My pranams to my gurus !

On this auspicious day of Guru Pournima, I would like to thank all my teachers/gurus who made me  a professional. My pranams to all. I tried to recollect my teachers and gurus from my school days.

My first and foremost pranams (obeisance) to my parents. Every father is a hero. For me, he is a hero, a man of words, knowledge and wisdom. He is my first and foremost guru to me. He passed away recently. My teachers/gurus - without any order - please accept my namaskarams and pranams:

1. Kanchi Paramachariyar
2. Bhagavan Ramana Maharishi
3. Seshadri Swamigal
4. Smt. Joseph, [School]
5. Smt.Radha, [School]
6. Smt.Chitra [School]
7. Smt. Jubilee [School]
8. Shri. [Late] D.Subramaniam, Unlce [School] - my Maths guru
9. Shri. B,Radhakrishnan [School]
10. Shri. Parthasarathy Iyengar (Headmaster) [School]
11. Shri. Rajagopalan [School]
12. Shri. Aravazhi (Tamizh) [School]
13. Shri. Marudur S. Rengarajan (Tamizh) [School] 
14. Shri. TK Govindarajan [School]
15. Shri. [Late] KT Govindarajan (Economics & Headmaster) [School]
16. Shri. S Kannan (maths) [School]
17. Shri. Basheer (maths), [School]
18. Shri. Rajamani (maths), [School]
19. Shri. G.Baskar (maths) [School] 
20. Shri. KN Desikachari (Maths)  [School]
21. Shri. M.Hariharan [School]
22. Shri. Sattanathan [School]
23. Shri. K.Thiagarajan (Tamizh) [School]
24. Shri. K Dharmaraj (Accounts) [School] 
25. Shri. S Ramakrishnan (SRK, Economics) [School] 
26. Shri. P.Vijaya Chandran (PVC, Science) [School]
27. Shri. Madhavan (Commerce) [School]
28. Shri. V.P.Krishnamurthy [School]
29. Shri. Krishnamurthy (History & Geography) [School]
30. Shri. Mani (Crafts) [School]
31. Shri. A Vishwanatha Sharma (Sanskrit) [School]
32. Shri. M.P.Shanmugam [School]
33. Shri, Karmegam (Sports - Track and Field) [School]
34. Shri. Radhakrishnan (Sports & NCC-Air wing), [School]
35. Shri. Selvaraj (Sports - Track and Field) [School]
36. Shri. Nammalvar (NCC-Army). [School]
37. Shri. Janakiraman (Navy & English) [School]
38. Shri. Durai Pandian (Accounts), [College]
39. Shri. Kanakasabesan (Stats) [College]
40. Shri. Arun (Tamizh), [College] 
41. Shri, Kayaroganan (Tamizh), [College]
42. Shri. B. Suresh (English), [College]
43. Shri. S,K.Ramakrishnan (Income Tax), [College]
44. Shri. Balagangadharan (Auditing), [College]
45. Shri. Ramasamy (Business Management & Commercial Law), [College]
46. Shri. Sudharshan (Accounts), [College]
47. Shri. S.Jagannathan (Economics) [College] 
48. Shri. Kalyanaraman (Accounts), [College]
49. Shri. M.Sakthivelmurugan (Corporate Law), [College] 
50. Shri. Gopal Muralidhar (Management Accounting).[College]
51. Shri. Sundaresan, my Costing guru. If I am good in costing today, credit goes to him. [CMA]
52. Shri. Sankaranarayanan (Management) [CMA]
53. Shri. Sethuraman, who created the engineer in me [CMA]
54. Shri. Sundaram (Costing). [CMA]
55. Shri. Ramanathan (My principal during Auditing course) [CA]
56. Shri. S Nagarajan (Accounts), [CA]
