers on HSBC list might be denied benefit of compliance window.

FAQs relating to compliance window

How to avail benefit of compliance window?

A declaration of undisclosed foreign asset or income can be made by a person who is resident and ordinary resident in India under the income-tax Act. Declaration can be made in ‘Form 6’ on or beforeSeptember 30, 2015.

Any person availing of benefit of compliance window is required to pay taxes at the rate of 30% of value of undisclosed asset and a further penalty of 100% of tax. Such taxes and penalty are required to be paid by declarant on or before December 31, 2015.

Where to file declaration?

The declaration may be filed with the Commissioner of Income-tax, Delhi. The declaration may also be filed on the e-filing website of the Income-tax department using the digital signature of the declarant.

Who are authorized to sign the declaration?

S. No. Status of declarant Declaration to be signed by
1. Individual – Individual, or- Any person authorized by individual (if individual is absent from India), or- Guardian or any other person competent to act on his behalf (if individual is mentally incapacitated).
2. HUF – Karta, or- Any other adult member of Karta (If Karta is absent from India or is mentally incapacitated from attending to his affairs)
3. Company – Managing Director, or- Any director (if for any unavoidable reason the managing director is not able to sign or there is no managing director)
4. Firm – Managing partner, or- Any partner not being a minor (If for any unavoidable reason the managing partner is not able to sign the declaration, or where there is no managing partner)
5. Any other association – Any member of the association or the principal officer.
6. Any other person – That person or by some other person competent to act on his behalf.

Who are not eligible to make declaration?

Following persons shall not be eligible to make declaration under the Black Money Act:

(1) A person against whom proceedings for prosecution are pending in respect of offences relating to public servants under Chapter IX of the Act;

(2) A person against whom proceedings for prosecutions are pending in respect of offences against property under the Indian Penal Code;

(3) A person against whom proceedings in respect of unlawful activities are pending;

(4) A person against whom proceedings for Prevention of Corruption Act are pending.

Circumstances where declaration shall be invalid

In following situations, a declaration shall be void and shall be deemed to have never been made:

(1) If the declarant fails to pay the entire amount of tax and penalty on or before December 31, 2015.

(2) Where the declaration has been made by misrepresentation or suppression of facts or information.

Where the declaration is held to be void for any of aforesaid reasons, then declarant would be liable to pay penalty three times of tax and will also be liable for prosecution.

Circumstances where a declaration cannot be made

No declaration under the compliance window can be made in respect of any undisclosed foreign assets which have been acquired from income chargeable to tax under the income-tax Act for assessment year 2015-16 or any other earlier assessment year in the following cases:

 (1) If any information regarding undisclosed foreign asset or income has been received by the Government on or before June 30, 2015.

(2) Where a notice under section 142 or Section 143(2) or section 148 or section 153A or section 153C of the Income-tax Act has been received in respect of such assessment year and the proceeding is pending before the Assessing Officer. (The person will not be eligible under the compliance window if any of the above notices has been served on or before June 30, 2015);

(3) Where a search has been conducted or requisition has been made or a survey has been carried out under the Income-tax Act (If time for issuance of notice under Sections 143(2), 153A and 153C has not expired.)

Q What will be the effect of valid declaration?

Following would be the effects of valid declaration:

(1) The amount disclosed under this scheme shall not be included in the total income of the declarant under the Income-tax Act for any assessment year;

(2) The contents disclosed in the declaration shall not be admissible in evidence against the declarant in any penalty or prosecution proceedings under the Income-tax Act, the Wealth Tax Act, the Foreign Exchange Management Act, the Companies Act or the Customs Act.

(3) The value of assets declared in the declaration shall not be chargeable to wealth tax for any assessment year.

(4) Declaration of undisclosed foreign asset will not affect the finality of completed assessments. However, the declarant will not be entitled to re-assessment for any earlier year or revision of any order or any benefit or set off or relief in any appeal or proceedings under the Act or under Income-tax Act in respect of undisclosed asset located outside India now declared through compliance window or any tax paid thereon.

