Tax saving investments routes

Tax saving is the strategy by which one saves taxes by using the provisions specified under law. At the time of filing your return, you can seamlessly claim these exemptions and deductions from the income tax department. Such provisions are provided by the government to incentivize savings and investments in the economy. The process of tax saving is completely legal and encouraged by the government. It is a compulsory contribution to state revenue levied by the government on workers income and business profits or added to the cost of some goods, services and transaction. Taxes paid by public are used by the government for carrying out various welfare schemes including employment programs. Under section 80 of Income Tax Act, 1961 (“Act”) there are various deductions a taxpayer can claim from his total income which would bring down his taxable income and thereby reduce his tax outgo.

Every year most of us struggle to save our tax and it might be challenging for the new earners or newly recruited employees as well. Most commonly used option to save income tax is section 80C. According to this section, if an individual or hindu undivided family (HUF) invests in or spends on specified sources, then up to INR 1.5 lakhs of such investment can be claimed as a deduction from gross total income before calculating tax payable on it in financial year. Such deduction made can be claimed only from the income in the financial year in which such investment was made.

Tax saving investment is an essential part of tax planning we do to save our tax and also an activity which every tax payer should undergo. So, here is all the information and analysis we need in order to choose the tax saving investment scheme under section 80C:

1. Public provident fund (PPF): Investment in PPF is the best option under section 80C of Income Tax Act.  It is worthiest for the ones who need to keep aside funds for their retirement. It declares to allow the return on par with the inflation generally. Contribution amounting INR 150,000 is allowed under PPF. Rate of interest is determined by Ministry of Finance from time to time. Interest earned is tax-free. The lock-in period for PPF is 15 years. After five years amount can be withdrawn subject to certain conditions. It is amongst the best strategies for tax saving.
2. 5 year bank fixed deposits (FDs): Any term deposit with the tenure of at least 5 years with the scheduled bank also qualifies for the deductions under section 80C and the interest earned on it is taxable. The investment made in FDI cannot be withdrawn in between.
3. Equity Linked Saving Schemes (ELSS): ELSS funds have the shortest mandatory lock-in period of three years among the tax-saving investment options available under section 80C. The investment is made in equity, directing more prominent returns and gives about 15% in the long term. The deduction can be claimed u / s 80C easily. ELSS is an overall financial plan and is perfect to assemble one’s long-term fiscal goals.
4. National Savings Certificate (NSC): The best thing about this instrument is that unlike an insurance policy or a pension plan NSC does not require a multi-year commitment. So, it is a good option for those who don’t have time to study the features of the plan or look up to the promising ELSS funds. It is issued in the post offices. The income tax deduction for this investment can be claimed under section 80C of the Act.
5. Unit Linked Investment Plan (ULIP): ULIP came into focus from last year after the budget introduced tax on long-term capital gains from stocks and equity funds. It is the combination of investment and insurance which is eligible for tax exemption. It covers the return but there are no guaranteed returns.
6. Premium of life insurance: The scheme is covered under section 80 of the Act. The schemes of life insurance help a person to protect itself and its dependents from any risk occurring in future.
7. Senior Citizens Savings Scheme (SCSS): SCSS was already the best tax-saving option for those above 60 years of age, but last year’s budget made it more attractive by offering senior citizens an additional INR 50,000 exemption on interest income. This means that the overall tax exemption for senior citizens above 60 is now INR 3.5 lakhs and for very senior citizens above 80 is INR 5.5 lakhs. Maximum limit for the above mentioned investment is INR 15 Lakhs. The lock-in period of 5 years. The deduction is allowed under section 80C.

Above stated are the investments which provide deductions that can be claimed under section 80C for saving the tax, considering various provisions. The last quarter of every financial year that is January to March is the time when most of us rush to settle our tax saving exercise by submitting the documents to our employers and also making various investments. Doing this we should keep in mind some important points or measures which we should take for exercising the tax saving benefit. The same will be discussed in our next segment.

We have a team of skilled professionals who can help you with making appropriate investment decisions, tax planning, computation and payment of advance taxes, etc. Still confused and have questions regarding Income tax saving or planning, get assistance from our team of experts click here.

