Budget 2012 - impact on individuals & salaried class

It was exactly a year before that I posted my last post on leadership (in Cricket). Today, a history was created in Cricket. Yes, Sachin finally scored his 100th CENTURY!

Congrats Sachin!

Sachin's long awaited 100th Century overshadowed the Union Budget. How was the budget? The simple dipstick is the Sensex. Market was positive till the budget was presented and went down to close 210 points lower!

It shows that market is not happy about the budget.

Let us see what is in store for the salaried class and individuals:

Tax rate                             Current                         Proposed                 

Basic exemption                      180,000                      200,000

10%                                180,001 - 500,000      200,001 - 500,000

20%                                500,001 - 800,000     500,001 - 1,000,000

30%                                800,001 & above      1,000,001 & above

No special concession for women. The basic exemption stands revised to Rs.200,000 (from the current Rs.190,000).

For the Senior Citizen (60-80 yrs) & Very Senior Citizen (80+ yrs) - No change in the basic exemption

Senior Citizen - Proposed tax rates

Upto Rs.250,000 - Nil

250,001 -   500,000  - 10%

500,001 - 1,000,000 - 20% (current : 500,001 - 800,000)

Above 1,000,000      - 30% (current : 800,001 & above)

Very Senior Citizen - Proposed tax rates

Upto Rs.500,000      - Nil

500,001 - 1,000,000 - 20% (current : 500,001 - 800,000)

Above 1,000,000      - 30% (current : 800,001 & above)
The Finance Minister could have done more, but UPA needing support from others forced them to do a moderate budget.

Few benefits for an individual:

• Proposal to allow a deduction of upto Rs.10,000 for interest from savings bank accounts (earlier section 80L deduction brought back)
• Proposal to allow deduction of upto Rs.5,000 for preventive health check up.
• Senior citizens not having income from business proposed to be exempted from payment of advance tax.

Need to go through the fine prints to understand the conditions for availing the benefits.

Expect the service cost goes up, as the Service Tax rate has been increased from 10% to 12%. This is in line with implementing the GST. Your charges to banks, credit card companies will go up by 2%.

In a nutshell, the finance minister has given some benefit which will partly take care of the inflation.

Cheers,
Gopal

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True Leadership demonstrated

Well done India in winning the World Cup !!!

There were several points to be noted in this World Cup.

• Clear leadership demonstrated by Dhoni. No wonder he is able to lead the team to many heights, including the World Cup.
• Gary, no doubt, has done his part really well in bringing the team up in ranks - be it Tests, ODI or the T20. India is in the top.
• Sachin no doubt the master blaster. He could have finished the top run scorer in the Cup, but his quick stint in the final match could not take him to the top.
• Zaheer is undoubtedly the dependable bowler - YES..there is no other bowler who could support him.
• Gambhir, Shewag, Kohli, Yuvaraj - demonstrated that they are still capable of big innings. Gambhir's innings in the final is a class. He is an unsung hero.

Dhoni has silenced many critics, including me. People were questioning his team selection and batting line up. It is always easy to sit outside and comment. He is a clear Leader, who knows his team very well and utilised them very well.

 

In the final match, he took on his shoulders the responsibility and finally proved that he can do it.

 

With the dream run, I wish India all the very best.

Take some rest, till the IPL starts.

Too much cricket nowadays.

Cheers,

Gopal

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Process improvement - Good story

One of the most memorable case studies on Japanese management was the case of the empty soap box, which happened in one of Japan's biggest cosmetics companies. The company received a complaint that a consumer had bought a soap box that was empty.

Immediately the authorities isolated the problem to the assembly line, which transported all the packaged boxes of soap to the delivery department. For some reason, one soap box went through the assembly line empty.
Management asked its engineers to solve the problem. Post-haste, the engineers worked hard to devise an X-ray machine with high-resolution monitors manned by two people to watch all the soap boxes that passed through the line to make sure they were not empty.

No doubt, they worked hard and they worked fast but they spent whoopee amount to do so. But when a workman was posed with the same problem, did not get into complications of X-rays, etc but instead came out with another solution.

He bought a strong industrial electric fan and pointed it at the assembly line. He switched the fan on, and as each soap box passed the fan, it simply blew the empty boxes out of the line.

Moral of the story
Always look for simple solutions. Devise the simplest possible solution that solves the problem. So, learn to focus on solutions not on problems. "If you look at what you do not have in life, you don't have anything; if you look at what you have in life, you have everything.

Cheers,

Gopal

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Managing growth & risk in current Indian economic scenario

In today’s world, the growth of a business is critical and is challenging. With inflation adamant of not coming towards south and travelling north direction, RBI hiking the rates (further rate hike on the cards), economy is not so stable, Forex not steady, heavy competition, the business is put to lot of stress on its growth aspects and increase the risk factors.

Let us see what the factors for growth of a business are.

• Strong business strategy. The business should have a strong strategy for its growth, either organic or inorganic.
• Top line v Bottom-line. It should be clear on the growth aspects, do not ignore the bottom-line for the top line growth.
• Market leadership. Unless you are a leader it is difficult to sustain the growth.
• Differentiator. Not only a leader, but you need to be a differentiator with your product or services.
• Sound financial position. Financial prudence is critical for a business growth. Have a good finance practice.
• Focus on core businesses. Develop on the strength and management should concentrate on the core businesses, which yields good results.
• Diversify - known businesses. Do not diversify into unknown areas or unrelated areas. This will put strain on the management, as they have to spend time on the new one and focus will be lost on the existing business.
• Monitor the external environment. Keep a watch on the external factors like the other countries economy (wherever you have operations), political stability, tax regulations, Government policies, etc.,

Challenges for growth

It is easy to prescribe the factors for growth. Is it something that can be achieved, so easily? There are challenges to that. Let us see some of them.