/ INCOME TAX

ITR Forms for FY 2022-23 -Types & Applicability

Kind of Tax returns

NEW ITR FORMS FOR FY 2022-23 – TYPES & APPLICABILITY

BRIEF INTRODUCTION

Where offline ITRs were filed, greater importance be given on the type of ITR form applicable based on the source and quantum of the income of the taxpayer. However, with the advancement of technology, all these manual works is now done with the help of software’s and thus, would not require application of knowledge.

Even though everything is online, the taxpayer is required to have a basic knowledge of all the ITR forms, in order to proceed with their ITR filing.

INCOME TAX RETURN

Income Tax Return is a statement, forming the structure of a taxpayer’s income. It basically describes the quantum of income and their sources, and the said information is furnished with the government, so that they can easily gather the details of income of all the taxpayers and can collect taxes accordingly.

ITR FORMS

Where a taxpayer is required to file their ITR, the same can be done by filing the ITR forms, made available on the IT portal. Specific forms have been prescribed, based on the source and quantum of income. The taxpayer is required to identify the applicable form and furnish the information in the said identified form.

TYPES OF ITR AND THEIR APPLICABILITY

  1. ITR 1

This form is applicable to individuals who are residents and have total income of up to Rs 50 lakh constituting of Income from Salary, one house property, income from other sources (including family pension and interest income), and income from agricultural activities maximum up to Rs 5000. This ITR form does not apply to a Director in a company or made investment in unlisted equity shares or even in cases where TDS got subtracted as per section 194N where the ESOP taxation aspect has been deferred under new relaxation.

ITR -1

  1. ITR 2

It is applicable to Individuals and HUFs having income from different sources except from business or professional income. Thus, an individual or HUF, not eligible to file Sahaj ITR 1, can file ITR-2. Therefore, any director of a company, as well as anyone who owns unlisted equity shares of a company, will be required to file ITR-2 returns. Also, individuals having more than one house property should also file an ITR-2 income tax return.

ITR 2

  1. ITR 3

It is to be filed by persons having income from a business or profession. Thus, the eligible source of income for ITR 3 are –

    • Running a business or profession whether subject to audit or not.
    • Income from all other sources like salary, house property, capital gain and other sources, be also included.

ITR 3

  1. ITR 4

It is applied to Individuals, HUFs, and Firms, excluding LLPs, who are residents and have total income up to Rs.50 lakh. Such income constitutes income from business and profession, subject to computation under sections 44AD, 44ADA, or 44AE. Apart from business or profession, it includes income from one house property with single ownership, interest Income, Family Pension, and agricultural income up to Rs.5,000.

ITR -4

  1. ITR 5

This form is to be filed by Firms, LLPs, Association of Persons, Body of Individuals, Artificial Juridical Person, legal heirs of deceased and insolvent person, trust and investment-based funds.

  1. ITR 6

Such form is required to be filed by companies not eligible for an exemption under Section 11. It is to be noted that exemption under section 11 is provided to companies that receive income from property held for charitable or religious purposes. Such a return be filed electronically and authorized with the assigned digital signature.

  1. ITR 7

It is to be filed by trusts, political parties, charitable institutions etc. receiving exempt income under the Act. Also, where the individuals and companies, fall under section 139(4A), section 139 (4B), section 139 (4C), or section 139 4D, they can also file ITR-7 form. One of the required aspects of this form is that, the taxes deducted, collected, or paid by or on their behalf, must match with their Tax Credit Statement Form 26AS. This form is divided into two parts with a total of 23 schedules.

/ Company Law Compliances

MAURITIUS VS INDIA TRADE ROUTE MARRED?

MAURITIUS VS INDIA TRADE ROUTE MARRED?

