No service tax on railway tickets booked before 1 October

No service tax on railway tickets booked before 1 October

Recently service tax is levied on railway tickets for AC and First class. Service tax department made a clarification that the tickets booked before 1 October will attract no service tax. Service tax on railway tickets is applicable from 1 October. In the case the traveling date is after or on 1 October but the tickets are booked before 1 October, no service tax will be charged on these tickets. Service tax department has issued a press release dated 28 September 2012 for the same which is as follows.


LEVY OF SERVICE TAX ON RAILWAY PASSENGERS TRAVELLING IN AC CLASSES/FIRST CLASS FROM 1-10-2012 - NO SERVICE TAX TO BE LEVIED ON TICKETS ISSUED PRIOR TO 1-10-2012 - IN CASE OF CANCELLATION OF TICKETS ISSUED ON OR AFTER 1ST OCTOBER 2012, THE APPLICABLE AMOUNT INCLUDING SERVICE TAX TO BE REFUNDED BY RAILWAYS
PRESS RELEASE, DATED 28-9-2012
The Ministry of Railways has made partial modification in levy of Service Tax on the fare of passengers travelling in AC Classes/First Class from 1st October, 2012. As per the corrigendum issued by Ministry of Railways today i.e. 28-9-2012, there are following changes:

 (i)  Service Tax amounting to 3.708% on the total fare of passenger services in (a) AC First Class, (b) Executive Class, (c) AC-2 tier Class, (d) AC-3 tier class, (e) AC Chair Car class, (f) AC Economy class and (g) First Class is leviable from the 1st day of October, 2012. It has been clarified that the Service Tax would be collected on the tickets issued/bookings made on or after 1-10-2012. Service Tax is not leviable on tickets issued prior to 1-10-2012 and hence will not be collected on board the trains.

(ii) In case of cancellation of tickets booked by the passengers on or after 1-10-2012, the applicable amount including refundable Service Tax amount will be refunded by Railways as per Railway refund rules and Finance Ministry guidelines.
Tags-service tax on railways,service tax on railway tickets
Income tax office will remain open on 29 and 30 September

Income tax office will remain open on 29 and 30 September

Due to heavy rush of income tax returns, income tax offices will remain open on 29 September and 30 September. This is neccessary as the last date of filing income tax return of the assessee who has business income is 30 September and the 29 and 30 September are Saturday and Sunday respectively. Income tax department issued the order for the same. 
Extra 3% interest subvention scheme for short time crop

Extra 3% interest subvention scheme for short time crop

Reserve bank of India has notified the union budget interest subvention scheme for farmers. In this regard there was 2% interest subvention scheme. There is also a new scheme launched for farmers where 3% additional interest subvention will be given to farmers on short time crop. RBI has issued a release dated 28 September 2012 about interest subvention for short time crop. Full release is as under.

 RBI/2012-13/228 
RPCD.No.FSD.BC.31/05.04.02/2012-13
September 28, 2012
The Chairman/Managing Director
All Public Sector Banks
Dear Sir,
Union Budget – 2012-13 – Interest Subvention Scheme – 2 per cent interest subvention and 3 per cent additionalsubvention for short-term crop loans in 2012-13
As you are aware, the Hon’ble Finance Minister, in his Budget Speech (paragraph 80) for 2012-13 had announced as follows:

"The interest subvention scheme for providing short term loans to farmers at 7 per cent interest per annum will be continued in 2012-13. An additional subvention of three per cent will be available to prompt paying farmers.  In addition, the same interest subvention on post harvest loans up to six months against negotiable warehouse receipt will also be available. This will encourage the farmers to keep their produce in warehouses."

2. In pursuance of this announcement, Government of India will provide interest subvention of 2 % p.a. to Public Sector Banks in respect of short-term production credit up to Rs.3 lakh during the year 2012-13. This amount of subvention will be calculated on the crop loan amount from the date of its disbursement/drawal up to the date of actual repayment of the crop loan by the farmer or up to the due date of the loan fixed by the banks for the repayment of the loan, whichever is earlier, subject to a maximum period of one year. This subvention will be available to Public Sector Banks on the condition that they make available short-term production credit up to Rs. 3 lakh at ground level at 7% p.a.

