Budget 2016-17: Key Highlights

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INTRODUCTION

  • Growth of Economy accelerated to 7.6% in 2015-16.
  • India hailed as a ‘bright spot’ amidst a slowing global economy by IMF.
  • Robust growth achieved despite very unfavourable global conditions and two consecutive years shortfall in monsoon by 13%
  • Foreign exchange reserves touched highest ever level of about 350 billion US dollars.

 

CHALLENGES IN 2016-17

  • Risks of further global slowdown and turbulence.
  • Additional fiscal burden due to 7th Central Pay Commission recommendations and an additional burden due to One Rank One Pension OROP.

ROADMAP & PRIORITIES

  • Focus on enhancing expenditure in priority areas of – farm and rural sector, social sector, infrastructure sector employment generation and recapitalization of the banks.
  • Government to focus on:
  • ensuring macro-economic stability & prudent fiscal management.
  • boosting on domestic demand
  • continuing with the pace of economic reforms and policy initiatives to change the lives of our people for the better.
  • ‘Transform India’ to have a significant impact on economy and lives of people.
  • Focus on Vulnerable sections through:
    • Pradhan Mantri Fasal Bima Yojana
    • New health insurance scheme to protect against hospitalisation expenditure
    • facility of cooking gas connection for BPL families
  • Continue with the ongoing reform programme and ensure passage of the Goods and Service Tax bill and Insolvency and Bankruptcy law
  • Undertake important reforms by:
    • giving a statutory backing to AADHAR platform to ensure benefits reach the deserving.
    • freeing the transport sector from constraints and restrictions
    • incentivizing gas discovery and exploration by providing calibrated marketing freedom
    • enactment of a comprehensive law to deal with resolution of financial firms
    • provide legal framework for dispute resolution and
    • re-negotiations in PPP projects and public utility contracts
    • undertake important banking sector reforms and public listing of general insurance companies undertake significant changes in FDI policy.

AGRICULTURE AND FARMERS’ WELFARE

  • Allocation for Agriculture and Farmers’ welfare is 35,984 crore
  • ‘Pradhan Mantri Krishi Sinchai Yojana’ to be implemented in mission 28.5 lakh hectares will be brought under irrigation.
  • Implementation of 89 irrigation projects under AIBP, which are languishing for a long time, will be fast tracked
  • A dedicated Long Term Irrigation Fund will be created in NABARD with an initial corpus of about 20,000 crore
  • Programme for sustainable management of ground water resources with an estimated cost of 6,000 crore will be implemented through multilateral funding.

MULTILATERAL FUNDING

  • 5 lakh farm ponds and dug wells in rain fed areas and 10 lakh compost pits for production of organic manure will be taken up under MGNREGA
  • Soil Health Card scheme will cover all 14 crore farm holdings by March
  • 2,000 model retail outlets of Fertilizer companies will be provided with soil and seed testing facilities during the next three years
  • Promote organic farming through ‘Parmparagat Krishi Vikas Yojana’ and ‘Organic Value Chain Development in North East Region’.
  • Unified Agricultural Marketing ePlatform to provide a common e-market platform for wholesale markets
  • Allocation under Pradhan Mantri Gram Sadak Yojana increased to 19,000 crore. Will connect remaining 65,000 eligible habitations
  • To reduce the burden of loan repayment on farmers, a provision of 15,000 crore has been made in the BE 2016-17 towards interest subvention
  • Allocation under Prime Minister Fasal Bima Yojana 5,500 crore.
  • 850 crore for four dairying projects – ‘Pashudhan Sanjivani’, ‘Nakul Swasthya Patra’, ‘E-Pashudhan Haat’ and National Genomic Centre for indigenous breeds

RURAL SECTOR

  • Allocation for rural sector – 87,765 crore.
  • 87 lakh crore will be given as Grant in Aid to Gram Panchayats and Municipalities as per the recommendations of the 14th Finance Commission
  • Every block under drought and rural distress will be taken up as an intensive Block under the Deen Dayal Antyodaya Mission
  • A sum of 38,500 crore allocated for MGNREGS.
  • 300 Rurban Clusters will be developed under the Shyama Prasad Mukerjee Ruban Mission.

