In this article we will go through the following topics:-

1. What is a Demat Account
2. Advantage and Disadvantage of Demat Account
3. Demat Account opening procedure
4. Document required for opening Demat Account
5. How to invest using Demat Account
6. Eligibility criteria and Charges
7. Dematerialization
8. Name of Full services and Discount brokers.

What is a Demat Account?

Demat Account is an account that allows investors to hold their shares in an electronic form.

Instead of having to deal with obnoxious paperwork, investors now hold their stocks or mutual funds and exchange-traded funds (ETFs) in an electronic form in a Demat account.

Demat Account is the equivalent of a Book Account, but where a Demat account holds all shares, a bank account holds your money.

As I have cleared it above, that an Individual can’t open Demat Account directly with a depository such as CSDL or NSDL. We have to register with a Depository Participant (DP).

A DP is usually a stock brokerage or bank, that has been granted the license to open Demat Accounts on behalf of its customers or investors.

Advantages and Disadvantages of Demat Account

Advantages:-

1. This account generally helps us to avoid problems which are associated with physical share certificates.
2. It is very easy and convenient to hold securities in this account.
3. It is safer than physical shares which are in paper form.
4. Any changes done by shareholders in a registered record with a partner automatically get registered with all securities held by the shareholder.
5. Automatic credit into an online account for shares which arises out of bonus and splits.
6. It reduces risks of delayed settlement.
7. Traders can deal with shares from anywhere using this account.
8. Shares are immediately credited to the account after purchases have been done.
9. Demat Account reduces transaction charges and avoids stamp duty on them as well.

Disadvantages:-

1. Trading in securities may become uncontrolled in case of dematerialized securities.
2. There is no provision to close a Demat account which is having illiquid shares.
3. After liquidating the holdings many Indian investors don’t close their DP account.
4. Only educated PPI can access it.
5. It may become difficult for the regulator to access market activity in all Demat.

Demat Account Opening Procedure:-

There are two ways to start with your account:

1. Online Account Opening
2. Traditional Method of Submitting Physical Forms.

Before starting on the Demat Account opening procedure, select broker on a variety of factors- such as brokerage fees/charges, the platform’s/user interface and customer service.

1. Online Account Opening
   1. Head to the brokers online Demat account opening page.
   2. Enter your basic details and click sign up.
   3. Keep scanned copies of your documents with you to upload them.

This number is called the Beneficial Owner Identification Number (BOID) or Unique Client Code (UCC).

Document Required for Demat Account

There are few governments approved documents required for opening Demat account:-

1. Proof Of Identity:-
   1. PAN Card
   2. Aadhaar
   3. Driving Licence
   4. Passport
   5. Any document notified by the Central Government
2. Proof Of Address:-
   1. Passport
   2. Aadhaar
   3. Voter Identity Card
   4. Driving Licence
   5. Bank Account Statement
3. Proof Of Bank:-
   1. Cancelled Cheque
   2. Bank Statement

How To Invest Using Demat Account:-

I’m hoping all of you’re familiar with What is Demat Account and have grasped how to open a Demat Account. Before starting this topic we need to discuss some important things:-

1. It was introduced in 1996.
2. The total number of investor accounts in the country, as of July 2017 stood at 16.02 million with NSDL and 12.03 million with CDSL.
3. On CDSL traders hold 25,709 Crores of securities.

Now, how to invest using a Demat Account. I will discuss this by an example.

Suppose you picked Upstox as Brocker or DP for opening my Demat Account. Here’s how you will start investing:-

1. You should get used to the trading platform you will be using- in this case, you can use Upstox Pro Web or Upstox Pro Mobile.
2. It is important for you to know trading terms like IPO, Portfolio, to know trading terms like IPO, Portfolio, Yield, Index, Sector, P/E ratio etc.
3. Link your bank account to the trading account you are using. Start buying your desired stocks from the market using the money in the trading account.
4. After you are done buying stocks; your trading account will be debited in real-time and the shares you bought will be credited to your Demat Account within the ‘Settlement’ period, which is T+2 days.
5. You can sell your stocks on the same platform.
6. Your securities will be debited and credited to and from your account in the ‘settlement period’. This is usually within T+2 days, i.e. two days after a trade is placed.

Eligibility Criteria and Charges:-

1. There is no minimum age to invest in the stock market. Both Minor and an Adult can invest in the stocks.
2. Pan and KYC details are a necessity to get started. (for minor parents detailed are required)
3. Annual Maintenance Fee (vary from broker to broker)
4. Account Opening Charges (vary from broker to broker)
5. Transaction Fees (vary from broker to broker)

Dematerialization:-

It is the process of converting physical share certificates and securities to an electronic format which is stored in a Demat account. To alleviate the risk associated with trading of securities in paper format, the concept of dematerialization was introduced in the Indian Share Markets.