3. Besides, Government of India will also provide additional interest subvention of 3% p.a. to Public Sector Banks in respect of those prompt paying farmers who repay their short-term production credit within one year of disbursement/drawal of such loans. This subvention will be available to such farmers on a maximum amount of Rs.3 lakh availed of by them during the year, from the date of disbursement/drawal of the crop loan up to the actual date of repayment by farmers or up to the due date fixed by the bank for repayment of crop loan, whichever is earlier, subject to a maximum period of one year from the date of disbursement. This additional subvention will be available to Public Sector Banks on the condition that the effective rate of interest on short-term production credit up to Rs. 3 lakh for such farmers will now be 4 % p.a. This benefit would not accrue to those farmers who repay after one year of availing such loans.

4. Similar to the previous year (2011-12), the benefits of interest subvention will  also be available to small and marginal farmers having Kisan Credit Card for a further period of up to six months post harvest on the same rate as available to crop loan against negotiable warehouse receipt for keeping their produce in warehouses.

5. Banks may give adequate publicity to the above scheme so that the farmers can avail the benefits.

6. It is also advised as under:-
i) Claims in respect of 2 % interest subvention and 3 % additional interest subvention may be submitted in Formats I and II(enclosed herewith) respectively to the Chief General Manager, Rural Planning and Credit Department, Reserve Bank of India, Central Office, Shahid Bhagat Singh Road, Fort, Mumbai – 400 001.

ii) In respect of 2 % interest subvention, banks are required to submit their claims on a half-yearly basis as at September 30, 2012 and March 31, 2013, of which, the latter needs to be accompanied by a Statutory Auditor’s certificate certifying the claims for subvention for the entire year ended March 31, 2013 as true and correct. Any remaining claim pertaining to the disbursements made during the year 2012-13 and not included in the claim for March 31, 2013, may be consolidated separately and marked as an 'Additional Claim' and submitted latest by April 30, 2014, duly audited by Statutory Auditors certifying the correctness.

iii) In respect of the 3% additional subvention, banks may submit their one-time consolidated claims pertaining to the disbursements made during the entire year 2012-13 latest by April 30, 2014, duly audited by Statutory Auditors certifying the correctness.

7.  In case of RRBs and co-operatives, a separate circular will be issued by NABARD.
Yours faithfully,
(C. D. Srinivasan)
 Chief General Manager
Service tax will be charged on railway AC and first class passengers

Service tax will be charged on railway AC and first class passengers

Service tax department has levied service tax on AC class and first class railway passengers. Service tax will be applicable on railway AC class and first class tickets from 01-October 2012. This will increases the railway fare. The rate of service tax will be 12% on the 30% of the railway fare which will be around 3.6% with surcharges extra. Service tax department has issued a press release dated 27 September 2012 which is as follows.


LEVY OF SERVICE TAX ON RAILWAY PASSENGERS TRAVELLING IN AC CLASS/FIRST CLASS FROM 1stOCTOBER 2012
PRESS RELEASE, DATED 27-9-2012
In compliance of the provisions contained in Finance Bill 2012 and subsequent notifications issued by Ministry of Finance, the Service Tax in case of railway travel, which was exempted upto 30th September 2012, will be levied on the fare of passenger services in the following classes from 1st October 2012.

(i)  AC First Class,
(ii)  Executive Class,
(iii)  AC-2 tier Class,
(iv)  AC-3 tier class,
(v)  AC Chair Car class,
(vi)  AC Economy class and
(vii)  First Class.

