Lunar Eclipse on 31st December 2009

There is a Lunar Eclipse on the night of 31st December 2009! What a way to celebrate the New Year.

As per the Hindu practices, people used to stop eating atleast 3 hours before the start of the eclipse. Why? Is it a matter of superstition? or just a practice or has some science behind it? Why people are asked to stop eating atleast 3 hours before the start of the eclipse? Is it to fast and pray to God?

I believe that it is not because of some superstition or so. It is proved scientifically that the digestive power will be reduced during the eclipse and not to give much work load to the organs. If all the food are digested during the eclipse, there is not much work load on digestive side. Digestion is related to the gravitational force.

Just to make sure that people stop eating, elders use the technique of fasting and praying to God, so that out of fear the youngster will adopt this.

All said and done, the lunar eclipse will have an impact on this New Year eve. Those follow the above will not party, as the eclipse ends by 1.00am on 1st Jan 2010.

Hang on....I was writing about the relationship found recently between the Moon phase and the return on Investment? Check it out with the Sensex & Nifty.

Who knows...later on there will be study which will show the relationship between Eclipse and return on investments by some universities, which we will accept. 
Superstition becomes Science, when proved!!!

Cheers & Happy New Year

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Recent notification on taxing the perquisites - More on the topic

In my last post on the taxing the employees on the perquisite (which was earlier taxed as FBT). Some of my friends wanted more clarity on this. I am giving my interpretation and anyone has to plan their salary package, better check with their tax consultants or their auditors before doing so.

Let me discuss some of them.

(a) Provision of meals to employees during the office hours

Under the FBT rules, it was exempted. But now they have brought in the perquisite valuation back. Upto Rs.50 per meal, it is exempted. This was the old valuation before FBT. Now that the prices have gone up tremendously, they should have thought about increasing the limit alteast, if not exempting the perquisite.

(b) Provision of Credit Cards

Any annual fee paid by the Company for the employee is now taxable as perquisite. Nowadays, all the cards are coming as "Free for life time". So, this may not hit the employee much. If you have any cards which you have acquired based on reimbursement by company, the annual fee or joining fee, consider surrendering or continuing based on the benefits. The fee paid by your employer is now taxable

(c) Provision of Club Memberships

Now the reimbursement or provision of club membership by the employers is taxable in the hands of the employees as perquisite.

(d) Provision of transportation

If it is used solely for official purposes, it is not taxable. But the onus is on the employee & employer to prove it.

If it is used for both official and personal purposes, then it will be treated as used for personal purposes. Ridiculous isn't it?

The valuation is as below:
  • For cars with a capacity of less than 1.6 litre,  Rs 1,800 for the vehicle and Rs 500 for chauffeur. 
  • For cars above that category, valuation will be Rs 2,400 for car and Rs 900 for chauffeur.
The transportation allowances of Rs.800 remains unchanged.

(e) Provision of residential accommodation

Any residential accommodation provided by employer with or without the following facilities:
  • supply of gas, electric energy and water
  • watchman, sweeper, and any personal staff
is taxable in the hands of the employee, as it is now.

(f) Concessional education facilities to employee or any member of the household

It is taxable as perquisite.

(g) Carriage of household goods

It is taxable as perquisite. Need further clarification. In today's world, people migrate to places. Will the re-location allowance paid is taxable as perquisite?

(h) Interest-free or concessional loans 

Any loan given to an employee at a concessional rate or as interest free is taxable as perquisite. The only exception is medical treatment expenses reimbursed under any insurance scheme.

(i) Concessional or Free travel / tour

Any concessional tour or travel to employee is taxable. It includes the value of travel/tour, accommodation or any other expenses which were directly paid by or reimbursed by the employer.

(j) Subscription to periodicals

Any reimbursement for subscription of periodicals are taxed as perquisite.

(k) Gift or Gift Voucher or Token

Any gift or gift voucher or token with value of Rs.5000 and above are taxable.

(l) Stock Options

I am not discussing on this topic, as it has various permutation combinations depending on the scenario / type of options.

To conclude, any expenses which were reimbursed or directly paid by the employer on your behalf is taxable, unless specifically exempted.

