Introduction
1.1 Schedule VI to the Companies Act, 1956 (‘the Act’) provides the manner in which every company registered under the Act shall prepare its Balance Sheet, Statement of Profit and Loss and notes thereto. In the light of various economic and regulatory reforms that have taken place for companies over the last several years, there was a need for enhancing the disclosure requirements under the Old Schedule VI to the Act and harmonizing and synchronizing them with Accounting Standards. Accordingly, the Ministry of Corporate Affairs (MCA) has issued a revised form of Schedule VI on February 28, 2011.
1.2 The relevant notifications along with the Revised Schedule VI to the Act are given in Annexure A. As per the relevant notifications, the Schedule applies to all companies for the financial statements to be prepared for the financial year commencing on or after April 1, 2011.
1.3 The requirements of the Revised Schedule VI however, do not apply to companies as referred to in the proviso to Section 211 (1) and Section 211 (2) of the Act, i.e., any insurance or banking company, or any company engaged in the generation or supply of electricity or to any other class of company for which a form of Balance Sheet and Profit and Loss account has been specified in or under any other Act governing such class of company.
2.Objective and Scope
2.1. The objective of this Guidance Note is to provide guidance in the preparation and presentation of Financial Statements of companies on various aspects of the Revised Schedule VI. However, it does not provide guidance on disclosure requirements under Accounting Standards, other pronouncements of the Institute of Chartered Accountants of India (ICAI), other statutes, etc.
2.2. In preparing this Guidance Note, reference has been drawn to the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended), other Accounting Standards issued by the ICAI (yet to be notified under the Act) and various other pronouncements of the ICAI. The primary focus of the Guidance Note has been to lay down broad guidelines to deal with practical issues that may arise in the implementation of the Revised Schedule VI. However, the Guidance provided herein should not be taken as exhaustive.
2.3.As per the clarification issued by ICAI regarding the authority attached to the Documents Issued by ICAI, “‘Guidance Notes’ are primarily designed to provide guidance to members on matters which may arise in the course of their professional work and on which they may desire assistance in resolving issues which may pose difficulty. Guidance Notes are recommendatory in nature. A member should ordinarily follow recommendations in a guidance note relating to an auditing matter except where he is satisfied that in the circumstances of the case, it may not be necessary to do so. Similarly, while discharging his attest function, a member should examine whether the recommendations in a guidance note relating to an accounting matter have been followed or not. If the same have not been followed, the member should consider whether keeping in view the circumstances of the case, a disclosure in his report is necessary.”
3.Applicability
3.1. As per the Government Notification no. F.No.2/6/2008-C.L-V dated 30- 3-2011, the Revised Schedule VI is applicable for the Balance Sheet and Profit and Loss Account to be prepared for the financial year commencing on or after April 1, 2011.
3.2. Early adoption of the Revised Schedule VI is not permitted since Schedule VI is a statutory format.
3.3. The Revised Schedule VI requires that except in the case of the first financial statements laid before the company after incorporation, the corresponding amounts for the immediately preceding period are to be disclosed in the financial statements including the notes to accounts. Accordingly, comparative information will have to be presented starting from the first year of application of the Revised Schedule VI. Thus for the financial statements prepared for the year 2011-12 (1st April 2011 to 31st March 2012), comparative amounts need to be given for the financial year 2010-11.
3.4. ICAI had earlier issued the Statement on the Amendments to Schedule VI to the Companies Act, 1956 in March 1976 (as amended). Wherever guidance provided in this publication is different from the guidance in the aforesaid Statement, this Guidance Note will prevail.
3.5. Applicability of the Revised Schedule VI format to interim financial statements prepared by companies in the first year of application of the Schedule:
Relevant paragraphs of AS-25 Interim Financial Reporting are quoted below:
“10. If an enterprise prepares and presents a complete set of financial statements in its interim financial report, the form and content of those statements should conform to the requirements as applicable to annual complete set of financial statements.
11. If an enterprise prepares and presents a set of condensed financial statements in its interim financial report, those condensed statements should include, at a minimum, each of the headings and sub-headings that were included in its most recent annual financial statements and the selected explanatory notes as required by this Statement. Additional line items or notes should be included if their omission would make the condensed interim financial statements misleading.”
3.6. Accordingly, if a company is presenting condensed interim financial statements, its format should conform to that used in the company’s most recent annual financial statements, i.e., the Old Schedule VI. However, if it presents a complete set of financial statements, it should use the Revised Schedule VI, i.e., the new format applicable to annual financial statements.
