Section 194-IA – TDS on Purchase of Immovable Property

Section 194-IA – TDS on Purchase of Immovable Property

1. Person responsible for tax deduction :-

Any person responsible for paying any sum to a resident transferor by way of consideration for transfer of an immovable property (other than agricultural land in rural area) is liable to deduct tax at source u/s 194-IA.

2. Time of deduction :-

At the time of payment or credit, whichever is earlier.

3. Rate of TDS :-

TDS to be deducted @ 1% of the sum paid. However, TDS needs to be deducted @ 20%, if the deductee does not furnish PAN.

4. Threshold Limit :-

No tax is deductible where the consideration paid or payable for the transfer of an immovable property is less than Rs. 50,00,000/-.

5. Other points:-

Provisions of TAN as prescribed u/s 203A shall not apply in respect of tax deducted u/s 194-IA.
Immovable property means any land, building or part of building. Such property may be situated in India or outside India.

TDS provisions of section 194-IA shall apply only if the transferor is resident in India.

 TDS provisions of section 194-IA shall not apply if a person acquires rural agricultural land in India.

6. Online Payment of TDS through challan cum statement on Form 26QB through NSDL Website:-

Tax so deducted should be deposited to the Government Account through any of the authorized bank branches using the e-Tax payment option available at NSDL E-payment within a period of seven days from the end of the month in which the deduction is made and shall be accompanied by a challan-cum-statement in Form No. 26QB.

                                                                             Steps to Pay Tax Online

Log on to NSDL-TIN website (www.tin-nsdl.com) or Alternatively person seeking payment of TDS on sale of Property can also use the following link - https://onlineservices.tin.nsdl.com/etaxnew/tdsnontds.jsp
Under TDS on sale of property, click on the option “Online form for furnishing TDS on property”.

1. Select Form for Payment of TDS on purchase of Property- Click on the option “TDS on sale of property’.
2. Select Financial Year from the drop down for which payment is to be done.
3. Select Tax applicable for which payment is to be done.
4. Mention PAN of Transferee/Buyer
5. Mention PAN of Transferor/Seller
6. Re-enter PAN of Transferee/Buyer
7. Re-enter PAN of Transferor/Seller
8. Provide Complete address of Transferee/Buyer
9. Provide Complete address of Transferor/Seller
10. Provide Complete address of Property transferred
11. Mention the date of Agreement/Booking of property
12. Mention the Total value of consideration (Property Value)
13. Mention if the above payment is done in Lump sum or in Installments
14. Please select the amount paid/credited (Enter the amount paid to the Transferor/Seller)
15. Please enter the TDS rate (Tax rate at which the TDS was deducted by the purchaser at the time of purchase of the property)
16. Please enter the TDS amount to be paid (amount deducted by the purchaser at the time of purchase of the property)
17. On proceed, confirmation page is displayed to verify the details entered
18. If all the above detail including the name displayed (as per ITD) is correct then, click on “SUBMIT” button
19. In case you have made a mistake in data entry, click on “EDIT” to correct the same.
20. On confirmation, nine digit alpha numeric Acknowledgment number would be generated
21. To do the required TDS payment, please click on ‘Submit to the Bank’ button
22. On clicking on Submit to the Bank, deductor will have to login to the net-banking site with the user ID/ password provided by the bank for net-banking purpose.
23. On successful login, enter payment details at the bank site.
24. On successful payment a challan counterfoil will be displayed containing CIN, payment details and bank name through which e-payment has been made. This counterfoil is proof of payment being made.

Disclaimer: The views expressed in this lesson are for information purposes only and do not construe to be any investment, legal or taxation advice. The lesson is a conceptual representation and may not include several nuances that are associated and vital. The purpose of this lesson is to clarify the basics of the concept so that readers at large can relate and thereby take more interest in the product / concept. In a nutshell, these learnings should be seen from the perspective of it being a primer on financial concepts. The contents are topical in nature and held true at the time of creation of the lesson. This is not indicative of future market trends, nor is Master Mind Financial Advisory attempting to predict the same. Reprinting any part of this material will be at your own risk. Master Mind Financial Advisory will not be liable for the consequences of such action.

Insurers in ops for 3 years can set up foreign branches

Setting up foreign branches is set to become less strenuous for Indian insurers with the Insurance Regulatory and Development Authority (Irda) enabling companies in operation for a minimum three years to set up international branches. Insurance companies said this would offer them a platform to set up offices abroad.

