The difference between NRE and NRO accounts

There are two options an NRI interested in opening a bank account in India can choose from – an NRE or an NRO account. Are you an NRI keen on getting a bank account opened in India? Then it would be advantageous to know how these two types of accounts differ and which one is right for you.

The Government of India has permitted NRIs to open rupee accounts in India in order to repatriate funds from their home countries. The two most common accounts are the NRE and NRO accounts. Let’s take a closer look at them.

What’s an NRE account?
A Non-Resident External (NRE) account is a bank account that’s opened by depositing foreign currency at the time of opening a bank account. This currency can be tendered in the form of traveler’s checks or notes.

What’s an NRO account?
A Non-Resident Ordinary (NRO) account is the normal bank account opened by an Indian going abroad with the intention of becoming an NRI. An NRI can also open this account by sending remittances from his home country or by transferring funds from his other NRO account. It offers the same facilities as an NRE account, except that any repatriation done through this account should be reported to RBI by filling up prescribed forms.

How do NRE and NRO accounts differ?
Funds remitted from overseas sources or local funds that would otherwise have been sent to the accountholder abroad can instead be transferred to NRE Accounts. On the other hand, local funds that aren’t eligible to be remitted abroad must be credited to an NRO account.

Can you transfer funds fromanNREto anNROaccount and vice versa?
It’s easy to transfer funds fromanNREto an NRO account. But it’s not possible to transfer funds from an NRO account to an NRE account. Once you transfer funds fromanNREtoanNRO account, the amount is non-repatriable. Consequently, you cannot transfer it back.

What’s the difference in the tax treatment for interest earned on an NRE and an NRO account?
The interest earned on any type of NRO bank as well as the credit balances in this kind of account are taxed under the account holder’s tax bracket. On the other hand, interest earned on the NRE account is totally exempted from income tax, and the credit balances in the account don’t attract any wealth tax. Any gift given to a close relative doesn’t attract gift tax

Technical support - Digital Signature use

Errors while signing on the form

Error message: Signer's identity unknown" (Shows a "?" mark) while signing the PDF document.


Solution: The message you get because Adobe software do not have the trust root certificate of CCA & TCS. You can go ahead and upload this file the MCA application will take care of the same. Incase you want to resolve this please follow the steps below.
Right click on the box with your signature in the eform and select "Properties".
A wizard will open up, Click on "Show Certificate" button .
On the right side top select "Trust" Tag.
You will see Red Cross mark against each settings.
Click on "Add to Trust Identities" button.
A adobe security message will come up , click "OK"
Under Trust Settings Check all the check boxes and click "OK"
Click on "Verify signature" button on the fist window and click "OK"
For further assistance please log the complaint ticket on MCA portal (Link below) http://www.mca.gov.in/DCAPortalWeb/dca/MyMCALogin.do?method=setDefaultProperty&mode=23
Error message: "Digital Signature Verification failed or Your CA is not Trusted" or Getting email id as "helpdesk@tcs-ca.tcs.co.in" or Windows has blocked this software because it can't verify the publisher Name: Assure SignContorl.Cab :Publisher:Unknow publisher on MCA portal.


Solution: Check whether the trust chain installed along with the certificate .If not, install the trust chain as per the below mentioned path.
Visit our TCS-CA web site: https://www.tcs-ca.tcs.co.in> click on Current certificates Under CA certificates> and click on each certificate(CCA2007 &TCSCA)> open>and install the same by clicking "Install certificate" until import was successful.
Once the same is completed then follow below instructions .Please note that the same has been sent by MCA .Hence, try the same once and if you are still facing the problem ,contact MCA help line on email id "appl.helpdesk@mca.gov.in" for further assistance.

Ensure that you are logged-in to the computer as 'Administrator' and 'ActiveX' control settings in 'Internet Explorer' are enabled, as per steps given below:
Open 'Internet Explorer' >Tools > Internet Options > Security.
Click "Internet" and change the Security Settings to "Medium".
Click "Custom Level" Button.
Enable the "Download Signed ActiveX controls" option.
Enable the "Run ActiveX controls and Plugins" option.
Enable the "Script ActiveX controls marked safe for scripting" option.
Enable the "Download unsigned ActiveX controls" option.
If all the settings are enabled and you have administrator rights then a control should get downloaded on your machine on accessing the Register DSC facility for Director or Manager/Secretary or Practicing Professional. You can check for the same by
1. Open Internet Explorer
2. Tools->Internet Options
3. General->Settings->View Objects
A control named 'AssureSignControl Control' should be present. If it doesn?t exist then it implies that admin rights are not set on your profile.
Please contact your local administrator for the same.
Error Message: Creation of the signature could not be completed :Platform exception, Key does not exists, 2148073494


