INCOME TAX: A LAYMANS OVERVIEW
In today’s world nothing is free. We have to pay taxes even for our basic needs in form of vat, service tax etc. Similarly a tax is levied on income of individual or business is known as Income Tax. The incidence of income tax can be progressive, proportional or regressive. The tax levied on individual is known as personal or individual income tax. Whereas when it is levied on the income of companies is known as Corporate tax or profit tax.
Indian overview: In India income tax is governed by the Indian Income tax Act 1961. The government of India imposes an income tax on individuals, Hindu undivided Family(HUF), Companies, firms, Co-operative Societies & trusts.
Every person whose total income exceeds the maximum amount which is not chargeable to income tax shall be liable to pay tax at the rates prescribed under the finance Act for the relevant assessment year.
An individual has to pay tax on his total income earned during previous year for every assessment year. The chargeability of tax not only depends on the nature of income (viz. revenue or capital) but also on residual status of an individual.
Objective: The objective of Income Tax Act is to tax only income and items which are construed as income chargeable unless specifically exempt.
What is income?
Sec.2 (24) of Indian Income Tax Act 1961 provides definition of income in an illustrative manner.
Tax Rates in India
India follows the progressive tax system for individual income tax. The effective tax rates with effect from April 1, 2010 are as follows.
Note: Surcharge has been abolished for personal income tax from the financial year 2009-10.
All the taxes in India are subject to an education cess of 2% & 1% of Higher secondary Education cess.
Due Dates
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INTERNATIONAL FINANTIONAL REPORTING STANDARD: AN INVESTORS OVERVIEW
The emergence of multinational corporations has not only boosted India’s growth story but has boosted the demand for capital from all around the world. India is one of the world’s favorite investment destinations and is already witnessing huge capital inflows all around the world.
Its not always possible & feasible for multinationals to prepare different sets of financial statements abiding each countries laws and regulations. Hence their was need for a common reporting standards which will be same from all over the world. The answer to this is International Financial Reporting Standard (IFRS). IFRS will overcome cross border geographical boundaries and will have no impact as an investor whether from India or any where in the world.
History: Birth of IFRS has been a series of incidents. It all started in 1967 with International Accounting Standards formulated by International Accounting Standards Committee (IASC). In between 1984 -2005 IASC & various accounting regulators all around the globe issued new accounting standards & revised old ones. Norwalk’s Agreement between IASB & FASB in 2002 stressed on formation & implementation of IFRS. Finally in June 2003, Ist IFRS was published titled “IFRS-1 – First time adoption of International Financial Reporting Standards”. At least 100 countries and 30 others including India will adopt or converge with IFRS over next 2-3years.
Indian overview: In the era of globalization, India cannot insulate its economy from development taking place around the globe. High quality financial reporting is the fundamental for an effective integrated capital market.
In India, the Institute of Chartered Accountants of India (which issues & governs accounting standards in India) is on the way towards converging of its accounting standards with IFRS. The ICAI has already started the process of issuing IFRS equivalent accounting standards (AS) & revising the existing standards & guidance notes to bring them at par with IFRS.
Why this convergence?
Converging with IFRS will have multiple benefits for Indian entities especially those who aspire to go global. The new converged standards will serve the objectives like that of providing timely & useful financial information about companies for stakeholders to assist in decision making. According to Sir David Tweedie, chairman, IASB, “The goal is to create one single set of accounting standards that can be applied anywhere in the world, saving millions for firms with more than one listing and allowing investors to compare the performance of business across geographic boundaries for the first time”. Some of the benefits are mentioned below:
• IFRS provides more compatibility among sectors, countries & companies. Its universal appeal can improve & initiate new relationship with investors, customers & suppliers across the globe.
• IFRS provides momentum to cross border acquisitions, enables partnerships & alliances with foreign entities.
• IFRS gives better access to global capital markets & reduces the cost of capital.
• Converge with IFRS means adoption of global financial reporting language that enables your company to be understood in a global market place.
• IFRS allows companies to benchmark themselves against their peers worldwide & allows investors & others to compare the company’s performance with competitors globally.
• IFRS will improve the quality & consistency of information, avoid multiple reporting & reduce the cost of the finance function.
How IFRS will be implemented?
The IFRS Task Force formed by ICAI has proposed the adoption of IFRS in a phased manner for listing entities & public interest entities as well as for all other entities operating in India from accounting period commencing on or after April1, 2011. A press release was issued by the ministry of Corporate Affairs on 22nd January 2010 for setting out road map for convergence with IFRS. According to press release IFRS will be implemented in 3 phases starting from April1, 2011 as shown below.
