How can we transform lives of domestic workers

Ruchi Anand and Associates, internal auditor in India provides best taxation solutions.   

There are so many people who wanted to help those who support them in their daily lives. There are

 ways which are required to encourage domestic helps, elevator operators, security guards, hotel operators who need financial inclusion.

Most of them struggle to secure a steady income and also manage periods of unemployment. That’s why most of them prefer to work with same employers at low wages for an extended period of time. It is time to invest in them and to create bright future for them and their family.

It is an advantage living in a large city to take a toll on domestic workers. It is difficult for them to limit expenses and save. They want to provide their children everything from education to better lives so that in future they can lead peaceful lives and will stretch their resources to do that. In small cities also, illness can throw these people off balance.

Formal financial facilities are not available to many. They mainly depend upon money-lenders, pawn brokers and chit funds to manage their needs. If we really want to help these people, it is mandatory to see ourselves as mentors, lenders, managers and service providers. We tend to opt different techniques in order to achieve this goal:

First, enable better liquidity and cash flow management. Incomes of domestic workers are mainly low so that they tend to take advances. They take hand loans, informal high-cost loans, or contribute to chit funds among friends, to tide over these issues.

 Create opportunities to earn overtime from specific additional tasks, help them enhance their skills, and spend some time working with them. There are so many employers who are exploitative in their approach of handling their employees. They ask hefty charges and pay paltry sums to their employees in return. Be a fair employer who is willing to pay market rates.

Second, get them an Aadhar card and PAN, and help them open a zero-balance bank account according to Prime Minister Jan Dhan Yojana. Use your relationships with banks to get the paperwork going. Use this account to manage their investments and savings. You need to hide access of these accounts to them, lest they spend the money in it. Keep custody of the ATM card and Internet banking passwords and provide your email and mobile for correspondence.

Third thing is to gift them life and health insurance as a Diwali or long-service bonus. Use your bank or your financial adviser to complete the paperwork, and choose plans that will provide a decent cover for the family. Create an informal pool of money among friends to take care of unexpected medical emergencies in your neighbourhood. If someone gets ill, there should be generous givers to make the unexpected payment.

Fourth, it is good to take a loan with some interest and tax rather than to pay usurious interest to money lenders. Suppose your driver’s child needs coaching classes to prepare for the chartered accountant in India examination.  He is too proud to accept a donation and likes to fund it himself.

Last, we need to make them understand the investment products that can offer them an opportunity to build long-term wealth. Government announces pension schemes, health schemes, life insurance schemes that target lower income groups. Mutual funds offer micro-SIPs and products that require lower investment amounts. Help them make sensible decisions.

By taking these little steps we can transform their lives. It requires only determination.

Window dressing and its effects

Ruchi Anand and Associates, internal auditor in India provides best taxation solutions. Window dressing is active from so many years and is still active. It has an adverse effect on economy of a nation. There are so many statements are issued by Government of India, RBI and various bank managements during last over a decade, arguing that they will curb this menace. Despite of all commitments we had noticed barely any action. None of them had taken any serious steps to cut this growing trend; rather behind they have encouraged window dressing to get hefty incentives and easy promotions. They show that there is consistent and healthy growth of banking sector in India.

First of all it is necessary to understand window dressing. Management manipulate financial statements and reports to show more promising results for a period of time at the end of financial year. Reaching the end of the financial year, maximum pressure is mounted on all the officers of the bank in order to ensure that all the targets meet on time. Thus, at the point of evaluation i.e. end of financial year, all banks try to boost their deposit, credit figures through artificial means.

If we turn toward light, banking sector is becoming weaker and weaker and we will definitely reach a stage where financial stability of Public Sector Banks will be at precarious condition, and there will be dangers of collapsing the same. Many banks are unable to give a reasonable wage hike to its employees and meet the pension liabilities of the retired employees.  

It is clear that bank top management, RBI, wherein they say that there is no danger to banking system when asked about their growth, but cry of weak financial status when a reasonable wage hike/pension is asked by employees. Again government intend to curb window dressing. It seems difficult that it will be followed to any logical end.

Government ask Income Tax Department to unearth domestic black money

Indian Government asked income tax department to take strict steps to unearth domestic black money as one year ago they promised people that whatever the circumstances, they will bring black money back to India .Now they are also working toward domestic black money.

They are keeping a close watch on ponzi schemes, bogus IPOs and other such illegal means of raising money. The government is determined to fight menace of black money both abroad and inside the country

Parliament recently passed the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Bill, 2015, to deal with black money stashed abroad.

It is goal for every officer to give equal emphasis on domestic black money. There are so many initiatives had been taken but there are some areas that are mainly targeted.

Ponzi schemes should be checked strictly which are unregulated and result in cheating the poor citizens of the country. In such a situation, Officers need to be very alert and if there are such schemes coming up then it needs to be referred to the respective regulatory agencies whether at state level or Reserve Bank level apart from taking deterrent action or taking effective action from tax point of view.

The second area is with regard to bogus IPOs and accommodation entry cases. There are so many cases identified in last couple of months so all the cases need to be taken to a logical conclusion.

All the assessment which requires to be completed before March 31, they have been completed. Investigation need to be completed expeditiously and finally.

Tax officials effectively share information with Central Economic Intelligence Bureau to check tax evasion and fraud.

The target of 7.98 lakh crore, direct tax collection that has been set in 2015-16, is very much achievable, it is a very realistic target, aligned with the kind of GDP growth which has been forecast in the economic survey and it is also based on our internal analysis and past and historical trends.