Solution: Please call us on below mentioned no?s for further assistance in this regard
Toll free: 18004252922 and direct Line 040-6667 3524/25/26.
Error message :
1. The following signatures on the form are not valid :Director/Manager/Managing Director. OR
2. Following errors have occurred in the prescrutiny. Please click to view the errors :
Signature validation failed for signature field for practicing professional. The person is not authorized to sign on this field. OR
3. Creation of this signature could not be completed Error encountered while signing:
Platform exception,Bad UID Error code: 2148073504
Platform exception,Access denied Error code: 2148073488



Solution:Please raise a support ticket on MCA portal (Link below)
http://www.mca.gov.in/DCAPortalWeb/dca/MyMCALogin.do?method=setDefaultProperty&mode=23
You can also mail to appl.helpdesk@mca.gov.in for further assistance in this regard.
Error Message: The windows Cryptographic Service Provider reported an error:The keyset is not defined.Error code:2148073497


Solution: Need to check whether the certificate is present along with the exchange key& corresponding root certificates and smart card is started. If yes then please contact MCA help line for further assistance in this regard.
Error Message:Platform exception.Cannot find the certificate and private key for decryptionError Code:2148081675


Reason : The above error occurs if the certificate does not have the exchange key

Solution: Need to check whether the certificate is present along with the exchange key& corresponding root certificates. If yes then there is no problem at the certificate and please contact MCA help line for further assistance in this regard.
Error Message:Creation of the signature could not be completed Platform exception.The operation requires a smart card,but no smart card is currently in the device. Error code:2148532236


Reason : The above error would occurs if the smart card services is not enabled

Solution : If you are using the certificate from any USB Token. Please ensure that same is plugged in token to USB port and check whether the Smart card services is started. Check accordingly and proceed further.
Error message on IT portal :
1. You might not have inserted the USB Token
2. Capicom.dll is absent on your system32 directory
3. No supported drivers installed on your system
For 2&3 Contact your System/Token vendor.


Solution: Please contact us on below mentioned no's for further assistance in this regard.
Toll free: 18004252922 and direct Line 040-6667 3524/25/26.
Error message: The message contents may have been altered would occur while verifying the signed mail at recipient end.


Solution:This message occurs if more text is added or removed from the mail content after signing.
For ex: Some of the mails at the bottom will have "DISCLAIMER" .Actually ,this Disclaimer is attached from the server side to the signed message and it will be added after the signing is completed . So, at the recipient end, while verifying the signed mail, this error would occur since the text "DISCLAIMER" has added after mail is signed.
Error Message: "Signature is Null" on NSDL Portal while logging by using Digital signature certificate.


Reason: Please check with NSDL whether the serial number of the certificate which you are using is mapped to the corresponding Login Id which is used for login on NSDL portal.
Error message : You do not have a valid digital certificate. Please get a Digital Certificate from a CCA approved Certification Authority.


Solution: If the certificate that you are using is a renewed one then ensure that the certificate details have to be updated on IREPS site before using the same. If not then find the below instructions for the error encountered.
Ensure that need to perform the below instructions on the system from where the certificate is being used for IREPS activities.
you have to check whether the certificate is present under personal tab of IE browser [Path to check the certificate in IE browser : Tools> Internet options>content>certificates>personal ] [If you have the certificate in any USB Token then ensure that need to plug-in the same to USB port of the system.]
Need to check whether the same certificate is also present in Other people tab of IE browser [Path to check the certificate in IE browser : Tools> Internet options>content>certificates> Other people]
Need to check the security settings as given on IREPS homepage by clicking on "system Settings" Under "Resources".
Check the date format of the system by following mentioned path
Under control panel>Click on Regional & languages>Click on Customize>Click on Date>where check the date format against Short date format .Same should be M/d/yyyy.

Once you check all the settings then try to register/ place the tender on IREPS portal. Incase if the problem still persists then contact IREPS for further assistance in this regard.
Error message : "Unable to retrieve the Signature" / "Please use the same digital signature certificate which has been attached to your profile" on IREPS Portal


Solution : Please check the below instructions.
Check at the certificate end whether everything is fine (i,e certificate is with in the validity period, exchange key and valid trust chain (i,e TCS & CCA) ,certificate category (i,e Class-III-Company) and appearing under Personal tab of IE browser)
Same Certificate is in Other people tab of IE browser
Check the security settings as given on IREPS homepage by clicking "system Settings" Under "Resources".

