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January 28, 2013

LTA/ LTC exemption

Leave Travel Allowance (LTA) is the most common element of compensation adopted by employers to remunerate employees due to the tax benefits attached to it. Section 10(5) of the Income-Tax Act, 1961, read with Rule 2B, provides for the exemption and outlines the conditions subject to which LTA is exempt. 
Who and what is covered?

Exemption of Fare Only - LTA exemption can be claimed where the employer provides LTA to employee for leave to any place in India taken by the employee and their family. Such exemption is limited to the extent of actual travel costs incurred by the employee. Travel has to be undertaken within India and overseas destinations are not covered for exemption.

Exemption on Actual Expense - For example, where an employer provides LTA of Rs 25,000, but an employee spends only Rs 20,000 on the travel cost, then the exemption is limited to only Rs. 20,000.

Travel cost means the cost of travel and does not include any other expenses such as food, hotel stay etc.

The meaning of ‘family’ for the purposes of exemption includes spouse and children and parents, brothers and sisters who are wholly or mainly dependent on you.

An individual would not be able to claim the exemption in relation to his parents, brother or sisters unless they are wholly or mainly dependent on the individual. Further, exemption is not available for more than two children of an individual born after October 01, 1998.

This restriction does not apply in respect of children born before this date, and also in cases where an individual, after having one child, begets multiple children (twins or triplets or quadruplets, etc.) on the second occasion. The term “Child” includes a step-child and an adopted child of the individual.

Is exemption available every year?

No. The tax rules provide for an exemption only in respect of two journeys performed in a block of four calendar years. The current block runs from 2010-2013. If an individual does not use their exemption during any block on any one or on both occasions, their exemption can be carried over to the next block and used in the calendar year immediately following that block.

In such cases, the journey performed to claim such exemption will not be counted for the purposes of regulating future exemptions allowable for the succeeding block. For example, Mr. X joins an organisation on April 1, 2008 and is entitled to a LTA of Rs 30,000 per annum (financial year 2008-09).

X undertook a journey in December 2008 and used his exemption. However, for his LTA entitlement for 2009-10, he did not undertake a journey during the calendar year 2009.

He can undertake the journey in 2010 to claim the exemption in relation to the LTA. He would also be able to use the LTA benefit for two other journeys which he can undertake in the current block 2010-13 in relation to his LTA entitlement for future years.

Proof of travel

Supreme Court has held in the case of Larsen & Toubro and ITI that employers are under no statutory obligation to collect bills and details to prove that the employees had utilised the amounts obtained against these claims on travel and related expenses.

Employers while assessing the travel allowance claims, do not need to collect proof of travel to submit to the tax authorities. Though it is not mandatory for employers to demand proof, they still have the right to demand documentary proof depending on its policy. The Judgement of Supreme Court has only moved the responsibility from the employer to the employee, the assessing officer can still ask for the employee to provide details of travel.

The individual however needs to keep copies for his or her own records. Such proofs are helpful at the time of the audit of the tax return of the individual. Proof of travel could be, for example, tickets, boarding passes, invoice of travel agent, duty slip etc .

During the Fringe Benefit tax (FBT) regime, provision of paid holidays, including travel cost to any place, stay expenses etc. were subject to FBT in the hands of employers and were not taxable in the hands of individuals. Many employers extended the paid holiday benefit instead of LTA.

Now with the elimination of FBT, with effect from. April 1, 2009, paid holiday benefit is fully taxable in the hands of employees and, therefore, employers are reintroducing the LTA element by withdrawing the paid holidays benefit.

Does claiming LTA in alternate years mean that the two year entitlement gets added together?

It does. If you are entitled to an LTA of Rs.10,000 per year and do not utilize it for the the first year it is carried forward to the next year. In the second year you can claim the entire amount (Rs.20,000) as tax exempt provided you spend it according to the specification in LTA tax laws as detailed above.

Carry over concession for Leave Travel Allowance
Leave Travel Allowance (LTA) comes with a carry forward feature. You can carry forward your
Leave Travel Allowance in the situation that it has not been used. It can be brought forward and
claimed in the first year of the next block.