Since an abatement of 70% has been permitted on passenger services by Ministry of Finance, the Service Tax will be charged on 30% of total fare including reservation charge, development charge, superfast surcharge which would be calculated as follows:-

 (i)  Service Tax of 12% will be charged on 30% of fare (equivalent to 3.6% on the total fare)

(ii)  Education Cess of 2% on Service Tax will be added (equivalent to 0.072% on total fare) and

(iii)  Higher Education Cess of 1% on Service Tax will also be added (equivalent to 0.036% on total fare)

(iv)  Total Service Tax implication will be (i)+(ii)+(iii)=3.708% on the total fare.

On Concessional value tickets/PTO tickets etc. service charge will be levied on 30% of the total fare actually being paid by the passengers.

The Service Tax will also apply to tickets issued in advance for journeys to commence on or after date of implementation of Service tax. In the case of tickets already issued excluding service tax, the service tax on total fare including development charge, superfast surcharge, reservation fee, etc. date of implementation of Service Tax will be recovered either by TTEs in the train or by the Booking Offices before commencement of the journey by the passengers. Commercial Inspectors and TIAs have been instructed to visit all important stations and ensure that service tax is levied on tickets issued as per the revised rates. Commercial Officers have also been asked to make surprise checks at the stations and ensure that Service Charges are levied from date of implementation of Service Tax.

The amount of Service Tax collected from passenger will be deposited with the Ministry of Finance as per procedure. Finance Departments of Zonal Railways have been instructed for proper accountal and remittance of Service Tax amount to the Government.

In case of refund of passenger fare, if any, refund of Service Tax shall be claimed by the passenger from the concerned Service Tax authority. No refund shall be made by the Railways on this account. For the purpose of claiming refund, Chief Commercial Manager (CCM) office of concerned Zonal Railway shall issue a certificate to passenger detailing the amount of refunds to be signed by an Officer authorized by CCM, which shall be countersigned by the Dy. Chief Account Officer (DCAO) or officer authorized by them for this purpose.
Tags-service tax on railway,service tax on railway tickets,service tax on ac class,service tax on first class,service tax rate on railway tickets,service tax on railway passengers
Service tax on transportation of goods by rail

Service tax on transportation of goods by rail

Service tax department levied service tax on transportation of goods by rail. Service tax will be applicable on transportation of goods from 01 October 2012. Service tax department has released a press release on 27-September 2012. Full press release is as under.


LEVY OF SERVICE TAX ON TRANSPORTATION OF GOODS BY RAIL FROM 1st OCTOBER 2012
PRESS RELEASE, DATED 27-9-2012
In compliance of the provisions contained in Finance Bill 2010 and subsequent notifications issued by Ministry of Finance, the Service Tax in case of transportation of goods by rail, which was exempted upto 30th September 2012, would now be levied on total freight charges with effect from 1st October 2012.

Since an abatement of 70% has been permitted on freight for the taxable commodities by the Ministry of Finance, the Service Tax will be charged on 30% of the total chargeable freight inclusive of all charges (like busy season charges, development charge etc.,) would be calculated as follows:-

(i)  Service Tax of 12% will be charged on 30% of freight (equivalent to 3.6% on the total freight charges)

(ii)  Education Cess of 2% on Service Tax will be added (equivalent to 0.072% on total freight) and

(iii)  Higher Education Cess of 1% on Service Tax will also be added (equivalent to 0.036% on total freight)
(iv)  Total Service Tax implication will be (i)+(ii)+(iii)=3.708% on the total freight charges.

Certain commodities have been exempted from payment of service tax as per Ministry of Finance notification. The list of such commodities and further details on the modalities of levy and collection of Service Tax on transportation of goods by rail, may be ascertained from Indian Railways' web site i.e. www.indianrailways.gov.in

The amount of Service Tax collected by Railways would be deposited with the Ministry of Finance as per prescribed procedure.
Tags-service tax on transportation of goods,transportation of goods service tax,service tax levy on transportation of goods
Custom exempt of bank guarantee for storing sensitive goods in private wearhouse

Custom exempt of bank guarantee for storing sensitive goods in private wearhouse

Custom department has granted the exemption from furnishing security or bank guarantee by central or state undertaking for storing sensitive goods in private wearhouses. Custom department has issued a circular no. 26/2012 dated 10 September 2012 about the exemption of bank guarantee for sensitive goods. Full circular is as under.