Introduction

In a complete disregard to the decision of the Supreme Court of India (“SC”) in Union of India vs. azadi Bachao Andolan, (2003) 263 ITR 706, 263 ITR 706 (SC), which had permitted the Mauritian companies having tax residency certificates to benefit from the India-Mauritius tax treaty, Circular No. 789, dated 13-4-2000, the recent decision of the Bombay High Court (“HC”) in E Trade Mauritius Limited vs. ADIT & Ors, WP. No. 2134 of 2008, seriously impacts the Mauritius route.

Factual Matrix

E Trade Mauritius Ltd. (“E Trade”), a wholly owned subsidiary of E Trade Financial Corporation based in Mauritius sold its stake in IL & FS Investmart; an Indian company to Mauritius based HSBC Violet Investments (“HSBC”). To authorize payment of consideration by HSBC without any withholding of tax in this sale, E Trade sought to obtain a certificate from the Indian tax authorities under section 197 of the Income Tax Act, 1961 (which provides for the certificate to get benefits of reduced rates/no rates). The tax authority refused this certificate, and, in response to the refusal E Trade filed a writ petition before the HC challenging this decision.

The HC directed E Trade to file a revision application before the Director of Income Tax (“DIT”) and accordingly disposed the writ petition. Pending the decision of the DIT, HSBC was also directed to deposit a sum of INR 245 million which would be withheld from the consideration paid to E Trade. The HC further stated that the DIT shall also issue an appropriate order regarding the disposal of the amount deposited. Pursuant to the HC’s order, the DIT, in its revisional decision refused to grant the certificate regarding withholding of tax by HSBC. Aggrieved E trade again appealed to the HC. The HC, giving effect to the decision of the revisional authority, in its order, dated March 23, 2009 directed for the release of INR 243.1 million after deducting the tax at source from the deposited amount to the government and the refund of the balance amount to E Trade.

Our observation

The HC has not gone into the merits of the case and its order give effect to the decision of the revisional authority. The said order is solely in relation to the issue of withholding tax and there is no ruling on the issue of chargeability of the capital gains to tax in India. At this stage, it cannot be said that there has been any concrete determination of taxability of the consideration received by E Trade in India. DIT’s decision was based on the premise that E Trade held the shares of the Indian company on behalf of E Trade US and as such, would not be entitled to the benefits of the India-Mauritius tax treaty.

The Indo-Mauritius tax treaty provides that capital gains arising in India from the sale of securities can only be taxed in Mauritius thereby leading to zero taxation as there is no capital gains tax in Mauritius. The SC, in the Azadi Bachao Andolan case, had highlighted the role of such treaties in fostering inflows of foreign exchange and capital into India. The current decision of the HC has the potential to disrupt the Mauritius trade route.

In our opinion any change in the tax treaty or questions of treaty abuse have to be addressed at a policy level between the governments of two nations by making necessary amendments. As E Trade is entitled to challenge the revisional order of the DIT before the HC in writ, pending any change in the existing treaty or revision of the current judgment, the SC judgment will continue to prevail, but foreign investors will need to be cautious about the potential tax benefits of investing through Mauritius.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@caindelhiindia.com or call at 011-233 433 33

/ Company Law Compliances

FASTER WAY TO EXIT ROUTE FOR THE DEFUNCT COMPANIES

A Faster Way to Exit Route For the Defunct Companies –  Shut down your Defunct Companies

The Scheme provides an easy route for the defunct companies to make an application to the ROC to remove their names from the ROC register which has not

  • been doing any business activity in the previous financial year,
  • commenced any business activity since incorporation, or
  • been identified as dormant by MCA or have an active status. The Scheme, which will come into effect from July 03, 2011, is an improvement over the previous Easy Exit Scheme (EES) and will provide an opportunity to the defunct companies to a fast track exit with minimal compliance.

PROCEDURE– To avail the Scheme, a defunct company has to file an application in e-form FTE with

  • A fee of INR 5,000,
  • An affidavit and an indemnity bond signed by all directors
  • Statement of accounts as on date not prior to more than one month preceding the date of filing of application with the ROC.