Till now, Irda took decisions on setting up foreign branches on a case- to- case basis. In a set of guidelines, Irda said life insurance, non- life insurance and reinsurance companies should have a net worth of ₹ 500 crore, ₹ 250 crore and ₹ 750 crore, respectively, to be eligible to open branches abroad. The new guidelines have provided a platform to insurers to expand operations abroad, says Amitabh Chaudhry, managing director and chief executive officer (CEO) of HDFC Life. “While insurers would also need approvals in those jurisdictions where they desired to open offices, it is an enabling provision.”

Chaudhry, however, adds companies would not take any immediate decision to open foreign offices. HDFC Life, which has a liaison office in Dubai, is in the process of exploring other markets to expand, he says. Sector experts say developing nations in Asia and Latin America would be the areas insurance companies would look at for expansion. According to Roopam Asthana, CEO and whole time director of Liberty Videocon General Insurance, it is an interesting option for companies. “Countries like Sri Lanka, Bangladesh, Bhutan and Nepal have a synergy of operations in insurance, with that of India. This would present a good opportunity, when, coupled with local regulations, governing insurance in those nations.”

Life insurers see marginal rise in new business premium

Life insurance industry has seen a marginal increase in new premium collection for the month and period ended April 2013. As per the monthly data from Insurance Regulatory and Development Authority ( Irda), life insurers collected total premiums of ₹ 4965.37 crore for April, seeing a 0.57 per cent rise over same period last year. Interestingly, while private insurers saw a 18.5 per cent rise in overall new premium collection, Life Insurance Corporation of India ( LIC) saw a 4.7 per cent fall.

Private life insurance industry collected new premiums of ₹ 1333.67 crore for the period in individual and group segments. LIC on the other hand, collected new premiums of ₹ 3,631.72 crore for April 2013 as compared to ₹ 3,811.72 crore in April 2012. On the general insurance side, non- life insurance companies saw a 22.01 per cent rise in premium collection for April 2013. General insurance companies collected premiums of ₹ 7,890.40 crore for the period, as against ₹ 6,467 crore in April 2012.

Public general insurers contributed ₹ 4245.52 crore to the kitty, seeing a 15.1 per cent rise over same period previous year. Private general insurers contributed ₹ 3644.89 crore and saw a 31.1 per cent rise in premium collection over same period last year. 

source: BS

Insurers’ non- operating fin arms under spotlight

The Insurance Regulatory and Development Authority (Irda) will examine how non- operating financial holding companies ( NOFHC), which are subsidiaries of a promoter company, can hold stake in insurance firms. “Our rules do not allow subsidiaries to hold stake in an insurance company. Hence, we will have to examine NOFHCs holding stake in insurance companies. We will look into this matter and decide on the changes that need to be made,” said a senior Irda official. According to the Reserve Bank of India’s ( RBI) new bank licence guidelines, promoter companies of insurance firms should float NOFHCs to do insurance activities.

While RBI said this is the ‘preferred structure’, it added this is subject to the regulations of the respective regulator. “The applicants may approach Irda in this regard. The decision of Irda will prevail,” said RBI in response to the questions on whether these NOFHC would be eligible to become insurance company promoters. The applicants had queried whether an exception would be made for insurance companies or a specific approval from the Irda would be given, to enable NOFHCs to qualify as promoters of insurance firms. Insurance companies such as Birla Sun Life Insurance, Reliance Life Insurance, Reliance General Insurance, Shriram Life Insurance, Bajaj Allianz General Insurance, and Royal Sundaram Allianz Insurance have Indian promoters with banking aspirations.

According to the Irda (Registration of Indian Insurance Companies) Regulations, 2000, an Indian promoter can be a company formed under the Companies Act, 1956, but not a subsidiary as defined in Section 4of that Act. This means, subsidiaries cannot become promoters of insurance companies. Therefore, after issuance of licences, if an insurance company is promoted by its subsidiary, then the insurance regulator will have to make some changes to its regulations to prohibit a violation of rules. According to the Reserve Bank of India’s ( RBI) new bank licence guidelines, promoter companies of insurance firms should float NOFHCs to do insurance activities GOOD TIMES RBI has said floating non- operating financial holding companies is the ‘preferred structure’ The central bank has said this is subject to the regulations of the respective regulator An Indian promoter can be a company formed under the Companies.