Mukherjee Rurban Mission

  • 100% village electrification by 1st May, 2018.
  • District Level Committees under Chairmanship of senior most Lok Sabha MP from the district for monitoring and implementation of designated Central Sector and Centrally Sponsored Schemes.
  • Priority allocation from Centrally Sponsored Schemes to be made to reward villages that have become free from open defecation.
  • A new Digital Literacy Mission Scheme for rural India to cover around 6 crore additional household within the next 3 years.
  • National Land Record Modernisation Programme has been revamped.
  • New scheme Rashtriya Gram Swaraj Abhiyan proposed with allocation of 655 crore.

SOCIAL SECTOR INCLUDING HEALTH CARE

  • Allocation for social sector including education and health care – 1,51,581 crore.
  • 2,000 crore allocated for initial cost of providing LPG connections to BPL families.
  • New health protection scheme will provide health cover up to One lakh per family. For senior citizens an additional top-up package up to 30,000 will be provided.
  • 3,000 Stores under Prime Minister’s Jan Aushadhi Yojana will be opened during 2016-17.
  • ‘National Dialysis Services Programme’ to be started under National Health Mission through PPP mode
  • “Stand Up India Scheme” to facilitate at least two projects per bank This will benefit at least 2.5 lakh entrepreneurs.
  • National Scheduled Caste and Scheduled Tribe Hub to be set up in partnership with industry associations
  • Allocation of 100 crore each for celebrating the Birth Centenary of Pandit Deen Dayal Upadhyay and the 350th Birth Anniversary of Guru Gobind Singh.

EDUCATION, SKILLS AND JOB CREATION

  • 62 new Navodaya Vidyalayas will be opened
  • Sarva Shiksha Abhiyan to increasing focus on quality of education
  • Regulatory architecture to be provided to ten public and ten private institutions to emerge as world-class Teaching and Research Institutions
  • Higher Education Financing Agency to be set-up with initial capital base of 1000 Crores
  • Digital Depository for School Leaving Certificates, College Degrees, Academic Awards and Mark sheets to be set-up.

SKILL DEVELOPMENT

  • Allocation for skill development – 1804. crore.
  • 1500 Multi Skill Training Institutes to be set-up.
  • National Board for Skill Development Certification to be setup in partnership with the industry and academia
  • Entrepreneurship Education and Training through Massive Open Online Courses

JOB CREATION

  • GoI will pay contribution of 8.33% for of all new employees enrolling in EPFO for the first three years of their employment. Budget provision of 1000 crore for this scheme.
  • Deduction under Section 80JJAA of the Income Tax Act will be available to all assesses who are subject to statutory audit under the Act
  • 100 Model Career Centres to operational by the end of 2016-17 under National Career Service.
  • Model Shops and Establishments Bill to be circulated to States.

INFRASTRUCTURE AND INVESTMENT

  • Total investment in the road sector, including PMGSY allocation, would be 97,000 crore during 2016-17.
  • India’s highest ever kilometres of new highways were awarded in 2015. To approve nearly 10,000 kms of National Highways in 2016-17.
  • Allocation of 55,000 corer in the Budget for Roads. Additional
    15,000 crore to be raised by NHAI through bonds.
  • Total outlay for infrastructure – 2,21,246 crore.
  • Amendments to be made in Motor Vehicles Act to open up the road transport sector in the passenger segment
  • Action plan for revival of unserved and underserved airports to be drawn up in partnership with State Governments.
  • To provide calibrated marketing freedom in order to incentivise gas production from deep-water, ultra deep-water and high pressure-high temperature areas
  • Comprehensive plan, spanning next 15 to 20 years, to augment the investment in nuclear power generation to be drawn up.
  • Steps to re-vitalise PPPs:
    • Public Utility (Resolution of Disputes) Bill will be introduced during 2016-17
    • Guidelines for renegotiation of PPP Concession Agreements will be issued
    • New credit rating system for infrastructure projects to be introduced
  • Reforms in FDI policy in the areas of Insurance and Pension, Asset Reconstruction Companies, Stock Exchanges.
  • 100% FDI to be allowed through FIPB route in marketing of food products produced and manufactured in India.
  • A new policy for management of Government investment in Public Sector Enterprises, including disinvestment and strategic sale, approved.

FINANCIAL SECTOR REFORMS

  • Statutory basis for a Monetary Policy framework and a Monetary Policy Committee through the Finance Bill 2016.
  • A Financial Data Management Centre to be set up.
  • RBI to facilitate retail participation in Government securities.
  • New derivative products will be developed by SEBI in the Commodity Derivatives market.
  • Amendments in the SARFAESI Act 2002 to enable the sponsor of an ARC to hold up to 100% stake in the ARC and permit non institutional investors to invest in Securitization Receipts.
  • Comprehensive Central Legislation to be bought to deal with the menace of illicit deposit taking schemes.
  • Increasing members and benches of the Securities Appellate Tribunal.
  • Allocation of 25,000 crore towards recapitalisation of Public Sector
  • Target of amount sanctioned under Pradhan Mantri Mudra Yojana increased to 1,80,000 crore.
  • General Insurance Companies owned by the Government to be listed in the stock exchanges.