57. Shri. Ranga Rao (Accounts), [CA]
58. Shri. Murali (Auditing and Company Law..inspiring me to quote relevant sections, when you say something on Company Law) [CA]
59. Shri. Thangapandian (Electricity accounting) [CA]
60. Shri. Sivakumar (Standard Costing), [CA]
61. Shri. LS Sivakumar  (Maths & Stats), [CA]
62. Shri. Venkatasivakumar (Costing). [CA]
63. Shri. T.N.Manohar (Tax) [CA]
64. Shri. PR Vittak (Naths) [CA]
65. Shri. Bhupathi (Tax) [CA]
66. Shri. T.G.Suresh (Income Tax), whom I never knew that he is a professor in my college. [CA]
67. Shri. Ramesh Kumar (Marketing), [IIM, B]
68. Shri. Amit Gupta (Organizational behavior) [IIM, B]
69. Shri. Shyamal Roy - my favorite economics guru [IIM, B]
70. Shri. Ganesh Prabhu, [IIM, B]
71. Shri. NM.Agarwal [IIM, B]
72. Smt. Padmini Srinivasan, [IIM, B]
73. Shri. Ashok Thampy [IIM, B]
74. Smt. Anjana Vivek, [IIM, B]
75. Shri. YLR Murthy (Marketing) [IIM, B]
76. Shri, Krishna Sundar - he taught the supply chain management by a beer game. A tough person in class - cool outside. [IIM, B] 
77. Shri. S. Krishnamoorthy - a CA with lot of wits & humor in his teaching. [IIM, B]
78. Shri. M.S.Narasimhan (MSN- like Microsoft Network - he builds a good network among participants). Always willing to help with a smile - even when he says NO. [IIM, B]
79. Shri. Mahadevan [Management & Spirituality]
80. Shri. K.Gopalakrishnan (KGK) - my Guru in Stock Market, Financial Services [Office]
81. Shri. G.Balasubramanian - learnt a lot of good habit and English too.[Office] 
82. Shri. M.S.Rangesh (MSR) - my Guru in managing/handling people. Great mentor [Office]
83. Shri. W.R.Vasudevan (WRV) - who taught me project management. [Office]
84. Shri. R.Srinivasan (RS) - who taught me corporate finance [Office]
85. Shri. G.Thirugnanasambandam (GTS) - who educated me on agriculture and plants [Office]
86. Shri. J.Subramani (JS) - who taught me the plant bio-tech intricacies [Office]
87. Shri. T.Nataraajan (TN) - A great mentor in Finance and management - who gave me a free hand to manage Finance, Tax, Accounting, MIS. [Office]
88. Shri. S.Raghunandan (Raghu) - I cannot forget his training on presentation skill. [Office]
89. Shri. Peter Sands - the way he analyse performance of a large organization [Office]
90. Shri. Hemant Kulkarni - learnt how to manage a Shared Services Center [Office]
91. Shri. Nipun Bhatia - learnt BCP and leadership skills [Office]
92. Shri. S.Raghavan - learnt a lot about LPG and LNG [Office]
93. Shri. Romi Malhotra - learnt how to be down to earth [Office]
94. Shri. Krishna Kumar - my coach and mentor
95. Shri. Venkatesh Seshadri - my coach and mentor
96. Shri. Shankar Thayumanavan - my mentor and good friend
97. Shri. CVS Krishnakumar - a great friend and taught how to be down to earth
98. Shri. Vijay Dhawan - an inspiration - with his daily positive messages & speed of trust
99. Shri. Marshall Goldsmith - my guru who I follow a lot.
100. Shri. Ken Blanchard - my guru for effective management