Perceiving tax scrutiny

Thousands of income tax returns (“return”) filed are reviewed and filing patterns are monitored by Income Tax department (“Department”) annually. Some scrutiny cases are selected randomly whereas some are chosen deliberately as a result of meeting the pre-set watch criteria, laid down by the Department. Income tax scrutiny notice is sent to a large number of individuals as well as businessmen filing returns by the Department as a part of their routine check and annual supervision. The idea behind this process is to assess that all the filings made by any person are in compliance with all the protocols, norms and regulations laid down by the Department.

Scrutiny assessment
Critical examination of returns by giving reasonable opportunity to the assessee to substantiate the income, losses and expenses furnished as well as deductions and exemptions claimed, in the return in relation to information provided in the evidence. Income tax officer conducts enquiry from assessee and third party as a part of its assessment. Scrutiny assessment is undertaken to ascertain the factual and legal correctness of the claims for deductions, exemptions, etc.

Purpose of scrutiny assessment
Enquiries are conducted by the assessing officer to ensure that following activities are not performed by the assessee:

• Understatement of income as compared to actual
• Computation of excess loss than actual
• Underpayment of tax
• Concealing any material facts, incomes, etc.

Penalties
In case information supplied in the return is incorrect under any circumstances, whether in the form of omissions, inaccuracies, discrepencies, etc. as a result of this examination. Assessing officer is authorized to assess the income in accordance with his best knowledge (termed as best judgement) as well as evidence or facts so derived and as per the provisions under section 143(3) of the Income Tax Act (“Act”). Assessing officer further has the following authorities:

• Charging of requisite additional interest
• Levying penalties as per the set provisions of the Act
• Initiating prosecution proceedings

Types of scrutiny assessments
Following are the types of scrutiny assessments:

1. Manual scrutiny cases
2. Compulsory scrutiny cases

We have a team of professionals possessing desired experience in annual filings of returns or e-TDS returns as well as other compliances, representation, opinion, litigation, conducting independent audit, furnishing reports, assessments and tax planning services.
Our team is also proficient in the areas of accounting and bookkeeping, auditing & assurance, internal audit, tax audit, management audit, statutory audit, income tax, tax planning, direct taxes, service tax, delhi value added tax, sales tax, company formation, business consultation, company registration / incorporation India, corporate compliance, foreign branch / liaison office registration. Get in touch with us for any assistance by clicking here

Source: http://www.newcompanyregistrationindia.com/blog/perceiving-tax-scrutiny/

Ways To Fund Your Small Business

One of the biggest challenges of launching a new business is finding the cash to get things started. Fortunately, there are options besides winning the lottery or receiving a large inheritance, including small business loans, credit cards, bootstrapping with retirement savings, seeking private investment, and crowdfunding.
When it comes to funding, there isn’t a one-size-fits-all approach. Depending on where you’re at in your business, what type of funding you are seeking, and the amount you need, where you’ll look can vary widely. We’ve compiled a list from a variety of places to help you research and narrow down the options that are best for you.
Before we examine the various funding sources, here is some general advice on preparing to finance your business pursuits.

Crowdfunding
Over the last two decades, several crowdfunding sites that allow entrepreneurs opportunity to seek funding for their ideas have sprouted over the internet. In most cases, you only need to create a funding campaign that you can them pitch to family and friends through social media. In most cases, compelling pitches go viral fast thus attracting enormous contributions from individuals across the globe. Note that if you are to make a kill with your funding campaign, make it clear to the contributors how your idea will support the community as an asset.
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Angel investors
Angel investment remains one the most realistic and feasible for entrepreneurs that don’t need long term business partners. Family and friends come in handy in identifying a trustworthy angel investor, pump in capital into your small business with the promise of payback of their investment plus interest. However, if your angel investing pitch is to fruition, you need to master your business plan and back your valuations with real projections. Additionally, note that such transparent relationships must be based on trust.

Nonprofit microloans
Kiva is a great example of an outline portal for microloans. If you only need a small amount of money, particularly if you are a minority-owned business operating in a developing nation, working with one of Kiva’s field partners could be a good route.

Governmental grants and loans
Most governments of the world understand the role small businesses play in their economy. These governments thus set up elaborate financing schemes aimed at funding these small outfits. However, only a handful of individuals end up benefiting with such loans and grants either due to ignorance or the bureaucracy in accessing them.

Therefore, as an entrepreneur, you need to spend more time learning of these government loans and grants from your local banks as well as the internet. Note that to beat the lengthy, and often frustrating, process of accessing these funds it is advisable that you work with loans and grants specialists.