GOVERNANCE AND EASE OF DOING BUSINESS

  • A Task Force has been constituted for rationalisation of human resources in various Ministries.
  • Comprehensive review and rationalisation of Autonomous Bodies.
  • Bill for Targeted Delivery of Financial and Other Subsidies, Benefits and Services by using the Aadhar framework to be introduced.
  • Introduce DBT on pilot basis for fertilizer.
  • Automation facilities will be provided in 3 lakh fair price shops by March 2017.
  • Amendments in Companies Act to improve enabling environment for start-ups.
  • Price Stabilisation Fund with a corpus of 900 crore to help maintain stable prices of Pulses.
  • “Ek Bharat Shreshtha Bharat” programme will be launched to link States and Districts in an annual programme that connects people through exchanges in areas of language, trade, culture, travel and tourism.

FISCAL DISCIPLINE

  • Fiscal deficit in RE 2015-16 and BE 2016-17 retained at 3.9% and 3.5%.
  • Revenue Deficit target from 2.8% to 2.5% in RE 2015-16
  • Total expenditure projected at 19.78 lakh crore
  • Plan expenditure pegged at 5.50 lakh crore under Plan, increase of 3%
  • Non-Plan expenditure kept at 14.28 lakh crores
  • Special emphasis to sectors such as agriculture, irrigation, social sector including health, women and child development, welfare of Scheduled Castes and Scheduled Tribes, minorities, infrastructure.
  • Mobilisation of additional finances to the extent of 31,300 crore by NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority by raising Bonds.
  • Plan / Non-Plan classification to be done away with from 2017-18.
  • Every new scheme sanctioned will have a sunset date and outcome review.
  • Rationalised and restructured more than 1500 Central Plan Schemes
    into about 300 Central Sector and 30 Centrally Sponsored Schemes.
  • Committee to review the implementation of the FRBM Act.

RELIEF TO SMALL TAX PAYERS

  • Raise the ceiling of tax rebate under section 87A from 2000 to 5000 to lessen tax burden on individuals with income upto 5 laks.
  • Increase the limit of deduction of rent paid under section 80GG from 24000 per annum to 60000, to provide relief to those who live in rented houses.

BOOST EMPLOYMENT AND GROWTH

  • Increase the turnover limit under Presumptive taxation scheme under section 44AD of the Income Tax Act to 2 crores to bring big relief to a large number of assessees in the MSME category.
  • Extend the presumptive taxation scheme with profit deemed to be 50%, to professionals with gross receipts up to 50 lakh.
  • Phasing out deduction under Income Tax:
    • Accelerated depreciation wherever provided in IT Act will be limited to maximum 40% from 1.4.2017
    • Benefit of deductions for Research would be limited to 150% from 1.4.2017 and 100% from 1.4.2020
    • Benefit of section 10AA to new SEZ units will be available to those units which commence activity before 31.3.2020.
    • The weighted deduction under section 35CCD for skill development will continue up to 1.4.2020
  • Corporate Tax rate proposals:
    • New manufacturing companies incorporated on or after 1.3.2016 to be given an option to be taxed at 25% + surcharge and cess provided they do not claim profit linked or investment linked deductions and do not avail of investment allowance and accelerated depreciation.
    • Lower the corporate tax rate for the next financial year for relatively small enterprises i.e companies with turnover not exceeding 5 crore (in the financial year ending March 2015), to 29% plus surcharge and cess.
  • 100% deduction of profits for 3 out of 5 years for startups setup during April, 2016 to March, 2019. MAT will apply in such cases.
  • 10% rate of tax on income from worldwide exploitation of patents developed and registered in India by a resident.
  • Complete pass through of income-tax to securitization trusts including trusts of ARCs. Securitisation trusts required to deduct tax at source.
  • Period for getting benefit of long term capital gain regime in case of unlisted companies is proposed to be reduced from three to two years.
  • Non-banking financial companies shall be eligible for deduction to the extent of 5% of its income in respect of provision for bad and doubtful
  • Determination of residency of foreign company on the basis of Place of Effective Management (POEM) is proposed to be deferred by one year.
  • Commitment to implement General Anti Avoidance Rules (GAAR) from 4.2017.
  • Exemption of service tax on services provided under Deen Dayal Upadhyay Grameen Kaushalya Yojana and services provided by Assessing Bodies empanelled by Ministry of Skill Development & Entrepreneurship.
  • Exemption of Service tax on general insurance services provided under ‘Niramaya’ Health Insurance Scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability.
  • Basic custom and excise duty on refrigerated containers reduced to 5% and 6%.