Circular No. 26/2012-Customs
F. No. 473/16/2012-LC
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs
****
New Delhi, the 10th of September, 2012
To,

All Chief Commissioners of Central Excise & Customs
All Chief Commissioners of Central Excise
All Chief Commissioners of Customs
All Chief Commissioners of Customs (Preventive)
The Director General of Revenue Intelligence/Central Excise Intelligence/Systems and Data Management/Export Promotion /Safeguards/Audit
The Chief Departmental Representative (CESTAT), Delhi



Subject: Grant of exemption from furnishing Security/Bank guarantee by Central/State Government Undertakings for storing sensitive goods in private bonded warehouses – regarding.
****

Reference is invited to Circular No. 99/95-Customs dated September 20, 1995 (issued from file F. No. 473/61/94-LC) laying down the procedure for licensing of Private Bonded Warehouses under Section 58 of the Customs Act, 1962. Paragraph 3 (viii) of the Circular stipulates inter alia, that In respect of individual consignments to be warehoused, the licencees are to give a double duty bond as required under the law. In respect of sensitive goods we may take a cash deposit or bank guarantee equal to 25% of the duty liability (effective duty foregone) for each consignments. In this connection, a reference has been received from M/s. India Tourism Development Corporation Limited, a Government of India Undertaking, seeking exemption from furnishing Bank guarantee for storing sensitive goods in duty free shops operated by them.

2.         The matter has been examined in the Board. As a measure of relaxation to the Central/State Government Undertakings, as has been done in case of relaxation of requirement of Bank guarantee/security for Custodians of Sea Ports and Air Cargo Complexes/ICDs/CFSs (Circular No. 34/02-Customs dated June 26, 2002 and Circular No. 13/02-Customs dated February 22, 2002 refers), it is clarified that all Central and State Public Sector Undertakings shall be exempt from furnishing Bank guarantee or other form of security for storing sensitive goods in the duty free shops operated by them. The execution of a double duty bond and other requirements stipulated under Circular No. 99/95-Customs dated September 20, 1995 would, however, remain.

3.         Publicity to this Circular may be given by way of issuance of public notice and standing order.

4.         Difficulties, if any, faced in the implementation of this circular, may be immediately brought to the notice of the Board.

5.         Please acknowledge receipt.

6.         Hindi version follows.
Yours faithfully,

(M. Satish Kumar Reddy)
Director (ICD)
Gratuity Calculator and Calculation of Exemptions from Tax

Gratuity Calculator and Calculation of Exemptions from Tax

Gratuity is the payment  made for the past services of the  employee by the employer. Calculation of gratuity is very easy , however many people are confused while calculate the value of gratuity and income tax thereof.
Gratuity received by an employee on his retirement is taxable under the head Salary .
Gratuity is divided into three parts for easily understand.
 Government employee and employee of local authorities.
Under this head the entire amount received of gratuity is free from tax.

Employee covered under the Payment of Gratuity Act, 1972
In this head the minimum of the following is exempt from tax
1-      Amount of gratuity received.
2-      Half month salary of every completed year.Completed year will be treated more than 6 months out of year.
3-      Rs. 350000.
Other employees not covered under the Payment of Gratuity Act, 1972
In this head the minimum of following is exempt from tax.
1-      Actual amount of gratuity received.
2-      Half month average salary for every year completed.
3-      Rs. 350000.

In all condition salary means Basic Salary + D.A
Gratuity = Salary on retirement x 15/26 x No. of years of service
for download gratuity calculator go to
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New file validation utility FVU 3.6 version for e-tds/tcs

New file validation utility FVU 3.6 version for e-tds/tcs

Tin. nsdl has released new file validation utility version 3.6 fopr e-tds and e-tcs. This FVU version 3.6 is different from other version as it has many new features. This new fvu version 3.6 is mandatory from 16 October 2012. Upto 15 October 2012, both fvu version 3.5 and version 3.6 can be used. FVU has many new features which are as follows.


