MCA proposes new CARO, 2016

MCA proposes new CARO, 2016 with wide coverage:

On 9th February, 2016, Ministry of Corporate Affairs (MCA) has issued draft Companies (Auditor’s Report) Order (CARO), 2016. As per Section 143 of the Companies Act, 2013, every auditor’s report under this section shall contain matters specified under applicable CARO (currently CARO, 2015). In comparison to the existing CARO (2015), CARO (2016) proposes reporting on some new requirements and eliminates some of the existing reporting requirements.

In comparison to CARO, (2015), CARO (2016) proposes additional reporting on the following:-

Auditor should report

(i) Whether title deeds of immovable properties are held in the name of the company. If not, provide details thereof.

(ii) Whether the company has granted any loans, secured or unsecured to companies, firms or other parties covered by clause (76) of Section 2 of the Companies Act, 2013. If so,

Whether the terms and conditions of the grant of such loans are not prejudicial to the company’s interest.

(iii) In respect of loans, investments and guarantees, whether provisions of Section 185 and 186 of the Companies Act, 2013 have been complied with. If not, provide details thereof.

(iv) Whether managerial remuneration has been paid/ provided in accordance with the requisite approvals mandated by the provisions of section 197 read with schedule V to the Companies Act? If not, state the amount involved and steps taken by the company for securing refund of the same.

(v) Whether the Nidhi Company has complied with the Net Owned Fund in the ratio of 1: 20 to meet out the liability and whether the Nidhi Company is maintaining 10% liquid assets to meet out the unencumbered liability.

(vi) Whether all transactions with the related parties are in compliance with Section 188 and 177 of Companies Act, 2013 where applicable and the details have been disclosed in the Financial Statements etc. as required by the accounting standards and Companies Act, 2013.

(vii) Whether the company has made any preferential allotment / private placement of shares or fully or partly convertible debentures during the year under review and if so, as to whether the requirement of Section 42 of the Companies Act, 2013 have been complied and the amount raised have been used for the purposes for which the funds were raised. If not, provide details thereof.

(viii) Whether the company has entered into any non-cash transactions with directors or persons connected with him and if so, whether provisions of Section 192 of Companies Act, 2013 have been complied with.

Further, in the case there is any unfavourable/ qualified/ disclaimer of opinion, auditor’s reports should state reasons for the same.

Stakeholders need to provide their comments on the proposed CARO, 2016 by February 23, 2016.
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ICAI released an announcement on Manner of Signing of Certificates by Chartered under Accountant With a view to bring uniformity in the manner of signing of certificates, icai has decided to require the members of the ICAI to include (in addition to any other requirements in this regard prescribed by the relevant law or regulation under which the certificate is being issued) the following details in their “Signatures” on the certificates issued by them:

1)Name of the CA firm*
2) Firm Registration Number (FRN)*
3) Name of the member
4) Designation (Partner/Proprietor)
5) Membership Number

Link: http://resource.cdn.icai.org/41158aasb30942announ.pdf

Quotes for those who are going through hard times!

“Your pain is the breaking of the shell that encloses your understanding. Even as the stone of the fruit must break, that its heart may stand in the sun, so must you know pain.” – Kahlil Gibran

“The most beautiful people we have known are those who have known defeat, known suffering, known struggle, known loss and have found their way out of the depths. These persons have an appreciation, a sensitivity and an understanding of life that fills them with compassion, gentleness and a deep loving concern. Beautiful people do not just happen.” – Elisabeth Kubler-Ross

“Never to suffer would never to have been blessed.” – Edgar Allan Poe

“When you come out of the storm, you won’t be the same person who walked in. That’s what this storm’s all about.” – Haruki Murakami

“In the midst of winter, I found there was, within me, an invincible summer. And that makes me happy. For it says that no matter how hard the world pushes against me, within me, there’s something stronger–something better, pushing right back.” – Albert Camus

“You don’t develop courage by being happy in your relationships every day. You develop it by surviving difficult times and challenging adversity.” – Epicurus

“Every adversity, every failure, every heartache carries with it the seed of an equal or greater benefit.” – Napoleon Hill

“They tried to bury us, but they didn’t know that we were seeds.” – Mexican Proverb

Quotes by Richard Branson

“I believe in goals. It’s never a bad thing to have a dream. If something is really what you want to do, just do it. Whatever your goal.”