3.7. The format of Balance Sheet currently prescribed under Clause 41 to the Listing Agreement based on the Old Schedule VI is inconsistent with the format of Balance Sheet in the Revised Schedule VI. Till Clause 41 is revised, this issue to be addressed by companies as explained below :
3.7.1. Clauses 41(I)(ea) and 41(I)(eaa) to the Listing Agreement regarding presentation of Balance Sheet items in half-yearly and annual audit results, respectively states as under:
“(ea) As a part of its audited or unaudited financial results for the half-year, the company shall also submit by way of a note, a statement of assets and liabilities as at the end of the half-year.
(eaa) However, when a company opts to submit un-audited financial results for the last quarter of the financial year, it shall, submit a statement of assets and liabilities as at the end of the financial year only along with the audited financial results for the entire financial year, as soon as they are approved by the Board.”
3.7.2. Further, Clause 41(V)(h) regarding format of Balance Sheet items states as under:
“(h) Disclosure of balance sheet items as per items (ea) shall be in the format specified in Annexure IX drawn from Schedule VI of the Companies Act, or its equivalent formats in other statutes, as applicable.”
Based on the above:
Sheet items, in case of half-yearly results of a company, it has prescribed a specific format for the purpose. Hence, till the time a new format is prescribed by the Securities and Exchange Board of India (SEBI) under Clause 41, companies will have to continue to present their half-yearly Balance Sheet based on the format currently specified by the SEBI.
(Dear Reader if you want full text of the above guidance note and other information please mail to tvenkatappaiah@andhracements.com)
Saturday 24 September 2011
Friday 8 April 2011
THINGS TO KEEP IN MIND WHILE FILING INCOME TAX RETURNS
Filing tax returns is an annual mandate that tax payers have to comply with, the last date for which is in sight i.e. July 31st, 2011. In a haste to meet the deadline, make sure you do not miss key elements that can cause trouble later.
Critical information should be cross verified
No income tax return will be accepted without the PAN and incorrect PAN can result in a fine being levied. Communication address should be correctly stated as all notices or other communication from the IT department will be sent to the provided address. Also make sure that the MICR code is correct if you want an electronic refund and also ensure that bank account details are correctly stated for hassle free refunds.
Safe keep all relevant documents for future use
The IT department has done away with enclosing documents while filing returns i.e. proof of tax, statement showing computation of taxable income etc. Not having to produce it at the time of filing returns doesn’t meet that you can put away the documents carelessly. In case of scrutiny, the tax authorities may need supporting documents for verifying the claims made in the return.
Disclose exempt income and investments made
Income such as dividends from mutual funds and long-term capital gains on listed securities, are exempt from tax. Even though the tax laws do not require you to pay tax on the same, the law requires you to report these in your tax return.
Investments above a prescribed limit have also to be disclosed as per IT laws. They include
Mutual fund investment in excess of Rs. 2 lakh
Cash deposits in excess of Rs. 10 lakh
Credit card payment in excess of Rs. 2 lakh
Bond investment in excess of Rs. 5 lakh
Property bought or sold in excess of Rs. 30 lakh
Report income from a previous employer
Employers deduct TDS from the employee’s salary. While computing the TDS, employers generally provide the basic exemption deduction to the employee. If at the time of changing the job, the employee has not informed the new employer, it could lead to a situation where the TDS cut by the new employee would be low, as he may be taking in to consideration the full deduction amount while calculating tax. Thus you may have tax liability at the time of filing returns. Not disclosing income from the previous employer may result in an income tax notice as it will be spotted when the TDS data is being reconciled.
Revision of Income
If the IT return has been filed before the due date i.e. 31st July, tax payers are entitled to submit a revised return in case of any error or omission therein. However, revision is not permitted if the return is filed beyond the due date.
Precautions taken at the time of filing returns will prevent hassles later. To make sure you file your returns before the 31st, start the process now- Procrastination is the thief of time!
Read more: Things to keep in mind when you file tax returns | SIMPLE TAX INDIA-TDS RATE INCOME TAX RATE
Critical information should be cross verified
No income tax return will be accepted without the PAN and incorrect PAN can result in a fine being levied. Communication address should be correctly stated as all notices or other communication from the IT department will be sent to the provided address. Also make sure that the MICR code is correct if you want an electronic refund and also ensure that bank account details are correctly stated for hassle free refunds.
Safe keep all relevant documents for future use
The IT department has done away with enclosing documents while filing returns i.e. proof of tax, statement showing computation of taxable income etc. Not having to produce it at the time of filing returns doesn’t meet that you can put away the documents carelessly. In case of scrutiny, the tax authorities may need supporting documents for verifying the claims made in the return.