Service tax rate increased from 12.36% to 14 %

The new service tax rate of 14 percent will come into effect from June 1. It includes all things from eating out in restaurants or insurance and phone bill expense.

Currently service tax levied at the rate 12.36 percent including education cess.

It includes advertising, air travel, services if architect, certain type of constructions, credit card, even management, and tour operator.

Government is concentrating on economy. It is required to boost Indian economy.  

How your vacation helps you in tax deduction

There are many ways of tax deduction but many people prefer vacation. Here’s how they do it.

You need to make all your business appointments before you leave for your trip. Most people believe they can go on vacation and in the end they hand out their bill and get deductions. But you must have at least one business appointment before you leave in order to make it looks like business purpose. You can set up business appointment with your business colleagues in the various cities that you plan to visit.

You need to make sure that your trip is all business trip. You can deduct all your on-the-road expenses only when you are travelling on business. Suppose you go to a regional meeting which is only two-hour drive from your home. If you have some problem there like traffic problem and you need to sleep for one night then that expenses also count in business travel.

You need to make sure that you are deducting all your on-road-expenses for each day you are away. For every day you are on business travel, you can deduct 100 percent of lodging, tips, car rentals, and 50 percent of your food.

Suppose you have a weekend between your business days. If you have a business day on Friday and another one on Monday, you can deduct all on-the-road expenses during the weekend.

Make the trip days count as business days. You can deduct transportation expenses if business is the primary purpose of the trip. A majority of days in the trip must be for business activities.

To make sure that you can legally deduct your vacation when you combine it with business, call the office before you plan your trip.

It is good to take advice from tax advisor before you plan such an event.

Things to do if you forget to fill a tax return

All the tax returns should be file by the taxpayers which are due. A taxpayer may qualify for the payment plan depending upon the situation. The most important thing to know is that full payment of taxes can save your money.

Things to do when your return is late

You need to gather return information and need to bring all information related to income and deductions for the tax years for which a return is required to be filed. There are different ways of doing payment on your taxes. Payments can be made by credit card, electronic funds transfer, check, cashier’s check, or cash. There are also payment options for those who cannot pay full payment at a time. By paying as much as possible now, the penalties and amount of interest will be lessened. Based on situation, a taxpayer could qualify for an extension of time to pay, a temporary delay, an installment agreement or an offer of compromise.

There are generally two types of extensions. One is short-term payment extension and other is monthly payment plan.

A taxpayer gets 60 to 120 days to pay in short term extension. No fee is charged, but the late-payment penalty plus interest will apply. Generally taxpayers will pay less in penalties and interest if the debt were repaid through an installment agreement over a greater period of time. Penalties and interest will continue to be charged on the unpaid portion of the debt throughout the duration of the installment agreement/payment plan. When you are going to pay tax bill, it is necessary to check penalties and interest imposed. It is possible that your interest and penalties amount is more than the interest rate on a loan or credit card. You should pay as much as possible before entering into an installment agreement. You can also pay your tax via credit card or debit card. There is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee or flat fee. There is user fee you need to pay if the installment agreement is approved.

It is necessary to understand consequences of not filing a past due return and the steps that the IRS will take. Taxpayers who continue to not file a tax return and failed to respond to IRS requests for a return may be considered for a variety of enforcement actions.

If you haven’t filed a tax return yet, please contact a tax consultant for assistance.

Proposed changes for budget 2015-2016

These are the proposed changes for budget 2015-2016

Particulars	Existing Provisions for FY 2014-15 OR AY 2015-16	Proposed Changes in Budget for FY 2015-16  OR AY 2016-17
Surcharge on taxable income exceeding Rs. 1 Crore for Individuals, Senior Citizens, Very Senior Citizens, HUFs, AOPs, BOIs, artificial juridical persons, firms, cooperative societies and local authorities	10% of Income Tax	12% of Income Tax
Comparison of Benefits under various IT Sections
Exempted amount of transport allowance	Rs. 800/- per month	Rs. 1,600/- per month
Section 80D - Deduction for Health  Insurance premium	Rs. 15,000/-	Rs. 25,000/-
Section 80D - Deduction for Health  Insurance premium for Senior Citizens	Rs. 20,000/-	Rs. 30,000/-
Investment in Sukanya Samriddhi Scheme	-	Eligible for deduction u/s 80C and any payment from the scheme shall not be liable to tax.
Section 80DDB - Deduction in case of very senior citizens on expenditure on account of specified diseases	Rs. 60,000/-	Rs. 80,000/-
Section 80DD - Maintenance, including medical treatment of a dependent who is a person with disability	Rs. 50,000/-	Rs. 75,000/-
Section 80DD - Maintenance, including medical treatment of a dependent who is a person with severe disability	Rs. 1,00,000/-	Rs. 1,25,000/-
Section 80U - Person with disability	Rs. 50,000/-	Rs. 75,000/-
Section 80U - Person with severe disability	Rs. 1,00,000/-	Rs. 1,25,000/-
Section 80CCC - Contribution to provident fund of LIC or IRDA approved insurer	Rs. 1,00,000/-	Rs. 1,50,000/-
Section 80CCD - Contribution by the employee to National Pension Scheme (NPS)	Rs. 1,00,000/-	Rs. 1,50,000/- The budget also proposes to provide a deduction of upto Rs. 50,000 over and above the limit of Rs. 1.50 lakh in respect of contributions made to NPS.