Amount Exempted

1.   Journey performed by Air - Economy Air fair of National carrier by the shortest route or the amount spent whichever is less will be exempt
2.   Journey performed by Rail – A.C. first class rail fare by shortest route. or amount spent whichever is less will be exempt.
3.   Place of origin and destination place of journey connected by rail but journey performed by other mode of transport - A.C. first class rail fare by shortest route or amount spent whichever is less.
4.   Place of origin& destination not connected by rail (partly/fully) but connected by other recognised Public transport system - First class or deluxe class fare by shortest route or amount spent whichever is less.
5.   Place of origin& destination not connected by rail (partly/fully) and not connected by other recognised Public transport system also – AC first class rail fare by shortest route (as the journey had been performed by rail) or the amount actually spent, whichever is less.

All credit for compiling aforesaid information goes to CA Swadesh Gupta.  

Transactions requireing PAN

(a)  sale or purchase of  immovable property valued at Rs. 5,00,000 or more;
(b) sale or purchase of a motor vehicle, which requires registration by a registering authority;
(c) a time deposit, exceeding Rs. 50,000 in a Bank or Post Office.
(d) a contract of a value exceeding Rs. 1,00,000 for sale or purchase of securities;
(e) opening an account with a banking company;
(f) making an application for installation of a telephone/ cell connection.
(g) payment to hotels and restaurants against their bills for an amount exceeding Rs. 25,000 at any one time ;
(h) payment in cash for purchase of bank drafts or pay orders or banker's cheques from a bank for an amount aggregating Rs. 50,000 or more during any one day;
(i) deposit in cash aggregating Rs. 50,000 or more, with a bank during any one day;
(j) payment in cash in connection with travel to any foreign country of an amount exceeding Rs. 25,000 at any one time.
(k) making an application to any bank or to any other company or institution, for issue of a credit or debit card;
(l) payment of an amount of Rs. 50,000 or more to a Mutual Fund for purchase of its units;
(m)  payment of an amount of Rs. 50,000 or more to a company for acquiring shares issued by it;
(n)  payment of an amount of Rs. 50,000  or more to a company or an institution for acquiring debentures or bonds issued by it;
(o)  payment of an amount of Rs. 50,000  or more to RBI, for acquiring bonds issued by it;
(p) payment of an amount aggregating Rs. 50,000 or more in a year as life insurance premium to an insurer;
(q)  payment to a dealer, for purchase of bullion or jewellery  -
                  -of an amount of Rs. 5,00,000 or more at any one time; or
                  -against, a bill for an amount of Rs. 5,00,000 or more.

January 24, 2013

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January 21, 2013

Difference Between Police Custody and Judicial Custody

When someone gets arrested then he remains in lock up and there in police station but he must be produced before magistrate within 24 hours and its mandatory and after that if police wants to take further remand then they can take it with them back to police station but by order of court but if not allowed then to be send to jail its judicial custody where he just remain and works and also there no threat of torture too. Judicial is maximum of 14 days till gets bail.

If it is required by police that the accused is needed for investigation purposes then the magistrates gives the custody of the accused to police this is called police remand
Police custody is given in non-bailable offences, depending upon the circumstances of the case, to facililatate investigation.

Whereas judicial custody means that the accused is technically in the custody of the Magistrate. Police can not interrogate a person in judicial custody without permission of the concerned Magistrate/court.