As mentioned earlier, please check with your tax consultant before taking any decision.

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Season's Greetings


It was a wonderful year (2009) for me and hope for many too. The economy started reviving and the Stock Market bounced back from the steep slide.

I wish you all a Merry Christmas and a Happy New Year.

I wish the New Year will bring in eternal Happiness, Prosperity, Joy, Peace, Success in our life.

Like 20-20, 2010 will a successful one.

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GST Task Force recommendation - Implementation may be delayed!

The Thirteenth Finance Commission’s taskforce on the proposed goods and services tax (GST) has recommended a 5 per cent central GST and 7 per cent state GST on all goods and services, except five specific categories. It has proposed a zero rate for exports though it is not in favour of any special dispensation for the special economic zones (SEZs).

For inter-state transactions, the taskforce, in its report, recommended zero-rated structure through adoption of the modified bank model. Pending constitutional amendment, the report suggested that the collection from 7 per cent state GST should accrue to the state government and devolution to the third-tier (local) government should be made based on recommendations of state finance commissions.

The exemption list includes public services of Union, state and local governments, service transaction between an employer and employee, unprocessed food articles sold under the public distribution system, educational and health services provided by non-government schools, college and agencies.

It has favoured doing away with area-based exemption and replacing it with direct investment-linked cash subsidy in case the government wants to support industry for balanced regional development.

The taskforce has also recommended that “sin” goods comprising emission fuels, tobacco products and alcohol should be subject to a dual levy of GST and excise with no input credit for excise. “However, industrial fuels should be subjected only to GST with the benefit of input credit like any other intermediate good,” the report said.

Central taxes proposed to be subsumed in GST are central excise duty, including additional excise duty, service tax, additional customs duty, all surcharges and cesses. Among state taxes that should be subsumed are value added tax, including purchase tax and central sales tax, and entertainment tax, among others.

In recommending what it terms as a “flawless” GST, the taskforce, headed by Arbind Modi, joint secretary, Department of Revenue, has made wide variations from what was proposed by the empowered committee of state finance ministers in their first discussion paper released last month.

The discussion paper had recommended a two-rate structure for both state GST and central SGT while keeping the purchase tax levied by states like Punjab, Haryana and Uttar Pradesh out of the purview of GST.

The discussion paper had recommended a dual rate structure for CGST and SGST with a single rate for services. The finance commission taskforce, however, said “there should be no classification between goods and services in law so as to ensure that there is no classification dispute”.

The state governments will meet soon to discuss the fine contours of GST as the scheduled date (April 1, 2010) for its introduction draws closer.

Even in the case of exempted items, the discussion paper did not list the items but favoured retaining the exempted list of value added tax and Central VAT which is currently around 100.

  • A zero rate for exports though it is not in favour of any special dispensation for the special economic zones.
  • It has favoured doing away with area-based exemption and replacing with direct investment-linked cash subsidy.
  • The taskforce has also recommended that ’sin’ goods comprising emission fuels, tobacco products and alcohol should be subject to a dual levy of GST.

  • The taskforce in its report has suggested that small dealers, service providers and manufactures with an annual turnover of less than Rs 10 lakh should be exempted from both CGST and SGST though they could voluntarily register themselves for GST in order to get the benefit of input credit. The discussion paper had suggested Rs 10 lakh as threshold for SGST and Rs 1.5 crore as threshold for CGST

In order to reduce administrative and compliance burden, the taskforce report proposed compounded levy of one per cent each for CGST and SGST for those with turnover of Rs 10 lakh to Rs 40 lakh with “no input credit allowed against compounded levy or purchases made from exempt dealers”.

The 13th Finance Commission task force on the proposed Goods and Services Tax has recommended a single, 12 per cent rate on all items and suggested deferring implementation of the new tax regime by six months from April to October next year.

Out of the GST of 12 per cent, states should receive seven per cent while the rest five per cent should go to the Centre’s kitty, said thetask force.

The recommendations, however, are at variance with the Discussion Paper prepared by the Empowered Committee of State Finance Ministers which had suggested four rates, including a separate category for exempt items.

