Study For Buddies: SY Semester 3 theory
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    Showing posts with label SY Semester 3 theory. Show all posts

    Thursday, September 30, 2021

    Elements of direct taxes

    September 30, 2021 0
    Elements of direct taxes
    S.Y B.COM
    SEMESTER - III

    ELEMENTS OF DIRECT TAXES
    (EDT)

    What is tax?

    • Tax is a price which is paid by every citizen of country for social welfare what he / she avails.

    • Cost of living in a society

    Why are taxes levied?

    • The reason for levy of taxes is that they constitute the basic source of revenue to the Government. Revenue so raised is utilized for meeting the expenses of Government like defence, provision of education, health-care, infrastructure facilities like roads, dams etc.

    Types of tax 

    Types of Tax

    • Direct Taxes : If tax is levied directly on the income or wealth of a person, then, it is a direct tax. The person who pays the tax to the Government cannot recover it from somebody else i.e. the burden of a direct tax cannot be shifted. e.g. Income- tax.

    • Indirect Taxes : If tax is levied on the price of a good or service, then, it is an indirect tax e.g. Goods and Services Tax (GST) or Custom Duty. In the case of indirect taxes, the person paying the tax passes on the incidence to another person.

    Assessment & Previous Year

    • Assessment Year- It is a year in which assessee pays tax for Previous Year. 

    • Previous Year- It is a year in which assessee earns income.

    Income Tax Law

    • Two Acts are more important -

    i. Income Tax Act, 1961
    - Provisos and Explanations
    - sub-sections or clauses and sub-clauses 

    ii. Annual Finance Act - Fixation of tax rate 

    Important Definitions

    • Assessment Year u/s 2(9)
    • Previous Year u/s 3
    • Assessee u/s 2(7)
    • Person u/s 2(31)
    • Gross Total Income u/s 14
    • Income u/s 2(24)

    Assessment Year u/s 2(9)

    • Means -

    The period starting from April 1 and ending on March 31 of next year. Thus, the assessment year 2021-22 commences on April 1, 2021 and ends on March 31, 2022. Income of pervious year of an assessee is taxed during the next following year at the rate prescribed by relevant Finance Act. 

    Previous year u/s 3 

    • Means - 
    The year in which income is earned is known as previous year and the next year in which income is taxable is known as assessment year.

    In our syllabus, we will consider A.Y 2021-22 and P.Y. 2020-21 throughout the semester.

    Assessee u/s 2(7)

    • It includes -

    i. A person who files tax return though his income is less than Rs. 2,50,000. 

    ii. A person who doesn't file tax return though his income is more than Rs. 2,50,000

    iii. A person in respect of whom any proceeding under the Act has been taken 

    iv. Deemed Assessee

    Person u/s 2(31)

    • The term person includes-

    a. An Individual
    b. A Hindu Undivided Family 
    c. A company 
    d. A firm 
    e. An AOP or BOI, whether incorporated or not 
    f. A local authority; and 
    g. Every artificial juridical person not falling within any of the preceding categories 

    Gross Total Income u/s 14 

    • As per section 14, income of a person is computed under the following five heads: 

    1. Salaries 
    2. Income from house property 
    3. Profits and gains of business or profession 
    4. Capital gains 
    5. Income from other sources 

    The aggregate income under these heads is termed as "gross total income". 

    Income u/s 2 (24)

    • It is inclusive definition as it includes- 

    - Profits and gains 
    - Dividend 
    - Anv allowance
    - Winning from lottery
    - Compensation 
    - Consideration etc.

     Tax v/s Duty 

    TAX

    Duty

    In case of tax, person earns income and then pays tax to government.

    In case of duty, person pays tax and then he may earn income by selling the product or he may consume himself.

    For eg. Income tax

    For eg. Custom duty 

    Deduction v/s Exemption

    Deduction

    Exemption

    Deduction is generally given from Income chargeable to tax. Deduction can be less than or equal to or more than amount of income. If amount deductible is more than the amount of income, the resulting amount will be taken as loss

    If an income is exempt from tax, it is not included in the computation of income. Exemption can never exceed the amount of income.

    Method of Accounting 

    Income chargeable under the head "Profits and gains of business or profession" or " Income from other sources" is to be computed in accordance with the method of accounting regularly employed by the assessee.

    In other cases, method of maintaining books of account is irrelevant. 