MAKE IN INDIA

  • Changes in customs and excise duty rates on certain inputs to reduce costs and improve competitiveness of domestic industry in sectors like Information technology hardware, capital goods, defence production, textiles, mineral fuels & mineral oils, chemicals & petrochemicals, paper, paperboard & newsprint, Maintenance repair and overhauling [MRO] of aircrafts and ship repair.

MOVING TOWARDS A PENSIONED SOCIETY

  • Withdrawal up to 40% of the corpus at the time of retirement to be tax exempt in the case of National Pension Scheme (NPS). Annuity fund which goes to legal heir will not be taxable.
  • In case of superannuation funds and recognized provident funds, including EPF, the same norm of 40% of corpus to be tax free will apply in respect of corpus created out of contributions made on or from 4.2016.
  • Limit for contribution of employer in recognized Provident and Superannuation Fund of 1.5 lakh per annum for taking tax benefit. Exemption from service tax for Annuity services provided by NPS and Services provided by EPFO to employees.
  • Reduce service tax on Single premium Annuity (Insurance) Policies from 5% to 1.4% of the premium paid in certain cases.

PROMOTING AFFORDABLE HOUSING

  • 100% deduction for profits to an undertaking in housing project for flats upto 30 sq. metres in four metro cities and 60 sq. metres in other cities, approved during June 2016 to March 2019 and completed in three years. MAT to apply.
  • Deduction for additional interest of 50,000 per annum for loans up to 35 lakh sanctioned in 2016-17 for first time home buyers, where house cost does not exceed 50 lakh.
  • Distribution made out of income of SPV to the RE ITs and INVITs having specified shareholding will not be subjected to Dividend Distribution Tax, in respect of dividend distributed after the specified date.
  • Exemption from service tax on construction of affordable houses up to 60 square metres under any scheme of the Central or State Government including PPP Schemes.
  • Extend excise duty exemption, presently available to Concrete Mix manufactured at site for use in construction work to Ready Mix Concrete.

RESOURCE MOBILIZATION FOR AGRICULTURE, RURAL ECONOMY AND CLEAN ENVIRONMENT

  • Additional tax at the rate of 10% of gross amount of dividend will be payable by the recipients receiving dividend in excess of 10 lakh per annum.
  • Surcharge to be raised from 12% to 15% on persons, other than companies, firms and cooperative societies having income above 1 crore.
  • Tax to be deducted at source at the rate of 1 % on purchase of luxury cars exceeding value of ten lakh and purchase of goods and services in cash exceeding two lakh.
  • Securities Transaction tax in case of ‘Options’ is proposed to be increased from .017% to .05%.
  • Equalization levy of 6% of gross amount for payment made to non­residents exceeding 1 lakh a year in case of B2B transactions.
  • Krishi Kalyan Cess, @ 0.5% on all taxable services, w.e.f. 1 June 2016. Proceeds would be exclusively used for financing initiatives for improvement of agriculture and welfare of farmers. Input tax credit of this cess will be available for payment of this cess.
  • Infrastructure cess, of 1% on small petrol, LPG, CNG cars, 2.5% on diesel cars of certain capacity and 4% on other higher engine capacity vehicles 12 and SUVs. No credit of this cess will be available nor credit of any other tax or duty be utilized for paying this cess.
  • Excise duty of ‘1% without input tax credit or 12.5% with input tax credit’ on articles of jewellery [excluding silver jewellery, other than studded with diamonds and some other precious stones], with a higher exemption and eligibility limits of 6 crores and 12 crores
  • Excise on readymade garments with retail price of 1000 or more raised to 2% without input tax credit or 12.5% with input tax credit.
  • ‘Clean Energy Cess’ levied on coal, lignite and peat renamed to ‘Clean Environment Cess’ and rate increased from 200 per tonne to 400 per tonne.
  • Excise duties on various tobacco products other than beedi raised by about 10 to 15%.
  • Assignment of right to use the spectrum and its transfers has been deducted as a service leviable to service tax and not sale of intangible goods.