The task force has said the GST be introduced from October 1, 2010.

The Empowered Committee, which is yet to take a final call on GST tax rates, is meeting here under the chairmanship of Asim Dasgupta.

“It (GST) will have four slabs. I hope the rates will be released in the next 15 days,” Dasgupta had said.

I feel that the implementation will be delayed further not only because of the rates and structure but also due to getting the constitutional amendment done. With the strong government in place it is not that difficult. But issues like Telangana, Terrorism will digress important issues.

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GST - PM's Economic Advisory Committee favors single slab for Goods & Services

In my earlier posting, I have mentioned the salient points of the recommedations by the Empowered Committee of the State Finance Ministers (EC). 

Last week the Prime Minister's Economic Advisory Committee (PMEAC) headed by C.Rangarajan favoured a single slab each for goods and services or one common rate for both under the proposed goods and services tax (GST), unlike the proposal mooted by the states.

Rangarajan said,"The Centre could follow the pattern in which there is only one rate for goods and one rate for services, or one rate which is common to both goods and services". He added that there is an advantage in having single uniform rate. He added that having a separate slab for precious metals is neither advisable nor advantageous.

As I mentioned in my post that the empowered committee suggested two main rates for goods, besides a special rate for precious metals. However, for services the committee proposed just one rate. It also suggested that some goods be exempted from the proposed GST.

Last week, chairman of empowered committee of state finance ministers Asim Dasgupta had said GST would have four slabs. Among the GST tax slabs, it would be zero for exempted items, one standard rate for majority of goods and services and another having a moderate rate, he said.

The EC expected the Centre will follow same structure for GST as mooted by it. However, a task force set up by the 13th Finance Commission has suggested a single GST for the Centre and the states, though rates proposed are different.
Wait for more updates. I will post a separate note on the hurdles on implementaion.
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Do return on Investments have link to the Moon phase?

Read an article on the link between moon phase and the return on investment. Sounds silly. Here you go....

Macquaire Securites team of 14 senior market analysts scrutinised the data of 32 leading indices around the world. The data pertains to few decades (since 1988).

The finding : A strong surge in returns was seen leading into the turn of the month.

It means, the 2 days on either side of the new month represent most of the Positive returns on equity markes for next four weeks. Of the 32 markets studied, ALL showed higher than average returns around the turn of the month and for many of the markets, the average return for the rest of the month was BELOW or close to ZERO.

Not only this, the stock market has got into the beliefs of astronomy and vaastu saastra. There are so many astrological predictions done for the day's trading. Bejan Daruwalla's Ganesha Speaks in MoneyControl is a classic example of linking the market hour-wise and predicting with the move in the planetary positions.

I can relate to what my father used to say, whenever I invest in anything. Do it after during the New Moon day and not after the Full Moon day. The reason is..when the moon start growing, it will give better result and your investment will grow. It was sounding bit odd and silly for me, when he used to say this. But, with the recent study, I cannot question his belief.

Sounds interesting! Let us watch this phenomena.

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Hurray.....Schumi is back !! Sadly.....Tiger is away !!!

Can't hold myself ! The World Champion turned Consultant is now back to the grid. It is not just a sport. You need to manage the vehicle, plan your moves, take quick decision (in milli seconds), plan your pit stops etc., to make sure you are finishing and that too first!

His management skills on the wheels is known to all. Unfortunately, he is not representing Ferrari. He has signed up with Mercedes. Whatever team he may represent, he is a master in that sport, undoubtedly.

With Tiger Woods endorsements at stake, Schumi may get more endorsements. So many endorsements by Tiger Woods are at stake, if he is not going to play Golf. So, here comes another great sporstman. He has signed for 3 years with Mercedes. Marketing managers and Brand managers would have started working on the endorsements. Let us wait and see.

Welcome back Schumi.
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Monetary Policy - What the RBI will do?

We have the Reserve Bank of India (RBI)  to come out with the next review of the Monetary policy by the end of January 2010. With the expansionary policy last year, the RBI was able to do some justice. The indicators currently points towards reversing or taking back the expansionary policy in the coming review. This may put a  cap on the rising prices. 