I specifically did not mention anyone from my current organization, though there are a lot of them who inspired me and I learnt a lot from them.

To all my friends, from whom I learnt a lot. 

If I missed anyone, it is not intentional. It is due to my aging.

With warm regards.

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72nd Chartered Accountants day

Today, July 1 is the Chartered Accountants Day.  

It is on this day of 1949 the institute came into existence through an Act of Parliament, The Chartered Accountants Act, 1949.

The Institute of Chartered Accountants of India (ICAI) is the second largest professional Accounting & Finance body in the world and third largest professional accounting body in the world in terms of membership.

I take this opportunity to wish all my co-members and prospective members a HAPPY CHARTERED ACCOUNTANTS DAY.

Jai Hind.

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Sovereign Gold Bond (SGB)?

What is Sovereign Gold Bond (SGB)?

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. 

Some facts about SGB

Issuer	Reserve Bank of India on behalf of Govt of India
Denomination	grams
Who can invest?	Any person, a resident of India (as per FEMA*)  If the person later becomes NRI, can hold till maturity
Can minor invest?	Yes, through guardian
Joint holding ?	Yes
PAN* required?	Yes, it is mandatory
Min investment	1 (one) gram
Max investment (per financial year)	4 (four) kilograms    4 kgs - Individuals (applies to First holder)    4 kgs - Hindu Undivided Family (HUF)  20 kgs - trusts and similar entities
Interest rate	2.5% p.a. (paid semil-annually)
From where to buy?	Banks : Nationalised, Scheduled Private & Foreign  Designated Post Offices,  Stock Holding Corporation of India Ltd. (SHCIL)  Stock exchanges - directly or through their agents
Any discount?	No discount. But if applied digitally, a concession of  Rs.50/gram can be availed.
How is the issue  price fixed?	Simple average of closing price of gold (999 purity)  published by the India Bullion & Jewelers Assn Ltd,  for the last 3 business days of the week preceding  the subscription period.
What is the tenor?	8 years from the date of isse   Early redemption available after 5 years
Transferable?	Can only be transferred to eligible investor   If held in Demat, can be traded in stock exchange
Tax benefits	Interest is taxable   Capital Gains for individual      - on redemption is tax exempted      - indexation benefits for transfer
Redemption price?	Simple average closing price of gold (999 purity)   of previous 3 business days from the date of repayment,  published by the India Bullion & Jewelers Assn Ltd.
Nomination	Nomination is available

* Abbreviations used

PAN : Permanent Account Number

FEMA : Foreign Exchange Management Act

Benefits

1. No need to hold in physical format
2. No cost of storage (Locker)
3. Gold price appreciation. Redemption linked to prevailing market Gold price
4. Interest @ 2.50% p.a.
5. Tax benefits - no capital gains on redemption
6. Backed by Government guarantee
7. Can buy in lots of 1 gram
8. if digitally bought, Rs.50/gm concession available
9. Can be traded, if in demat format.
10. Nomination facility available

See you in next post on whether to invest in SGB or Gold ETF or Gold itself.

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BEWARE : Phishing attack in the name of CoViD19 testing

The Indian government has issued an advisory to citizens warning them against a large scale phishing campaign which impersonate the Indian government and promises free Covid -19 tests and other resources.

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Stock Ideas - Federal Bank (CMP : 50.95)

Federal Bank Limited is a major Indian commercial bank in the private sector headquartered at Aluva, Kerala having more than thousand branches and ATMs spread across different States in India. The Bank is a pioneer among traditional banks in India in the area of using technology to leverage its operations and was among the first banks in India to computerize all its branches.

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China products - Boycott or make in India?

Off late, I see lot of people suddenly raising their voice to boycott Chinese products and social media is bubbling.

India is a vast country with a huge population & consumer base. In a trading world, we see countries import and export. Not every country is self-reliant on their own. There are dependency on each others. Surplus gets exported.

With so many Chinese products flooding the markets, can we avoid them? can we boycott them? What is the right way to deal with this situation?

With Atmanirbhar Bharat (Self reliant India), how can we capitalize this situation?

Most of the countries flourished after they were devastated. Crisis gives an opportunity to come with more innovative and growth oriented activities.

Coming back to the situation in hand, why not look at creating those products in India itself rather than boycotting some other country's products. Why we buy them is that they are less costlier than our own products.

Can't we make them in India at the same cost? These kind of move will create more job opportunities and lot of industries can get us the products that we so far relied on other countries.

In my view, we should make more in India to creae more job opportunities and bring up industries, especially the MSMEs.

What do you all think?

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Proposed regulatory framework for Housing Finance cos

The Reserve Bank of India has come out with draft regulatory framework for the Housing Finance Companies (HFC).

I feel this may the fallout of the various HFC which more act as an NBFC and fund their group companies.