PROVIDING CERTAINTY IN TAXATION

  • Committed to providing a stable and predictable taxation regime and reduce black money.
  • Domestic taxpayers can declare undisclosed income or such income represented in the form of any asset by paying tax at 30%, and surcharge at 7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income. Declarants will have immunity from prosecution.
  • Surcharge levied at 7.5% of undisclosed income will be called Krishi Kalyan surcharge to be used for agriculture and rural economy.
  • New Dispute Resolution Scheme to be introduced. No penalty in respect of cases with disputed tax up to 10 lakh. Cases with disputed tax exceeding 10 lakh to be subjected to 25% of the minimum of the imposable penalty. Any pending appeal against a penalty order can also be settled by paying 25% of the minimum of the imposable penalty and tax interest on quantum addition.
  • High Level Committee chaired by Revenue Secretary to oversee fresh cases where assessing officer applies the retrospective amendment.
  • One-time scheme of Dispute Resolution for ongoing cases under retrospective amendment.
  • Penalty rates to be 50% of tax in case of underreporting of income and 200% of tax where there is misreporting of facts.
  • Disallowance will be limited to 1% of the average monthly value of investments yielding exempt income, but not exceeding the actual expenditure claimed under rule 8D of Section 14A of Income Tax Act.
  • Time limit of one year for disposing petitions of the tax payers seeking waiver of interest and penalty.
  • Mandatory for the assessing officer to grant stay of demand once the assesse pays 15% of the disputed demand, while the appeal is pending before Commissioner of Income-tax (Appeals).
  • Monetary limit for deciding an appeal by a single member Bench of ITAT enhanced from 15 lakhs to 50 lakhs.
  • 11 new benches of Customs, Excise and Service Tax Appellate Tribunal (CESTAT).

SIMPLIFICATION AND RATIONALIZATION OF TAXES

  • 13 cesses, levied by various Ministries in which revenue collection is less than 50 crore in a year to be abolished.
  • For non-residents providing alternative documents to PAN card, higher TDS not to apply.
  • Revision of return extended to Central Excise assesses.
  • Additional options to banking companies and financial institutions, including NBFCs, for reversal of input tax credits with respect to non­taxable services.
  • Customs Act to provide for deferred payment of customs duties for 14 importers and exporters with proven track record.
  • Customs Single Window Project to be implemented at major ports and airports starting from beginning of next financial year.
  • Increase in free baggage allowance for international passengers. Filing of baggage only for those carrying dutiable goods.

TECHNOLOGY FOR ACCOUNTABILITY

  • Expansion in the scope of e-assessments to all assessees in 7 mega cities in the coming years.
  • Interest at the rate of 9% p.a against normal rate of 6% p.a for delay in giving effect to Appellate order beyond ninety days.
  • ‘e-Sahyog’ to be expanded to reduce compliance cost, especially for small taxpayers.

Startups enjoy 3 years tax holiday over a five year window

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs, Income Tax,e-Filing- Individuals, Firms, Companies | 0

If a startup claims benefit in first year & does not make profit in next two years, it can still enjoy tax exemption on profit in fourth and fifth year

The three-year tax holiday proposed for startups in India will be available over a five-year window, ensuring that innovators won’t lose the benefit even if they make a profit later, the government said.

Those seeking the income tax exemption, announced in the Startup Action Plan on Saturday, will need to get approval by March 2019, in line with the government’s policy to weed out exemptions and bring down the corporate tax rate to 25%. Startups approved until March 31, 2019, will enjoy the benefit for up to five years. The government has proposed that a high-level, inter-ministerial committee should vet startup proposals to validate the innovative nature of the business for granting tax-related benefits. The details of the tax benefits will be announced in the budget.

“The benefit will be available for three years over a five-year period, “a senior government official told ET. If a startup claims the benefit in the first year and does not have a profit in the next two years, it will not lose out on the exemption. If profits are made in the fourth and fifth year, they will still be eligible for the tax break.

“All startups incorporated in India not prior to five years as per the definition of startup and starting the operations before 2019 can get this benefit for three years,“ said Amitabh Kant, secretary in the Department of Industrial Policy and Promotion, which piloted the startup initiative.

With the deadline for seeking exemption set for March 2019, the scheme will effectively run till March 2024, a period of eight years from now.

“This fiscal exemption shall facilitate growth of business and meet the working capital requirements during the initial years of operations, “according to the action plan document.

