EPFO to issue monthly Provident Fund statement from FY13

Faced with high defaults in provident fund contributions by employers, the Employees Provident Fund Organisation , or EPFO, has decided to give monthly updates of contributions instead of an annual statement.

The EPFO expects this will bring instances of defaults by employers to the notice of workers, who, in turn, will put pressure to demand their dues.

The EPFO, which manages retirement savings of more that 5 crore workers, has been computerising its offices across the country and will be in a position to provide monthly information from the next fiscal.

At present, subscribers only get a small slip at the end of the fiscal with just the opening and closing balance and have no idea about how the amount has grown through the year.

"Often subscribers do not calculate what the total amount should be and do not notice even if contributions have not been made in particular months," Central Provident Fund Commissioner Samirendra Chatterjee told ET. Once monthly data is available, omissions can be easily identified, he added.

The default amount identified by the EPFO through periodic inspection of random establishments in 2009-10 was about 166.12 crore. The EPFO expects more complaints about defaulting employers once the monthly statements are made available to employees.

Defaults have been highest for establishments in Tamil Nadu followed by Andhra Pradesh, Bihar, Karnataka and Kerala.

"Every subscriber is expected to have a detailed statement from 2012-13," Chatterjee said.

Both employers and employees are mandated to contribute 12% of basic pay to the fund every month. The entire contribution to the fund is usually made by employers who deduct the employees share from their pay and add it their own contribution.

About 20,000 crore to 30,000 crore is added to the corpus every year.



Source : ET

Pay Rs 50,000 and earn Rs 1 lakh within 35 days? Don't fall for the trap

Came accross this news , Thought of sharing it with Everyone - Beware of Such Calls !!!

The stock market is cracking and equity portfolios are awash in red. But Rahul Patil, a business development executive with the Ahmedabad-based equity advisory firm Radhe Advisory, has an investment plan that can erase your losses and put you on the path to profit. "If you join our premium plan for Rs 50,000, you can make Rs 1 lakh within 35 days," says Patil.

Sounds unbelievable? Patil (who has called us after we registered on another site Krishna Stocks, which is no longer functional) doesn't think so. He insists that if we join their moneyback plan, we can make big money in no time. What they are not revealing to us (and possibly to hundreds of other investors) is that the Rs 50,000 is the fee for a service of trading tips sent by SMS.

If you invest as per the tips given by the research team, you could make a profit of Rs 1 lakh in a month. "Chances are such outfits are hand in glove with market operators and take investors for a ride," says Ajay Bhaskar, head of retail, Prabhudas Lilladher, a brokerage house.

Hundreds of investors from across India have lost money this way. Till about a few months ago, another Ahmedabad-based company Krishna Stocks had used the same modus operandi to cheat gullible investors . Ambala-based Sandeep Kumar put Rs 30,000 in a special Diwali moneyback offer from Krishna Stocks in October 2010. "After the month ended, they told me that this was an SMS service," says Kumar.

Most established brokerage houses such as Prabhudas Lilladher and Nirmal Bang send trading tips to their clients free of charge. Others charge a fee, but it's not even close to the Radhe Advisory charges. For instance, the Power Your Trade service, promoted by Network 18, charges Rs 450 a month. A two-year package costs Rs 4,320.

Still, informed investors walked into the trap laid by Krishna Stocks with eyes wide shut. Hyderabad-based Kollol Chaudhury (read his account below) makes a fair amount from trading in shares and is aware of the SMS services on offer. Yet, he fell for the temptation of easy money and put in Rs 10,000 in Krishna Stocks last year.

"This is only the tip of the iceberg. The problem will become bigger as more sophisticated instruments are introduced," says Virendra Jain, founder of the Midas Touch Investors' Association. "There should be a regulatory mechanism to check such outfits."

Meanwhile, urgency is perceptible in the tone of Patil. "You can download the form and pay online. Fill in the form and send it to us along with the ID of the online payment. So, when can you make the payment?" he asks. We tell him that the salary cheque has just been deposited and it may take two days to get credited. "S**t," he mutters. "Can't you arrange for funds and make the payment today. The earlier the better."

Finance ministry okays 9.5% interest on PF, but with riders

The finance ministry has approved an interest payout of 9.5% on employee's provident fund for 2010-11, bringing cheer to millions of subscribers six months after it raised objections to a 1% increase in the rate.

The approval, however, comes with a rider. North Block has said that all employee accounts should be updated within the next six months and any shortfall after crediting of interest will have to be adjusted against interest payments in the following year.