    Income tax slabs under the new tax regime for all individuals for FY 2020-21
    (Applicable from A.Y. 2021-22)

    Income Tax Slab

    Tax Rate

    Up to Rs 2.5 lakh

    NIL

    Rs. 2.5 lakh to Rs. 5 lakh

    5% (tax rebate of Rs.12,500 available under under section 87A)

    Rs. 5 lakh to Rs. 7.5 lakh

    10%

    Rs. 7.5 lakh to Rs. 10 lakh

    15%

    Rs. 10 lakh to Rs. 12.5 lakh

    20%

    Rs. 12.5 lakh to Rs. 15 lakh

    25%

    Rs. 15 lakh And above

    30%

    Income Tax Slabs & Rates for Individual Tax Payers & HUF (Less Than 60 Years Old) for FY 2020-21- 
    Part I
    (A. Y. 2021-22) 


    Income Tax Slab

    Tax Rate for Individual & HUF Below the Age Of 60 Years

    Up to Rs. 2,50,000

    Nil

    Rs.2,50,001 to Rs. 5,00,000

    5% of total income exceeding Rs.2,50,000

    Rs. 5,00,001 to Rs. 10,00,000

    Rs. 12,500 + 20% of total income Exceeding Rs.5,00,000

    Above Rs.10,00,000

    Rs. 1,12,500 + 30% of total income exceeding Rs. 10,00,000 

     Computation of Tax: An outline

    I. Aggregate of income under 5 heads 

    Salary                                                        xxx
    Income from House Property                xxx
    Profit and gain of Bus. Or Profession   xxx
    Capital Gain                                             xxx
    Income from other sources                   xxx
    ----------------------------------------------------------------
    Gross Total Income                               xxx

    II. Less: Deduction (80C to 80U)         xxx
    Net Income/Total Income                    xxx

    III.Calculation of Tax using applicable tax slab 

    IV. Less: Rebate upto Rs. 12500 if net income is less than or equal to Rs. 500000 

    V. Add: Surcharge if applicable 

    VI. Add: Health and education tax @ 4% on tax liability 

    Example 

    • Mr. Dev is an Indian citizen (age: 56 years). He has received salary of Rs. 800000 in the year 2019-20 and also paid LIC premium of Rs. 72000 in the same financial year. Calculate his lax liability for the assessment year 2020-21. 

    Ans. Salary                      800000
    Less: Deduction             (72000)
    Net Income                      728000 
    728000-250000 (exempt) 
    = 478000 - 250000 (5% on 250000) = 12500 
    = 228000 @20% = 45600 
     tax libility = 12500 + 45600 
                      = 58100 @ 4% (HEC) = 2324          Total tax = 58100 + 2324 
                      = 60424

    Examples 

    • Mr. Dev is an Indian citizen (age: 66 years). He has received salary of Rs. 750000 in the year 2019-20 and also paid LIC premium of Rs. 72000 in the same financial year. He has also received rental income of Rs. 50000 from house property in the financial year 2019-20. Calculate his lax liability for the assessment year 2020-21. 

    • Mr. Dev is an Indian citizen (age: 86 years). He has received salary of Rs. 700000 in the year 2019-20 and also paid LIC premium of Rs. 72000 in the same financial year. He has also received rental income from house property of Rs. 100000 in the financial year 2019-20. Calculate his tax liability for the assessment year 2020-21. 

    Broad principles which clarify the concept of income 

    • Meaning of income as generally understood: 

    - Periodical monetary return 
    - Regularity 
    - True increase in the amount of wealth which comes to a person during a fixed period of time. 

    Principles: 

    1. Regular and definite sources 
    2. Different form of income 
    3. Receipt vs Accrual
    4. Illegal Income 
    5. Disputed Title
    6. Relief or reimbursement of expenses not treated as income 
    7. Diversion of income by overriding title vs Application of income 
    8. Surplus from mutual activity 
    9. Temporary and permanent income 
    10. Lump sum receipt
    11. Tax free income 
    12. Receipt on account of dharmada, gaushala etc. 
    13. Devaluation of currency 
    14. Income includes loss
    15. Appropriation of payment between capital and interest 
    16. Same income cannot be taxed twice
    17. Income should be real not fictional 
    18. Source of income need not exist in the assessment year 
    19. Pin Money 
    20. Award received by a sportsman 
    21. Revenue receipt vs Capital receipt 
    22. Voluntary payment 
    23. Prize on winning a motor rally 
    24. Burden of proof 

    Incidence of Tax 

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    Wednesday, February 24, 2021

    HUMAN RESOURCES MANAGEMENT (UNIT - III)

    February 24, 2021 0
    HUMAN RESOURCES MANAGEMENT (UNIT - III)
    S.Y. B.COM
    SEMESTER - III

    HUMAN RESOURCES MANAGEMENT
    (HRM)

    CONTENTS

    PLACEMENT INDUCTION

    1. Placement with its Importance
    2. Induction or orientation with its objectives
    3. Internal Mobility policy
    4. Transfer, promotion & Demotion
    5. Types of Employee separations

    PLACEMENT INDUCTION

    Q.1. Explain placement with its importance

    A) MEANING:

    After candidate has been selected, he should be placed on a suitable job. Placement is the actual posting of an employee to a specific job, it involves assigning a specific rank & responsibility to an employee

    B) FEATURES:

    1) The placement decisions are taken by the line manager after the matching the qualifications of a candidate.

    2) Most organizations put new reunites on probation for a given period of time after which their services are confirmed.

    3) During this period, the performance of the probationer is closely monitored if the new recruits fails to adjust himself to the job & turn outs poor performance, the organization may considered his name for placement elsewhere such second placement is called differential placement.

    4) Usually the employees supervision in consultation with the higher levels of line
    management takes decision regarding the future placement of each employee.

    5) Placement is an important human resources activity.