The policy imposes only one condition on startups claiming the benefit, apart from seeking approval from the appropriate body and meeting eligibility criteria: it should not distribute dividend while getting the tax exemption.

Tax-friendly Regime Need of the Hour for Startup Investors

The devil is in the details. The tax incentive package for startups will be clear in the Budget. But open-ended tax breaks won’t be possible as the government has already signalled a phasing out of exemptions to lower the corporate tax rate. Investments in unicorns would typically be long-term. So, it makes eminent sense to spare investors from paying capital gains tax when they sell their unlisted shares in startups after holding them for over a year. A tax-friendly regime will encourage many of them to relocate to India from, say, Singapore. The government, as promised, should end its Inspector Raj to boost the startup ecosystem.

Source: http://epaperbeta.timesofindia.com/Article.aspx?eid=31816&articlexml=Startups-May-Get-5-Year-Window-to-Avail-18012016015013

 

SEBI puts in place new form for ASBA

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With a checklist regime kicking in for initial public offerings (IPOs), capital markets regulator the Securities and Exchange Board of India (SEBI), has put in place a new form for ASBA (Application Supported by Blocked Amount) facility.

ASBA facility has become mandatory for all categories of investors applying for a public issue for making payment from Friday. The facility allows the bid amount to remain in the applicants account till the time the shares are finally allotted.

In a circular, SEBI said that the application form for ASBA would be printed in a booklet form of A4 size paper.

Besides, SEBI has prescribed white colour form for Resident Indian, NRIs applying on a non repatriation basis and blue colour form for NRIs, Foreign Venture Capital Investor, Foreign Institutional Investors, their Sub-Accounts (other than sub-accounts which are foreign corporates or foreign individuals bidding under the QIB Portion), on a repatriation basis.

It further said that top of the application form will have a coloured identifier strap incorporating the name of the issuer, ISIN (An International Securities Identification Number) and type of form (Repatriation, Non- Repatriation). Besides, the main application should have information about eight digit application number, PAN number, bidders depository account details, investor category, among others.

A confirmation by the applicant (on behalf of joint bidders) that he/she has read, understood and agrees to such confirmations is also required.

The regulator said that application should also highlight about different category of investors (retail, non-institutional and QIBs), number of equity shares (reservation if applicable), percentage of issue available for allotment, basis of allocation in case of over-subscription, mode of allotment and terms of payment.

The new circular will be applicable for all public issues opening on or after January 1, 2016, SEBI said.

The regulator, in August, had made ASBA facility mandatory for all categories of investors applying for a public issue.

In order to enhance the points for submission of applications, SEBI had also allowed Registrar and Share Transfer Agents (RTAs) and Depository Participants (DPs) to accept application forms (both physical as well as online) and make bids on the stock exchange platform.

This will be over and above the stock brokers and banks where such facilities are presently available. The number of bank branches with ASBA facility has now increased to about 95,500, from 9,800 when this facility was introduced.

Source: http://www.thehindu.com/business/Industry/new-form-for-asba-in-place/article8055065.ece

SEBI to allow soon mutual funds sale on e-commerce platforms

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SEBI Chairman, U K Sinha said sale of mutual funds on e-commerce platforms could become effective in a month, a move which will help deepen the respective market. He said sale of mutual funds on e-commerce platforms could become effective in a month, a move which will help deepen the respective market. The markets regulator has set up a committee under Infosys co-founder Nandan Nilekani to deliberate ways in which electronic means can be used better for sale of mutual funds (MF).

The committee is also working to make sale of mutual funds possible on e-commerce platforms, the SEBI Chairman said. “My guess is that in the next one month, this will be done (permitting sale of mutual funds on e-commerce websites),” he said while speaking to media on the sidelines of the launch of Bandhan Bank’s 600th branch.

According to Sinha, mutual fund growth in the country has been “very good” and that an ever-growing number of consumers flock to e-commerce websites for shopping. “However, electronic means are not used as well as they should have been and the growth is not happening using such means. We have some experts deliberating on how the electronic means can be used better,” Sinha said.

Targeting the young and educated people with high salaries and disposable income, Sinha said, the move would help them invest easily. “If these people are doing e-shopping, and they know financial markets, then they should also invest in MFs and that is the direction in which we are thinking,” the SEBI Chairman said.

On listing of start-ups, Sinha said it will take its own time. “Important thing to note is that the regulations are in place. If there is a company under pressure, there is alternative before the company to raise(funds),” Sinha noted, adding that the markets regulator was in dialogue with start-ups related to the issue.