Act If an insurance company is promoted by its subsidiary, the insurance regulator will have to make changes to its regulations to prohibit a violation of rules SWEEPING THE DOUBTS Non- operative financial holding company (NOFHC) must be wholly- owned by a single promoter group Applicants must approach other financial regulators to bring entities regulated by them under NOFHC If any promoter group entity is in existence for less than 10 years, track record for the period of existence will be seen NBFC can promote a bank through NOFHC, provided the existing NBFC business is shifted to the bank No single entity or group, other than NOFHC, can have over 10 per cent of the voting equity capital of the bank Para- banking activities like credit cards can be conducted either through the bank or subsidiary of NOFHC/ JV Businesses like insurance and asset management can be conducted only outside the bank Lending activities must be conducted from inside the bank Foreign Indian citizens and person of Indian origin can become bank chairman or chief executive but cannot have stake in NOFHC Foreign direct investment in new banks to be capped at 49 per cent for initial five years.

New banks must have at least 500 crore of voting equity capital If an NBFC converts into a bank, minimum net worth of ₹ 500 croremust be maintained all times Both new and existing banks need to have 25 per cent of branches in unbanked rural centres RBI may allow new bank to take over and convert existing NBFC branches in Tier- II and VI centres. 

source: BS

Daiwa MF to sell its schemes to SBI MF

Uncertain global market conditions and increasing competition in Indian mutual funds industry are reportedly behind the decision to sell out. SBI Mutual Fund is likely to buy Daiwa’s mutual fund schemes for an undisclosed amount, said a source privy to the development. Though there is no official announcement, the deal was confirmed by senior officials of both SBI MF as well as Daiwa MF on the condition of anonymity.

Due to uncertain global market conditions, increasing competition and weak macro-economic indicators are factors that have made Daiwa MF take this decision to sell its mutual fund schemes to SBI MF, said a senior official of Daiwa MF. Daiwa MF is a subsidiary of Japan’s second largest brokerage firm Daiwa Securities Group. In India, Daiwa MF started its operations in February, 2009. It manages AUM of Rs 266 crore as on March 31, 2013. Daiwa’s AUM declined by 50 percent compared to the previous quarter. SBI Mutual Fund manages AUM of Rs 54905 crore as on April 13, 2013. It is the sixth largest in terms of AUM.

Revised DDT in debt funds effective from June 1

Dividend options of debt funds are still attractive for investors falling in the highest tax slab of 30%.
The hike in dividend distribution tax (DDT) in debt funds for retail investors from 12.5% to 25% (plus surcharge and cess) proposed in the Budget FY2014 gets effective from today. For retail investors, the DDT on liquid and money market funds is already 25%. Now, all debt funds will have a uniform DDT of 25%. The surcharge on DDT too has been increased from 5% to 10%.

Accounting for the hike in surcharge, the DDT on liquid funds will now be 28.32% for retail investors. For corporates, the DDT will be 33.99% in liquid and debt funds. So, how does it affect your clients? Since the DDT is 25% now, the post-tax return will be less. However, investors who fall in the highest tax slab of 30% can still opt for dividend option since they have to pay 28.32% in debt funds compared to 30.9% in bank fixed deposits. If your investors’ time horizon is more than a year you can advise them to invest in growth options of debt funds as they can benefit by paying a less tax of 10% without indexation or 20% with indexation; (plus education cess).

Short term capital gains are taxed as per the investor’s taxable slab. An alternative is to opt for SWP if your clients need a regular income. SWPs are more tax efficient as compared to bank fixed deposits. Investors belonging to the highest tax slab will have to pay 10.3% on the SWP income compared to 30.9% in bank fixed deposits. To avail this benefit, investors have to opt for SWP after a year. Fund houses pay DDT on the distributed income but dividends are tax free in the hands of investors.

Bonds likely to trade in a narrow range

Any correction, either ahead of the policy as the rate cut hopes dim or post policy if the rate cut is not delivered can provide a good opportunity for fresh positions
Bond markets corrected this week after trading in a narrow range over much of last week. The new benchmark 10-year yields hardened by 12 basis points (bps) to 7.25%. AAA 10-year PSU bonds and one-year bank certificates of deposit rates also moved up by 15 bps in a near parallel movement. The proceedings in fixed income markets were guided by two major developments. Firstly, the rupee weakened further to an intra-week low of 57 mark, near its all time low of 57.30 on the back of global strength in the greenback and a sell-off in equities markets on fear of a slowdown in the Fed’s bond buying programme.