The affidavit must be sworn in by all the directors individually with a declaration regarding the business of the company stating whether it has not carried on any business since the time of incorporation or discontinued the business later. The indemnity bond should also be from all directors either individually or collectively stating that any losses, claims and liabilities on the company will be met in full by them even after the name of the company is removed from the register of ROC. ROC will update the list of companies availing the Scheme on a daily basis and the stakeholders (creditors or shareholders) having any objection against any defunct company availing the Scheme can approach the ROC within 30 days of the application. The company shall stand dissolved from the date of publication of notice in the official gazette.

EXCLUSIONS– The Scheme is not open to all companies and certain exclusions have also been cited. The Scheme excludes companies that are –

  • Listed,
  • Delisted due to non compliance,
  • Registered under section 25 of the Act,
  • Vanishing companies (They are so called because they are registered under the Act and listed with stock exchange but have failed to file returns with ROC and Stock Exchange for a consecutive 2 years, not maintaining its registered office at the address notified with the ROC or stock exchange, and none of its directors are traceable),
  • Under investigation or prosecution,
  • Facing prosecution for a non-compoundable offence in a court,
  • Having outstanding public deposits or defaulted in repayment,
  • Having a secured loan,
  • Having management dispute,
  • Unable to do filings as that has been stayed by court or Company Law Board or any authority, and
  • Having dues towards any tax or banks or government departments.

It may be noted that the decision of the ROC to remove the name from the ROC register is final and on the condition that it should not materially affect the creditors of the company. Indemnity bond attached to the e-form FTE holds the directors personally liable for all future claims from the creditors. Given the time and cost involved in winding up procedure, the Scheme is a welcome respite for small companies who have already stopped their business and have nil assets and liabilities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@caindelhiindia.com or call at 011-233 433 33

/ Company Law Compliances

TYPES OF LOANS AVAILABLE IN INDIAN MARKET

common financial terms

TYPES OF LOANS AVAILABLE IN INDIAN MARKET

PERSONAL LOAN:

We offered our services in providing personal loans for any purpose. Our wide expertise in this area allows us to offer you the helping hand with immediate effect right from your request. Our personal loans are meant for business as well as for personal purpose. Our personal loans are available for a range of different amounts and have different repayment terms. The repayment period depends on the amount and the purpose of loan. We offer personal loans starting from 2,00,000 or more. The maximum amount one can avail depends from one lender to other.

 ELIGIBILITY CRITERIA

  • Minimum age of Applicant: 21 years
  • Maximum age of Applicant at loan maturity: 60 years
  • Minimum employment: Minimum 2 years in employment and minimum 1 year in the current organization
  • Minimum Net Monthly Income: Rs. 10,000 per month (Rs. 15,000 in Mumbai, Delhi, Bangalore, Chennai and Hyderabad & Rs. 12,000 in Calcutta, Ahmadabad and Cochin)

 DOCUMENTS REQUIRED:

  • Identity Proof: Proof of Identity (Passport Copy/ Voters ID card/ Driving License)
  • Address Proof: (Ration card Tel/Elect. Bill/ Rental agreement / Passport copy/Trade license /Est./Sales Tax certificate)
  • Bank Statements: (latest 3 months bank statement / 6 months bank passbook)
  • Salary Slip: Latest salary slip or current dated salary certificate with latest Form 16

BUSINESS LOAN:

An individual always need appropriate money in pocket or bank account to nurture and enrich his/her business. Business goals cannot be accomplished without proper funding. At loan inn, we are helping people to choose the right loan for commercial purpose. Hence, these finances are also known as commercial loans. Business loan Delhi helps Delhi-based entrepreneurs to make their popular and successful. We also have loan options for those businessmen who are living in other parts, like Noida, Gurgaon, etc. Whether you are seeking for immediate loan amount to increase the size of your business or want to meet your working capital, this loan always helps you in every condition.

SELF EMPLOYED (PROFESSIONALS) INCLUDE SELF – EMPLOYED DOCTORS, CHARTERED ACCOUNTANTS, ENGINEERS, MBA CONSULTANTS, ARCHITECTS, COMPANY SECRETARIES.

