Archive for September, 2011

RBI liberalises Forex Facilities for Individuals/ NRIs

September 28, 2011

The Reserve Bank of India has further liberalised foreign
exchange facilities for individuals under the Foreign Exchange Management Act,
(FEMA) 1999.  The facilities are:

1.   NRIs can be Joint Holders in Resident’s SB/EEFC/RFC Accounts

Individual residents in India are now permitted to include non-resident close relative(s) as joint holder(s) in their resident bank
accounts, namely, savings(SB), Exporter Earners’ Foreign Currency (EEFC) and Residents’ Foreign Currency (RFC) accounts, on ‘former or survivor’ basis.

2.   Residents can be Joint Holders in NRE/FCNR Accounts

Non-Resident Indians (NRIs)/ Person of Indian Origin (PIO) , are now permitted to open Non-Resident (External) (NRE) Rupee Account Scheme/Foreign Currency (Non-Resident) (FCNR) Account (Banks) Scheme with their resident close relative(s) as  joint holder(s) on ‘former or survivor’ basis.

3.   Residents can gift Shares/Debentures upto USD 50,000 Value

A person resident in India can now give to a person resident outside India, by way of gift, any security/shares/debentures of value upto USD 50,000 in value per financial year subject to certain conditions.  Earlier, a person resident in India could give to a person resident outside India, by way of gift, any security/shares/debentures of value upto USD 25,000 per calendar year.

4.  Sale Proceeds of FDIs can be credited to NRE/FCNR (B) Account

Sale proceeds of Foreign Direct Investment (FDI) can be credited to NonResident (External)  Rupee (NRE) Account Scheme/Foreign Currency (NonResident) Account FCNR (Banks) Scheme  provided the original acquisition was by way of inward remittance or funds held in their NRE/FCNR (B) accounts.

5.  Gifts to NRIs can be credited to NRO Accounts in Rupees

Resident individuals are now permitted to make rupee gifts within the overall limit of USD 200,000 per financial year as permitted under the Liberalised Remittance Scheme (LRS) to an NRI/PIO who is a close relative by way of crossed cheque/electronic transfer to the Non-Resident (Ordinary) Rupee Account (NRO) of the NRI/PIO.

6.  Loans to NRI Close Relatives can be given in Rupees

Similarly, Resident individuals are now permitted to lend in Rupees within the overall limit under the Liberalised  Remittance Scheme of USD 200,000 per financial year to a Non Resident Indian (NRI)/ Person of Indian Origin (PIO) close relative by way of crossed cheque/electronic transfer, subject to certain conditions.

7.  Residents can repay the loans given to NRI Close Relatives 

Resident individuals are now granted general permission to repay loans availed of in Rupees from banks in India by their NRI close relatives.  Earlier, repayment of loans by close relative in respect of Rupee loan availed by NRIs was restricted only to housing loans.

8.  Residents can bear Medical Expenses of NRIs

Residents will now be allowed to bear the medical expenses of visiting NRIs/PIOs close relatives. Earlier, residents were allowed to make payment in rupees towards meeting expenses on account of boarding, lodging and services related to it or travel to and from and within India of a person resident outside India and who is on a visit to India.


India Export/Import data available

September 28, 2011

We are glad to inform you that we can now arrange the exports data with indian exporters details for the following indian ports :

  • Hyderadbad Air.
  • Hyderabad ICD.
  • Bangalore Air.
  • Bangalore ICD.
  • Ahmedabad Air.
  • Ahmedabad ICD.
  • Mumbai Air.
  • JNPT.
  • Chennai air.
  • Kolkata sea.
  • Delhi Air.
  • Vizag.
  • Cochin.

Following ports data available with complete details: Delhi TKD, Delhi PPG, Kandla, Mundra and Kolkata sea.