The obvious implication of this is an imminent tightness in domestic liquidity due to expected RBI intervention and a slowing down of capital flows. Secondly, the RBI governor commented that consumer inflation still remains high even though WPI inflation has come down and current account deficit remains under pressure. The market interpreted these comments as a reduced probability of a rate cut in June policy and sold off. After hitting an intra-week low of 7.30%, the old benchmark 10-year hit a low of 7.50% before some bargain buying set in, resulting in eventual closing at 7.44%. This was a very healthy correction resulting in the transfer of floating stock into stronger hands. The market will now await the incoming data on monthly inflation and trade balance number for May, which will be released in the week starting June 10.

While WPI inflation is expected to be reported well below 5%, consumer price inflation may come below 9% for May, and the trade balance is likely to come higher than $15 bn keeping the market on edge. Pending that, bonds are likely to remain lacklustre in a narrow trading range. As the underlying momentum is strong and expectations of further easing in medium term remain strong, one cannot rule out a full retracement back to the previous low on bond yields though higher levels will attract profit booking. A sharp decline in crude oil prices back to $100 in Friday’s trading may add to this. Also favourable comments from finance ministry officials will support the momentum. 

Recent developments like rupee weakness, RBI comments, risk-off momentum in global markets etc all suggest increasing probability of a pause in the current rate cut cycle in June policy as RBI’s immediate priority would likely be to tackle the currency front and financing of current account deficit. However, a timely onset of monsoon in Kerala, satisfactory progress in fiscal consolidation (FY13 final fiscal deficit was at 4.89%) and a below-par growth still indicating a resumption in rate cuts later this year, should continue to strengthen this trend. As such, any correction, either ahead of the policy as the rate cut hopes dim or post policy if the rate cut is not delivered can provide a good opportunity for fresh positions.

As the trading pattern evolves, one will get a better sense of a good entry point. Technical charts suggest 7.35% on the new benchmark to be a good reference point which mark is expected to be hit ahead of the policy. 

source: BS

Seniors left in lurch as companies curb health cover for employees’ parents

Companies are withdrawing health insurance cover facility for employees’ parents under group mediclaim policies citing rising costs. Parental cover, routinely provided by companies around five to six years ago, is now sponsored by employers in just 36% of group covers. In almost every employee benefit group policy where parental cover is included, a bulk of the claims is not from employees, but for treating their parents. It is obvious that companies are discontinuing the cover to prevent their premium bills from galloping every year. 

Although many corporates said employees could include their parents by paying separately, the move resulted in adverse selection-those with healthy parents chose not to pay while employees whose parents had pre-existing ailments stayed on, making it unviable for insurers without hiking rates. According to an employee health and benefits study by insurance broker Marsh, only 36% organizations now sponsor cover for dependent parents under employee group mediclaim policies. The number of policies covering parents (including cover sponsored by employee) fell to 54% from 65% last year. "On an average, every year around 10% corporates with mediclaim stop sponsoring parental cover.

This number which was 70% at the time of detariffing has come down over the years to 36%" said Sanjay Kedia, MD, Marsh India. He added that there is a need to have an environment where companies can cover pre-existing ailments so that there can be a policy which will provide benefits through collective bargaining and health management. "This is going to be a big social issue as there will be no cover for parents with ailments," said Segar Sampathkumar, general manager and head of health insurance at New India Assurance. The group mediclaim cover for parents can work if HR departments work out a separate cover for parents with co-payments by employees and employees are given only a one-time option to be part of the scheme," said Segar Sampathkumar, general manager and head of health insurance at New India Assurance.

Seniors left in lurch as companies curb health cover for employees’ parents For companies with a young workforce, particularly in the IT space, that provide comprehensive health cover for dependents, over 60% of their claims is for parents and another 25% for maternity-related claims, he said. In an IT company, for instance, after the parent cover was discontinued and was made optional, a large number of employees chose not to buy it and the parental group policy had to be discontinued. A prominent private life insurer discontinued parental cover after it received a poor response following the cover being made payable by employees. Instead of withdrawing the group mediclaim cover for parents, the right way to tackle costs would be through wellness programmes and encouraging ’responsible consumption’ of insurance benefits, said Kedia.