Sinha also noted that some start-ups have raised issues concerning taxation but the same is beyond the jurisdiction of SEBI. On initial public offers (IPOs), the SEBI chief said that the pipeline by companies for the coming year is “very healthy”. “You might have noticed that the time taken by SEBI in providing its observations, has come down substantially. Earlier, matters went up to one year, now it is three months on an average for IPOs.”

Sinha noted that SEBI had allowed Rs 60,000 crore worth of IPOs in 2013-14, but the promoters had decided to withdraw the offers implying lack of desire to make investments. “In 2014-15 we saw around Rs 9,500 crore worth of IPOs and this year already Rs 18,000 crore has been garnered through IPOs, while the pipeline going forward is very healthy”, Sinha said.

Source: http://yourstory.com/2015/12/sebi-mutual-funds-e-commerce/

Fraud reporting norms increase responsibility on auditors: Report

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Immaterial frauds will now form a part of the annual report, and the requirement to report immaterial frauds to the central government has been done away with, it noted.

Statutory auditors will now have to mandatorily report to the Centre all corporate frauds amounting to Rs. 1 crore or above.

 

By specifying a threshold of Rs. 1 crore, the Corporate Affairs Ministry (MCA) has now done away with the requirement to report immaterial frauds to the Centre.

 

The Ministry has also now spelt out the procedure for fraud reporting to the Centre. First, the auditor has to inform the Board or audit committee and seek their views within 45 days.

 

On receipt of audit committee’s views, the auditor would have to within 15 days send his report to the Centre.

 

For frauds involving amounts lower than Rs. 1 crore, statutory auditors now need to report this matter only to the audit committee of the company, the Ministry has said amending rules for this purpose.

 

The reporting to the audit committee would have to be done not later than two days of his knowledge of the fraud.

 

Prior to this Ministry move, the company law required statutory auditors to report to the Centre all frauds by the company or against it.

 

Vishal Seth. Managing Director and National Leader IFRS and Financial Reporting Advisory, Protiviti India, Indian arm of a global consulting firm, said this threshold of Rs. 1 crore was a “fairly reasonable” given the magnitude of transactions in India.

 

“This is a big change in India. There was a need for a threshold and the Ministry has now specified it,” Seth told Business Line here.

 

Meanwhile, KPMG in India said in a note that the Ministry’s move on fraud reporting would increase responsibility of auditors. The amended rule prescribing the timelines for fraud reporting indicates the effort the Ministry is putting to increase the efficiency and timelines of such reporting, KPMG has said.

 

Related party transactions

 

The Ministry has now amended rules to specify that an audit committee would be empowered to provide “omnibus approvals” for related party transactions (RPTs) so long as certain conditions are met.

 

The conditions specified by the Ministry are largely similar to the Listing Regulations.

 

Yogesh Sharma, Partner, Grant Thornton India LLP, said this will certainly assist in ease of doing business without compromising the intent of the law.

 

Moreover, omnibus approval process was already included in the SEBI listing guidelines and hence this change will align the two requirements, he added.

 

For RPTs, the Company Law enacted in 2013 required every individual transaction to be approved by the Audit Committee. This made the approval process inefficient and delayed the decision making. For instance, each repeat transaction also required a separate approval.

 

The company law amendments in 2015 enabled “omnibus approval” for RPTs on annual basis that meet specified conditions prescribed in rules. The Ministry has now specified the conditions under which such omnibus approvals could be provided.

 

Reacting to the Ministry’s move, CA Institute President Manoj Fadnis welcomed the threshold specified by the Ministry. “This will bring certainty to the auditors as to the frauds that are to be reported to the central government and those that are to be reported to the audit committee,” he told Business Line .

Greater vigil

  • The auditor must first report the fraud to the company’s audit panel
  • The audit panel will have to give its views in 45 days
  • Within 15 days of that, the auditor will have to send his report to the Centre
  • Frauds amounting to less that Rs. 1 crore will need to be reported only to the company’s audit panel

Source: http://www.thehindubusinessline.com/todays-paper/tp-news/rules-eased-auditors-need-to-report-to-centre-corporate-frauds-of-over-rs-1-cr/article8029996.ece

SEBI relaxes listing, fund-raising norms for startups

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In a major boost for startups, capital markets regulator SEBI has relaxed its regulations for them to list and raise funds through a dedicated platform on domestic stock exchanges, rather than going overseas. Under the new norms approved by SEBI’s board, the stock exchanges would have a separate institutional trading platform for listing of startups from the new age sectors, including e-commerce firms, while the minimum investment requirement would be Rs 10 lakh.