·         Import of challan file (.csi file): Import of challan file downloaded from the TIN website (Challan Status Inquiry) has been made mandatory at the time of validating the quarterly TDS/TCS statement, if the TDS/TCS is deposited through challan. This will be applicable in case of regular statement and for correction statement in the scenarios as below:
o   Update of challan (C2 correction).
o   Deductee/ Collectee and corresponding challan is updated (C3 correction).
o   Addition of challan (C9 Correction).
·         Incorporation of sections codes as below:
Section code
Section code to be quoted in Quarterly TDS/TCS Statement
Applicable to TDS/TCS statement Form No.
Remarks
194LB
4LB
27Q
Applicable from FY 2011-12 onwards
194LC
4LC
27Q
Applicable from FY 2012-13 onwards
206CJ
J
27EQ
Applicable from FY 2012-13 onwards
206CK
K
27EQ
Applicable from FY 2012-13 onwards

·         Separate flag “O” has been incorporated for reporting salary details of “Super senior citizen” (individual above the age of 80 years) at Form no. 24Q. This categorization is applicable from FY 2011-12 onwards.
·         Separate flag “S” for categorizing software vendor transaction (as per ITD notification dated 21/2012) in Non salary TDS statements (Form 26Q – Section code 194J and 27Q –Section code 195). This categorization is applicable from FY 2012-13 onwards.
·         FVU version 3.6 will be mandatory w.e.f October 16, 2012. Upto October 15, 2012 FVU version 3.5 and FVU version 3.6 will be applicable.

    Download FVU version 3.6
    Tags-fvu version 3.6,fvu 3.6,file validation utility 3.6
New return preparation utility RPU version 3.1 for e-tds

New return preparation utility RPU version 3.1 for e-tds

Tin.nsdl has released new return preparation utility RPU version 3.1 for e-tds/tcs. Return preparation utility is used for preparing regular quarterly statements for e-tds/tcs. This new rpu version 3.1 has many new features which will be very easy for the users for import of challan file as well as preparing regular and corrective statement. So the new features of rpu 3.1 are as follows.


·         Incorporation of File Validation Utility (FVU) as below:

FVU version
Remarks
3.6
Applicable from FY 2010-11 onwards.
2.133
Applicable upto FY 2009-10.

·         Aforementioned FVU version will be mandatory w.e.f October 16, 2012.
·         Import of challan file (.csi file): Import of challan file downloaded from the TIN website (Challan Status Inquiry) has been made mandatory at the time of validating the quarterly TDS/TCS statement, if the TDS/TCS is deposited through challan. This will be applicable in case of regular statement and for correction statement in the scenarios as below:

o   Update of challan (C2 correction).
o   Deductee/ Collectee and corresponding challan is updated (C3 correction).
o   Addition of challan (C9 Correction).
·         Incorporation of sections codes in quarterly TDS/TCS statements as below:

Section code
Section code to be quoted in Quarterly TDS/TCS Statement
Applicable to TDS/TCS statement Form No.
Remarks
194LB
4LB
27Q
Applicable from FY 2011-12 onwards
194LC
4LC
27Q
Applicable from FY 2012-13 onwards
206CJ
J
27EQ
Applicable from FY 2012-13 onwards
206CK
K
27EQ
Applicable from FY 2012-13 onwards

·         Separate flag “O” has been incorporated for reporting salary details of “Super senior citizen” (individual above the age of 80 years) at Form no. 24Q. This categorization is applicable from FY 2011-12 onwards.

Separate flag “S” for categorizing software vendor transaction (as per ITD notification dated 21/2012) in Non salary TDS statements (Form 26Q – Section code 194J and 27Q –Section code 195). This categorization is applicable from FY 2012-13 onwards.
Download RPU version 3.1
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Dearness allowance 7% hiked to central government employees

Dearness allowance 7% hiked to central government employees

Cabinet has approved 7% hike in dearness allowance DA for central government employees and central government pensioners. This hike is effective from July 2012. 