Error message : Welcome to Indian Railways E-Procurement System. Your request for registration to www.ireps.gov.in can not be accepted due to the following reason(s)
1. Company/Firm name already exists.
2. Company/Firm name and user name in digital signature and your request does not match.
3. Digital signature attached by you are not Class III type with Company/Firm name as per stipulation of IREPS system.
4. Digital signature attached by you is not valid.
You may take further corrective action and can submit your request for registration afresh.


Solution: Please check the above all instructions whether you are following accordingly. If yes and even though , facing the problem then need to check below conditions.
Check the security settings as given on IREPS homepage by clicking "system Settings" Under "Resources".
Have the valid certificate in both personal & other people tab of IE browser
Control panel>Click on Regional and Language options>Click on Customize>Click on Date>In the Short date format field , the date format should be M/d/yyyy.

Error message: "Signing Failed Reason" while placing the tender on DGS & D portal


Solution : Access the site : http://dgsnd.gov.in >Click on Indentor's Page >Click on Click Here(E-Lock software) This solution would solve the problem. Incase the problem still persists then please contact concerned e-tender for further assistance in this regard.
Error message: Your Machine is Not Ready for Certificate Mapping on NALCO e-tender


Solution : Need to check the security level whether it is medium and all active x controls & plug-ins are enabled under Tools>Internet options>security>Custom level of IE browser. If not make the changes and once the changes are done then you would be asked for installing a control. So, do install the same and once it is done then try to use the certificate on said e-tender
Error message: PKI Based security "Sorry Authentication failed" on https://www.tenderwizard.com portal.


Solution : If you are using the certificate from any USB token then need to check whether the correct password is provided to token. If yes and even though getting the problem then request you to check with the concerned e-tender if the corresponding certificate SRNO need to be mapped to the user id with which you are logging on said portal.

Others

Error Message : "Records not available" after logging on TCS-CA webporta.


Reasons & Solution:
You must be trying to access the records with the wrong User-Id. Solution: Check the user id that you are using is the same as the user id when you registered for Digital Signature certificate request.
If renewal request has already been placed under renewal link.
If you are trying to renew the certificate 30 days before & after expiry of the certificate since renewal link on TCS-CA web portal will only be available exactly 30 days before and after from the date of expiry of the certificate including time.
Please check the above all mentioned reasons and proceed further.
Error Message: Certificate got generated with wrong Email-Id which was given at the time of enroll


Solution: Once the certificate is generated the details cannot be changed. The Authentication PIN mail is an automated one and can be sent only to that email-ID provided during online enrollment. Hence, a valid email ID has to be provided during enrollment. Before the online request is generated, there is a prompt to check the email ID once again.

So, in this case solution is
Please check if the email id can be created as provided in the online enrollment.If the same is possible then you may utlilize get authentication pin for getting the authentication pin.
If the email id creation as given in the enrollment form is not possible then only solution is to revoke the existing certificate and apply for a fresh certificate on a chargeable basis.

Error Message: Authentication failed.


Solution: This error happens in two situations.
If you give wrong User ID or password for during Member Login on TCS-CA web portal. In this case, you may please contact your Registration Authority for resetting password of User ID member login.
If you give wrong password while logging into the token.In this case , It is advised that not to access the token with the wrong password since token will be blocked after maximum no. of attempts. Hence, please contact you Registration Authority whom did you approach for obtaining the certificate for further assistance in this regard.

Error message :You may have disabled Active X controls (Object Error)


Solution : In Internet Explorer (IE)browser, Tools>Internet options>security>select Trusted sites>Click on Sites> where add the TCS-CA site https://www.tcs-ca.tcs.co.in in the box provided (I.e. Add this website to the zone). Now click on Add and close

Now again, Under Tools>Internet options>security>Select trusted sites>Click on Custom level of IE browser. Set the Reset custom settings to Medium then click on "Reset" > Click yes on the pop box. Check whether all activeX controls are enabled. If no, then make all the activeX controls enable. click on OK > Click yes on the pop box.