"The approval vindicates our stand and shows that whatever we have done is absolutely correct," central provident fund commissioner Samirendra Chatterjee told ET.

The approval has come just in time for the Employees' Provident Fund Organisation , or EPFO, to update account slips with the higher interest rate. The account slips are handed over to subscribers in April.

"There is enough time for us to update account slips. We just need to put in the higher interest rate," Chattterjee said.

Last September, the EPFO had declared a 9.5% interest for 2010-11, against the 8.5% it had been paying since 2005-06, after discovering a surplus of Rs 1,733 crore in its interest suspense account following a change in accounting procedure.

The calculation was questioned by the finance ministry, which went on to seek a snap audit by the Comptroller and Auditor General of India , or CAG.

The CAG audit found that as on March 31, 2010, of the over-five crore EPF accounts, 4.72 crore accounts had not been updated, or credited interest.

Based on this, the CAG had said that the surplus could not be verified as a large number of accounts had not been updated.

It, however, did not go into the question whether there would be a surplus to justify the higher payout once accounts had been updated.

Based on the findings, the finance ministry had refused to ratify the decision to pay 1% higher interest. In the absence of a surplus, the government would have to provide funds to bridge the deficit.

The EPFO has now convinced the ministry that the surplus amount will be available even after accounts are updated.

The organization had updated 1.1 crore accounts by the end of last year. What is not clear yet is the action the ministry will take if the EPFO fails to update accounts within the stipulated time.

It is doubtful whether the EPFO has the means to work on 4.7 crore accounts in such a short time. "We will have to try our best,"



Source : ET

Union Budget 2011: Impact on various sectors

The Finance Minister tabled the Budget for the next financial year on 28th Feb . Some significant proposals in this Budget include the slight hike in the slabs of individual income tax, wider service tax net for the luxury hospitality sector, discontinuation of STPI for IT/ITeS sector, hike in the Minimum Alternate Tax (MAT) rate, and reduction in the tax surcharge for domestic companies.

The service tax net has been widened with some more services in the arena, but the maximum service tax limit has been retained at 10 percent. The Budget also gave a strong signal on containing inflation and continued the focus on spending on infrastructure, agriculture and education. In general, the markets have taken the Budget with positive sentiments.

These are some significant sectors that will be directly or indirectly impacted by the Budget proposals for the next fiscal :

Aviation

The Budget is a bit negative for the aviation sector due to the introduction of service tax on domestic and international tickets. However, the outlook for this sector is positive due to the increase in demand and load, with stable pricing backed by rising incomes

Other challenges for the aviation sector include rising fuel price and shortage of skilled manpower.

Fertilizer

The Budget proposals are expected to have a positive impact on the fertilizer sector. The proposals to include capital investments in fertilizer production as an infrastructure sub-sector will help fertilizer companies in accessing cheaper financing and tax breaks.

Also, the proposed system of direct transfer of subsidy for fertilizers is seen as a positive for the sector as the domestic industry has suffered from under-recovery of cost and delay in disbursement of subsidy for long.

FMCG

The Budget is positive for the FMCG sector in an indirect sense. The thrust on rural infrastructure development will indirectly benefit the FMCG companies looking at growth in the semiurban and rural markets. Similarly, the rising income level in rural areas is a positive for this sector.

Hospitality

The Budget is a bit negative for the hotel sector due to the introduction of service tax on hotel accommodation and air conditioned restaurants serving liquor. However, the general outlook for the hotel sector is positive as the economic growth is picking up in the global as well as domestic markets which will result in more tourism related demand.

The demand-supply gap in the hotel industry will help in increasing the rates and margins, especially in the metro cities.

Information technology

This Budget is negative for companies in the IT and ITeS sector (especially for the smaller and mid-cap companies). The Budget proposals include a levy of MAT on companies which are operating in the SEZ areas. This is expected to impact IT companies that had exemption from MAT under the SEZ scheme significantly.

On the other hand, the IT industry was expecting an extension of the sunset clause under the Software Technology Park of India (STPI) Act, which was not included in the Budget proposal. Overall, the additional tax burden is expected to have a negative impact on the small-cap and mid-cap IT companies.

However, the improvement in the global economic conditions is expected to have a positive impact on the top lines of IT companies and cushion some of this extended taxation.