It is proposed to introduce the concept of ‘qualifying assets’ for HFCs as done in case of NBFC-MFIs. The proposed regulations are as under:

Qualifying Assets refer to ‘housing finance’ or ‘providing finance for housing’  subject to the following:

1. Not less than 50% of net assets are in the nature of ‘qualifying assets’ for HFCs
2. 75% of the 50% of net assets should be towards individual housing loans.

“Net assets” shall mean total assets other than cash and bank balances and money market instruments.

The HFC is given 4 years timeframe comply with the requirements.

Timeline	At least 50% of net assets as qualifying assets i.e., towards housing finance	At least 75% of qualifying assets towards housing finance for individuals
March 31, 2022	50%	60%
March 31, 2023	-	70%
March 31, 2024	-	75%

‘Housing Finance” or “providing finance for housing” means:

1. Loans to individuals or group of individuals including co-operative societies for construction/ purchase of new dwelling units.
2. Loans to individuals for purchase of old dwelling units.
3. Loans to individuals for purchasing old/ new dwelling units by mortgaging existing dwelling units.
4. Loans to individuals for purchase of plots for construction of residential dwelling units provided a declaration is obtained from the borrower that he intends to construct a house on the plot within a period of three years from the date of availing of the loan.
5. Loans to individuals for renovation/ reconstruction of existing dwelling units.
6. Lending to public agencies including state housing boards for construction of residential dwelling units.
7. Loans to corporates/ Government agencies (through loans for employee housing).
8. Loans for construction of educational, health, social, cultural or other institutions/centres, which are part of housing project in the same complex and which are necessary for the development of settlements or townships;
9. Loans for construction of houses and related infrastructure within the same area, meant for improving the conditions in slum areas for which credit may be extended directly to the slum-dwellers on the guarantee of the Government, or indirectly to them through the State Governments;
10. Loans given for slum improvement schemes to be implemented by Slum Clearance Boards and other public agencies;
11. Lending to builders for construction of residential dwelling units.

All other loans including those given for furnishing dwelling units, loans given against mortgage of property for any purpose other than buying/ construction of a new dwelling unit/s or renovation of the existing dwelling unit/s, will be treated as non-housing loans.

Loan foreclosure charges

As a measure of customer protection and also in order to bring in uniformity with regard to repayment of various loans by borrowers of banks and NBFCs, no foreclosure charges/pre-payment penalties shall be levied on any floating rate term loan sanctioned for purposes other than business to individual borrowers with or without co-obligants. Since similar regulations are currently not prescribed for HFCs, it is proposed to extend these instructions to HFCs.

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One person company (OPC)

The One Person Company (OPC) was introduced through the Companies Act, 2013. Like partnership firms having an option to be a Limited Liability Partnership, sole proprietorship can look at a OPC.

This will increase better compliance and put OPC in a better position in availing loans/funding. This will bring in the unorganized sector or sole proprietorship into an organized sector. There are many advantages of being an OPC. Let us see them.

Before going into the benefits of being an OPC, let us see what is an  OPC and how one can form it?

Who is eligible to incorporate	A natural person who is an     a. Indian citizen and     b. Indian resident
Who is a nominee?	The memorandum of OPC shall indicate the name of the person, with his prior written consent, to become a member of the OPC when the sole member dies or becomes incapacitated to contract. A nominee can be a nominee in only one OPC. A nominee can be a member in an OPC. Where a member in One Person Company becomes a member in another OPC by virtue of his being a nominee in that OPC, then such person shall meet the eligibility criteria of being a member in only one OPC within a period of 180 days, i.e., he/she shall withdraw his membership from either of the OPCs within one hundred and eighty days
How many such OPC can a person register	A person can register only one OPC
What will be the nature of this OPC	OPC will be treated as a Private Limited Company
What will be the suffix	OPC will be suffixed to differentiate from other types of companies
What are the requirements relating to Director, shareholder	Shareholder   : Min 1  Director         : Min 1 Share Capital : No minimum Share capital / maximum : Rs.50 lakh Director and Shareholder can be the same person
Liability	Limited liability (only to the extent of shareholding)
Status	Enjoys the status of Pvt Ltd Company.