Please find the below procedure to install the cab file
Download the TCSCADataSigner.cab file from link http://www.tcs-ca.tcs.co.in/controls/TCSCADataSigner.cab and save on your machine.
Extract all the files to a loation.
Go to Start -> Run
Type regsvr32 <> at the command prompt.
<> needs to be replaced by the full path to the ocx.
For example: If you have saved TCSCADatasigner.ocx in C drive,then type the following at the command prompt:regsvr32 c:\TCSCADatasigner.ocx

Service of documents by e-mode instead of Under Posting Certificate (UPC)

Ministry of Corporate Affairs General Circular No. 17 dated 21 April 2011
21 Apr 2011
Service of documents by e-mode instead of Under Posting Certificate (UPC) - Clarification
All the Regional Directors,

All the Registrar of Companies/ Official Liquidators

Subject:- Green Initiatives in the Corporate Governance - Clarification regarding service of documents by e-mode instead of Under Posting Certificate (UPC).

Sir,

The Ministry of Corporate Affairs has taken a "Green Initiative in the Corporate Governance" by allowing paperless compliances by the Companies after considering sections 2, 4, 5, and 81 of the Information Technology Act, 2000 for legal validity of compliances under Companies Act through electronic mode.

Section 53 of the Companies Act, 1956 provides service of documents under 'Certificate of posting' as one of the accepted mode of service. Whereas the Department of posts has recently discontinued the postal facility under 'Certificate of posting' vide their letter dated 23.02.2011. The Information Technology Act, 2000 also permits service of documents etc., in electronic mode.

Keeping in view of above, it is hereby clarified that a company would have complied with Section 53 of the Companies Act, if the service of document has been made through electronic mode provided the company has obtained e-mail addresses of its members for sending the notice/documents through e-mail by giving an advance opportunity to every shareholders to register their e-mail address and changes therein from time to time with the company.

In cases where any member has not registered his e-mail address with the company, the service of document etc will be effected by other modes of service as provided under section 53 of the Companies Act, 1956.

Amendment in FCRA Act w.e.f 1 May 2011

The Foreign Contribution (Regulation) Act, 2010 has come into effect from May 1, 2011. The Ministry of Home Affairs has issued the necessary Gazette Notification vide S.O. 999 (E) dated the 29th April, 2011 in this regard.

The Ministry of Home Affairs has also issued a Gazette Notification vide G.S.R. 349 (E) dated the 29th April, 2011 notifying the Foreign Contribution (Regulation) Rules, 2011 made under section 48 of FCRA, 2010. The FCR Rules, 2011 have come into force simultaneously with FCRA, 2010.

Salient Features of the Act
• Any association granted prior permission or registered with the Central Government under Section 6 or under the repealed FCRA, 1976, shall be deemed to have been granted prior permission or registered, as the case may be, under FCRA, 2010 and such registration shall be valid for a period of five years from the date on which the new Act has come into force.


• While the provisions of the repealed FCRA, 1976 have generally been retained, the FCRA, 2010 is an improvement over the repealed Act as more stringent provisions have been made in order to prevent mis-utilisation of the foreign contribution received by the associations.


• Any organisation of a political nature and any association or company engaged in the production and broadcast of audio or audio visual news or current affairs program have been placed in the category prohibited to accept foreign contribution.


• A new provision has been introduced to the effect that no person who receives foreign contribution as per provisions of this Act, shall transfer to other person unless that person is also authorized to receive foreign contribution as per rules made by the Central Government.


• Another new provision has been made to the effect that foreign contribution shall be utilized for the purpose for which it has been received and such contribution can be used for administrative expenses up to 50% of such contribution received in a financial year. However, administrative expenses exceeding fifty per cent of the contribution to be defrayed with the prior approval of the Central Government.


• New provisions have been made for suspension as well as cancellation of registration granted for violation of the provisions of the Act. Such provisions did not exist in the repealed Act.


• New provision has also been made for management of foreign contribution and assets created out of such contribution of persons whose certificates have been cancelled.


• Under the repealed Act, there was no time limit regarding the validity of registration certificate granted to the associations etc. for accepting foreign contribution. FCRA, 2010 provides that the certificate granted shall be valid for a period of five years and the prior permission shall be valid for the specific purpose or specific amount of foreign contribution for which permission was granted. Further, every person who has been granted a certificate shall renew it within six months before the expiry of the period of certificate.


• No funds other than foreign contribution shall be deposited in the FC account to be separately maintained by the associations etc. Every bank shall report to such authority, as may be prescribed, the amount of foreign remittance received, sources and manner and other particulars.