Phase 1: The phase 1 companies will have to prepare their opening balance sheet as on April1, 2011 converging with IFRS. It includes companies which are part of NSE index (Nifty 50) & BSE Sensex (BSE 30). Companies whose shares or others are listed or not having net worth of more than Rs.1000/- Crores.
Phase II: Phase II companies will have to converge their opening balance sheet with IFRS as on April 01, 2013. It includes those which are not covered in phase I & net worth exceeding Rs.500/- Crores.
Phase III: Listed companies which are not covered in phase I or phase II are covered in this phase. These companies have to prepare converge balance sheet with IFRS as on April 01, 2014.
Note: If the financial year of a company commences at a date other than 01 April, then it shall prepare its opening balance sheet at the commencement of immediately following financial year.
Challenges in adopting IFRS
Every change brings along with it a degree of apprehension & therefore, it needs to be ensured that these apprehensions are addressed early to ensure effective & efficient transition. IFRS pose great challenge to drafters of financial statements & auditors. IFRS may have material impact on reported results, which could lead to stock price volatility. International standards setting may be hindered by stakeholder’s divergent interests. Other important challenges would be educating investors and analysts about impact of the IFRS.
Conclusion
The adoption of IFRS will not only reduce the barriers to both trade and the flow of capital but also the investors will have access to more reliable financial data to compare and analyze corporate performance in multiple jurisdiction.
HOW TO PAY TAXES ELECTRONICALLY? ITS 24X7
In today’s world you can almost buy anything on net by just a single click. So why not taxes? Yes, you can also pay taxes from anywhere in the world. In India almost all banks are providing online tax payment facility. The intention of this article is to create awareness about net banking facilities provided by various financial institutions. Despite of net banking facility and many other add-on services most of us are still using age old practices. Most of the banks will not accept your tax payment in cash. Banks will accept tax payments if they are paid through instrument or electronically. Cheque/ Online payment has been made mandatory by some of the laws like Income Tax Act, 1961 & Service Tax Act etc. You can also read my articles on my site http://www.mytaxform.info. Further we would discuss how to pay taxes online or electronically? For making online tax payment there is no need to download any software or purchase income tax challan. Any person having a net banking facility can pay taxes electronically. The detailed information can be obtained from the bankers as the procedure varies from bank to bank. The list of banks providing e tax payment facility is available on NSDL-TIN website.
How secure is the transaction?
There is no need to worry. All the transactions made through banks or NSDL-TIN or Income Tax site are encrypted and have Secure Socket Layer (SSL) authentication. Most of the banks in India have Verisign Digital Certification. This assures that this site is secured for financial transactions. Additionally, the security level will differ from bank to bank. If you don’t see the signs as mentioned above, you have to take extra measures for protection. Look for the closed padlock and “s” in https in the URL.
How to pay taxes online?
There are 2 ways by which one can pay taxes. (1) From NSDL-TIN website. (2) From your Bank site. 1) NSDL-TIN website/ Income Tax website: For paying from this site you can log on to http://www.onlineservices.tin.nsdl.com/etaxnews . Alternatively you can also pay through http://www.incometaxindia.gov.in. On Income Tax site there is ‘Pay your Tax Online” button on left hand menu bar. By clicking on this you will be redirected to NSDL-TIN website. The following steps will lead you in paying e-taxes.
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(payment of Income Tax & Corporation Tax) |
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(Tax Deducted at Source / Tax Collected at Source (TDS/TCS) from Corporates or non-corporates) |
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(payment of Security Transaction Tax, Hotel Receipts Tax, Estate Duty, Interest Tax, Wealth Tax, Expenditure Tax /Other Direct taxes & Gift tax) |
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(payment of Banking Cash Transaction Tax and Fringe Benefits Tax) |
• Select appropriate challan Form.
• After selecting appropriate challan, fill the details such as PAN, Name & address and then click on ‘Proceed’ button.
• A confirm data page will appear along with message in red letter. “For PAN ‘XXXXX 0000X’ given by you above, the name as per Income Tax Department database is ‘
XXXXXXXXX’.
Tax credit will be effected
to the said PAN nam
e. If the name is correct, then click on “Submit to the bank”
• Login with the user id and password and enter the tax amount along with any intrest or penalty.
• An e-receipt will be generated, save or print it for your record.
This is the complete e-payment process.
2). If you have to pay taxes through your bank directly then following steps should be taken:
• Login with user id and password.
• Click on E-Tax menu and select on appropriate type: Direct Tax, Indirect Tax or State Tax.
• Fill the appropriate challan along with tax am
ount.
• Click on Confirm button.
• An e-receipt will be generated containing CIN (Challan Identification Number).
Stop taking pains by wasting your time in standing long queue in banks and of carrying liquid cash, just clicking will pay your taxes. Pay your Taxes & have sound sleep