Please provide your requirements with the following details:

  1. Indian port
  2. Exports or Imports
  3. Your contact details


RBI/SEBI allows investment in the units of Domestic Mutual funds by Non- resident investors other than FIIs

September 26, 2011

RBI in consultation with SEBI has allowed Non- resident investors (other than SEBI registered FIIs and SEBI registered FVCIs) who meet the KYC requirements of SEBI, hereinafter called ‘Qualified Foreign Investors’ (QFIs), to purchase on repatriation basis rupee denominated units of equity schemes of domestic MFs issued by SEBI registered domestic MFs in accordance with the terms and conditions as stipulated by  SEBI and the RBI from time to time in this regard.

Qualified Foreign Investor (QFI) shall mean a person resident in a country that is compliant with Financial Action Task Force (FATF) standards and that is a signatory to International Organization of Securities Commission’s (IOSCO’s ) Multilateral Memorandum of Understanding, provided that such person is not resident in India. Provided further that such person is not registered with SEBI as Foreign Institutional Investor or Sub-account

The QFIs may invest in rupee denominated units of equity schemes of domestic MFs issued by the SEBI registered domestic MFs under the two routes, namely:

1.  Direct Route –  SEBI registered Depository Participant (DP) route
2.  Indirect Route – Unit Confirmation Receipt (UCR) route

These investments under the aforesaid two routes would be subject to the following terms and conditions:

  • Investments by the QFIs would be subject to a ceiling of USD 10 billion under both the routes. For the purpose of this ceiling of USD 10 billion, total amount invested for the purchase of domestic MFs units by all QFIs and the money lying in the single rupee pool bank accounts of DPs would be added.  SEBI will monitor the ceiling of USD 10 billion on daily basis through the concerned domestic MFs and DPs.
  • It has also been decided to allow QFIs to invest (under both the routes – Direct and Indirect, subject to the general terms and conditions mentioned ) up to an additional amount of USD 3 billion in units of domestic MF debt schemes which invest in infrastructure (“Infrastructure” as defined under the extant ECB guidelines) debt of minimum residual maturity of 5 years, within the existing ceiling of USD 25 billion for FII investment in corporate bonds issued by infrastructure companies.
  • The investment under both the routes by the QFIs will be in the units which are directly issued by the domestic MFs and no secondary market purchases would be allowed.
  • Only QFIs from jurisdictions which are compliant with the FATF standards and are signatories to the IOSCO’s Multilateral Memorandum of Understanding will be eligible to invest in domestic MFs under this Scheme.
  • DPs will ensure KYC of the QFIs as per the norms prescribed by SEBI.
  • Domestic MFs would also undertake KYC of the QFIs.
  • Units and UCRs issued under this scheme to QFIs, would be non-tradable and non-transferable.
  • The investment will be subject to the necessary regulations prescribed by SEBI in this regard from time to time.

Green Initiative by Ministry of Corporate Affairs

September 26, 2011

In its continuous drive towards Green Initiative & improved Corporate Governance Assurance, the Ministry has yet again taken another stride in this direction by introducing the following three initiatives:-

  • Participation by Shareholders in general meetings through electronic mode
  • Participation by Directors in meetings of Board / Committee of Directors through electronic mode
  • Issuance of Digital Certificates by the ROC officials

Participation by Shareholders in General Meetings under the Companies Act, 1956 through electronic mode vide General Circular No. 27/2011 dated 20.05.2011

The Ministry of Corporate Affairs has clarified that that a Shareholder of a Company may participate in a general meeting under the provisions of Companies Act, 1956 through electronic mode. This has been made possible by utilizing the relevant portions of the Information Technology Act, 2000.

For this purpose certain general points have been specified to ensure proper conduct of the meetings such as proper audio visual facilities to be provided for participation, proper communication through notice to the Shareholders for availability to participate through such an option, ensuring proper recording and to take care of technical challenges that can be faced during such a process.