“Fantasizing about the future is one of my favourite pastimes.”

“All you have in life is your reputation: you may be very rich, but if you lose your good name, then you’ll never be happy. The thought will always lurk at the back of your mind that people don’t trust you.”

“Complexity is your enemy. Any fool can make something complicated. It is hard to keep things simple.”

“There are no rules. You don’t learn to walk by following rules. You learn by doing, and by falling over, and it’s because you fall over that you learn to save yourself from falling over.”

“I am the captain of my ship and master of my fate. I believe in myself. I believe in the hands that work, in the brains that think, and in the hearts that love.”

“I don’t think of work as work and play as play. It’s all living.”

“I cannot remember a moment in my life when I have not felt the love of my family. We were a family that would have killed for each other – and we still are.”

“You only live once, and I just don’t want to waste a minute of my life.”

The CEO of a start-up is not just a CEO

Have you ever seen your CEO or owner walking to the delivery boy on the office door to receive the pizza and bring it back to his hard working team to gather them around for a pizza break? Have you ever seen your CEO walking towards his employees giving each of them hi-fis even on the smallest achievement? If yes, then you are working with the most amazing leader who has a vision to grow his idea into a business.

It is true, most of the CEOs of big organizations don’t even know half of their employees by face, leave apart knowing them by name or knowing personally. No doubt they have bigger responsibilities to handle that keep them away from constant touch with their employees. Such bigger organizations have functional specialists handling different aspects of managing the company.

However in a start-up a CEO is not just a CEO. To start with, he is responsible for visualizing and framing the idea of the business. He must have the eyes of a recruiter or human resource manager to select the potential employees or resources to kick start his idea. He must show the analytical ability of a Finance Manager to arrange the money, allocate the budget and keep a flawless track as to when and where that money is flowing to. He must also show the enthusiasm to go out on the streets, talk to people and make the first sale even before his employees do. In short the CEO of a start-up must come out as a leader who knows the path, walks on it and shows others how to walk on that path.

But why is it so important in a start-up culture? When you own a start-up you are limited on money and resources. Be it a product based or a service based company it is not possible always to have expert people handling different functions like marketing, finance, human resources, operations etc. It is important for the CEO to step out of his cabin and sit with the employees, work with them, listen to them and find out the gaps in the working of the business. Only this way he shall be able to analyze which functions require a specialist manager, for which he can hire a functional expert. But for the remaining functions he should be ready to step into the specialist managers’ role. For that matter he should be open to work as a staff boy too. If it is hard to digest, then look back at your manpower budget and financials and work out whether it is worth hiring people who are not going to add value to your business at present.

Apart from that, this is a very valuable organization culture an owner of the start-up can create for his employees. It is important for the employees to understand that when you are working in a start-up you are hired not just to display the capability you have but also to dirty your hands for other tasks lying idle on the table. It does not mean you should poke around into the work of others. But this is an added opportunity for you to do multi-tasking in your job and handle tasks not allocated to a specific employee.

Right route for overall success advised by Gurus

One should...

1. Think Right
2. Eat Right
3. Exercise Right
4. Sleep Right
5. Speak Right
6. Act Right
7. Network Right
8. Decide Right
9. Be at the Right place at the Right Time
10. Manage Right etc.

After all we are Humans...Right?

Working at a Start-up

Today Start-ups are in fashion and are hogging the headlines. They are also well funded and can afford to hire elite professionals like you. If you have received a call from a start up - here is how you can decide.

Should I work at a start-up?

1. Do you believe?

Do you believe in the team? Start-ups do not have rigid roles and routines. Often the vision, product and processes evolve. If you believe in the people - you will be enthusiastic and happy in adapting and contributing. Else you will be very frustrated. Very soon.

2. Are you ready to hunt?

Hunters have to hunt before they can eat. Likewise start-ups are new firms that haven't made profits/ revenues yet. They value and keep people who directly contribute to the business. Are you ready to do what it takes to make the business succeed? 

3. Are you a marathoner?

The real benefits from a start-up lie in the long run. If the start-up and you survive, you get huge responsibilities, immense learning and tremendous payouts. There are little or no benefits in the short run with a start-up. 