 ELIGIBILITY CRITERIA

  • Minimum age of Applicant: 25 years
  • Maximum age of Applicant at loan maturity: 65 years
  • Years in business: 4 to 7 years depending on profession
  • Minimum Annual Income: Rs. 100000 p.a.

 DOCUMENTS REQUIRED:

  • Proof of Identity: Passport Copy/ Voters ID card/ Driving License.
  • Address Proof: Ration card Tel/elect. Bill/ Rental agr. / Passport copy/Trade license /Est./Sales Tax certificate.
  • Bank Statements: latest 6 months bank statement /passbook
  • Latest ITR along with computation of income, B/S & P&L a/c for the last 2 yrs. certified by a CA
  • Qualification proof of the highest professional degree

LOAN AGAINST PROPERTY:

Loan against property is a loan provided to individuals against his own residential or commercial property and the best part of this scheme is that the money received from the bank can be utilized the way owner likes. As such this is the most popular loan scheme for investment in business or buying any other property. This scheme is so popular among the public that all the banks and NBFC’s are offering loans to consumers at very competitive price for expansion of their business or any other purpose. Hence you are always assured that you will get a profitable, affordable and cheap loan deal.

 HOME LOAN:

Now a day’s banks are very aggressive to provide home loans for the prospective buyers but some time it appears to be a tough job to get a housing loan sanctioned in time. You will get complete solution to all the problems. Even we can help you to get your loan sanctioned without finalizing the property so that you can have a lucrative deal to be executed well in time. Having a home can be a dream job for any individual and we are committed to stand by you. If you are also planning to build a sweet home in Delhi or NCR, then one visit  will save your lot of money and energy. We are always here to help you in cherishing your dream of sweet home. Continue reading “TYPES OF LOANS AVAILABLE IN INDIAN MARKET” →

/ Accounting Services

Summary of changes made in Passed Finance Bill, 2015

Summary of changes made in Passed Finance Bill, 2015.

On April 30, 2015, the Lok Sabha passed the Finance Bill. The Bill which was presented originally in the Lok Sabha on February 28, 2015 is not passed in its original shape. Various changes have been made in the Bill. New amendments are proposed, some proposed amendments are removed, so on and so forth. A gist of all changes made in the Finance Bill, 2015 as passed by the Lok Sabha viz-a-viz the Finance Bill, 2015 as presented in the Lok Sabha are presented here.

MAT exemption extended to foreign companies.

The Finance Bill, 2015 presented originally proposed that long-term capital gains and short-term capital gains (on which STT is paid) arising to FIIs would be excluded from the chargeability of MAT. Further, expenditures, if any, debited to the profit and loss account, corresponding to such income would also be added back to the book profit for the purpose of computation of MAT.

Thus, the Finance Bill, 2015 proposed to provide relief from MAT only to FIIs without extending such relief to foreign companies. The foreign company would be liable to pay MAT on capital gains arising from transfer of securities and income arising from royalty, interest or FTS even if such income would not be chargeable to tax or taxable at lower rate in India by virtue of applicable double taxation avoidance agreements (‘DTAA’)or any provision of the Income-Tax Act.

The impact of such proposal would be that foreign companies would be liable to pay MAT even on that income which was exempt from tax by virtue of DTAAs or Income-tax Act.

Therefore, the Finance Bill, 2015 as passed by Lok Sabha proposes to provide relief from MAT to foreign companies as well.

Capital gains from transfer of securities, interest, royalty and FTS accruing or arising to foreign company has been proposed to be excluded from chargeability of MAT if tax payable on such income is less than 18.5%. Further, expenditures, if any, debited to the profit loss account, corresponding to such income shall also be added back to the book profit for the purpose of computation of MAT.

MAT exemption on notional gain arising on transfer of share of SPV.