• No / Lack of strategy. In most of the cases, the strategy was missing or not being clear. This is very critical for growth.
• Communicating the strategy. Having a clear strategy is not that important. It has to be communicated to the stakeholders and should have their buy-ins.
• Personal v Professional aspirations. Sometimes, the professional vs the personal aspirations come in the way of growth. This is true in case of a person driven business. 
• Operational level challenges
• Funding – if funding is not available at the right time, growth is at risk 
• Talent – you need to retain the talents to achieve the growth. It is the talent which works for the growth of a business.
• Risk taking ability – business need to take calculated risk, to stay in lead.
• Ability or willingness to change – if the business still in the traditional way of working (like technology), we have grown in that way attitude, it has to change. It is not only ability but also willingness to change is a success factor.

Mitigating risk

The Biggest Risk is Not Knowing the Risk. If you do not know your risk, better know it or forget your business. Ignorance will not help here. I would categorize the risk as CFOS.

•  Compliance risk – something this will destabilize a business (eg. Pollution control)
• Financial risk – if you do not have your homework done properly in this area, you are inviting trouble. Example: Mix of Debt/Equity, not generating cash, borrowing at high rate (higher than your business return) etc.,
• Operational risks– Destruction of facility, non-availability of resources etc., A good disaster recovery plan / Business Continuity Management Program will help a long way in mitigating this risk.
• Strategic risk – if your strategy itself is not correct, you cannot expect to grow. You need to course correct the same, as you move on. Review it periodically.

To sum up, if you want to grow, the following points have to be kept in mind:

• Focus on your strategy
• Engage customers – they are the one who gives you the business to grow.
• Engage employees – they are the one who helps you to achieve the business requirements.
• No compromise on quality – AT ANY COST. If you compromise, you lose even your existing business.
• Open to change. Be open to change. Traditional working will not work for long.
• Monitor the external environment – this is critical as it has direct impact on your business.
• Diversify – in known businesses and do not lose focus on the core business.

All the very best and have a risk free & growing business.

Cheers,

Gopal

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Obtaining Directors Identification Number (DIN) is now made easy

If you are a Director without DIN or going to be a Director in a company, you have to have your Directors Identification Number (DIN). Currently, we have to fill form in physical form, attach supporting documents, take a DD and send to the DIN processing center. You have to wait to know whether your DIN is allotted or not. You will query later on, which will drag the process of getting a DIN.

Lot of representations have been received by the Ministry that the documents required to be submitted should be simple to prove the existence/residence of a person, who intend to become a director of a company.

The Ministry of Corporate Affairs on 4th March, 2011 issued a circular simplifying the procedure for getting the DIN. Following is the extract of the same:

1. 1. Application for DIN will be made on eForm ; No physical submission of documents shall be accepted and for this purpose Scanned documents along with verification by the applicant will be attached with the eForm. Only online fee payment will be allowed i.e. No challan payment.
2. The application can also be submitted online by the applicant himself using his DSC.
3. DIN 1 eForm can be digitally signed by the professional who shall also confirm that he has verified the particulars of the Applicant given in the application.
4. Where the DIN 1 is verified by the professional, the DIN will be approved by the system immediately online. 
5. In other cases the DIN cell will examine the application and same shall be disposed of within one or two days. 
6. Companies (Directors Identification Number) Rules, 2006 are being amended on the above lines.
7. Penal action against the applicant and professional certifying the DIN application in case of false information / certification as per provisions of section 628 of the Act will be taken in addition to action for professional misconduct and revocation of DIN, allotted on false information.
8. The above procedures is expected to enable allotment of DIN on the same day.
9. The above procedures applies to filing of DIN 4 intimating changes in particulars of Directors.

So, if you have proper documentation and the professional certifies your credentials, you get your DIN almost on the same day.

Process improvements and usage of internet is on a big way in government departments. This will improve the efficiency of the system, reduction of time, transparency etc.,

Wishing more and more such improvements.

Cheers,

Gopal

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Budget impact on Software Industries

The much debated Software Technology Parks of India (STPI) tax benefit has ended. No more tax benefits for the STPI units.

What does it mean? Small companies in the IT & ITES sector will suffer to compete with others. No impact for bigger companies, as they are not hit much because of this tax benefit.

Small and medium companies price their products / services based on the tax benefits (thought it is not the correct way). In the competitive world, they have to do this.

People look only at the tax payment. Actually, it is nothing but deferring the tax to a future date, as there is a MAT on companies.

After STPI, companies started to look at SEZ (Special Economic Zone). But even SEZ is not spared from MAT (both the developers & Companies operating in SEZ are covered under MAT). This will dampen the profits.

What is there in the budget, which makes the IT sector to smile?

• the surcharge has been reduced from 7.5% to 5%. But MAT has been marginally increased by 0.5% (from 18% to 18.5%).
• reduction of foreign dividend tax rate to 15% for Indian companies
• Lot of IT spending by the Govt towards UID, e-stamping, computerisation for GST means more business for the IT Industries (if it is given to private IT companies).

This budget, i would say, is neutral to the IT / ITES sector. The sunset clause (STPI) was as expected.

I think we should come of the exemption / concession mode and this is in the right direction.

Cheers,

Gopal

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