Compliance matters

Board meeting	Atleast one board meeting in each half of the calendar year The gap between 2 meetings shall be more than 90 days
Annual or Extraordinary General meeting	Only resolution to be communicated to the meber and minutes to be updated.
Quorum	No quorum required

Mandatory conversion to Private Limited Company

In case the paid up share capital of an OPC exceeds Rs.50 lakh or its average annual turnover of immediately preceding three consecutive financial years exceeds Rs. 2 crore, then the OPC has to mandatorily convert itself into private or public company.

Advantages of an OPC

There are many advantages of being an One Person Company when compared to sole proprietorship. Am not comparing with Partnership, as here the individual wants to be on own and do not want to share the control of his business.

1. Full control of business - faster decision making.
2. Separate legal entity from the person
3. Liability is limited
4. Nominee facility available
5. Having compliance requirement lesser than Private Ltd Co.
6. Being with better compliance, higher chances of getting funding (loan or equity)
7. Being a separate legal entity, can be sold at good valuation, if required.
8. Director's remuneration is allowed as deduction while computing Income Tax
9. Suitable for startups and MSMEs
10. Better chances of being selected as vendor to provide service / good. 

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Decoy effect - marketing technique / consumer preferences

Having studied, Psychology and cognitive behaviors, this is where most of the consumers, especially in supermarkets fall prey.

Have you ever heard about this marketing concept - DECOY EFFECT?

The consumers have a cognitive bias while shopping or buying in which they will tend to have a specific change in preferences between two options when also presented with a third option that is asymmetrically dominated.

This is used mostly in products or services to make sure that the product the seller want to sell is priced in such a way as a third option to make the consumer tend to buy them.

Let me give an example:

Today's world, we depend more on the online meetings and webcasts. We need to choose a better one which suits our requirement and not heavy on our purse.

You go to a service provider, who you feel is good and want to see the options, Your requirement is unlimited time per session, 20 sessions per month. The options available with the service provider are:

Option A : 20 sessions/month and 2 hours max per session - Rs.350

Option B : 30 sessions/month and unlimited hours max per session - Rs.500

Normally, you will go for Option A, as it fits your requirements well. Now, the intention of the service provider is to sell more of Option B. To achieve that, what he will do is, introduce another option, say Option C.

Option A : 20 sessions/month and 2 hours max per session - Rs.350

Option B : 30 sessions/month and unlimited hours max per session - Rs.500

Option C : 20 sessions/month and 3 hours max per session - Rs.450

The consumer will look at the Option B and C. For Rs.50 he is getting a better deal. So, he will go for Option B. Here Option C is the decoy.

Which one will you buy given the following options for soap "Super"?

25 gms - Rs.30

50 gms - Rs.50

75 gms - Rs.60

Please let me know, which is the decoy here? Did you fall in for the decoy recently?😉 

Next time, when you see Buy 2 get 20% off, look for the decoy.

Watch the following video:

Share in the comment, if you have seen any decoy recently.

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Cost inflation index for Financial Year 2020-21

For computing certain long term capital gains, the cost can be adjusted for the inflation and for that purpose, the Central Board of Direct Taxes notifies the cost inflation index every financial year.

On 12-Jun-2020, the cost inflation index for FY2020-21 was notified as 301.

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Will EMI moratorium impacts the credit rating?

Many people ask this question, when the EMI moratorium was extended till 31-Aug-2020 - Whether my credit rating by Credit Information Bureau (India) Limited (CIBIL) will go down due to this?

RBI in their press release under Statement on Developmental and Regulatory Policies dated 22-May-2020 cleared this that the moratorium period between 1-Mar-2020 and 31-Aug-2020 shall not be counted for asset classification by lenders. That means, your non-payment of interest or EMI shall not be adversely affect your credit rating.

What is assert classification, NPA? To know, click HERE (Refer FAQ 3)

The relevant portion of the notification is given below:

(i) As the moratorium/deferment is being provided specifically to enable borrowers to tide over COVID-19 disruptions, the same will not be treated as changes in terms and conditions of loan agreements due to financial difficulty of the borrowers and, consequently, will not result in asset classification downgrade.