• Provision has been made for inspection of accounts if the registered person or person to whom prior permission has been granted fails to furnish or the intimation given is not in accordance with law.


• A new provision has been introduced to the effect that the assets of any person who has become defunct shall be disposed of in such manner as may be, specified by the Central Government.


• A new provision has been introduced to the effect that any person, who knowingly gives false intimation and seeks prior permission or registration by means of fraud, false representation or concealment of material fact, shall, on conviction by Court, would be liable to imprisonment for a term which may extend to six months or fine or with both.


• Any person contravening the provisions of the Act shall be punishable with imprisonment for a term which may extend to five years or with fine or with both.

Salient Features of the Rules

• Guidelines for declaration of an organisation to be of a political nature, not being a political party have been prescribed.

• Activities to be treated as speculative activities have been defined.

• Expenditure constituting 'Administrative expenses' has been clearly defined.

• Modalities for submission of application for obtaining registration or prior permission to receive foreign contribution have been given in detail in the Rules and Forms for filing the applications.


• The applications for obtaining registration or prior permission shall have to be made electronically on-line, and shall have to be followed by forwarding the hard copy of the on-line application, duly signed, together with the required documents within thirty days of the submission of the on-line application, failing which the request of the person shall be deemed to have ceased.


• Any person whose request has ceased shall be able to prefer a fresh on-line application only after six months from the date of cessation of the previous application.


• No person would be permitted to prefer a second application for registration or prior permission within a period of six months after submitting an application either for the grant of prior permission for the same project or for registration.


• A new provision has been made for submission application fee. The fee for obtaining registration or prior permission would be Rs. 2000/- and Rs. 1000/- respectively.


• Applications made for registration or prior permission under the repealed FCRA, 1976 but not disposed of before the date of commencement of these rules shall be deemed to be an application for registration or prior permission, as the case may be, under the new Rules, subject to the condition that the applicant furnishes the prescribed fees for such registration or prior permission, as the case may be.


• Every person who has been granted registration or prior permission shall maintain a separate set of accounts and records, exclusively, for the foreign contribution received and utilised.


• Every certificate of registration issued to a person shall be liable to be renewed after the expiry of five years from the date of its issue on proper application and application for its renewal shall have to be made in the prescribed form accompanied by a fee of Rs. 500/- six months before the date of expiry of the certificate of registration. A person implementing an ongoing multi-year project shall apply for renewal twelve months before the date of expiry of the certificate of registration.


• In case no application for renewal of registration is received or such application is not accompanied by the requisite fee, the validity of the certificate of registration of such person shall be deemed to have ceased from the date of completion of the period of five years from the date of the grant of registration. If the validity of the certificate of registration of a person has ceased in accordance with the provisions of these rules, a fresh request for the grant of a certificate of registration may be made by the person to the Central Government as per the provisions of the Rules.


• In case a person who has been granted a certificate of registration or prior permission receives foreign contribution in excess of one crore rupees, or equivalent thereto, in a financial year, he/it shall place the summary data on receipts and utilisation of the foreign contribution pertaining to the year of receipt as well as for one year thereafter in the public domain. Besides, the Central Government shall also display or upload the summary data of such persons on its website for information of the general public.


• In case the certificate of registration is suspended under the relevant provisions the Act, up to twenty-five per cent of the unutilised amount may be spent, with the prior approval of the Central Government, for the declared aims and objects for which the foreign contribution was received. The remaining seventy-five per cent of the unutilised foreign contribution shall be utilised only after revocation of suspension of the certificate of registration.


• The amount of foreign contribution lying unutilised in the exclusive foreign contribution bank account of a person whose certificate of registration has been cancelled shall vest with the banking authority concerned till the Central Government issues further directions in the matter.


• If a person whose certificate of registration has been cancelled transfers/has transferred the foreign contribution to any other person, the provisions of sub-rule (1) of this rule shall apply to the person to whom the fund has been transferred.


• Every bank shall send a report to the Central Government within thirty days of any transaction in respect of receipt of foreign contribution by any person who is required to obtain a certificate of registration or prior permission under the Act, but who was not granted such certificate or prior permission as on the date of receipt of such remittance. The report shall contain the details regarding name and address of the donor, name and address of the recipient, account number, name of the Bank and Branch, amount of foreign contribution (in foreign currency as well as Indian Rupees), date of receipt, manner of receipt of foreign contribution (cash/cheque/electronic transfer etc.).