For their listing, SEBI has relaxed the mandatory lock-in period for the promoters and other pre-listing investors to six months, as against three years for other companies. Besides, the disclosure requirements for these companies have also been relaxed, SEBI Chairman U K Sinha told reporters after the board meeting.

At least 25 per cent of their pre-issue capital would need to be with institutional investors for technology startups, while this requirement would be 50 per cent for companies from other areas. Sinha said “Indian startup space is very vibrant and the country is ranked number five as far as startups are concerned. More than 3,100 startups are there in the country and a large number of M&As have also happened.” “However, most of these startups were thinking of listing outside. We have made a very special provision for startups,” he added.

According to PTI, under the new norms, 75 per cent shares can be reserved for institutional investors, while allocation can be on discretionary basis for such investors. For non-institutional categories, it will be on proportional basis.

SEBI has also provided for reclassification of promoters as public investors provided they let go all their special rights, including voting powers, and do not own more than 10 per cent stake. However, an outgoing promoter can serve as a CEO or hold other senior positions for up to three years if the same is approved by the company’s board.

Source: http://yourstory.com/2015/06/sebi-startups-funding/

SEBI allows foreign venture funds to register as FPIs, plans to finalize listing norms for startups soon

by | posted in: Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0

Capital markets regulator SEBI has said that Foreign Venture Capital Investors (FVCIs) can be granted registration as a foreign portfolio investor if they meet certain guidelines.

The announcement came following a query from designated depository participant seeking clarification with regard to any restrictions on applicants, holding registration as a FVCI, from obtaining registration as a FPI (Foreign Portfolio Investor).

FVCI is an investor incorporated or established outside of India who can invest either in a domestic venture capital fund or a venture capital undertaking (domestic unlisted company), while FPI comprises of FIIs, sub-accounts and Qualified Foreign Investors.

In the circular, Securities and Exchange Board of India (SEBI) said depository participants may consider an applicant, holding FVCI registration, for grant of registration as a FPI.

The capital markets regulator “do not expressly prohibit FVCI from holding registration as a FPI.” However, the registration is subject to certain criteria like the applicant complies with the eligibility criteria as prescribed under the FPI regulations.

Other criteria include funds raised, allocated and invested must be clearly segregated for both registrations, reporting of transactions must be done separately and there should be clear segregation of securities held under FVCI and FPI registrations.

“Separate accounts must be maintained with the custodian for execution of trades. However, such an applicant shall have same custodian for its activities as FPI and FVCI,” SEBI noted.

Also, to attract technology startups to the domestic stock markets, SEBI is all set to make their listing and fund raising requirements easier. The final norms, which would be presented for approval from the SEBI’s board later this month, have been finalised after taking into account suggestions from all stakeholders to the draft guidelines released in March, sources said.

Asking technology startups founded by Indians to remain within the country, SEBI Chairman U K Sinha, last weekend, had promised an easier set of regulations for them to get listed and raise funds from the domestic stock market. “We are going to take a decision very soon in this regard. We are looking into how to make it easier for them to raise money,” Sinha had said.

The new norms are expected to help startup companies raise funds within India and stop their flight to overseas markets. “What is happening today is most of these startups, who have been reasonably successful, they are getting attracted to the New York Stock Exchange or Singapore Stock Exchange,” Sinha had said.

“They do not want to get listed here for varieties of reasons. They are getting attracted to foreign markets. Our effort is to provide a mechanism that they get listed in India itself, for the benefit of the country and for the benefit that the country’s startups remain within the country,” he had added.

Under the new norms, the entire pre-issue capital is expected to be locked-in for a period of six months for all shareholders. At present, promoters are required to offer a minimum of 20 per cent of post-issue capital as lock-in for a period of three years. Besides, SEBI is expected to make easier disclosure norms for startup listings. While filing the draft offer document with the capital market watchdog, such firms will only need to disclose broad objectives in line with the major international jurisdictions.

SEBI has already made it easier for the Small and Medium Enterprises (SMEs) to raise money from capital markets. “SMEs are primarily dependent on bank loans today and we know that banks have their own limitations. We have created separate platforms for SMEs at the two top exchanges BSE and NSE. We have balanced the requirement of safeguarding the investors and also facilitating the fund requirement of the SMEs.
Source: http://yourstory.com/2015/06/sebi-allows-foreign-venture-funds/