Disclose exempt income and investments made
Income such as dividends from mutual funds and long-term capital gains on listed securities, are exempt from tax. Even though the tax laws do not require you to pay tax on the same, the law requires you to report these in your tax return.
Investments above a prescribed limit have also to be disclosed as per IT laws. They include
Mutual fund investment in excess of Rs. 2 lakh
Cash deposits in excess of Rs. 10 lakh
Credit card payment in excess of Rs. 2 lakh
Bond investment in excess of Rs. 5 lakh
Property bought or sold in excess of Rs. 30 lakh
Report income from a previous employer
Employers deduct TDS from the employee’s salary. While computing the TDS, employers generally provide the basic exemption deduction to the employee. If at the time of changing the job, the employee has not informed the new employer, it could lead to a situation where the TDS cut by the new employee would be low, as he may be taking in to consideration the full deduction amount while calculating tax. Thus you may have tax liability at the time of filing returns. Not disclosing income from the previous employer may result in an income tax notice as it will be spotted when the TDS data is being reconciled.
Revision of Income
If the IT return has been filed before the due date i.e. 31st July, tax payers are entitled to submit a revised return in case of any error or omission therein. However, revision is not permitted if the return is filed beyond the due date.
Precautions taken at the time of filing returns will prevent hassles later. To make sure you file your returns before the 31st, start the process now- Procrastination is the thief of time!
Read more: Things to keep in mind when you file tax returns | SIMPLE TAX INDIA-TDS RATE INCOME TAX RATE
Friday 1 April 2011
Issue refunds fast says Finance Ministry to Income Tax department
Concerned over high interest outgo on tax refund claims, the finance ministry has asked the income tax department to speed up the processing of such claims for the current financial year.
The slow processing of tax refund claims has always been a bugbear for the government and taxpayers alike. The backlog has risen steadily over the years. In 2005-06 there were 5.7 lakh refund claims, which has shot up to 19.4 lakh in 2009-10.
The finance ministry has asked income tax department to take the help of the Institute of Chartered Accountants of India (ICAI) -the regulatory and governing body of CAs -to clear up long-pending claims.
“The income tax department has raised concerns over the delay in processing the refund cases and the authorities have been asked to expedite the exercise,“ a government official, who refused to be identified said.
The government wants to finish the process by March 31. The Comptroller and Auditor General of India had said in its report that the government has refunded R57,101 crore in 200910, which includes an interest amount of about R12,951 crore -nearly 30%. In 2008-09, the amount of actual refunds saw a decline while interest payments increased, reflecting the delay in clearing claims. The CAG report also revealed that the pendency rate for tax refund claims has gone up to 40.4% in 2009-10 from 22.5% in 2005-06.
“We will work closely with the government in clearing income tax refunds and the exercise would get priority,“ said G Ramaswamy, president, ICAI.
In India, the average time taken for processing income tax refund claims is about 10 months. Any taxpayer, who has paid income tax in excess of the amount due in a given year, is eligible for a refund.
The slow processing of tax refund claims has always been a bugbear for the government and taxpayers alike. The backlog has risen steadily over the years. In 2005-06 there were 5.7 lakh refund claims, which has shot up to 19.4 lakh in 2009-10.
The finance ministry has asked income tax department to take the help of the Institute of Chartered Accountants of India (ICAI) -the regulatory and governing body of CAs -to clear up long-pending claims.
“The income tax department has raised concerns over the delay in processing the refund cases and the authorities have been asked to expedite the exercise,“ a government official, who refused to be identified said.
The government wants to finish the process by March 31. The Comptroller and Auditor General of India had said in its report that the government has refunded R57,101 crore in 200910, which includes an interest amount of about R12,951 crore -nearly 30%. In 2008-09, the amount of actual refunds saw a decline while interest payments increased, reflecting the delay in clearing claims. The CAG report also revealed that the pendency rate for tax refund claims has gone up to 40.4% in 2009-10 from 22.5% in 2005-06.
“We will work closely with the government in clearing income tax refunds and the exercise would get priority,“ said G Ramaswamy, president, ICAI.
In India, the average time taken for processing income tax refund claims is about 10 months. Any taxpayer, who has paid income tax in excess of the amount due in a given year, is eligible for a refund.
Monthly Provident Fund statement w.e.f 2012-13
the Employees Provident Fund Organisation , or EPFO, has decided to give monthly updates of contributions instead of an annual statement.
The EPFO expects this will bring instances of defaults by employers to the notice of workers, who, in turn, will put pressure to demand their dues.