The Finance (No. 2) Act, 2014 inserted clause (xvii) in Section 47 to provide that transfer of share of special purposes vehicle (‘SPV’) to a business trust in exchange of units allotted by that trust to the transferor shall not be regarded as transfer, thus, no capital gain would arise on such transaction.

The Finance Bill, 2015 as passed by Lok Sabha proposes to exclude the following from the chargeability of MAT:

  • Notional gain resulting from transfer of shares of SPV to a business trust in exchange of units allotted by that trust;
  • Notional gain resulting from any change in carrying amount of said units; and
  • Actual gains from transfer of said units.

A new clause is proposed to be inserted to re-compute the gains from transfer of said units (as referred to in point (c) above) which shall be added back for computation of MAT. It is proposed that the amount of gain from transfer of said units shall be computed by taking into account the cost of shares exchanged with units or the carrying amount of the shares at time of exchange where such shares are carried at a value other than the cost through profit & loss account.

Accordingly, notional loss arising from transfer of asset or notional loss arising from change in carrying amount of said units and actual loss from transfer of said units shall be added back to the book profit for the purpose of computation of MAT.

A new clause is proposed to be inserted to re-compute the loss from transfer of said units which shall be reduced from the book profit. It is proposed that the amount of loss from transfer of said units shall be computed by taking into account the cost of shares exchanged with units or the carrying amount of the shares at time of exchange where such shares are carried at a value other than the cost through profit & loss account.

Deduction under Section 80D in case of individual.

The Finance Bill, 2015 as presented originally omitted to propose amendment to clause (a) and clause (b) of sub-section (2) of Section 80D to enable assessee to claim deduction of Rs. 25,000 instead of Rs. 15,000. However, sub-section (4) of Section 80D was amended to allow deduction of Rs. 30,000 instead of Rs. 25,000 if individual or his family member or any of his parent is a senior citizen or very senior citizen.

Accordingly, it is proposed in the Finance Bill, 2015 as passed by the Lok Sabha that the existing deduction of Rs. 15,000 shall be substituted with Rs. 25,000. The following table highlights the deduction available to an Individual under Section 80D:

Deduction in respect of Individual and his family(none of them is a senior citizen) Parents of Individual(none of them is a senior citizen) Individual and his family(if senior citizen or very senior citizen) Parents of Individual(if senior citizen or very senior citizen)
(a) (b) (c) (d)
  ■  Health Insurance 25,000 25,000 30,000 30,000
  ■ Contribution to CGHS 25,000 – 25,000 –
 ■  Preventive health check-up 5,000 5,000 5,000 5,000
  ■  Medical expenditure if no amount is paid in respect of health insurance – – 30,000(only in case of very senior citizen) 30,000(only in case of very senior citizen)
Maximum Deduction 25,000 25,000 30,000 30,000

Note: Deduction for preventive health check-up of assessee, spouse, dependent children and parents shall not exceed in aggregate Rs 5,000.

  • Maximum deduction, if individual or any member of his family or any of his parent is not senior or very senior citizen: Rs. 50,000 [(a) + (b)]
  • Maximum deduction if individual or any member of his family is not senior citizen but any of his parent is a senior citizen or very senior citizen: Rs. 55,000 [(a) + (d)]

Maximum deduction if individual or any member of his family and any of his parent is senior citizen or very senior citizen: Rs. 60,000 [ (c) + (d)]

Residential Status of a Company.

The Finance Bill, 2015 as presented earlier proposed to amend Section 6 to provide that a company shall be said to be resident in India if its place of effective management, at any time in that year, is in India. In other words, the concept of Control or Management (wholly in India) is replaced with Place of Effective Management (at any time in India).

The amendment proposed in the original Finance Bill, 2015 might have caused difficulty in establishing the place of effective management as a company might have place of effective management in more than one country at any point of time during the year.

Thus, the Finance Bill, 2015 as passed by the Lok Sabha has proposed to omit the words ‘at any time’ which shall have effect that a company shall be deemed to be resident in India if its place of effective management is in India

Filing of return is mandatory if assessee has foreign assets.

