Public Provident Fund - PPF - Investment limit extended to Rs.1 lakh per year

A good news for people bent on investing in Public Provident Fund (PPF), from 1.12.2011 the limit of maximum investment of Rs.70,000 per year has been increased to Rs.1,00,000.  Another announcement from Ministry of Finance dated 25.11.2011 says that interest rate on PPF subscriptions after 1.12.2011 will be 8.6% p.a. - not a bad rate considering the tax saving option also which PPF provides.

The natural question to all of us will be why PPF?  I recommend PPF for long term investment.  The following are its features :

1. Minimum investment per year is Rs.500 subject to a maximum Rs.1,00,000 (from 1.12.2011 - earlier Rs.70,000)
2. The account can be opened with Post Offices and notified Scheduled Banks
3. Tax benefit under section 80C of the income tax act, also interest accrued is exempt from tax.  
4. Withdrawals from PPF is also exempt from income tax - this adds much to the flavour
5. The only flip side is one has to be invested for 15 years, but there are some ways of withdrawing before 15 years as explained in the subsequent points
6. After expiry of 5 years from the date of initial subscription an amount equal to 50% of balance outstanding as on end of the 4th year is allowed as a withdrawal
7. Loans also can be taken from this account from the end of 1 year from initial subscription, interest on loan is 2% p.a. from 1.12.2011 (earlier 1% p.a.)
8. Nomination facility is available for PPF

Some do's and don't of PPF

1. Treat this as a long term investment and invest regularly do not withdraw or take loan unless it is absolutely necessary
2. PPF cannot be opened in the name of a HUF
3. PPF can be opened in the name of a minor by either of the parents (not both)

XBRL filing deadline extended to 31.12.2011

Ministry of Corporate Affairs has vide their Circular number 69/2011 dated 30.11.2011 extended the due date for filing of XBRL returns by eligible companies either within 60 days of their due date of filing of the returns or by 31.12.2011 whichever is later.  Technically the last date will be 31.12.2011 for all companies required to file XBRL returns this year.

XBRL - eXtensible Business Reporting Language

eXtensible Business Reporting Language (XBRL) is basically an electronic communication tool (or software) of business and financial data which helps capture information of business and financial data in a systematic and a uniform way.

How it helps : XBRL for business reporting in India

Currently for filing form 23AC & form 23ACA (ie) Balance Sheet and Profit & Loss Account with ROC, companies upload their balance sheet & Profit and Loss account in a Pdf format.  Retrieval of information from this Pdf format is a challenge as companies do not have uniform method of presentation in their annual reports though all follow Schedule VI format.  There are subtle variations in the presentations, which makes it quite difficult for comparisons among companies and also analysing data's of companies for various decision making.  XBRL help comes in handy here.  XBRL has developed General Purpose Financial Reporting XBRL taxonomy for Commercial and Industrial Companies, which helps to capture data in a systematic manner.  All companies (there are certain exceptions here) should

1. update their audited financials in the XBRL format (which is almost like an Excel facility)
2. validate the data filled in XBRL (tool available within the XBRL software)
3. Generate and XML file using XBRL tools
4. Get it certified by either a Chartered or Cost Accountant or a Company Secretary
5. File form 23AC & 23ACC along with this XML file

XBRL provides a coherent format of Schedule VI where every company has to fill in data in a sequential format along with schedules, notes to accounts, Directors Report & Auditors Report.  XBRL taxonomy has been designed beautifully to cover all types of companies from manufacturing and service sectors, it is quite exhaustive.  However currently Banking Companies are not covered which is currently under development.

How to capture data in XBRL :

There are lot of software vendors from where you can buy XBRL software plus there are also free software available for download.  You can choose any of them.  I tried it with the software purchased from taxmann publications.  First there is a General Information where you have to provide general information about the company and also the method of preparation of your financials (ie) type of balance sheet, profit and loss account and cashflow.  The detail of Balance Sheet is taken in from fixed assets to provisions and the main balance sheet account is generated. Similarly for profit and loss account all schedules from revenue to taxes are inputed and the main profit and loss account is generated.  Cashflow is also generated.  Data on various notes on accounts is also captured.  The beautiful part is that all these reports are interlinked (ie) data in balance sheet / profit & loss account / Cashflow & notes on accounts should tie up if they are linked.  For example expenses on Auditors fees is captured in Profit and Loss account as a single line item.  In notes there is a requirement for detailed audit fees, the validation here is that the Audit fees total in Notes on account should tally with the audit fees captured in the profit and loss account.  This is true for all the entries.  This validation helps in accuracy of data.