Another problem hurts parents whose health cover has been withdrawn by their children’s employer. In theory, a senior citizen covered under his/her children’s group mediclaim policy should be able to use the portability route to buy a cover if the employer discontinues the policy. But in reality, no insurer has an individual policy which allows a senior citizen with pre-existing ailments to port into. 

source: ET

UTI Dynamic Bond Fund announces change in exit load

With effect from 03 June 2013 

UTI Mutual Fund has announced change in exit load under UTI Dynamic Bond Fund, with effect from 03 June 2013. Accordingly, the revised exit load will be: 

<=89 days: 0.75%
>89 days: Nil

UTI MF Launches UTI - FTIF– Series XV – V (366 Days)

NFO Period from 04 June to 07 June 2013 

UTI Mutual Fund has launched a new fund named as UTI - Fixed Term Income Fund – Series XV –V (366 Days), a close ended income scheme. The duration of the scheme is 366 days from the date of allotment. The New Fund Offer (NFO) price for the schemes is Rs 10 per unit. The new issue which is open for subscription from 04 June will close on 07 June 2013. 

The investment objective of the scheme is to generate returns by investing in a portfolio of fixed income securities maturing on or before the date of maturity of the scheme. 

The scheme offers growth option, quarterly dividend option with payout and reinvestment facility, annual dividend option with payout and reinvestment facility and maturity dividend option with payout facility. 

The scheme will allocate upto 100% of assets in debt including securitized debt with low to medium risk profile and upto 100% of assets would be allocated to money market instruments with low risk profile. The scheme will invest upto 50% of its debt portion in securitized debt. 

The minimum application amount is Rs 5000 and in multiples of Rs 10 under all the options.
The fund seeks to collect a minimum subscription (minimum target) amount of Rs 20 crore under the scheme during the NFO period. 

Entry and exit load charge will be nil for the scheme. 

Benchmark Index for the scheme is CRISIL Short Term Bond Fund Index. 

Manish Joshi and Arpit Kapoor are the fund managers for the scheme.

HSBC Global Asset Management has announced appointments to strengthen the firm's Asian Equity capabilities

HSBC Global Asset Management has announced appointments to strengthen the firm's Asian equity capabilities. 

Subject to regulatory approval, Sanjiv Duggal, currently Investment Director at HSBC Asset Management Singapore and lead manager of the HGIF Indian Equity fund, is appointed Head of Asian and Indian Equities. Duggal has been with HSBC Global Asset Management for over 17 years in Mumbai, London and Singapore, and will move to Hong Kong in his new role. Duggal will continue to manage the HGIF Indian Equity fund. 

Also subject to regulatory and other local approvals, Viresh Mehta, Senior Portfolio Manager for the HGIF Indian Equity fund, is to be appointed Head of Equities for HSBC Global Asset Management India Private Limited and will relocate to Mumbai. Mehta has worked for 11 years with HSBC Global Asset Management in Mumbai and Singapore. HSBC is adding further to its team in Mumbai to support future growth in its domestic fund ranges and to provide analytics for its international funds that invest in Indian equities. 

Puneet Chaddha, Chief Executive Officer, HSBC Global Asset Management India said: "With this move we will significantly enhance our ability to serve our global and domestic clients with regard to Indian equities. This is also a testament to our commitment to growing our asset management business in India." 

Regional Chief Investment Officer, Asia-Pacific and global strategy CIO, Equities, Bill Maldonado said: “One of HSBC's great strengths is its ability to connect clients with investment opportunities in faster growing markets. These appointments will enhance HSBC Global Asset Management's Asian equities capabilities and will allow us to meet our clients' needs even more effectively.”

Religare Invesco MF Announces Change in Key Personnel

With effect from 24 May 2013 

Religare Invesco Mutual Fund has announced change in key personnel with effect from 24 May 2013. 

Accordingly, Kedar Wilankar is designated as Head - Human Resources, while Rohit Goyal is designated as Head - Institutional Sales. Madhu Nair - Head - Institutional & Offshore Sales is re-designated as Head - Retail & Offshore Sales. 

Aloke Sharma - Head - Retail Sales has resigned from the services of Religare Invesco Asset Management Company Pvt. Ltd. (RIAMC) and will cease to be key person of RIAMC with effect from close of business hours on 1 July 2013.