Infrastructure

The Budget has many positives for the infrastructure sector. This reiterates the fact that spending on infrastructure development has been among the top priorities of the government. The foreign institutional investor (FII) investment cap is increased in corporate bonds of infrastructure companies

On the other hand, tax-free bonds to the tune of Rs 30,000 crores have been allowed to be raised by government undertakings such as National Highways Authority of India , HUDCO etc. This is expected to support and make it easy to finance projects for infrastructure companies.

However, the gestation period of these infrastructure projects is quite long and therefore investors with a long-term horizon only should look at investing in these stocks.

Oil companies

The oil refining and marketing companies have been disappointed by the Budget. They were expecting some relief in terms of a cut in the customs duty or plan to deregulate diesel prices. However, no favourable announcement in the Budget has left these companies hoping for a possible revision in the prices of diesel and cooking gas.

The government is moderating the prices as a steep hike will push the inflation rate further up which is already running beyond the comfortable levels.

Telecom

The Budget indications paint a negative picture for the telecom sector. The Finance Minister indicated that the government is expecting to raise money through recurring license fees and other usage charges from the telecom sector. These license fees will put additional financial burden on the larger telecom service providers


Source : ET

Budget opens back door for black money

Budget proposals allowing foreign individuals to invest in mutual funds and halve the tax on dividends from overseas arms of Indian companies may provide a window for undeclared income parked abroad to enter the country

Tax experts said many would use this to bring black money and cash stashed in tax havens into the country.

Public Accounts Committee member and Bharatiya Janata Party leader Yashwant Sinha agrees. “The schemes are a ploy to get back black money into the country. They have opened gates for flow of capital from tax havens, which was waiting to come to India under a pretext and incentive,” Sinha said.
Sinha, who has twice been the country’s finance minister, is also of the view that banks and mutual funds are not following the know-your-customer (KYC) norms.

“The scrutiny of KYC norms is extremely poor, leaving the field open for people to bring back illegal wealth into the country. Also, in several tax havens, it is easy to put any amount of profits on your books without anybody asking questions. The money can later be transferred to Indian companies in the form of 100 per cent dividend,” said Sinha.

For long, high net worth individuals were using offshore derivatives instruments, known as participatory notes (P-notes), for investing in the stock markets. P-note deals did not attract much scrutiny as they were struck overseas and the identity of the actual holder was hazy. Of late, however, P-notes have been linked with flow of hot money into the country.

The earlier 30 per cent tax on dividends from overseas arms took the effective cost of bringing money into the country as profits to 33.3 per cent. Mukherjee has now halved the tax to 15 per cent for financial year 2011-12.

“Since the Direct Taxes Code will kick in from the next financial year, which will again tax such dividends at 30 per cent, the scheme is a surprise. It is more like an amnesty scheme,” said a top Mumbai-based tax consultant.
“The scheme has been very smartly structured. Of course, capital will flow from tax havens. However, the money coming into the country can only be used for business purposes, as it is companies that will receive dividends, not individuals,” said Anil Harish, a partner with Mumbai-based D M Harish & Co.

“The intent is to incentivise repatriation of foreign dividends by providing a concessional tax rate. However, if these are received from non-cooperative jurisdictions, the flows will be subjected to source reviews based on the newly-introduced anti-avoidance measures,” said Sameer Gupta, a senior partner with accounting firm Ernst & Young.

“Double Irish” or “Dutch Sandwich” are some of the techniques companies use to route their money. They funnel their corporate income through Ireland and from there to a shell in the Netherlands, from where it can be transferred to Bermuda. This money is later routed to India through a subsidiary in the Gulf. This is because India has information-sharing agreements with the countries there and so these fund transfers do not attract close scrutiny. In the Emirates, it is easy to show any amount of profit, as the authorities do not get into the nitty-gritty of transactions. Once this is done, companies can even pay 100 per cent dividend.

Much of the economic activity in tax havens involves professional financial services such as mutual funds, banking, life insurance and pensions. Generally, unaccounted funds are deposited with these intermediaries, who then on-lend or invest the money.

The US National Bureau of Economic Research has suggested that roughly 15 per cent countries in the world are tax havens. Apart from Switzerland, Isle of Man, Singapore, Mauritius, British Virgin Islands, Bahamas, Bermuda -- where Indian real estate and other companies have set up base -- the diamond and bullion traders have their branches in the Gulf countries. In the past few years, Dubai has emerged as the main hub for Indians to route their hawala money.

Tax havens are countries which impose nil or nominal taxes and offer themselves, or are perceived to offer themselves, as a place to be used by non-residents to escape high taxes in their country of residence.


Source : BS