Benefits of XBRL :

1. Uniform presentation of data
2. Can be used for updation by all Commercial and Industrial Companies including Service industries
3. Data captured is exhaustive with all detailed information on financials of the companies
4. Investors, analysts, regulators & general public can have exhaustive information in a relevant & consistent format
5. Comparison between company's financials made easy
6. Quite flexible as it can change to changes in regulations by making changes in taxonomy - so this will withstand test of time

Conclusion :

XBRL is a tool which needs to be filled by an expert who has knowledge of Schedule VI and its relevant schedules.  The expert can be within the organisation or there are also professionals available who can help companies fill in XBRL for a small fees.  Overall I feel this is an important step towards systematic data collection, which will help business to grow further, I welcome this important change and hope to see this extend further to other areas like Direct tax & indirect tax data's.

"SET OFF" Imports vs Exports - Liberalisation of Procedures

Reserve Bank of India vide its circular

RBI/2011-12/264 A.P. (DIR Series) Circular No. 47 dt. 17.11.2011

has delegated powers to AD-1 Category banks to accept applications from exporters to "Set Off" Export Receivables against Import Payables.  Earlier this power was vested with RBI.  This is a step towards liberalisation of Export - Import procedures. 

 

The RBI cicurlar can be accessed at

 

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6822&Mode=0

 

Apart from various conditions the main conditions which need to be followed by importer / exporters are :

• All documents relating to the transactions (import / export) should be provided to the banker
• Returns in Form "R" seperately for Import and Export transactions should be provided to AD
•  The "Set Off" will be against Imports & Exports which has been dealt with from the same overseas buyer and seller
• This facility will not be available from ACU countries namely - Bangladesh, Bhutan, Iran, Maldives, Myanmar, Nepal, Pakistan & Srilanka

This is quite a welcome step by RBI considering the volume of import / export transactions with a single entity.  This will be a beneficial move especially for companies which have subsidiary abroad or is a subsidiary of a company situated abroad.  This will not only help save transaction time but also transaction costs.

Income Tax Quarterly Returns now to be filed early by 15 days

Income Tax department has issued Notification No.57/2011 dated 24.10.2011 and notified rules called Income Tax (Eighth Amendment) Rules, 2011. 

This notification comes into effect from 1.11.2011.

Under this notification the due date for filing of Quarterly Statements for tax deduction has been advanced by 15 days.

In short.

For Quarter ending 30th June - Quarterly Statement should be filed on or before 15th July of the same financial year

For Quarter ending 30th Sept - Quarterly Statement should be filed on or before 15th October of the same financial year

For Quarter ending 31st Dec  - Quarterly Statement should be filed on or before 15th January of the same financial year

For Quarter ending 31st Mar  - Quarterly Statement should be filed on or before 15th May of the next financial year

Please take note of these changes and file Quarterly Statements accordingly.

Karnataka VAT - epayment of VAT

Notification No.EG1.CR.33/2011-12 dated 19.10.2011 has been issued under Karnataka Value Added Tax, Act, 2003 whereby all dues under this Act (namely Karnataka VAT) should be paid through electronic mode.  This will be applicable for all registered dealers whose liability under the Act is more than one lakh rupees.

The link for this payment is through https://vat.kar.nic.in or https://vat.kar.nic.in/epay

This notification is effective from 2.11.2011.

Please take note of this and be prepared to pay Karnataka VAT online if liability is more than one lakh rupees.

Special Additional Duty of Customs (SAD) Refund

Ministry of Finance issued a Notification No.102/2007-Customs dated 14.09.2007 to clarify certain points as to refund of the Special Additional Duty of Customs one of such clarification is contained in Point 2(b) which reads as follows.

"the importer, while issuing the invoice for sale of the said goods, shall specifically indicate in the invoice that in respect of the goods covered therein, no credit of the additional duty of customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975 shall be admissible;"

Hence the notification made it mandatory to incorporate the above declaration in the sales invoice of the assessee for granting refund of Special Additional Duty of Customs.

As is the general practice the Tribunals and courts take a liberal view on the notifications and they always are of the opinion that the notications have to be intepreted liberally and circumstantial evidence if they are very strong the and if there is positive intention on the part of the assessee then even if some "technical lapses" are evident the Tribunals and Courts overlook them and favour the assessee.

Similarly interpreting the above clause 2(b) cited in notification No.102/2007-Customs the Mumbai Tribunal has recently passed 2 judgements

        [2011 (272) ELT 287 (Tri-Mumbai)] and

[2011 (272) ELT 310 (Tri-Mumbai)]

In the above orders the Tribunal has held that the assessee has not charged or shown the Special Additional Duty in the invoice buy failed to incorporate the declaration as given in condition 2(b) the assessee is still elibgible for availing of refund of the Special Additional Duty.  Further the Tribunal observed that there is a Chartered Accountant Certificate which specifically proves the payment of VAT / CST liability and hence the declaration is not mandatory to avail refund of Special Additional Duty.

The views of Tribunals and Courts are more welcome, however this is absent till Commissioner (Appeals) level, which leads to increase in litigations reaching higher judicial authorities, which can be very well avoided.