• The bank shall also send a report containing the above details to the Central Government within thirty days from the date of such last transaction in respect of receipt of any foreign contribution in excess of one crore rupees or equivalent thereto in a single transaction or in transactions within a duration of thirty days, by any person, whether registered or not under the Act.


• Every person who receives foreign contribution under the Act shall submit a report, duly certified by a chartered accountant, in the prescribed Form, accompanied by an income and expenditure statement, receipt and payment account, and balance sheet for every financial year beginning on the 1st day of April within nine months of the closure of the financial year, to the Secretary to the Government of India, Ministry of Home Affairs, New Delhi. The annual return in the prescribed Form shall reflect the foreign contribution received in the exclusive bank account and include the details in respect of the funds transferred to other bank accounts for utilisation. If the foreign contribution relates to articles or foreign securities, the intimation shall be submitted in the prescribed Forms.


• Every such return in shall also be accompanied by a copy of a statement of account from the bank where the exclusive foreign contribution account is maintained by the person, duly certified by an officer of such bank. The accounting statements referred to above shall be preserved by the person for a period of six years. A ‘NIL’ report shall be furnished even if no foreign contribution is received during a financial year.


• Foreign contribution received by a candidate for election, referred to in section 21, shall be furnished in the prescribed Form within forty-five days from the date on which he is duly nominated as a candidate for election.


• An application for revision of an order passed by the competent authority under the Act shall be made to the Secretary, Ministry of Home Affairs, Government of India, New Delhi on a plain paper. It shall be accompanied by a fee of Rs. 1000/-


• An application for the compounding of an offence may be made to the Secretary, Ministry of Home Affairs, on a plain paper and shall be accompanied by a fee of Rs. 1000/-.


• The Central Bureau of Investigation or any other Government investigating agency that conducts any investigation under the Act shall furnish reports to the Central Government, on a quarterly basis, indicating the status of each case that was entrusted to it, including information regarding the case number, date of registration, date of filing charge sheet, court before which it has been filed, progress of trial, date of judgment and the conclusion of each case.


• Any information or intimation about political or speculative activities of a person shall be furnished to the Secretary to the Government of India in the Ministry of Home Affairs, New Delhi
. Such information or intimation shall be sent by registered post.
Any person intending to transfer the foreign contribution may make an application to the Central Government in the prescribed Form. The Central Government may permit the transfer in respect of a person who has been granted the certificate of registration or prior permission under, in case the recipient person has not been proceeded against under any provision of the Act. Any transfer of foreign contribution shall be reflected in the prescribed returns by the transferor and the recipient.


• In case the foreign contribution is proposed to be transferred to a person who has not been granted a certificate of registration or prior permission by the Central Government, the person concerned may apply for permission to the Central Government to transfer a part of the foreign contribution, not exceeding ten per cent, of the total value of the foreign contribution received. The application shall be countersigned by the District Magistrate having jurisdiction in the place where the transferred funds are sought to be utilised. The District Magistrate concerned shall take an appropriate decision in the matter within sixty days of the receipt of such request from the person. The donor shall not transfer any foreign contribution until the Central Government has approved the transfer.


• The Foreign Contribution (Regulation) Act, 2010 (42 of 2010) dated the 26th September, 2010 was notified in The Gazette of India – Extraordinary – Part II - Section I dated the 27th September, 2010. However, the Act was to come into force on such date as the Central Government may, by notification in the Official Gazette appoint. Consequently, the earlier Act, viz., the Foreign Contribution (Regulation) Act, 1976 has also been repealed.

An overview of New Section 44AD of the Income Tax Act, 1961 that comes into effect from A.Y. 2011-2012

An overview of New Section 44AD of the Income Tax Act, 1961 that comes into effect from A.Y. 2011-2012

Section:44AD – Special provision for computing profits and gains of business on presumptive basis.

(1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid amount claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.

(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed:

Provided that where the eligible assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.

(3) The written down value of any asset of an eligible business shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.

(4) The provisions of Chapter XVII-C shall not apply to an eligible assessee in so far as they relate to the eligible business.

(5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business as lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section.

Explanation.—For the purposes of this section,—
(a) “eligible assessee” means,—
(i) an individual, Hindu undivided family or a partnership firm, who is resident, but not a limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009); and
(ii) who has not claimed deduction under any of the sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading “C. Deductions in respect of certain incomes” in the relevant assessment year;

(b) “eligible business” means,—

(i) any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE; and

(ii) whose total turnover or gross receipts in the previous year does not exceed an amount of sixty lakh rupees.