The EPFO, which manages retirement savings of more that 5 crore workers, has been computerising its offices across the country and will be in a position to provide monthly information from the next fiscal.
At present, subscribers only get a small slip at the end of the fiscal with just the opening and closing balance and have no idea about how the amount has grown through the year.
"Often subscribers do not calculate what the total amount should be and do not notice even if contributions have not been made in particular months," Central Provident Fund Commissioner Samirendra Chatterjee told ET. Once monthly data is available, omissions can be easily identified, he added.
The default amount identified by the EPFO through periodic inspection of random establishments in 2009-10 was about 166.12 crore. The EPFO expects more complaints about defaulting employers once the monthly statements are made available to employees.
Defaults have been highest for establishments in Tamil Nadu followed by Andhra Pradesh, Bihar, Karnataka and Kerala.
"Every subscriber is expected to have a detailed statement from 2012-13," Chatterjee said.
Both employers and employees are mandated to contribute 12% of basic pay to the fund every month. The entire contribution to the fund is usually made by employers who deduct the employees share from their pay and add it their own contribution.
About 20,000 crore to 30,000 crore is added to the corpus every year.
The EPFO expects this will bring instances of defaults by employers to the notice of workers, who, in turn, will put pressure to demand their dues.
The EPFO, which manages retirement savings of more that 5 crore workers, has been computerising its offices across the country and will be in a position to provide monthly information from the next fiscal.
At present, subscribers only get a small slip at the end of the fiscal with just the opening and closing balance and have no idea about how the amount has grown through the year.
"Often subscribers do not calculate what the total amount should be and do not notice even if contributions have not been made in particular months," Central Provident Fund Commissioner Samirendra Chatterjee told ET. Once monthly data is available, omissions can be easily identified, he added.
The default amount identified by the EPFO through periodic inspection of random establishments in 2009-10 was about 166.12 crore. The EPFO expects more complaints about defaulting employers once the monthly statements are made available to employees.
Defaults have been highest for establishments in Tamil Nadu followed by Andhra Pradesh, Bihar, Karnataka and Kerala.
"Every subscriber is expected to have a detailed statement from 2012-13," Chatterjee said.
Both employers and employees are mandated to contribute 12% of basic pay to the fund every month. The entire contribution to the fund is usually made by employers who deduct the employees share from their pay and add it their own contribution.
About 20,000 crore to 30,000 crore is added to the corpus every year.
Friday 18 March 2011
LAST MINUTE TAX PLANNING? SOME USEFUL HINTS
Do you find yourself in a situation where there are just a bunch of days ahead for the deadline of submission of tax documents? Here is a quick guide to help you sort out your finances last minute!
1. Target full utilisation of Section 80 C: Maximum deduction available is to the tune of Rs. 100,000. Assess your income to arrive at the amount you need to invest in this section. The investment avenues include; Public Provident Fund (PPF) up to Rs. 70,000, National Saving Certificate (NSC), Life Insurance or ULIP premium, tuition fees paid for children’s education
(2 children max), Equity linked savings schemes (ELSS), Post office saving deposit (POSD) and five year fixed deposits with banks among others. For individuals in the higher income bracket, section 80 C which is the most popular one may not be sufficient to reduce overall tax liability. Here is where the other sections will play a key role in reducing tax outflow.
2. Interest on home loan: Individuals intending to buy a house should consider opting for a home loan. Interest payments up to Rs 150,000 pa are eligible for deduction under Section 24
3. House Rent Allowance (HRA): You can take advantage of this if you are renting an accommodation. There are set guidelines determining the amount deductible. Please note that the rent agreement / rent receipts need to be submitted
4. Health Insurance Premium: Annual deduction of Rs. 15,000 is permissible for self, spouse and dependent children. Also and additional Rs. 15,000 is allowed for parents
5. Medical reimbursement: Medical treatment expenses up to Rs. 15,000 can be claimed annually as deduction from salary u/s 17(2). Actual bills need to be produced
6. Donation to Charitable institutions: Subject to the stated limits, donations to specified funds/institutions are eligible for tax benefits under Section 80G. Receipt needs to be produced.
