Finance Facts

(05/04/2018)

I should start with a warm message - Happy new financial year. It is rightly said that a good beginning makes a good end. Hence to convert this beginning into a good start, it makes sense to make some resolutions of New Financial Year - resolution to plan our expenses, resolution to achieve Financial Freedom and make your money work for you. It is better to come to the point. Here are some things you must consider today, tomorrow and for the whole year and of course for the life time:

Reviewing your ‘Income Expenses Structure’ (Budgeting): 

It is always important to prepare your Inflow/Outflow chart in the beginning of the financial year, so as to be prepared for the year ahead and also keep a track on your expenses. It helps you to get a reality check about what percentage of your total income is going towards expenses and how much money can be left for savings. It also gives you a fair idea on where can you cut down some of your unusual expenses. This process will help you to plan your bigger expense & also help you to make your saving automated.

Spend Smarter: 

Along with managing your money in a better & efficient way it is equally important to spend your money smarter. Nowadays we own more stuff than we actually need, there must be few things that you purchased, were of no use or of minimal use to you. Spend your money wisely; this can help you save more without any added efforts. The way you can do it is trying postponing your urge to buy that particular thing by few days & after that if you feel no urge to buy it that means you don’t need it. 

Prioritise your debts:

Paying off your debt should be your first priority, as it is always advisable to earn compounding interest rather than paying it. how compounding interest can do wonders for you, but do understand that it can equally play out as a curse if it’s on debt & not investment. So make a list of all your loans & try paying them off, starting with the one where you are paying highest interest rate.

Set your goal:

Everyone has some or the other goal in life. To achieve these goals you should follow a simple rule ‘Plan – Save – Invest’. Create a financial plan, start saving and invest early in order to generate long term wealth and fulfill your goals. You should define your goals in order to achieve them. Identifying goals gives a purpose for investments.

Have right asset allocation:

It is known that 90% of long term wealth creation happens through correct asset allocation decisions. Periodic portfolio health check up helps in achieving long term goals. You should review your financial portfolio at least once a year and there is no better time other than month of April (start of Financial New Year) to check your portfolio, to know the proper asset allocation of your portfolio. Also do check if there is a change in your current risk profile and the concurrence of your asset allocation and risk profile.

Magic of tax planning:

Tax planning is one thing that most of the individuals ignore in the beginning and then end up paying more tax. This additional tax payment could have been saved if planned properly in the beginning of the year. At the end they rush to save their taxes and end up investing in instruments which doesn’t suit their portfolio or risk appetite. 

Tax-planning is not only to reduce tax liability but it’s a way to achieve future goals by planning finances in a tax –efficient way with a view to earn optimum returns. Over a longer period power of compounding can also show its wonder under section 80C 



The above working illustrates the wonder that compounding can show U/S 80C (Yearly investment of Rs.1.5 Lacs/-) if planned systematically. Tax planning products can be broadly divided into debt & equity, if your portfolio is small & major portion is covered by tax planning than you should also pay equal attention towards asset allocation in tax planning & when you need the corpus. 

Some of the famous Tax efficient investment avenues are:


Overcome procrastination:

Some people have the habit of giving less urgent tasks the preference over more urgent ones, and thus putting off impending tasks for future, sometimes to the last minute before the deadline. For example, every year you can file your income tax returns between April 1 and July 31. However, most taxpayers file tax returns during the last week of July. Similarly, for most people every year tax planning starts in January, instead of planning and executing it round the year. Procrastination even costs one if investments for a particular goal is delayed. For example, two people start investing Rs.2,000 every month for retirement, the first at 30 years of age and the second at 40. At 8% p.a. rate of interest on their investments, the first person has about Rs. 18 lakhs more than the second person at 60.

Conclusion:

It is always better to be proactive than reactive, proactive behaviour brings in more focus & control. It helps you to see your financial challenges in advance & gives you healthy time to find a solution for them.

EWay Bill will roll out from 1st April,2018 also e-waybill on the intra-state movement of goods would be applicable from 01st April 2018 in the following states -

1) Himachal Pradesh
2) Uttar Pradesh
3) Tripura
4) West Bengal
5) Odisha
6) Madhya Pradesh
7) Karnataka
8) Tamil Nadu

You are advised to take steps accordingly.