Earlier the dearness allowance and dearness relief for central government employees and ex-employees was 65% and has increased 7% to 72% on basic emoluments which is effective from 1 July 2012
Import of gold and diamond in any form including jewellery

Import of gold and diamond in any form including jewellery

Reserve bank of India made some soft rules for the letter of credit for importing of gold and precious metal in any form including jewellery. RBI  issued a circular no. 34 dated 24 September 2012 about the import of gold and diamonds. Full circular is as under.


RBI/2012-13/220
A.P. (DIR Series) Circular No. 34
September 24, 2012
To
All Category - I Authorised Dealer Banks
Madam / Sir,
Foreign Exchange Management Act, 1999-Import of gold inany form including jewellery made of gold/precious metalsor / and studded with  diamonds / semi  precious / preciousstones - clarification

Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to the provisions contained in A.P.(DIR Series) Circular No.59 dated May 6, 2011, in terms of which, AD Category – I banks have been permitted to approve Suppliers’ and Buyers’ credit (trade credit) including the usance period of Letters of Credit  for import of rough, cut and polished diamonds, for a period  not exceeding 90 days, from the date of shipment.

2. It is clarified  that Suppliers’ and Buyers’ credit (trade credit) including the usance period of Letters of Credit opened for import of gold in any form including jewellery made of gold/precious metals or/ and studded with diamonds/ semi precious / precious stones should not exceed 90 days, from the date of shipment.

3. All the instructions issued for direct import of gold, vide A.P. (DIR Series) Circular No.2 dated July 9, 2004; import of Platinum / Palladium/ Rhodium /Silver vide A.P. (DIR Series) Circular No.12 dated August 28, 2008; advance remittance for import of rough diamonds, vide A.P. (DIR Series) Circular No. 21 dated December 29, 2009 and import of rough, cut and polished diamonds, vide A.P.(DIR Series) Circular No.59 dated May 6, 2011, shall remain unchanged.

4. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

5. The directions contained in this circular have been issued under Section 10 (4) and Section 11 (1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Rashmi Fauzdar)
Chief General Manager
Now Rajiv Gandhi Equity Scheme REGSS foe retail investors

Now Rajiv Gandhi Equity Scheme REGSS foe retail investors

Cabinet has approved Rajiv Gandhi equity saving scheme for first time retail investors. This will is basically a income tax saving scheme for the assessee whose income is less than 10 lakh rupees and the tax benefit can be up to 50000 rupees. Government of India has issued a press release dated 21 September 2012 about approval of rajiv gandhi equity saving scheme for retail investors. Full press release is as under.


PRESS INFORMATION BUREAU
GOVERNMENT OF INDIA
FM APPROVES RAJIV GANDHI EQUITY SAVINGS SCHEME FOR RETAIL INVESTORS
New Delhi, Bharapada 30, 1934
                                September 21, 2012
The  Union  Finance Minister, Shri. P. Chidambaram approved a new tax saving scheme called “Rajiv 
Gandhi Equity Saving Scheme“(RGESS), exclusively for the first time retail investors in securities market. This Scheme would give tax benefits to new investors who invest up to Rs. 50,000 and whose annual income is below Rs. 10 lakh.

The Scheme not only encourages the flow of savings and improves the depth of domestic capital markets,but also aims to promote an ‘equity culture’ in India.  This is also expected to widen the retail investor base in the 
Indian securities markets. Salient features of the Scheme are as under:

1. Scheme is open to new retail investors, identified on the basis of their PAN numbers. This includes those who have opened the Demat account but have not made any transaction in equity and /or in derivatives till the date of notification of this Scheme and all those account holders other than the first account holder who wish to open a fresh account. 