To enable larger participation of shareholders in a Listed Company, more stress has been given for Listed Companies wherein it has been recommended to make such option available in at least five major States/UTs as per the address of the Shareholder.

However, this does not do away with the requirement of Quorum as required under section 174 of the Companies Act, 1956. This means though Shareholders can participate through videoconferencing but the requirement of quorum has to be fulfilled by members personally present.

Participation by Directors in meetings of Board / Committee of Directors under the Companies Act, 1956 through electronic mode vide General Circular No. 28/2011 dated 20.05.2011

As another measure towards green initiative undertaken by the Ministry of Corporate Affairs, participation of Directors/ Committee members through video conferencing has been allowed if proper notices have been issued and the same is allowed by Articles of Association of the Company. These Directors will be counted for the purpose of quorum, unlike the member meetings where quorum has to be physically present.

For this purpose certain general guidelines have been specified over important concerns to be taken care of such as providing specific notice to the directors about availability of the option of participation through video conferencing, arrangement of proper audio visual facilities, circulation of gist of the minutes within seven days of the meeting for removal of doubt, granting specific responsibility upon the Chairman and Secretary about maintaining the integrity and effective participation in the Meeting. A new concept of roll call has been introduced to ensure presence of the Directors at the meeting.

It is however mandatory for a Director to physically attend at least one meeting in one financial year and with respect to each meeting the Director has to specify well in advance regarding the mode through which he is going to participate in the meeting.

Issuance of Digital Certificates by the ROC officials vide General Circular No. 29/2011 dated 20.05.2011

In a move to curtail the time in issuing certificates and standard letters by Registrar of Companies, the Ministry has taken a step that these certificates and letters will now be issued under the Digital Signature of the Registrar of Companies.

NBFC licences put on hold till review of finance company guidelines

September 26, 2011

Toyota Kirloskar, and Daimler, the maker of Mercedes cars, will have to wait a few more months to begin their business of lending for car and equipment purchases as the Reserve Bank of India put on hold new licences awaiting new guidelines, said two people familiar with the decision.

The central bank, which is in the midst of tightening rules for lenders who don’t fall under the ‘banks’ category, has told some of the applicants for the finance company licence that it may not issue one till the new rules come into force, said those people who did not want to be identified. It might take RBI two to three months to come out with its new guidelines.

Jain Irrigation and German electrical equipment-maker Siemens are the other companies planning to set up a finance company that would fund purchases of their own product, helping their businesses grow. Europe’s biggest automobile company, Volkswagen, recently got the licence for such a company. It will invest 120 crore to expand the business.

Manufacturing companies such as General Electric and others across the globe do fund equipment purchase that has helped them grow. Even state-run Bharat Heavy Electricals plans to set up a non-banking finance company. However, reckless funding could result in the collapse of even the parent company. GE, the top manufacturing company in the world, had to seek the help of US authorities during the 2008 crisis as there were few takers for its commercial paper.

Because of these companies’ role in the financial markets, the RBI set up a committee under deputy chairman Usha Thorat to finalise a new set of guidelines after raising their capital requirements recently. RBI believes that there is a need to strengthen the supervision of the 12,500 NBFCs in the country due to the high exposure of banks to NBFCs at over 15 lakh crore.

“The recent global financial crisis has highlighted the regulatory imperatives concerning the non-banking financial sector and the risks arising from regulatory gaps, arbitrage and systemic inter-connectedness,” said the RBI statement. “A need was, therefore, felt to reflect on the broad principles that underpin the regulatory architecture for NBFCs keeping in view the economic role and heterogeneity of this sector and the recent international experience.”

The RBI has taken some measures in that direction. In the last few months, it has reduced the arbitrage opportunities of NBFCs. It has also increased the capital adequacy ratio of NBFCs to 15 % and removed the priority sector status of gold-loan companies.