The Finance Bill, 2015 as passed by the Lok Sabha has proposed mandatory filing of return by a person, being a resident other than not ordinarily resident in India, who at any time during the previous year:

  • Holds, as a beneficial owner or otherwise, any asset (including financial interest in any entity) located outside India or has signing authority in any account located outside India; or
  • Is a beneficiary of any asset (including any financial interest in any entity) located outside India.

However, filing of return shall not be mandatory under this proviso for an individual, being a beneficiary of any asset (including any financial interest in any entity) located outside India, if income arising from such an asset is includible in the income of the person who is beneficial owner of such an asset. Continue reading “Summary of changes made in Passed Finance Bill, 2015” →

/ Accounting Services

Managerial Remuneration in a Company -2 [SCHEDULE XIII] (See section 198, 269, 310 and 311)

Managerial Remuneration in a Company -2 [SCHEDULE XIII] (See section 198, 269, 310 and 311)

[SCHEDULE XIII]

(See section 198, 269, 310 and 311)

Condition to be fulfilled for the appointment of a managing or whole-time director or a manager with out the approval of the Central Government

[PART I]

Appointments

No person shall be eligible for appointment as a managing or whole-time director or a manager (herein after referred to as marginal person) of a company unless he satisfies the following conditions, namely:-

(a) He had not been sentenced to imprisonment for any period, or to a fine exceeding one thousand rupees, for the conviction of an offence under any of the following Acts, namely: –

  • The Indian stamp Act, 1899 (2 of 1899),
  • The Central Excise and Salt Act, 1944 (1 of 1944),
  • The Industries (Development and Regulation) Act, 1951 (65 of 1951),
  • The Prevention of Food Adulteration Act, 1954 (37 of 1954),
  • The Essential Commodities Act, 1955 (10 of 1955),
  • The Companies Act, 1956 (1 of 1956),
  • The Securities Contracts (Regulation) Act, 1956 (42 of 1956),
  • The Wealth Tex Act, 1957 (27 of 1957),
  • The Income Tax Act, 1961 (43 of 1961),
  • The Custom Act, 1962 (52 of 1962),
  • The Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969),
  • The Foreign Exchange Regulation Act, 1973 (46 of 1973),
  • The Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986),
  • The Securities and Exchange Board of India Act, 1992 (15 of 1992),
  • The Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992),

(b) He had not been detained for any period under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (52 of 1974);

Provided that where Central Government has given its approval to the appointment of a person convicted or detained under sub-paragraph (a) or sub-paragraph (b). as the case may be, no further approval of the central government shall be necessary for the subsequent appointment of that person if he had not been so convicted or detained subsequent to such approval;

(c) He has completed the age of 25 years and has not attained the age of 70 years:

Provided that where-

  • He has not completed the age of 25 years, but has attained the age of majority; or
  • He has attained the age of 70 years; and where his appointment is approved by a special resolution passed by the company in general meeting, no further approval of the Central Government shall be necessary for such appointment

(d) Where he is a managerial person in more than one company he draws remuneration from one or more companies subject to the ceiling provided in section III of Part II;]

(e) He is resident in India.

Explanation 2[I]. – For the purpose of this Schedule, resident in India

Includes a person who has been staying in India for a continuous period of not less than twelve months immediately preceding the date of his appointment as a managerial person and who has come to stay in India, –

  •  For taking up employment in India, or
  • for carrying on a business or vocation in India.

3 [Explanation II. – This condition shall not apply to the companies in Special Economic Zones as notified by Department of Commerce from time to time.

Provided that a person, being a non-resident in India shall enter India only after obtaining a proper employment visa from the concerned Indian mission abroad. For this purpose, such person shall be required to furnish, along with the visa application form, profile of the Company, the principal employer and terms and conditions of such person’s appointment.]