2. Those investors whose annual taxable income is ≤ Rs. 10 lakhs are eligible under the Scheme. 

3. The maximum Investment permissible under the  Scheme is Rs. 50,000  and the investor would get  a 50% deduction of the amount invested from the taxable income for that year. 

4 Under the Scheme, those stocks listed under the BSE 100 or CNX 100, or those of public sector undertakings which are Navratnas, Maharatnas and Miniratnas would be eligible. Follow-on Public Offers (FPOs) of the above companies would also be eligible under the  Scheme. IPOs of PSUs, which are getting listed in the relevant financial year and whose annual turnover is not less than Rs. 4000 cr for each of the immediate past three years, would also be eligible.

5 In addition, considering the requests from various stakeholders, Exchange Traded Funds (ETFs) and
Mutual Funds (MFs) that have RGESS eligible securities as their underlying and are listed and traded in the stock exchanges and settled through a depository mechanism have also been brought under RGESS. 

6 To benefit the small investors, the investments are allowed to be made in instalments in the year in which tax claims are made.

7. The total lock-in period for investments under the Scheme would be three years including an initial blanket 
lock-in period of one year, commencing from the date of last purchase of securities under RGESS.

8 After the first year, investors would be allowed to  trade in the securities in furtherance of the goal of 
promoting an equity culture and as a provision to protect them from adverse market movements or stock specific risks as well as to give them avenues to realize profits. 

9 Investors would, however, be required to maintain their level of investment during these two years at the 
amount for which they have claimed income tax benefit or at the value of the portfolio before initiating a sale 
transaction, whichever is less, for at least 270 days in a year. The calculation of 270 days includes those days 
pursuant to the day on which the market value of the residual shares /units has automatically touched the 
stipulated value after the date of debit. 

10 The general principle under which trading is allowed is that whatever is the value of stocks / units sold by 
the investor from the RGESS portfolio, RGESS compliant  securities  of at least the same value  are credited 
back into the account subsequently. However, the investor is allowed to take benefits of the appreciation of 
his RGESS portfolio, provided its value, as on the previous day of trading, remains above the investment for 
which they have claimed income tax benefit.

11 For the purpose of valuation of shares, the closing price as on the previous day of the date of trading will be considered so that new investors are certain about their debits and credits into the account. 

12 In case the investor fails to meet the conditions stipulated, the tax benefit will be withdrawn.

Like all financial products which have reached out substantially to the retail investors (post office savings, life insurance policies  etc) through tax benefits, this tax break for direct investment in equity is expected to substantially encourage the retail participation in securities market as well as to enhance their participation in the growth of Indian industry. Entry of more retail investors are expected to further deepen the securities markets as they bring in long-term stable funds, which can counteract the volatility created by the liquidity providers of the market. The  Scheme, thus, also  furthers the goal of financial stability and promotes financial inclusion. Since Exchange Traded Funds and Mutual Funds have also been brought under the Scheme, the Scheme should provide encouragement and re-assurance to the first time investors. 

The broad provisions of the  Scheme and the income tax benefits under it have  already  been incorporated as a new Section -80CCG- of the Income Tax Act, 1961, as amended by the Finance Act, 2012. 

Department of Revenue  will  notify the Scheme  and SEBI will  issue the relevant circulars to operationalize the Scheme in the next two weeks.
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Long term infrastructure bonds approval and rate of interest

Long term infrastructure bonds approval and rate of interest

Income tax department has notified the approval of loans and long term infrastructure bonds and rate of interest on these loans and bonds. Income tax department has issued a circular no. 7/2012 dated 21 September 2012 about long term infrastructure bonds and rate of interest on it. Full circular is as under.


CIRCULAR NO. 07/2012 
F.No. 142/17/2012-SO(TPL)
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Direct Taxes)
---------
Dated: September 21, 2012
Subject: Approval of loan agreements/ long term infrastructure bonds  and rate of interest for the purpose of Section 194LC of the Income-tax Act, 1961- regarding.