GST Update - To-do list for March end

15 Things to do before March End -

​1. Reversal of Input tax credit – As per the rules of Input tax credit, after issuance of tax invoice if receiver does not made the full pa​​yment of amount  within 180 days then the credit taken on that invoice is to be reversed. And whenever the payment is made, the receiver can take the credit of the amount. Therefore the aging analysis of the debtors and creditors is to be done. all old invoices  issued before 1st October, 2017, should be paid before 31st March 2018.

Ex. Suppose the fees Rs. 10000 is payable to the Chartered Accountant on 15th September, 2017, and the credit on that of Rs. 1800 has been taken in the return of that month, then the fees should be paid before 31st Marsh, 2018. Otherwise the extra payment of Rs. 1800 is to be made in the month of March.

2. E-way bill – It is compulsory to issue E way bill from 1st April, 2018 for inter-state Supply.  In case of inter-state supply, the goods are in transit as on 1st April, 2018, it is compulsory to generate e way bill for them. Therefore, it is necessary to take the registration under E way bill system before 31st March.

3. Reconciliation – All the taxpayers should reconcile the cash ledger, credit ledger and liability ledger with their books of accounts. All the entries should be done before the year end. Also debit note, credit note, rate difference, discount, etc also to be reconciled.

4. HSN Code in the Invoice – Before preparing first invoice in the new financial year, taxpayers should check the turnover for the year 2017-18. Taxpayers whose turnover is above Rs. 1.5 crores but below Rs. 5 crores shall use 2-digit code and the taxpayers whose turnover is Rs. 5 crores and above shall use 4-digit code. Taxpayers whose turnover is below Rs. 1.5 crores are not required to mention HSN Code in their invoices.

5. New series for tax invoice – If anyone wants to change the series for billing in the new year, then he can do that from 1st April. New numbering should be started form 1st April.

6. Composition scheme – If any taxpayer wants to register under composition scheme then he can apply in Form GST CMP – 02 before 31st March. Similarly, those who wants to cancel the registration under composition scheme, they have to apply in Form GST CMP – 04 before 7th April. They have to calculate the effects of ITC on closing stock.

7. Due dates of the returns – There are various due dates in the April month for filing the returns relating to 31st march. Such as GSTR 3B for March is to be filed up to 20th April. GSTR 1 for February is to be filed up 10th April. GSTR 4 is to be up to 18th April and GSTR 6 is to be filed up to 13th April.

8. Monthly/ Quarterly returns – Taxpayers should check the turnover for the year 2017-18. If the aggregate turnover is above Rs. 1.5 Crore then the taxpayers have to file monthly return. If the aggregate turnover is below Rs. 1.5 Crore then the taxpayers have an option to file the quarterly GST returns. Taxpayer can choose any of the option.

9. Form GST TRAN 2 – The taxpayers who have filed the TRAN 1 and have taken the credit of Excise duty paid, without any documents, they have to file the details of outward supplies for six months in TRAN 2 before 31st March 2018 for availing 40%/ 60% credit.

10. GSTR 6 – Input service distributor has to file GST return in form GSTR 6. So 31st March is the due date to file GSTR 6 from July 2017 to February 2018.

11. ITC Carry forward – Excess Input Tax credit needs to be carried forward. It will not lapse after the close of Financial Year.

12. GSTR 2 – Details of purchases are reflecting on the portal in the form GSTR 2A. All the taxpayers should check the details of purchases before 31st March to reconcile it with books.

13. Valuation of the closing stock – At the time of valuation of closing stock as on 31st March, the input tax credit taken on raw material, consumables, semi finished goods is to be calculated. In Excise, there was a concept of making provision for the tax payable on the finished goods as on 31st March, no such concept is introduced in the GST.

14. Depreciation on the capital asset – At the time of calculating depreciation on the capital goods (other than building), if ITC has been claimed, then the tax amount needs to be ignored at the time of calculating depreciation.

15.  Anti profiteering – Do the comparative check of the gross profit earned for March 2018 with the gross profit of financial year 2016-2017 or gross profit for April 2017 to June 2018. If the gross profit ratio for the March 2018 is higher, then taxpayer should check whether he is trapped in the Anti profiteering or not?