Check if you believe in the team, are ready to contribute in multiple ways and are happy to persist before you sign on with a start-up.

Maximizing Shareholder Value

Three drivers for maximizing shareholder value:

• Clients
• Build the right relationships
• Deliver consistent value at all levels
• Adapt and Innovate
• Anticipate customer needs, especially in changing times
• Create differentiation from competition
• Collaborate
• Ensure visibility across the organization
• Share best practices internally and with your customers
• Attract, retain and develop future leaders

20 Quotes which can help you become an Achiever!

1. Dream Big. Start small. Act now. 
2. Victims make excuses. Leaders deliver results.
3. Clarity breeds mastery.
4. Education is inoculation against disruption.
5. A problem is only a problem when viewed as a problem.
6. All change is hard at first, messy in the middle and gorgeous at the end.
7. If you’re not scared a lot you’re not doing very much.
8. Where victims see adversity, extreme achievers see opportunity.
9. The project you are most resisting carries your greatest growth.
10. Small daily improvements over time lead to stunning results.
11. Criticism is the price of ambition.
12. Potential unexpressed turns to pain.
13. Ordinary people love entertainment. Extraordinary people adore education.
14. Your daily behavior reveals your deepest beliefs.
15. The only failure is not trying.
16. Focus is more valuable than IQ.
17. To double your income, triple your investment in self-development.
18. Your excuses are nothing more than the lies your fears have sold you.
19. An addiction to distraction is the end of your creative production.
20. Life is short. Be of use.

Thanks to Robin Sharma!

HUF - What, Why & How?

What is HUF (Hindu Undivided Family)?

HUF is a family with husband, wife and children (and children’s spouses if any) living together. The property owned by this family will be through lineal ascendants or any ancestors. There are a set of laws that govern property ownership, marriages, taxation etc for a legally declared HUF. IT department of India has a format of taxation for a HUF; tax benefits can be availed from this format

Why HUF to Save Tax?

A very effective and legal way to save tax is to form a separate tax entity HUF i.e. Hindu Undivided Family. The creation of Hindu Undivided Family helps the tax payers to save their taxes in a legal manner. In India there are many families which are undivided and the incomes earned by such families are joint income as compared to Individual Incomes.

As these are joint incomes and not Individual Incomes, these incomes cannot be taxed in the hands of any specific individual and are therefore taxed in the hands of the whole family. As these are taxed in the hands of the family, the family has a separate PAN Card as compared to Individual members of the HUF who also have a separate PAN Card.

It is a well known fact that every individual member of the family specially the adult members of the family would enjoy a tax deduction up to Rs. 1,50,000 in under section 80C of the Income-tax Act, 1961.However, most of the prudent individuals are able to take the full advantage of the said section 80C of the Income-tax Act, 1961. 

Basically the logic behind forming an HUF to save tax is to avail the benefit of an extra PAN Card legally. As the Income of the Family is not taxed in the hands of any specific Individual, a new PAN Card is allotted to the HUF and Tax would be paid by the Family using this PAN Card.

As a new PAN Card would be allotted to the whole family, it will also enjoy the benefits of Income Tax Slab Rates i.e. Income would be Tax Free up to the specified limits and would then be taxed progressively at 10%, 20% & 30% resulting in tax saving.

How creating a Hindu Undivided Family Account would result in tax saving?

Example: 

Let’s assume there are 4 Members in a Family – Husband, Wife and 2 Children. The Income of the Husband is Rs. 30 Lakhs, Income of the Wife is Rs. 20 Lakhs. They also have a ancestral property from which they are earning rent of Rs. 8 Lakhs p.a.

The rent from such a property would either be taxed in hands of the Husband or the Wife or both.

Case 1: If taxed in the hands of the Husband, the husband who is currently in the 30% Income Tax Slab Category would be required to pay 30% of Rs. 8 Lakhs i.e. Rs. 2.4 Lakhs as Tax.

Case 2: If taxed in the hands of the Wife, the wife who is also currently in the 30% Income Tax Slab Category would be required to pay 30% of Rs. 8 Lakhs i.e. Rs. 2.4 Lakhs as Tax.