(ii) As earlier, the rescheduling of payments on account of the moratorium/deferment will not qualify as a default for the purposes of supervisory reporting and reporting to credit information companies (CICs) by the lending institutions. CICs shall ensure that the actions taken by lending institutions in pursuance of the announcements made today do not adversely impact the credit history of the borrowers.

(iii) In respect of all accounts for which lending institutions decide to grant moratorium/deferment, and which were standard as on March 1, 2020, the 90-day NPA norm shall also exclude the extended moratorium/deferment period. Consequently, there would be an asset classification standstill for all such accounts during the moratorium/deferment period from March 1, 2020 to August 31, 2020. Thereafter, the normal ageing norms shall apply.

(iv) NBFCs, which are required to comply with Indian Accounting Standards (IndAS), may follow the guidelines duly approved by their Boards and advisories of the Institute of Chartered Accountants of India (ICAI) in recognition of impairments. Thus, NBFCs have flexibility under the prescribed accounting standards to consider such relief to their borrowers.

For full notification dated 22-may-2020, CLICK HERE

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Director's salary - liable to GST? Clarified now.

Circular No: 140/10/2020 - GST dated 10-Jun-2020

Finally the government has cleared the air in terms of GST applicability on Directors Remuneration. The contention here is whether the Director is an employee or not. 

Wholetime/Executive Director

A whole time-director under section 2(94) of the Companies Act, 2013 is an inclusive definition, and thus he may be a person who is not an employee of the company.

Independent Director

Any such director should not have been an employee or proprietor or a partner of the said company, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed in the said company[ Section 149(6) of the Companies Act, 2013, read with Rule 12 of Companies (Share Capital and Debentures) Rules, 2014..

(A) Directors who are employees of the company

Salary is not taxable under GST

It is clarified that the part of Director‟s remuneration which are declared as "Salaries‟ in the books of a company and subjected to TDS under Section 192 of the IT Act, are NOT TAXABLE, being consideration for services by an employee to the employer in the course of or in relation to his employment in terms of Schedule III of the CGST Act, 2017.

Remuneration other than Salary is taxable under GST under reverse charge basis

It is further clarified that the part of employee Director‟s remuneration which is declared separately other than "Salaries‟ in the Company‟s accounts and subjected to TDS under Section 194J of the IT Act as Fees for professional or Technical Services shall be treated as consideration for providing services which are outside the scope of Schedule III of the CGST Act, and is therefore, TAXABLE. Further, in terms of notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis. 

(B) Directors who are not employees of the Company

In respect of such directors who are not the employees of the said company, the services provided by them to the Company, in lieu of remuneration as the consideration for the said services, are clearly outside the scope of Schedule III of the CGST Act and are therefore TAXABLE. 

Accordingly, remuneration paid to such independent directors, or those directors, by whatever name called, who are not employees of the said company, is taxable in hands of the company, on reverse charge basis

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Sweat Equity by Startups - MCA relaxes rules.

The Ministry of Corporate Affairs (MCA) has amended the Companies (Share Capital and Debentures) Rules, 2014, to allow startups to issue sweat equity shares not exceeding 50% of its paid-up capital upto a period of 10 years from the date of registration. 

What is a sweat equity?

It is part of the Share Capital of the Company which is issued by a company to its directors or employees at a discount or for consideration, other than cash, for providing their know-how or making available rights in the nature of intellectual property rights.

The companies take this route to overcome the initial cashflow challenges.

What is a startup?

An entity is considered as a startup if it meets the following criteria:

Entity	Private Limited Company Partnership firm Limited Liability Partnership (LLP)
Tenure	Upto 10 years from the date of incorporation / registration
Annual Turnover	Less than Rs. 100 crore for any of the financial years since its Incorporation
New entity	The entity should be new one and should not have been formed by splitting up or reconstructing an already existing business
Nature of work	work towards innovation, development or improvement of products/process/services and/or have scalable business model with high potential of employment generation or wealth creation

How this new relaxation help?

Given the business situation due to pandemic  and shortage / preservation of funds, this form of compensation shall be well received by the entrepreneurs. Any Company which is five or more years and less than 10 years of existence can issue sweat equity to its employees to retain them.

CLICK HERE for the notification.

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