    C) BENEFITS:

    Major benefits of a placement are as follows.

    1) The employee is able to show results on the job.
    2) The employee is able get along with people easily.
    3) The employees keep his spirits high, report for duty regularly
    4) The employees avoids mistakes & accidents.

    D) IMPORTANCE / SIGNIFICANCE OF PLACEMENT:-

    1) t improves the morale of an employees
    2) It helps in reviewing of an employees.
    3) It helps in reducing accident rates.
    4) It helps the candidates to work as per predetermined objectives of organization.
    5) lt avoids miss fit between the candidates & job.
    6) It reduces the dissatisfaction ratio among the employees.

    E) CONCLUSION:

    New recruits must be oriented properly so that they become productive contributions. There should be conscious & determined efforts to adapt the new recruit to the Organization's culture by conveying to the employee how things are done & what matters. when new employee know what is effected of them, they have better organizational performance & less frustration & uncertainly.

    Q.2. Write a short notes on induction or orientation with its objectives & also explain induction programme in Indian companies.

    A) MEANINGS:

    Orientation or induction is the task of introducing the new employees to the organization & its policies procedures & rules. A typical formal orientation programme may a last a day or less in most organization. During this time, the new employees provided with information about the company, its history, its current position, the benefits for which he is eligible, leave rules, rest periods etc.

    In some organizations, all this is done informally by attaching new employees to their seniors, who provide guidance on the above matters. Lectures, handbooks, flms, groups, seminars are also provided to new employees so that they can settle down quickly & resume the work.

    B) OBJECTIVES:

    Induction serves the following purpose..

    1) Removes Fears:

    A new comer steps into an organization as a stranger. He is new to the people, work
    place & work environment. He is not very sure about what he is supposed to do. Induction helps a new employee to overcome such fears & perform better on the job. It assists him in knowing more about..

    ---> The job, its content, policies, rules and regulation.
    ---> The people with whom he is supposed to interact.
    ---> The terms and conditions of employment.

    2) Creates Good Impression:

    Another purpose of induction is to make the newcomer feel at home and develop a same of pride in the organization induction beeps him to...

    ---> Adjust and adapt to new demands of the jobs.
    ---> Get along with people.
    ---> Get off to a good start.

    Through induction, a new recruit is able to see more clearly, as to..

    ---> what he is supposed to do,
    ---> how good the colleagues are,
    ---> how important is the job etc.

    He can pose questions and seek clarifications on issues relating to his job. Induction is a positive step in the sense it leaves a good impression about the company and the people working there in the minds of new recruits. They begin to take pride in their work and are more committed to their jobs.

    3) Acts as a valuable source of information:

    Induction serves as a valuable source of information to new recruits. It classifies many things through employee manuals / handbook. Informal discussions with
    colleagues may also clear the fog surrounding creating issues. The basic purpose of induction is to communicate specific job requirements to the employee, put him at ease and make him feel confident about his abilities.

    C) STEPS IN INDUCTION PROGRAMME:

    ---> Welcome to the organization.
    ---> Explain about the company.
    ---> Show the location / department where the new recruit will work.
    ---> Give the company's manual to the new recruit.
    ---> Provide details about various work groups & the extent of unionism within the
    company.
    ---> Give details about any benefits, holidays, leave, etc. emphasize the importance of attendance of prospects.
    ---> Clarify doubts, by encouraging the employee to come out with questions.
    ---> Take the employee on a guided tour of buildings, facilities, etc. hand him over to his supervisor.

    D) INDUCTION TIRAINING IN INDIA:

    Le's now take a look at the initiation programmes offered to new entrants by companies operating in India.

    1) Aptech:

    The company takes its new entrants through a structured induction training
    programme. The one day programme includes a briefing on the company's market position, the business in it, its functional style, its organizational structure & its HR policies.

    2) Maruti Udyog:

    The company customizes its initiation programmes to suit the profile of the new recruit.

    For engineers, the programme offered in four parts.

    ---> Familiarize with various functions & meet division neads
    ---> Work on shop floors
    ---> Work finally in departments four about 2 months, where they will eventually work.

    3) Standard chartered bank:

    The management trainees are picked from premium high schools & undergo induction training for 6 months. During the time of training the trainees spend time in
    the various divisions & get a chance to meet each of the bank's business heads.

    4) Citi bank:

    In citi bank, trainees spend the first two & a half weeks learning about the bank's
    three major levels of business. After spending two months on the job, the trainees attend classroom learning sessions conducted at the Asia Pacific Banking Institute in Singapore.

    5) Sony India: -

    There is no specific time frame given to 'new comers' to fit in the companies. Overall sony tries to bring out the best in a person thus allowing the individuals to develop their abilities.

    6) Indian Shaving Products:

    The company has different standards for recruits from different back grounds &
    different jobs. However all new comers are kept on probation for 6 months.

    7) Kpmg:

    Kpmg follows different standards for new entrants on the basis of their past
    experience. Further all the new comers are on probation for 6 months.

    E) CONCLUSION:

    In any case, the HR department & the supervision taking change of the orientation efforts, should be such that new comer is not.