The Finance Act, 2012 has introduced section 194LC in the Income Tax Act. This section provides for lower withholding tax at the rate of 5% on interest payments  by Indian companies on borrowings made in foreign currency by such companies from a source outside India. There are principally two modes of borrowing (referred to as “monies borrowed” in the said section) which are covered, subject to approval of the Central Government: 

a. Monies borrowed  under a loan agreement
b. Long term Infrastructure Bonds

2. It is further provided that the rate of interest on such borrowings, for the purpose of eligibility under the section 194LC, shall be as approved by the Central Government.

3. The lower rate of withholding tax is for monies borrowed or bonds issued during the period from 1.7.2012 to 30.6.2015.

4. Therefore, the approval of the Central Government is required in respect of both the loan agreement or bond issue and the rate of interest to be paid on such borrowings. 

5. Considering the fact that there would be a large number of cases of overseas borrowings or bond issues to be undertaken by Indian companies, providing a mechanism involving approval in each and every specific case would entail avoidable compliance burden on the borrower/issuer of bond. In order to mitigate the compliance burden and hardship, the Central Board of Direct Taxes [with the approval of Central Government] hereby conveys the approval of Central Government for the purposes of section 194LC in respect of the loan agreements and issue of long term infrastructure term bond by Indian companies which satisfy the conditions mentioned in paras A, B and C below:

A. In respect of agreements for loan
a. The borrowing of money should be under a loan agreement.

b. The monies borrowed under the loan agreement by the Indian company should comply with clause (d) of sub section (3) of section 6 of the Foreign Exchange Management Act, 1999 read with Notification No. 
FEMA3/2000-RB viz.  Foreign Exchange Management (Borrowing or Lending in Foreign exchange) Regulations 2000, dated May 3, 2000, as amended from time to time, (hereafter referred to as “ECB regulations”), either under the automatic route or under the approval route. 

c. The borrowing company should have obtained a Loan Registration Number (LRN) issued by the Reserve Bank of India (RBI) in respect of the Agreement. 

d. No part of the borrowing has taken place under the said agreement before 1st July, 2012. 

e. The agreement should not be restructuring of an existing agreement for borrowing in foreign currency 
solely for taking benefit of reduced withholding tax rates.

f. The end use of the funds and other conditions as laid out by the RBI under ECB regulations should be 
followed during the entire term of the loan agreement under which the borrowing has been made.

B. In respect of issue of Bonds
a. The bond issue by the Indian company should be authorized under ECB regulations either under the 
automatic route or under the approval route. 

b. The bond issue should have a  loan Registration Number issued by the RBI.

c. The term “long term” means that the bond to be issued should have original maturity term of three years or 
more.

d. The bond issue proceeds should be utilized in the “infrastructure sector” only. 

e. The term “infrastructure sector” shall have same meaning as is assigned to it by RBI under the ECB 
regulations.

C. Rate of interest
Further, the Central Government has also approved the interest rate for the purpose of section 194LC as any rate of interest which is within the All-in-cost ceilings specified by the Page 3 of 3 RBI under ECB regulations as is applicable to the borrowing by loan agreement or through a bond issue, as the case may 
be, having regard to the tenure thereof. 

6. In view of the above, any loan agreement or bond issue, which satisfies the above conditions, would be treated as approved by the Central Government for the purposes of section 194LC. 

7. In the case of other long-term Infrastructure Bonds where the Indian company receives subscription of such Bonds in foreign currency and such bond issue is not covered under ECB regulations, the approval, for purpose of section 194LC shall be on case to case basis.

8. The Indian company, for the purpose of obtaining the necessary approval u/s 194LC in respect of such long-term bond issue, may, therefore, apply in writing to Member (IT), Central Board of Direct Taxes with the relevant details of the purpose, period and rate of interest.

(Ashish Kumar) 
Director (Tax Policy & Legislation)
Tags-rate of interest on long term infrastructure bonds,long term infrastructure bonds,approval of loan formula,formula of approval of loan
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