Enlist Private Investors
Persuading others to share your dream and back you financially is a popular tactic for obtaining business funding.
Work with legal counsel (and possibly a business mentor) to clarify the roles you are prepared to let individual backers play (or not play) if they agree to provide you with funding. Get it all in writing, and do all you can to set clear realistic expectations.

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Requirements for Private Company?

Company is a a legal entity, allowed by company law in India, it permits a group of people, as shareholders (real owners), to apply to the Registrar of Companies for an independent business entity to be created, which can then focus on pursuing set of business goals and projects, and empowered with legal rights like individuals, such as to sue and be sued, own property, hire employees or loan and borrow money.

Incorporation / Formation of company involve a number of steps. We have tried to simplify the procedure to the maximum extent possible.

Minimum Requirement of a Private Company are as follows:

1. Minimum 2 Shareholders
2. Minimum 2 Directors (The directors and shareholders can be same person)
3. Minimum Authorised Share Capital shall be Rs. 100,000 (INR One Lac)
4. DSC (Digital Signature Certificate) for all the Directors (for applying of DIN)
5. DIN (Director Identification Number) for all the Directors
6. At least 1 of the Directors shall be an Indian Resident

Considering above minimum requirements interested business partners can form Private Company by appointing themselves as Directors as well as shareholders in company registration process. In simple words shareholders and Directors can be same person in company registration process.

Foreign company registration in India

India is one of the fastest growing economies in the world with healthy resources and a large market base. In the past few years, there is a great boost in foreign direct investment in India (FDI) because of the changed regulatory environment in the past few years. Therefore, it is very easy for foreign nationals to start a business in India.

Sometimes people get often confused in “Indian Company” and “Foreign Company”. If a foreign national incorporates a company in India then it is an Indian Company. But when a foreign company set up a branch office in India then it is known as Foreign Company.

Private Limited Company is considered to be the most ideal form of business for NRIs, foreign nationals and for foreign entities who want to set up business in India.
According to FEMA guidelines, Foreign Direct Investment (FDI) is not allowed in other types of businesses like Proprietorship, Partnership Firm and One Person Company. Though investment in LLP’s is allowed, but it requires prior approval of the RBI.

Subject to FDI norms, the shares of an Indian Company can be held by a NRI, Foreign National or Foreign Company. Therefore, Incorporation of a Private Limited Company is recommended for foreign nationals as it is the fastest and easiest way to enter into the Indian Market.

What is the process to be followed for a foreign company to establish their business in India?
For a foreign company to register in India, they need to follow certain norms and guidelines specified in the Company’s Act of 2013. A company of foreign nature can enter the Indian market and can commence its business operations by adopting the following methods.
As an Indian company:

• Wholly Owned Subsidiary
• Joint Venture

As a foreign company:

• Setting up of a Liaison Office
• Setting up a Project office or Representative office
• To open a branch office of the foreign company

Are there any restrictions for NRIs to set up a business in India?
Currently, there are no restrictions either for foreigners or NRI’s to start a business in India. With Foreign Direct Investment (FDI) gaining popularity and getting a much-needed boost from the Government many MRI’s are keenly looking forward to invest in India. Earlier NRI’s were not allowed to start or incorporate a business in India without the permission from the Reserve Bank of India (RBI). With the withdrawal of Foreign Exchange Regulation Act (FERA), such restrictions have been lifted.

Cost for company registration in India
Company formation services in India are inexpensive. The company formation process can be completed within few weeks. The incorporation process can be easy with the help of tax advisors in India. It would cost you some pennies but the whole process will be easy for you.

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STPI Registration

There is a 100% tax exemption U/S 10A of the Income tax Act, 1961 with respect to the profits earned by the 100% Export Oriented Units up to 31-03-2009, registered with the software technology parks of India (STPI).

The Documents for the application to the Software Technology Parks of India (STPI) to set up a 100% Export Oriented Unit (EOU), include:
1. Application Form in the prescribed form.
2. Memorandum and Article of Association.
3. Board Resolution for setting up STP Unit and persons authorized to sign and submit the application form.
4. Resume of person heading the operation/CEO.
5. Detailed project report/ Business plan consist of:

• Company profile.
• Promoters background.
• Units Area of expertise/Services offered.
• Marketing Strategy / marketing Arrangements.
• Manpower plan.
• Future plans.
• Brief write up on the parent Company and the activities proposed to be carried out by the Indian entity. (In case foreign equity participation)
• List of Capital goods proposed to be procured from abroad and within India.
• Details of foreign collaborator (whether financial or technical)
• Copy of floor plan of the Unit certified by an architect.
• Copy of the rent agreement if any.
• Copy of invoice of the Internet service provider.