    1) Overburdened with too many forms.
    2) Over whelmed with too much to absorb in a shot time.
    3) Asked to do jobs that are complex and hazardous with a high chance of failure.
    4) Pushed into the job with a sketchy orientation.

    Q.3. Explain the Internal mobility policy.

    A) MEANING OF INTERNAL MOBILITY:

    The lateral or vertical movement (promotion, transfer, demotion, or separation) of an employee within an organization is called 'Internal Mobility'.

    It may take place between jobs in various departments or divisions.

    Some employees mav leave the organization for reasons such as better prospects. retirement, termination etc. such movement are known as a 'External Motilities'

    B) PURPOSE OF INTERNAL MOBILITY:

    The purpose of Internal Mobility may be stated thus...

    1) Improved organizational effectiveness:

    Organization want to be lean & clean. To end this structural defects may have to
    eliminated unwanted positions removed & other jobs re-designed. Internal mobility
    increase every such change within an organization.

    2) Improves employee effectiveness:

    Knowledge, skills & abilities can be put to use if there is a good education between
    what the person has & what the organization demands. Through promotions & transfers, organizations try to bridge such gaps.

    3) Adjust to changing business operations:

    During a boom, there might be a phenomenal demand for new skills, finance professionals were in great have to be carried out in case of death or illness of an employee.

    4) Ensure discipline:

    Demotion causes loss of status & earning capacity. A demoted employee has to
    learn new ways of getting things done & adjust to a new setting, demotions can be
    used to ensure discipline & to correct wrong placement & job assignment

    C) CONCLUSION:

    The internal mobility policy & external mobility policy differs from organization to organization.

    Q. 4. Explain transfer, promotion & demotion in an organization.

    A) TRANSFER:

    A transfer is a change in job assignment. It may involve a promotion or demotion or
    no change at all in status & responsibility. A transfer has to be viewed as a change in
    assignment in which an employee moves from one job to another in the same level
    of hiarchy, requiring. Similar skills involving approximately same level of responsibilities, same status & same level of ray.

    A transfer does not imply any promotion or demotion or change in status or responsibility

    ---> Purpose of transfer:

    Organizations resort to transfers with a view to serve the following purpose.

    1) To meet the organizational requirement:

    Organizational may have to transfer employees due to change in technology changes in volume of production, production schedule, product line, quality of products changes in the job pattern caused by changes in organization structure fluctuations in the market consumptions. All these changes demand the shift in job assignments with a view to place the right man on the right job.

    2) To satistfy the employee needs:

    Employees may need transfers in order to satisfy their desire to work under a friendly superior in a department or region where opportunities for advancement are
    bright.

    3) To utilize employees better:

    An employee may be transferred because management feel that his skills, experience & job knowledge could be put to better use else where.

    4) To make employee more versatile:

    Employees may be rolled over different jobs to expand their capabilities. Job rotation may mepare the employees for more challenging assignment in future.

    5) To adjust the work force:

    Workforce may be transferred from a plant where there is more work.

    6) To provide relief:

    Transfers may be made to give relief to employees who are overburdened or doing hazardous work for long periods.

    7) To reduce conflicts:

    Where employees find it dificult to get along with colleagues in a particular sections, department or location. They could be shifted to another place to reduce conflict.

    8) To punish employees:

    Transfers may be effected as disciplinary measures to shift employees indulging in undersirable activities to remote, for flying areas.

    --> Types of transfers:

    Transfers can be classified that

    1) Production transfers:- Transfers caused due to changes in production.
    2) Replacement transfers:- Transfers caused due to replacement of an employees working on the some job for along time.
    3) Rotation transfers:- Transfers initiated to increase the versatility of employees.
    4) Shift ransfers:- Transfers of an employees from one shift to another.
    5) Remedial transfer:- Transfer initiated to connect the wrong placement.
    6) Penal transfer:- Transfers initiated as a punishment for in disciplinary action of
    employees.

    ---> Benefits:

    Benefits associated with transfers are as follows:

    1) It improves employee skills.
    2) It reduces monotony, boredom location.
    3) It reduces faulty placement decisions.
    4) It prepare the employee for challenging assignment in future.
    5) It stabilize changing work requirements in different departments or location.
    6) It improves employee satisfaction & morale.
    7) It also improves employer employee relations.

    ---> Conclusion:

    Transfer have to be carried out in a systematic way, with a view to avoid allegations of discrimination & favoritism.

    B) PROMOTIONS:

    Promotions refers to upward movement of an employee from current job to another job that is higher in pay, responsibility & or organizational level. Promotion brings
    enhanced status, better pay, increased responsibilities & better working conditions. Sometime there may be dry promotions, where a person is increase in pay. Promotion is slightly different from up gradation of an employees.