January 15, 2013

PWC again summoned for teaching them law

The income tax (I-T) department, probing a charge of Rs 2,500-3,000 crore tax evasion by the Indian arm of Nokia, the Finland-based telecom multinational, has summoned the company's audit firm, Price Waterhouse and Co.
The latter issued a statement that, "The department has called us as they are seeking our inputs on this. We will extend full cooperation". A questionnaire sent to Price Waterhouse was not answered.
The audit for Nokia was done by four officials of PWC from its Delhi branch and they signed the audit report. I-T department sources allege misrepresentation of facts in the report and has also seized emails, described as “key evidence”. The audit firm and Nokia have both been summoned on Wednesday, said the official.
K Baskaran, public relations officer for the chief commisioner of income tax here, had said, "It has been gathered that Nokia India has been making remittances to its Finnish parent, Nokia OYJ, as payments for software supplies since 2005. The above payments for software would attract TDS (tax deducted at source) as per the provisions of the I-T Act, 1961. But is the learnt that the assessee company has not made any TDS on the above software payments. In order to gather the relevant evidence on the issue, a survey has been organised.”
Adding: "Prima facie, there appears to be some defaults with respect to TDS deductions on royalty payments made to its parent company at Finland. It is also observed that the company has changed its accounting model and is in the process of re-organising the existing business to bypass certain direct and indirect tax liabilities."
Nokia India had paid around $5 billion as royalty in the last six years and the TDS amounts works to $500 million, said an official, who didn’t want to be named.

Whats Inside

Ek Baar 3 Chor Nilesh, Rathee Aur Lalit Police Se Chhup Ke 3 Boriyon Mein Ghus Gaye.

Police Wala Aaya, Usne Pehli Bori Mein Laat Mari.
Nilesh Bola:Bhow-Bhow
Police Wala: Kutta Hai

Dusri Bori Mein Laat Mari.
Rathee Bola:Meoooowwwww
Police Wala: Billi Hai

Teesri Bori Mein Laat Mari,
Koi Awaaz Nahi Aayi.
Phir Mari, Koi Awaz Nahi.
20-25 Laat Maari To Andar Se Lalit Chillaya: Abey Ulloo ke pathe, Aaloo Hoon Aaloo

January 7, 2013


Board for Industrial and Financial Reconstruction (BIFR)                

The Government of India, in order to tackle the problem of industrial sickness, had set up a Board for Industrial and Financial Reconstruction (BIFR), under the purview of Sick Industrial Companies (Special Provisions) Act,1985 (SICA). It had been established as a quasi-judicial body in the Department of Economic Affairs, Ministry of Finance, for revival and rehabilitation of potentially sick undertakings and for closure/liquidation of non-viable and sick industrial companies. The Industrial Finance Division of the ministry dealt with the appointment of the Chairman and the Members of BIFR and Appellate Authority for Industrial and Financial Reconstruction (AAIFR) as well as with all the other matters relating to industrial sickness.
Under SICA, it is mandatory for the Board of Directors of a sick industrial company to make a reference and report to BIFR for formulation of revival and rehabilitation schemes and other remedial measures to be adopted with respect to such a company.

SICA has been repealed by NDA government and in place of BIFR, NCLT was to come into place.  But due to negligence of Central government, NCLT has not yet come into existence and as government has not yet notified the repealment of SICA, BIFR is still continuing as official body. 

A bare reading of Section 22 of the Act of 1985 makes the position clear that during pendency of an inquiry under section 16 or during the preparation of a scheme referred to under section 17 or during implementation of a sanctioned scheme or pendency of an appeal under section 25,there will be suspension of legal proceedings, execution and distress sale etc. against the assets of a sick company while Section 22A deals with power of the Board to issue directions restraining the disposal of assets of such companies. These two provisions primarily ensure that the scheme prepared by the BIFR does not get frustrated because of certain other legal proceedings and to prevent untimely and unwarranted disposal of the assets of the sick industrial company. These sections clearly state certain restrictions which will impact upon the implementation of the scheme as well as on the assets of the company. These sections operate at different stages and in different fields
Section 22 of SICA was held to be wide enough to cover a suit for enforcement of a guarantee in respect of a loan or advance to the industrial company.
1) Scope of Section 22 of the Act of 1985 was sought to be restricted only to the items which have been reckoned or included in the scheme for rehabilitation failing which the recovery or proceedings in relation to that particular liability would continue despite the provisions of the Act of 1985. In that case the Court was concerned with the recovery of sales tax dues, which the sick industrial company was unable to collect after the date of sanction of the scheme. The revenue was due to the department and the recovery of such amount was held to be beyond the purview of the Act of 1985.
2) The section only deals with proceedings for recovery of money or for enforcement of any security or a guarantee in respect of any loans or advance granted to the company and proceedings for winding up of the company. The section does not refer to any criminal proceeding.