6. Financials statement like. A. Cost of project & Means of finance.

• Projected P&L A?C.
• Projected Balance Sheet.
• Projected Cash flow/fund flow statement.
• Export workings- (As per Transfer Pricing guidelines where ever applicable)
• Financials for a 5 year period projecting income from operations, Capital expenditure & cash Flows.
• Detail for aggregate foreign exchange comings & outgo for first 5 years.
• Detail for estimated numbers of employees and wage bill for first 5 years.

7. Other documents like
A. Copy of service agreement signed with parent company / clients/ PO with clients/ Master service Agreement.
B. Initial application processing fee of INR 2,500
8. Advances services charges of INR 50,000 at the time of executing the legal agreement. Service to be paid annually as per the following slabs.
Annual charges for 3 years are payable in advance. At the time of signing the Legal undertaking, the unit is needed to pay additional fees as per the turnover achieved, if the achieved turnover is more than the projected turnover. Note: Once the legal agreement has been executed then a request letter has to be sent to ht STPI for the issue of the Green Card.

(Company formation in India)
(Company registration in India)


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Originating Businesses

Investment required to start a business

"The Entrepreneur dependably scans for change, reacts to it and adventures it as a chance!"

Cited above isn't just an expression yet a genuine display of how a man seeking to build up his very own business should strike back to the dynamic condition we live in. As hazard and reward go as an inseparable unit, it is significant for a business visionary to gauge the cost included and pay created for any new business, regardless of whether you're a quick moving start up or as yet gauging the advantages and disadvantages of regardless of whether to set up another endeavor. 

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However, the assets expected to touch off and drive a business may shift contingent upon the nature and kind of business, here is a substance that sets down basic strides to work it out.

Assets accessible with you: Initially, you ought to break down the reality whether you have adequate assets to begin a business or not. Investigating your wage subsequent to deducting all your own costs will naturally lead you to the figure of assets that you have close by, likewise chopped down the installments which you think can be evaded and include vital consumption which can't be bypassed. These numbers will enable you to choose if your business is practical or not, and demonstrate to you a snappier way to equaling the initial investment and long haul gainfulness.

Fuelling the business: After confronting the emergency of budgetary crunch, take notes on what amount is expected to prop the business up for a more extended period. This procedure of fusing a business is trailed by assessing the use of such assets at different stages:

    Initial Cost: These tend to be one-off cost items, including:

1.     Lease or purchase of buildings or land
2.     Permits, licenses or other compliance costs
3.     Equipment and/or machinery
4.     Vehicles
5.     Shop fittings and/or office furniture
6.     Branding
7.     A website and domain name

    Fixed Costs: These are bills and other costs you need to pay on an on-going basis, also known as overheads. These tend to be time-related like monthly phone bills or quarterly rates payments. Common fixed costs include:

•     Insurance
•     Utilities, e.g., electricity and internet
•     Rent or mortgage payments
•     Wages/ Salaries

    Variable Costs: These are expenses that vary depending on how much, or how little, your business produces and include:

•     Raw ingredients
•     Production materials
•     Stock orders

In the event of deficient assets, financial specialists and moneylenders can turn out to be of most extreme help, however their choice generally relies upon the historical backdrop of your business. On the off chance that you step foot in the business showcase out of the blue, just remarkable thought or abilities can initiate them to put their cash in your business.

Take master sentiment: A specialist in the field of financing can give you clear bits of knowledge into how much cash is required to begin and maintain the business. Attempt to discover a bookkeeper or counsel who has a decent reputation with business like your own.

Breaking down set up organizations: A canny move to appraise benefits and expenses is by contemplating and dissecting different organizations in a similar industry. This couldn't turn out to be full evidence consistently, yet at the same time fills the need.

Basic assessment of sources and use of assets of most recent a year is important to keep a beware of what was arranged and how far the business has come. It's normal to work at a misfortune when first business is begun. One needs to ensure that they have enough cash available for later to continue amid this period. An income estimate will help foresee whether you'll have to acquire cash, and on the off chance that you are fiscally arranged for maintaining the business.

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