    ---> Purpose & Advantages of Promotions:-

    1) Promotion based either on meritorious performance or continuous service has powerful motivational value
    2) It forces an employee to use his knowledge, skills & abilities & become eliible fo vertical growth.
    3) It inspires employees to compete & get ahead of others. Thus promotion provides paths ways for employee self developments.
    4) The organization would be able to utiliza the skills & abilities of its personnel more effectively.
    5) The organization would also benefits immensely because people are ready to assume challenging roles by improving their skills constantly
    6) It encourages them to remain loyal & commited to their jobs & the organization

    ---> Bases of promotions:

    Organizations adopt different bases of promotion depending upon their nature, size, and management etc. generally they may combine two or more bases of promotion. The well established bases of promotion are seniority & merit.

    1) Merit based promotions:

    Merit based promotions occur when an employee is promoted because of Superior performance in the current job. Merit here denotes an individuals knowledge, skills, abilities & efficiency as measured from his educational, experience, training & past employment record.

    ---> Advantages:

    a) It motivates employees to work hard, improve their knowledge, acquire new
    Skills & contribute to organization efficiency.
    b) It help the employers to focus attention on talented people, recognized &
    reward their meritorious contributions in an appropriate way.
    c) It also inspires other employees to improve their standard of perfommance through active participation in all developmental Initiatives undertaken by the employer.

    ---> Criticisms:

    a) It is not easy to measure merit personnel prejudices, biases & union pressure may come in the way of promoting the best perfomer.
    b) When young employees get ahead of other senior employees in an organization
    other employee may feel pressure & may even quit the organizaton.
    c) Also past performance may not quarantee future sucoess of an employee.

    2) Seniority based promotions:

    Seniority refers to the relative length of service in the same organization.

    ---> Merits:

    a) It is welcomed by unions because it is fairly objectives
    b) It is easy to measure the length of service & judge the seniority.
    c) There is no scope for favoritism, discrimination & subjective judgment.
    d) Everyone sure that they are getting the same one day.

    ----> Limitations:

    a) It demotivates the young & more competent employees & results in greater
    employee turnover.
    b) It kills zeal & interest to develop as everybody will be promoted without showing any all round growth or promise.
    c) The learning capabilities may diminish beyond a certain age.

    C) DEMOTION POLICY:

    Demotion is the downward movement of an employees in the organizational hierarchy with lower status & pay. It is a down grading process where the employees Suffers considerable emotional & financial loss in the form of lower rank, power & status, lower pay or poor Working condiuons.

    ---> Causes: -

    There are several factors responsible for demotions.

    a) A promoted employee is unable to met the challenges posed by a new job.
    b) Due to adverse business conditions, organizations may decide to lay off some & down grade other jobs
    c) Demotions may be used as disciplinary tools against errant employees

    ---> Conclusion:-

    The policy of transfers, promotions, demotions is differ from organization to organizations.

    Q.5. Explain the types of employee separations in which employees leaves the organization

    A. Employee leaves organization due to so many reasons. Separations can take several forms such as.

    1) RESIGNATION:-

    An employee may decide to quite an organization voluntarily on personal or
    professional grounds such as...

    ---> Geting a better job,
    ---> Changing careers wanting to spend more time with family or
    ---> Leisure activities,

    The decision could altematively be traced to the employee's displeasure with the current job, pay, working conditions or forced to quit the organization compulsorily or grounds of negligence of duty, insubordination, misuse of funds etc.

    The resignation in this case, unlike voluntary separation is initiated by the employers. If the employee refuses to quit, he may have to face disciplinary action, When employees resignation or quit an organization, there wil be a certain amount of disruption to the normal flow of work. Replacing an experienced & talented person may not be easy in a short span of time.

    2) RETIREMENT:- 

    Like a resignation, a retirement is normally initiated by the employee.

    a) Retirement usually occurs at the end of an employee's career.
    b) Retirement usually result in the retiree's receiving benefits like PF, Gratuity. etc from the organization. People who quit do not receive these benefits.
    c) Finally, the organization nomally plans retirements in advance.

    ---> Employees are retire from service on account of two reasons.

    a) Compulsory retirement:

    Government, employees retailer compulsorily after attaining the age of 58 or 60.

    ---> In the private sector, the retirement age may well go beyond 60 depending on a
    person's ability.

    b) Voluntary retirement:-

    In case of voluntary retirement, the normal retirement benefits are calculated &
    paid to all such employees who put in a minimum qualifying service.
    Sometimes the employer may encourage the employee to retire voluntarily with a view to reduce surplus staff & cut down labor costs.

    ---> Death:

    Some employees may die during the service. When the death is caused by
    occupational hazards, the employee gets compensation as per provision of workmen compensation Act 1923.
    The normal separation of people from an organization owing to resignation, retirements or death is known as attrition.

    ---> Lay off:

    A lay off is a temporary removal of an employee from the payroll of an organization due to reasons beyond the control of an employer. Global completion, reductions in product demand, changing technologies that reduce the need of worker, mangers & actuations are the primary factors behind most lay offs. The services of employees are not utilized
    during the lay off periods. If the lay offs is for a temporary period the employees are likely to be called back to join the ranks again. Lay offs therefore, have to be carried out in a cautious way keeping the financial, psychological& social effect in mind.