PART II

Remuneration

Section I. – Remuneration payable by companies having profits

Subject to the provisions of section 198 and section 309, a company having profits in a financial year may pay any remuneration, by way of salary, dearness allowance, perquisites, commission and other allowances, which shall not exceed five percent of its net profits for one such managerial person, and if there is more than one such managerial person, ten percent for all of them together.

Section II. – Remuneration payable by companies having no profits or inadequate profits.

1[I. Notwithstanding anything contained in this Part, where in any financial year during the currency of tenure of the managerial person, a company has no profits or its profits are inadequate, it may pay remuneration to a managerial person by way of salary, dearness allowance, perquisites and any other allowances-

(A) not exceeding the ceiling limit of Rs. 2400000 per annum or Rs. 200000 per month calculated on the following scale:-

Where the effective capital  Of Company is Monthly remuneration payable shall not exceed (Rupees)

  • less than rupees 1 crore                                                            75000
  • rupees 1 crore or more but less than rupees 5 crores        100000
  • rupees 5 crores or more but less than rupees 25 crores    125000
  • rupees 25 crores or more but less than rupees 50 crores  150000
  • rupees 50 crores or more but less than Rupees 100 crs   175000
  • rupees 100 crores or more                                                      200000

Provided that the ceiling limits specified under this sub paragraph shall apply, if –

  • payment of remuneration is approved by a resolution passed by the Remuneration Committee;
  • the company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in the preceding financial year before the date of appointment of such managerial person.

(B)Not exceeding the ceiling limit of Rs. 4800000 per annum or Rs. 400000 per month calculated on the following scale:-

Where the effective capital   Of Company is Monthly remuneration Payable shall not exceed (Rupees)

  • Less than rupees 1 crore                                                            150000
  • rupees 1 crore or more but less than rupees  crores           200000
  • rupees 5 crores or more but less than rupees 25 crores     250000
  • rupees 25 crores or more but less than rupees 50 crores  300000
  • rupees 50 crores or more but less than rupees 100 crore 350000
  • rupees 100 crores or more                                                       400000

Provided that  the ceiling limit specified under this paragraph shall apply, if-

  • payment of remuneration is approved by a resolution passed by the Remuneration Committee;Provided that the ceiling limits specified under this sub-paragraph shall apply, if –
  • The company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in the preceding financial year before the date of appointment of such managerial person;
  • A special resolution has been passed at the general meeting of the company for payment of remuneration for a period not exceeding three years;
  • A statement along with a notice calling the general meeting referred to in clause (iii) is given to the shareholders containing the following, namely:-

 I.General Information;

  • Nature of industry-
  • Date or expected date of commencement of commercial production.
  • In case of new companies, expected date of commencement of activities as per project approved by financial institutions appearing in the prospectus.
  • Financial performance based on given indicators.
  • Export performance and net foreign exchange collaborations.
  • Foreign investments or collaborators, if any.

 II.Information about the appointee:

  • Background details.
  • Past remuneration.
  • Recognition or awards.
  • Job profile and his suitability.
  • Remuneration proposed.
  • Comparative remuneration profile with respect to industry, size of the company,profile of the position and person (in case of expatriates the relevant details would be w.r.t. the country of his origin.)
  • Pecuniary relationship directly or indirectly with the company, or relationship with the managerial personal, if any.

III.Other Information:

  • Reason of loss or inadequate profits.
  • Steps taken or proposed to be taken for improvement.
  • Expected increase in productivity and profits in measurable terms.                          

 IV.  Disclosures:

(A)The shareholders of the company shall be informed of the remuneration package of      the managerial person.

(B)The following disclosures shall be mentioned in the Board of Directors report under       the heading “Corporate Governance”, if any, attached to the annual report: –

  • All elements of remuneration package such as salary, benefits, bonuses, stock   options, pension, etc. of all the directors;
  • Details of fixed component and performance linked incentives along with the performance criteria;
  • Service contracts, notice period, severance fees;
  • Stock option details, if and, and whether the same has been issued at a discount as well as the period over which accrued and over which exercisable.

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