The current liquidity position is good, so we can expect an increase in the interest rates. Whoever looking out to invest in Housing because of lower housing interest rate, be quick! The interest rates may go up in Jan 2010.

The RBI may hike the Cash Reserve Ratio (CRR), this will reduce the liquidity in the market. I hope all will know what CRR is. Refer my posting on 28th Jan 09. To put it simple, it is the deposit that a bank has to keep with RBI. With the money moved out of the banks to lend, the liquidity will be tightened.

It looks like the RBI may come out soon with their recommendations. Let us wait and watch what the next steps of RBI.

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Now the perquisites are to be taxed that too effective from April '09

As you are aware that the Fringe Benefit Tax (FBT) was abolished in the recent Finance Bill, which paved way for more tax in the hands of the employees. The taxability has been shifted from the Employer to the employee. This will have an impact on the tax to be deducted from the employees in the coming months till Mar 2010.

According to the new rule, which was notified on Friday (18t-Dec-09) by the Central Board of Direct Taxes (CBDT), the perks like ESOP, residential accommodation, free conveyance, free food, provision of company vehicles for personal & official use, concessional education, concessional journeys, credit card, interest-free loans, gift vouchers, hotel stay exceeding 15 days, medical facilities etc., are to be taxed in the hands of the employee with retrospective effect from 1-Apr-09.

For the valuation part of vehicles, small cars below 1.6 litres will now have a value of Rs 1,800 per month while cars with engine capacity above 1.6 litre cubic capacity will have a value of Rs 2,400 per month, if expenses on maintenance and running are reimbursed by the employer.

Per this new rule, the value of the perk will be added to the employees taxable income and taxed accordingly. Some employees at the lower tax bracket may move to the next bracket. 

It is important to take note of the following in the current situation:

  • The additional tax due the added taxable salary component, need to be collected in the remaining 3 months (Jan, Feb & Mar), if not started in Dec09.
  • If the employee got his final settlement before Dec09, who has to take the hit is a question mark. 
    • If the employer includes the taxable portion in his Form16, then he has to pay and collect from the employee.
    • Can the employer hold the issue of Form16 till the employee pay the employer? I don't think so.
    • Tax planning need to be redone by the employee.
  • Is the Payroll department robust enough to calculate the additional perks that need to be added to the employee's income and deduct the tax accordingly.
Let us see if the CBDT gives any further clarification in this regard.

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Is it worth investing in Gold now?

Gold had a fantastic bull run during the current year (2009) and people started investing in this category apart from the normal Equity markets. I read an article in the Equitymasters, that the Gold's Bull run may continue in the future also. I earlier suggested that one should have Gold as part of their investment portfolio, as it will not let you down. The article is written by Porter Stansberry, chief of the leading US-based private publishing company, Stansberry & Associates Investment Research. That article gave various reasons, which is acceptable, for a bull run in Gold.

The key reason is that "it has future". With the Central banks busy printing currencies (lead by the US Fed), many experts now predict a return of Gold Standard. Porter himself has been a Gold Bull for a number of years. His current view is that "GOLD IS NOWHERE NEAR THE TOP". He believes this because the central bankers have began to buy gold during the last six months. Hence, he feels that the bull market for Gold has lot further to run.

My personal view on Gold is that it is a safe investment and gives a steady return, considering the fact that it has a ever-growing demand (both fashion, sentiments, government requirements etc.,). Have atleast 10%-15% of your investment in Gold. It can be either in the form of solid Gold or you can trade in the Gold Benchmark funds, which are traded in the stock exchanges.

All the best and happy savings for 2010 and beyond.

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GST - Get...Set....Take-off

Here I am with an update on what is happening on GST (Goods & Services Tax). 

What is GST?

GST stands for Goods & Services Tax. It will replace Excise Duty, Customs Duty, Sales Tax, VAT, Services Tax, Luxury Tax, Entertainment tax, Cesses charged by States, etc.,). Stamp Duty, Toll Fee, Passenger Tax, Road Tax are not part of the GST. It will be a simplified tax, which can be easy to administer across the states in India.