    3) RETRENCHMENT:

    Retrenchment is the permanent termination of an employees services due to economic reasons such as surplus economic slow down etc. It should be noted here that termination of services on disciplinary grounds, illness, retirement, winding up of a business does not constitute retrenchment.
    In respect of organizations employing 100 or more persons the industrial dispute Act
    1947 makes it obligatory for the employer to give advance notice or pay equivalent
    wages before he has to give three months notice before retrenching the worker & get
    prior approval from the government as well.

    ---> Out placement: -

    In this case, employees who are retrenched off may have difficulty in finding an alternative job if the market conditions are adverse.

    There might be a demand for certain category of employees.


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    Sunday, February 21, 2021

    ELEMENTS OF DIRECT TAXES (EDT) EXEMPTED INCOMES

    February 21, 2021 0
    ELEMENTS OF DIRECT TAXES (EDT) EXEMPTED INCOMES
    S.Y.B.COM
    SEMESTER - III

    ELEMENTS OF DIRECT TAXES
    (EDT)
    UNIT - I

    EXEMPTED INCOMES

    Following incomes are exempt from tax under section 10 of Income Tax Act, 1961 and they do not form part of total income.

    1. Agricultural income [Section 10 (1)]
    2. Receipts by a member from a Hindu Undivided Family [Section 10 (2)]
    3. Share of profit received by a partner from a partnership firm [Section 10 (2A))
    4. Interest received by a Non- resident [Section 10 (4)]
    5. Leave Travel Concession [Section 10 (5)]
    6. Fees for technical services [Section 10 (6C)
    7. Gratuity [Section 10 (10)]
    8. Pension [Section 10 (10A)]
    9. Leave salary [Section 10 (10AA)]
    10. Retrenchment compensation [Section 10 (10B)]
    11. Compensation received at the time of voluntary retirement [Section 10 (10C)]
    12. Amount paid on life insurance policies [Section 10 (10D)]
    13. Payment from provident fund [Section 10 (11)
    14. Payment from approved superannuation fund [Section 10 (13)]
    15. House Rent Allowance [Section 10 (13A)]
    16. Special Allowances [Section 10 (14)
    17. Inters on securities [Section 10 (15)]
    18. Educational scholarships [Section 10 (16)]
    19. Daily allowance of Members of Parliament (Section 10 (17)]
    20. Awards [Section 10 (17A)]
    21. Family pension received by family members of armed forces [Section 10 (19)]
    22. Notional property income of any one palace occupied by a former ruler[Section 10(19A)
    23. Income of local authority [Section 10 (20)]
    24. Income of an approved research association [Section 10 (21)]
    25. Income of professional institutions [Section 10 (23A)]
    26. Income of educational institutions (Section 10 (23C)]
    27. Income of hospitals [Section 10 (23C)]
    28. Income of trade unions [Section 10 (24)]
    29. Income of provident funds (Section 10 (25)]
    30. Income of minor [Section 10 (32)]
    31. Dividend and interest on units (Section 10 (34)/(35)]
    32. Long term capital gain on equity shares/ units covered by STT [Section 10 (38)]

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    Wednesday, January 20, 2021

    HIGHER FINANCIAL ACCOUNTING(HFA) UNIT-IV

    January 20, 2021 1
    HIGHER FINANCIAL ACCOUNTING(HFA) UNIT-IV
    S.Y B.COM 
    SEMESTER - III

    HIGHER FINANCIAL ACCOUNTING
    (HFA)
    UNIT-IV 
    INVESTMENTS ACCOUNTS: AS-13 

    INVESTMENT: It is the assets held for earning income by way of dividend, interest and rentals, for capital appreciation or for other benefits.

    SCOPE: This statement deals with accounting for investment in the financial statements. However, as per opinion issued by ICAI, this AS to the extent it relates to current investment is also applicable to shares, debentures and other securities held as "Stock in trade" with suitable modification. The standard deals with the following aspects:

    ● Classificaticon of investment 
    ● Cost of investment 
    ● Carrying amount/valuation of investment 
    ●  Disposal of investments
    ● Reclassification of investments
    ● Disclosure of investment in the financial statements 

    APPLICABILITY: The Accounting standard does not deal with the following-

    ● The basis for recognition of interest, dividend and rentals earned on investment. 
    ● Operating or finance leases.
    ● Investiment of retirement benefit plans and life insurance enterprises.
    ● Mutual funds, venture capital fund and/or the related asset management companies, banks and public financial institutions. 

    DEFINITIONS: Investments are assets held by an enterprise for earning income by way of dividends, interest, and rentals, for capital appreciation, or for other benefits to the investing enterprise. Assets held as stock-in trade are not 'investments'. 

    CURRENT INVESTMENT: Such investment is readily realizable and is intended to be held for not more than one year from the date on which such investment is made. 

    LONG TERM INVESTMENT: Investment other than current investment is called long-term investment.

    INVESTMENT PROPERTY: It is an investment in land or building that is not intended to be occupied substantially for use by or in their operation of the investing enterprise. For example, if a company purchase land or building not for its business use but for earning the rent by letting the land or building; the land or building is not fixed asset but it is an investment or even if building is not let out but is held with the intention to earn capital appreciation, then it is an investment.