Discussion:

Ø What was 44AD earlier to A.Y. 2011-2012?
The section heading was as “Profits and gains of business of civil construction” whereby it was applicable to only such assessees who were engaged in business of civil construction.

Ø What is 44AD w.e.f. A.Y. 2011-2012?
The Finance (No. 2) Act, 2009 has expanded the scope of this section beyond the assessee who are engaged in business of civil construction.

Ø Who is eligible assessee?

a. Individual
b. Hindu Undivided Family
c. Partnership Firm, who is resident.
However, this section has excluded a limited liability partnership firm from its scope.

Further, this section is applicable only to those assessee who have not claimed deductions under the sections 10A, 10AA, 10B, 10BA or under the provisions of Chapter VI-A under the heading “C. Deductions in respect of certain incomes”, i.e. sections 80HH to 80RRB.

Ø What is eligible business?
a. Any business other than the business of plying, hiring or leasing of goods carriages that is covered by section 44AE;
b. The business whose turnover or gross receipts do not exceed ` 60 lakhs.

Ø What is the income deemed under this section?

The income deemed under this section shall be an amount equal to or higher than 8% of the turnover or gross receipts of the business. Such amount shall be deemed to the income charged under the head “Profits and gains of business or profession”.

Ø What are the other consequences?

a. The deductions under sections 30 to 38 shall be assumed to have already been given full effect. No further deduction shall be allowed under this sections.

b. The WDV of the assets used in the eligible business shall be deemed to have calculated as if the eligible assessee had been allowed the deduction of the depreciation for each of such assessment years.

c. The salary and interest to partners are still allowable subject to the limits prescribed under section 40(b)

Ø What are the provisions relating to Advance Tax?

The assessees opting for this section shall be exempted from the provisions of Chapter XVII-C i.e. advance tax. The eligible assessee shall not be required to comply with the provisions relating to advance tax.

Ø What about maintaining books of accounts?

The eligible assessee opting for this section need not maintain the books of accounts related to the eligible business.

Ø What if the income of the assessee is less than the deemed rate, i.e. 8 %?

The assessee has an option to declare income lower than what is deemed in this section. However, he has to fulfill certain conditions and compliances for that. Those compliances are as below:

a. Maintain the books of account and other documents as required under section 44AA
b. Get the books of accounts audited under section 44AB

Ø What about the section 44AF?

The earlier section 44AF which read as “Profits and gains of retail business” shall become inoperative from the assessment year 2011-2012

Director’s Relatives (Office or Place of Profit) Amendment Rules, 2011

Director’s Relatives (Office or Place of Profit) Amendment Rules, 2011

COMPANIES ACT

RULES/AMENDMENT RULES


Company Law : Director's Relatives (Office or Place of Profit) Amendment Rules, 2011 - Amendment in rules 3 and 7

NOTIFICATION [F.NO. 17/75/2011-C.L.V], DATED 6-4-2011

In exercise of the powers conferred by clause (b) of sub-section (1) of section 642, read with sub-section (1B) of section 314 of the Companies Act, 1956, the Central Government hereby makes the following rules to amend the Director's Relatives (Office or Place of Profit) Rules, 2003, namely:-

1. (1) These rules may be called Director's Relatives (Office or Place of Profit) Amendment Rules, 2011.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Director's Relatives (Office or Place of Profit) Rules, 2003, (hereinafter referred to as the said rules), in rule 3, for the figures "50,000", the figures "2,50,000" shall be substituted.

3. In the said rules, for the figures "50,000", the figures "2,50,000" shall be substituted.

4. In the said rules, for rule 7, the following rule shall be substituted, namely:—

The selection and appointment of a relative of a director holding office or place of profit in the company shall be approved by adopting the same procedure applicable to non-relatives :

Provided that, in the case of listed public companies, the selection of director for holding place of office or profit in the company shall have to be also approved by a Selection Committee.

Explanation.- For the purpose of this sub-rule, the expression "Selection Committee" means a committee, the majority of which shall consist of independent directors and an expert in the respective field from outside the company:

Provided that in case of unlisted companies, independent directors are not necessary but outside experts should be there in the Selection Committee:

Provided further that in the case of private companies, independent directors and outside experts are not necessary.