7. Interest paid on educational loans: Deduction can be claimed on interest paid on educational loans taken for higher education of you, your spouse and children under section (u/s) 80 E. There is no limit on the amount of deduction you can claim. However, the loan should be taken for a graduate or post-graduate program in engineering, medicine or management or a post-graduate course in the pure or applied sciencesPoints to remember1. Section 80 C allows deduction of tuition fees spent on children's education
2. If you want to pay rent to your parents or relatives (kindly note this arrangement cannot be done with your spouse), you will need to treat them as landlords and request the owner of the house to declare it in his/her personal income tax return
3. The maturity proceeds of life insurance policies are not taxable
4. Conveyance allowance up to maximum of Rs. 800 can be claimed per month as deduction from salary u/s 10(14)
5. Long term capital gains on listed shares/securities are not taxable
6. Capital gains on sale of house property can be avoided by purchasing another house property within two years after or one year before date of sale
7. Stamp duty charges and registration charges paid while purchasing new house is eligible for tax deduction under Section 80 C
The first step in the direction of tax saving is to assess your tax liability. So start the process so that you can then decide on what all to opt for to save maximum taxes.
Tax incentives are given to encourage savings/ investments. Savings form part of your overall financial plan which in effect means tax planning is a subset of financial planning. Your financial plan will set objectives for you based on your aspirations, your life style, your age group, size of family etc. The question you need to ask yourself is, "Did you adhere to your financial plan while investing in an instrument for tax saving purposes?" Well if your answer to that is "yes", then you’re moving in the direction of attaining your financial goals. If not, it's time for you to take corrective action. The damage may have been done for the past year but the forthcoming is an opportunity for you to plan well. Remember, procrastination is the thief of time. So if you postpone it now, this year will be no different from the last one.
1. Target full utilisation of Section 80 C: Maximum deduction available is to the tune of Rs. 100,000. Assess your income to arrive at the amount you need to invest in this section. The investment avenues include; Public Provident Fund (PPF) up to Rs. 70,000, National Saving Certificate (NSC), Life Insurance or ULIP premium, tuition fees paid for children’s education
(2 children max), Equity linked savings schemes (ELSS), Post office saving deposit (POSD) and five year fixed deposits with banks among others. For individuals in the higher income bracket, section 80 C which is the most popular one may not be sufficient to reduce overall tax liability. Here is where the other sections will play a key role in reducing tax outflow.
2. Interest on home loan: Individuals intending to buy a house should consider opting for a home loan. Interest payments up to Rs 150,000 pa are eligible for deduction under Section 24
3. House Rent Allowance (HRA): You can take advantage of this if you are renting an accommodation. There are set guidelines determining the amount deductible. Please note that the rent agreement / rent receipts need to be submitted
4. Health Insurance Premium: Annual deduction of Rs. 15,000 is permissible for self, spouse and dependent children. Also and additional Rs. 15,000 is allowed for parents
5. Medical reimbursement: Medical treatment expenses up to Rs. 15,000 can be claimed annually as deduction from salary u/s 17(2). Actual bills need to be produced
6. Donation to Charitable institutions: Subject to the stated limits, donations to specified funds/institutions are eligible for tax benefits under Section 80G. Receipt needs to be produced.
7. Interest paid on educational loans: Deduction can be claimed on interest paid on educational loans taken for higher education of you, your spouse and children under section (u/s) 80 E. There is no limit on the amount of deduction you can claim. However, the loan should be taken for a graduate or post-graduate program in engineering, medicine or management or a post-graduate course in the pure or applied sciencesPoints to remember1. Section 80 C allows deduction of tuition fees spent on children's education
2. If you want to pay rent to your parents or relatives (kindly note this arrangement cannot be done with your spouse), you will need to treat them as landlords and request the owner of the house to declare it in his/her personal income tax return
3. The maturity proceeds of life insurance policies are not taxable
4. Conveyance allowance up to maximum of Rs. 800 can be claimed per month as deduction from salary u/s 10(14)
5. Long term capital gains on listed shares/securities are not taxable
6. Capital gains on sale of house property can be avoided by purchasing another house property within two years after or one year before date of sale
7. Stamp duty charges and registration charges paid while purchasing new house is eligible for tax deduction under Section 80 C
The first step in the direction of tax saving is to assess your tax liability. So start the process so that you can then decide on what all to opt for to save maximum taxes.
Tax incentives are given to encourage savings/ investments. Savings form part of your overall financial plan which in effect means tax planning is a subset of financial planning. Your financial plan will set objectives for you based on your aspirations, your life style, your age group, size of family etc. The question you need to ask yourself is, "Did you adhere to your financial plan while investing in an instrument for tax saving purposes?" Well if your answer to that is "yes", then you’re moving in the direction of attaining your financial goals. If not, it's time for you to take corrective action. The damage may have been done for the past year but the forthcoming is an opportunity for you to plan well. Remember, procrastination is the thief of time. So if you postpone it now, this year will be no different from the last one.
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