    CLASSIFICATION OF INVESTMENT: Enterprises present financial statements that classify fixed assets, investments and current assets into separate categories. Investment is classified as Long-term Investment and Current Investment as defined above.

    COST OF INVESTMENT: Cost of investment comprises of purchase price and acquisition charges Such as brokerage, fees and duties etc.

    ● Investment is acquired by insue of shares or other securities: Purchase price of investment is the fair value of the securities issued.
    ● Investment is acquired in exchange for another asset: Acquisition cost investment is fair value of the asset given up. OR Fair value of the investment received if it is more clearly evident.
    ● Pre-acquisition interest: When interest has accrued in pre-acquisition period and was included in cost of investment at the time of acquisition, then subsequent receipt of such pre-acquisition interest is deducted from the cost of investment.
    ● Dividend: When dividend is declared from pre-acquisition profits, and later on received by the purchaser of investment, then such amount of dividend is deducted from the cost of investment.

    ● Right shares:
         ● If right shares offered are subscribed, then cost of right shares in added to the carrying amount of the investment.
         ● If right shares offered are not subscribed but right is sold in the market, then sale proceeds are taken to profit and loss account provided original share on which right is received is not acquired at cum-right.
        ● Investment purchased at cum-right: If Investment is acquired at cum-right price and after that it becomes ex-right, the market value of such investments will fall below the acquisition cost of investment. The cost of investment is reduced by the amount received on sale of rights.

    CARRYING AMOUNT OF INVESTMENT: (Valuation of investment for the purpose of Balance Sheet) 

    --> CURRENT INVESTMENTS: Carrying amount of each current investment is the lower of cost and realizable value. Any reduction in realizable value is debited in profit and loss account; however if realizable value of investment is increased subsequently, the increase in value of current investment to the level of the cost is credited to profit and loss account. 

    --> LONG TERM INVESTMENT:
    ●  It is usually carried/valued at cost
    ● If there is a decline in value of investment, but such decline is not temporary, then carrying amount of investment is reduced by the amount of such decline.
    ● The resultant reduction in carrying amount is charged to the profit and loss account. This reduction amount is reversed when there is a rise in the value of investment but such rise in value should not be temporary.
    ● Indicators of the value of an investment are obtained by reference to (a) its market value, (b) the investee's assets and results, (c) the expected cash flows from the investment, (d) the type and extent of the investor's stake in the investee, (e) restrictions on distributions by the investee or on disposal by the investor may affect the value attributed to the investment.
    --> INVESTMENT PROPERTIES : The cost of shares held in co-operative society is added to cost of investment properties. If the shares in co-operative societies are necessary to acquire the invesment properties, an enterprise holding investment properties should
     accout for them as long term investment.

    DISPOSAL OF INVESTMENT:

    ● When an investment is disposed of, the difference between the carrying amount and net sale proceeds (Gross sale less expenses) is recognized in the profit and loss account.
    ● When only a part of total investment is disposed of, the carrying amount of that part of investment is determined on the basis of the average carrying amount of the total investment.

    RECLASSIFICATION OF INVESTMENTS :

    ● From long-term investment to current investment.
           ● Transfers are made at the lower of cost and carrying amount on the date of transfer.

    ● From current investment to long-term investment
          ● Transfers are made at the lower of cost and fair value on date of transfer. 

    DISCLOSURES:

    ● Accounting policies followed for valuation of investment
    ● Classification of investment into current and long term in addition to classification as per Schedule III of Companies Act 2013 in case of company.
    ● Aggregate amount of quoted and unquoted securities separately.
    ● Any significant restriction on investment like minimum holding period for sale/disposal, utilization of sale proceeds or non remittance of sale proceeds of investment held outside India.

     Notes:
    Some Adjustments for Equity Shares Investment Account:

    Dividend received:

    Any dividend received out of pre-acquisition profit is credited to Investment Account. It is recorded in the "Cost Column" only. However, dividend received out of post-acquisition profit is credited to "Income Column" Dividend received from pre-acquisition profit will reduce the average cost of shares and dividend received from post- acquisition profit will increase the income.

    Bonus shares:

    The bonus issue refers to capitalization of reserves and profit. It results in conversion of reserves and surplus into share capital. The purpose is to ensure that, in the long-run, equity share capital of the company comes closer to equity shareholders funds employed in the business. To bring in sanctity to the Issue of Bonus Shares, The Companies Act, 2013 has introduced Section 63 to deal exclunively with Bonus shares.

       Bonus shares are issued by capitalizing free reserves. An existing shareholder (buniness/lnvetors) receives Bonus shares on the basis of existing holding, at no cost. Therefore, only the nominal value column of the investment Account needs amendment. The total nominal value of shares received as bonus will appear in nominal value column and nothing is recorded in the cost column. In effect, the average cost of the existing shares is reduced.

    RIGHT SHARES:

    Where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered-----

    (a) persons who, at the date of the offer, are holders of equity shares of the company in proportion, subject to the following conditions, namely:-----

    (i) the offer shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined;

    (ii) unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him. 