But NBFCs are also seeing a growth in retail lending. NBFCs presently have a 26% market share, which is expected to go up to 47% in the next three years, says a report by rating agency Crisil. The profitability of NBFCs has also peaked to the 2007 levels. Hence, in the next three years, NBFCs’ non-mortgage lending is expected to match the levels of a commercial bank, provided there are no regulatory challenges.

File e-returns, get income-tax refunds in a month

September 26, 2011

There is an incentive for taxpayers who file their income-tax returns electronically — they will get their refunds within a month.

To speed up refunds and encourage electronic filing of tax returns, the Central Board of Direct Taxes has promised expeditious refunds.

The wait for refunds in the case of physical tax returns ranges between 5-10 months. “We want tax-payers to file electronically as that helps in faster processing of refunds,” Sudhir Chandra, chairman, Central Board of Direct Taxes, told reporters.

As on December 31, 2010, there were about 40 lakh refund cases pending with the tax department. Last year, a Comptroller and Auditor General report had highlighted that it takes as much as 10 months for a taxpayer to get his refund.

Reports of widespread corruption and frauds in issue of refunds have also spurred a revamp of the refund system.

“The whole idea is that small taxpayers should not face any hardship in his interface with the department,” Chandra added. Though the e-filing of tax returns is rising in absolute terms every year, its level has stagnated at about a quater of the total retuns filed.

The verification of the paper tax returns filed is a tedious process that also delays tax refunds. This has become a bigger issue with the rising refunds. In 2010-11, the government had refund extra tax of Rs 78,000 crore.

“E-filing ensures that tax payers’ information on income, taxes and refunds are uploaded in the tax system instantly and tax computations are processed on a real-time basis,” said Vikas Vasal, executive director, KPMG.

The income-tax department has been trying to make refund process faster and efficient through the use of technology interface.

“A refund banker scheme is already in place in the whole of country to ensure that taxpayers get refunds well in time,” said an income-tax department official.

Income-tax authorities send data to State Bank of India which in turn issues refund it directly to tax-payers under the refund banker scheme.

“We issued the highest-ever refunds in 2010-11,” says Chandra, who had instructed his officials to clear all pending refunds before March 31.

Department to scrutinise all recent property deals to check for use of cash

September 26, 2011

Under pressure to unearth black money, the Income Tax department has decided to review all recent property deals to check for use of cash. The plan is to start the scrutiny from Delhi and the National Capital Region, comprising Gurgaon and Noida, and subsequently turn it into an all-India exercise.

“I-T department will review the property deals in Delhi and take action in appropriate cases,” Central Board of Direct Taxes chairman Sudhir Chandra told reporters here, adding that these reviews will include both individual and corporates property deals in Delhi and the National Capital Region (NCR – Noida, Gurgaon).

Officials in the tax department, who announced the move on Monday, did not elaborate on the period for which the review would be undertaken. However, indications are that transactions starting in 2010-11 would come under the scanner.

Aim of the move is to unearth black money in property deals which largely going undetected due to differences in market price and registry rates set by state governments.

The move is based on past searches and surveys conducted by the department that saw maximum undisclosed income by real estate companies. In the last three years, the income tax department conducted several search operations across the country in real estate companies, including the Lodha group, BPTP, Kanakia Group, Paras and Amrapali group, among others on charges of alleged tax evasion or misreporting of income. In fact, according to reports prepared by the intelligence department of the finance ministry, the quantum of unaccounted money is highest in the real estate sector, around Rs 2,000 crore as per a 2009 report. The department’s move is also likely to bring the DDA Housing Scheme 2010 under its scanner. All deals under the scheme would be scrutinised by the I-T department.

The use of cash in secondary market transactions is very high though tax officials have also come across several instances even in the sale of property by builders. It has become commonplace for buyers to under-report the transaction to save on registration cost. For sellers, especially those who do not intend to use the money to buy new property, it means a capital tax burden, which they want to evade.