I hope you find the same helpful.

Please verify the details before implementation

The new alleged fraud of around Rs 9.1 crore involves officials of a little-known company called Chandri Paper and Allied Products Pvt Ltd, the Central Bureau of Investigation said in the complaint.

1. Tax liability as per the Normal provisions of income tax act(tax rate 30% plus 3% Edu cess plus surcharge (if applicable)
2. Tax liability as per the MAT provisions are given in Sec 115JB(18.5 % of Book Profits Plus 3 % edu cess plus surcharge if applicable)

1.   Income Tax paid or payable if any calculated as per normal provisions of income tax act.
2.   Transfer made to any reserve
3.   Dividend proposed or paid
4.   Provision for loss of subsidiary companies
5.   Depreciation including depreciation on account of revaluation of assets
6.   Amount/provision of deferred tax
7.   Provision for unascertained liabilities e.g. provision for bad debts
8.   Amount of expense relating to exempt income u/s 10,11,12 (except sec 10AA and 10(38) (It means income u/s 10AA & long-term capital gain exempt u/s 10(38) are subject to MAT).

July 31, 2017 is the last date for filing income tax returns for FY 2016-17. It’s important to know what has changed in ITR compared to last year. The biggest change is the number of ITR forms have reduced from 9 to 7. Other than that all the tax returns have to filed electronically except for people who are more than 80 years of age and have income less than Rs 5 lakhs and have no claim for refund.
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1. Less number of ITR Forms
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The numbers of ITR Forms have been reduced from 9 to 7.
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The previous ITR 2A, ITR 2 and ITR 3 forms have been rationalized to single ITR 2 Form.The previous ITR 4 Form has been re-numbered as ITR 3.ITR 4S (Sugam) is now ITR 4 (Sugam).
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2. One pager form for Salaried Tax payer [ITR 1 Sahaj]
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As promised the government has come out with simple, one pager ITR 1 Sahaj form which can be filled by tax payers who have income from salary/pension, one house property and income from other sources like interest income. However to fill this form the total income should be less than Rs 50 Lakhs.
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The form has done away with the long list of deductions and only included the most common deductions under section 80C, 80D, 80G and 80TTA. If the tax payer wants to claim tax benefit under other sections he can do so by mentioning relevant section in column titled “Any Other”.
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Some new columns have been introduced to report dividend income (u/s Section 10(34)) and exempted long term capital gains (u/s Section 10(38)).
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3. Disclose Cash Deposited during Demonetization [ITR 1, 2, 3, 4, 5, 6, 7]
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A new field has been inserted in all ITR Forms to report the amount of cash deposited during the demonetization period of November 9 to December 30, 2016. However you need to report this if the cash deposit during the period exceeds Rs 2 Lakhs.
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4. New Field for quoting Aadhar Number [ITR 1, 2, 3, 4]
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The finance bill was amended to make it compulsory for tax payers to quote their aadhar number while filing income tax return. The ITR Forms have introduced column for either entering aadhar number or the Enrolment ID in case the aadhar is not received but has been applied for.
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5. Fields for Income Taxable at special rates [ITR 2, 3, 4, 5, 6, 7]
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Some incomes are taxed at special rates. The ITR forms have introduced columns to declare these.
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Unexplained Income:
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As per Section 115BB, any unexplained income or investment attracts special tax of 60% (plus surcharge and cess, as applicable) irrespective of the tax slab. This can now be shown in the newly inserted column under ‘Schedule OS’ .
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6. Deduction under section 80EE [ITR 2, 3, 4]
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Section 80EE gives additional tax exemption of Rs 50,000 for payment of interest on housing loan to first time home buyers. This is over and above the tax exemption of Rs 2 lakhs u/s 24(b). A new field has been introduced in Schedule VI-A to claim this deduction.
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In case you are filling ITR 1 you can mention Section 80EE in “Any Other” deductions to avail this tax benefit.
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7. More detailed declaration of assets/liabilities by Individuals earning above Rs 50 lakhs [ITR 2, 3, 4]
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Last year the income tax department had introduced new section to declare the values of assets and liabilities of individuals with income of more than Rs 50 lakhs. This year the ITR form asks for more detailed information like address of immovable property.
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