    (iii) after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of Directors may dispose of them in such manner which is not disadvantageous to the shareholders and the company;

    (b) to employees under a scheme of employees stock option, subject to special resolution passed by company and subject to such conditions as may be prescribed; or

    (c) to any persons, if it is authorised by a special resolution, whether or not those persons include the persons referred to in clause (a) or clause (b), either for cash or for a consideration other than cash, if the price of such shares is determined by the valuation report of a registered valuer subject to such conditions as may be prescribed.

         Right shares are issued at a lower price than the existing market rates. Moreover, a business can buy rights from outsiders against a consideration. The following are the possible situations:

    ● Accepting Rights Shares When Issued: An existing shareholder (business/Investor) receives right shares on the basis of existing holding, at a cost less than market price. When right shares are taken up, nominal value is recorded in the nominal value column and the amount paid is recorded in the cost column. In effect, the average cost of the existing shares will be reduced.

    ● Sale of Rights to Outsiders: The Shareholders may take up the rights issue by subscribing for the shares offered; alternatively, the rights may be sold in the open market. When the rights to the shares are sold, the total amount received is credited to the Profit and Loss Account.

     ● Purchase of Rights from outsiders: The shareholder may purchase rights from the open market. The total amount paid is debited to the Investment Account-"Cost Column". 

    INVESTMENTS ACCOUNTS: AS-13

    Eg 1. On 1.1.2016, 400 6% Debentures of Rs.100 each of ABB Ltd. were held as investments by Mr. Vinod at a cost of Rs. 36,400. Interest is payable on 30th September and 31st March every year.
    On 1.4.2016 Rs. 8,000 of such debentures were purchased by Vinod @ Rs. 98 each cum-interest.
    On 1.9.2016 Rs. 12,000 of debentures were sold at Rs.96 ex-interest.
    On 1.12.2016 Rs. 16,000 debentures were sold @ Rs. 99 cum-interest.
    On 31.12.2016 Rs. 20,000 debentures were purchased @ Rs. 95 ex-interest.
    Assume brokerage at 0.1% of nominal value of Rs.100 each in each case. The stocks were quoted at Rs. 97.50 as on 31st December 2016. Prepare Investment Account for 6% Debentures of ABB Ltd. in the books of Mr. Vinod for the year ended 31st December, 2016. Ignore Income Tax. 

    2. Mayuri Ltd. held on 1.4.2016 12% Govt. Stock of Rs. 1,80,000 purchased at the cost of Rs. 1,69,500. (Rs. 100 face value)
    On 1.9.2016, it purchased further of Rs. 1,20,000 stock at Rs. 96.50 cum-interest, brokerage being Rs. 600.
    On 31.10.2016 Rs. 1,50,000 of the stock was sold at Rs. 94.50 ex-interest, brokerage being Rs. 750.
    On 1.3.2017, Rs. 60,000 of the stock was sold at Rs. 96 cum-interest. Brakerage paid Rs. 300. Interest was paid quarterly basis on 30th June, 30th September, 31st December and 31st March every year. The stocks were quoted at Rs. 85 as on 31st March,2017.
    Prepare lnvestment Account for the year ended 31st March 2017 in the books of M Ltd. Ignore Income Tax

    3. On 1st June 2016, Mr. Naitik acquired 12,000 equity shares of Rs. 10 each in ABB Ltd. for Rs. 2,40,000 on cum-right basis :
    ABB Ltd. declared: 

    (a) one for three borus issue on 1st July, 2016; and 
    (b) one for four right issue on 1st September, 2016 at 20% premium.
    Mr. Naitik:
    (a) took up half the right Issue; 
    (b) sold the remaining rights for Rs. 8 per share;
    (c) sold half of its total shareholdings on 31stDecember, 2016 for Rs. 1,48,000.
     You are required to prepare the Investment Account for the period ended on 31st December, 2016. Ignore Income Tax.

    4. On 1/4 /2016, Kartik had 50,000 equity shares of HP Ltd at a book value of Rs. 15 per share [face value Rs. 10]  on 20/6/2016. He purchased another 10,000 shares of the company at Rs. 16 per share. The directors of HP Ltd announced a bonus and right issue. No dividend was payable on these issue .The terms of the issue are as follows:

    Bonus basis 1:6 [date 16/8/2016]; Right basis 3:7 [date 31/8/2016] Price Rs 15 per share.
    Due date for payment: 30/9/2016.
    Shareholders can transfer their rights in full or part. Accordingly, Kartik sold 331/3% of his entitlement to Naksh for a consideration of Rs. 2 per share. 

    Dividends: Dividend for the year ended 31/3/2016 at the rate of 20% was declared by HP Ltd and received by Kartik on 31/10/2016. Dividends for shares acquired by him on 20/6/2016 are to be adjusted against cost of purchase.

    On 15/11/2016, Kartik sold 50,000 equity shares at a premium of Rs. 5 per share. You are required to prepare in the books of Kartik [1] investment Account; and [2] Extracts of profit and Loss Account. Books of accounts are closed on 31/12/2016. Ignore Income Tax. 


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