As you know that the Government is keen in rolling out the GST with effect from 1-Apr-2010, all the teams are working towards the same.Here are the some high level points on the recommendations by the Empowered Committee of the State Finance Ministers (EC):
  • Dual GST - Central GST (CGST) & State GST (SGST) - an agreement reached.
  • Dual GST Rates agreed :
    • Standard rate would be in the range of 8% to 9%
    • Essential Commodities - 4% to 5%
    • Precious metals (Special rate) - 1%
    • Few products - exempted from GST
      • Special treatments:
        • Tobacco products subject to GST and Centre to levey excise duty over & above the GST
        • Alcoholic beverages & Petroleum products kept out of the GST purview
    • Inter-State GST
      • It is known as IGST (Integrated GST) - taxable for all inter-state sales including branch transfers & consignment goods
      • Centre will be taxing these transactions
      • Input credits of IGST, CGST & SGST will be available for offset.
      • Central agency to act as a clearing house for IGST funds among States.
  • Central Govt agreed to compensate the State for any revenue loss
  • GST paid on imports are available as input tax credits
  • Place of supply determines the State in which the SGST on Import payable.
  • Services to be charged in the state of consumption
  • Supply rule determines the place of consumption for cross-border services
  • State GST - Charged based on the location of the recipient of services
  • Thresholds for the GST applicability:
    • For SGST - Gross Annual Turnover of Rs.10,00,000 (both for Goods & Services)
    • For CGST - Gross Annual Turnover of Rs.150,00,000 (for goods) and for services it may be slightly higher. This is in line with the basic exemption duty from Central Excise.
  • For a better monitoring purposes, a PAN-linked Tax Payer Id with 13/15 digits will be allotted.
A Joint Working Group (JWG) to prepare paper on:
    • Rules and Procedures
    • Legal & Constitutional changes required
It is expected that the required Constitutional amendments (required for Centre & State sharing the revenue etc.,) would be made in the winter session of the Parliament (Let us hope it get through)
The Information Technology (IT) infrastructure is expected to operational by end-Jan 2010.

Let us hope for the best!!! The above is the gist of EC recommendations.

We will see in the next post on the latest developments.

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Back after a Gap

Apologies for not posting during the last few weeks. Occupied with some official work. Here I am with the postings, with lot of interesting things happening. I may be covering the following during the next 2 weeks:
  • GST - Recommendation by the empowered committee
  • GST - What the PM team wants
  • Is it good to invest in Gold
  • Where the Stock Market is heading?
  • Taxing the perquisites - Only 3 months remaining
  • Monetary Policy - current situation and expectation
Any other thing that crops up during the next few days.

Am really thrilled and excited on hearing from many on why I am not posting. Thanks for following me.

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Telangana like incident - Impact on our economy

When the world is looking at consolidation, only Indian politicians can think of disintegration. All done for political mileage or camouflaging the situation. Thanks to the media, the citizens are now aware of what is happening in the country. When the government announced that they will consider splitting Andhra into 2, I was shocked. What an Idea sirji !

What will happen when you have two states in the place of one. Two elections ! If in case the government is minority, it may have many elections! Whose money is spent on these? Our own money.
When we are working on increasing the GDP growth, fighting against economy slowdown, why our hard earned money spent on these petty things. Already the political and government spending are alarming. With such a step, we can expect more taxes than sops!

Few items, which crossed my mind, when I saw that Govt is considering a separate state of Telangana:

  • Already VAT implementation is fought with the existing states and having difficulties. This will add more headaches. Trouble for interstate traders.

  • More IAS required

  • More government spending on running an extra state

  • More opportunities for Employee, Establishment, VAT & Sales Tax consultants to comply with the respective state's requirement.

  • Changing the maps frequently - Students need to know the changes frequently

  • With water & electricity sharing, the states are fighting with each other. So, this will create more problem than a solution.

If it is only a political stunt, it is good that only we lost few crores as of now (protecting TRS chieft during the hunger strike, burning buses, damaging public properties etc.,). Hope no more damage will happen!

Let Manmohan Singh concentrate on the Economy than on the internal politics!

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