In fact, the real estate sector has been identified as a key generator of black money in the economy. This is despite the fact that registrars across the country have to report all real estate transactions of Rs 30 lakh or more. The tax department then uses the software available with it to match the data with the tax returns using the permanent account number (PAN) furnished by taxpayers while registering property. It is unclear if the department plans to match all returns filed by registrars with the PAN numbers available with it.

At present, the department has data for 2009-10 available with it, while information for 2010-11 will only be available starting August this year.

Officials admitted that the challenge would be to review transactions of less than Rs 30 lakh. The government is likely to depend on developers to track these transactions.

RBI Filing of Annual Return for the Foreign Assets and Liabilities

September 26, 2011

The Reserve Bank of India has issued a A.P. (DIR Series) Circular No. 45 dated March 15, 2011. In this regard, please note the following:

a.      Submission of annual Part B of FCGPR has been discontinued with effect from March 15, 2011.

b.      New annual return on Foreign Liabilities and Assets (copy enclosed as Annex 1) has been notified for submission under Notification-March 15, 2011 at website

c.       All the Indian companies which have received FDI and/or which have made overseas Direct Investment in the previous year(s), including the latest financial year, should submit this Annual return.

d.      In case of Foreign direct investment in India (liability side), equity investment should be valued at market price for listed Indian companies while in case of unlisted companies equity should be valued using Own Fund Book value Method (details given in the return), based on books of accounts of Indian reporting company.

e.        In case of Foreign direct investment made abroad (asset side) by Indian reporting company, equity should be valued at market price, if the investment is made in listed company abroad. However, if the overseas company, in which you have made the investment, is unlisted then use the Own Fund Book value Method, based on books of accounts of overseas company.

File Service Tax Return in time as Maximum Penalty increased 10 times to INR 20,000

September 26, 2011

Under the existing scheme of law, Rule 7 of the Service tax Rules, 1994 read with its sub-rules deals with the provisions relating to the filing of service service tax return.

Rule 7C Prescribe the Penalty which Assessee has to Pay if there is delay in filing of service Tax Return.

We are producing herebelow the extract of Rule 7C

Where the return prescribed under rule 7 is furnished after the date prescribed for submission of such return, the person liable to furnish the said return shall pay to the credit of the Central Government, for the period of delay of-
(i) fifteen days from the date prescribed for submission of such return, an amount of five hundred rupees;
(ii) beyond fifteen days but not later than thirty days from the date prescribed for submission of such return, an amount of one thousand rupees; and
(iii) beyond thirty days from the date prescribed for submission of such return an amount of one thousand rupees plus one hundred rupees for every day from the thirty first day till the date of furnishing the said return:

Provided the total amount payable in terms of this rule  shall not exceed  the amount  specified in Sec.70 of the Act.

It is clear from the above that above penalty is subject to maximum specified in section 70. Section 70(1) Specify the maximum Penalty of Rs. 2,000/- in respect of  return filed up to 31st March 2011. This amount of Maximum Penalty is been increased to Rs. 20,000/- (Twenty Thousand only) w.e.f. 01.04.2011.

Allotment of Director Identification Number (DIN) under Companies Act, 1956

September 26, 2011

1.The Ministry of Corporate Affairs has already simplified the process for obtaining DIN online, if the DIN-1 eform has been digitally signed by the practicing Chartered Accountant, Company Secretary or Cost Accountant, verifying the particulars of the applicants given in the application. However, in other cases, where the DIN form is digitally singed by the applicant only, the applications are being disposed off with in one or two days after examination by the Central Government.

2. As another step towards simplification in allotment of DIN, the Ministry is considering to allot all DIN applications online. To examine the DIN-4 eform through the system, it has been decided that following fields in the DIN-1 eform will be mandatory : -‑

i. Name of Applicant

ii. Father’s name of the Applicant

iii. Date of Birth

iv. Income Tax Permanent Account Number (PAN) in case of all Indian Nationals.

v. Passport in case of all Foreign Nationals.