Case 3: If taxed equally in the hands of both Husband and Wife i.e. Rs. 4 Lakhs each, both the Husband and Wife would be required to pay tax @ 30% on Rs. 4 Lakh = 1.2 Lakhs each by both Husband and Wife thereby leading to a total tax outflow of Rs. 2.4 Lakhs.

However, there is a better way out by which you can plan your Income Tax. As this Income is arising from an asset which belongs to the whole family, this Income shall be taxed in the hands of the Family (provided an HUF is formed) and you would be able to enjoy the benefits of slab rates.

Case 4: If this Rental Income of Rs. 8 Lakhs is taxed in the hands of HUF, the tax payable by the HUF as computed as per the Slab Rates would be Rs. 70,000 to Rs. 80,000 (depending on the income tax deductions claimed by the HUF). Taxing this Rental Income in the hands of the HUF would lead to a Tax Saving of Rs. 1,80,000 p.a. (Rs. 2,40,000 – Rs. 60,000).

For easy understanding of the concept, we explained this article using only Rental Income, but there are many other Incomes as well which arise to the family as a whole wherein the concept of saving taxes by forming an HUF can also be applied.

Benefits and Drawbacks of forming an HUF

1. The major advantage of creating a Hindu Undivided Family Account is that the family gets an extra PAN Card and can split the family income and thereby resulting in tax saving and reducing the tax outgo. This is the major reason why CA’s advise their clients to create a HUF and save taxes of upto Rs. 1.8 Lakhs every year (as explained above). Apart from getting tax deduction up to Rs. 1,50,000 for an individual, it is possible that if an HUF is created by that individual, he will be able to claim higher tax deduction and exemptions under the Income-tax Law because the new tax entity in the form of a Hindu Undivided Family will be eligible to claim separate tax deduction under section 80C of the Income-tax Act, 1961. Likewise, the dividend income and the Long-term Capital Gains on listed securities would also be exempted for such Hindu Undivided Family. The income from Short-term Capital Gain by this Hindu Undivided Family will also be eligible to a lower tax rate of 15 per cent tax only. 
2. Various other tax benefits within the framework of the Income-tax Law are available for the Hindu Undivided Family to save tax. 

However it should be noted that there is a disadvantage as well and that is the fact that all assets of in the name of the Hindu Undivided Family are assets of the family and not of a specific individual. All members of the family have a right in the assets of the Hindu Undivided Family (including an unborn child in the womb of a mother).

Therefore proper caution should be exercised while gifting assets to the Hindu Undivided Family as the whole family would be having a share in the assets of the family as compared to the fact that if these assets were in the name of a specific individual – only that individual would have a right over that asset.

To be Continued...

Documents Required for Loans by the Banks

 Term Loan

1. Audited Financial Statement of last 3 years along with Income Tax Return Acknowledgement.
2. Provisional Balance Sheet for the current year.
3. Projection of Sales , Purchase, Stock & Raw Material Consumption for the next 5 years.
4. Quotation of Machinery to be purchased.
5. Installed Capacity, Licensed Capacity - existing & proposed, Envisaged Capacity Utilisation.
6. Details of Raw Material requirement, calculation, how desired ?Source of supply and supply position. Cost of raw material supported by current quotation.
7. Catalogue / Brochure of Machine.
8. Maintenance arrangement & costs thereof.
9. Project implement schedule.
10. Cost already incurred.
11. Sources of such expenditure.

Housing Loan

1. Financial Statement of last 3 years along with Income Tax Return Acknowledgement.
2. Provisional Balance Sheet for the Current Year.
3. Copy of Pay Slip and Form No. 16.
4. Agreement of Sale of House Property to be purchased.
5. Copy of Last Municipal Tax Paid Receipt.
6. Copy of Sanctioned Plan.
7. Receipt of Advance Money Paid to Promoter/Seller.
8. Collateral Security Offered.

Car Loan

1. Financial Statement of last 3 years along with Income Tax Return Acknowledgement.
2. Provisional Balance Sheet for the Current Year.
3. Copy of Pay Slip and Form No. 16.
4. Quotation of Car to be purchased.
5. Receipt of Advance Money Paid to Seller.
6. Statement showing repayment schedule.