Process of Dematerialisation of Shares:-

1. First, approach your brokerage firm and complete all the procedures to open a Demat account
2. To convert your securities from physical to electronic form, you have to request a Demat Request Form (DRF)
3. For every share with a different ISIN (International Securities Identifications Number), a separate form will be required.
4. The brokerage firm will process the request to the company in which you hold the shares.
5. Once the request is approved by the company, your physical form of the share will be destroyed and a confirmation will be sent.
6. The depository will confirm the dematerialization process. Once the process is completed, all the physical shares will be converted into electronic form from 15 to 30 days.

List of Brokers in India:-

There are two types of Brokers in India viz. Full-Service Brokers and Discount Brokers

1. Full-Service Brokers:-
   1. Sharekhan
   2. Motilal Oswal
   3. Angel Broking
   4. ICICI Direct
   5. HDFC Securities
   6. Axis Direct
   7. Kotak Securities
   8. Karvy
   9. India Infoline (IIFL)
2. Discount Brokers:-
   1. Zerodha
   2. 5 paisa
   3. Upstox (RKSV)
   4. My value Trade
   5. SAMCO
   6. Trading Bells
   7. SAS Online
   8. R K Global
   9. Trade plus
   10. Trade smart Online

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• Agricultural produce: means any produce out of cultivation of plants and
  rearing of all life forms of animals, except the rearing of horses, for food,
  fibre, fuel, raw material or other similar products, on which either no further
  processing is done or such processing is done as is usually done by a
  cultivator or producer which does not alter its essential characteristics but
  makes it marketable for the primary market.
• Agricultural Produce Marketing Committee or Board: means any
  committee or board constituted under State law for the time being in force
  for the purpose of regulating the marketing of agricultural produce
• Services by way of transportation by rail or a vessel from one place
  in India to another of agricultural produce.
• Services provided by a goods transport agency, by the way of transport in a goods carriage of agricultural produce
• Agricultural extension: means application of scientific research and
  knowledge to agricultural practices through farmer education or training.

Source: ICAI Study Material

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Vision for Infrastructure

The first vision is to build next-generation physical as well as social infrastructure for a $10 trillion economy and to provide ease of living. It will also build a quality and science-oriented educational system with Institutes of Excellence providing leadership at the top.

Vision for Digital India with Youths

The second vision is to create a Digital India reaching every sector of the economy. It also involves developing a digital infrastructure and digital India that comes under the reach of every citizen. Our youths will lead us to this by creating numerable startups and enhance job opportunities through their skills and competence.

Vision for Environment

The vision is “Making India a pollution free nation with green Mother Earth and blue skies“. This India will drive electric vehicles with renewables becoming a major source of energy supply bringing down imported dependence and increasing energy security for our people.

Vision for Rural India

The vision for rural India is to expand rural industrialization to generate massive employment using modern Industrial technologies based on the “Make In India” approach using grass root MSMEs and startups across the country.

Vision for River, Water, and Irrigation

The vision for India of 2030 is Clean Rivers, with safe drinking water to all Indians and efficient use of water in irrigation using micro-irrigation techniques.

Vision for Oceans and Coastlines

Ocean and coastlines are one of the dimensions of the vision for 2030 to ensure better standards and quality of life for a large number of people living in the coastal area. The long coastline can be pivotal for the economy, using the strength of the blue economy and Sagarmala programme.

Vision for India in Astronomy

The vision for Indian astronomy is for India becoming launch-pad of the world by space programme-Gangayaan, placing an Indian astronaut in space by 2022.

Vision for Food and Agriculture

Vision is to achieve self- sufficient in food and improving agricultural productivity with emphasis on organic way. It further add focus on an integrated approach towards agro and food processing, preservation, packaging and cold storage facility.

Vision for Health and Wellness

A healthy India, with distress-free and comprehensive wellness system for all, women having equal rights and concern for their safety and empowerment is a dimension for the vision 2030 through Ayushman Bharat Scheme.

Vision for Governance

‘Minimum Government and Maximum Governance’ with proactive, responsible and friendly bureaucracy, electronic governance is the vision 2030 for the Good Governance.

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A big announcement for MNREGA

Goyal announced to allocate ₹60,000 crore for MNREGA in the year 2019-20. He also announced 143 million LED bulbs to provide illumination to all houses and save electricity. Mr. Goyal promises to provide a home to all by 2022.

Farmers will be given 6,000 rupees in their accounts.

The Finance Minister announced in parliament a direct support ₹6,000 per hectare in farmer’s bank accounts directly. Prior to the election, ₹2,000 will be given as the first installment. This money will go into the accounts who own up to 2 hectares of land. This will benefit the families of 12 crore farmers. The scheme, which will be applicable from 01st December 2018 and will cost about ₹75,000 crore to our government. Also, interest on the loans given for animal husbandry and fishery care will be given 2% discount.

₹750 crore will be spent on Kamdhenu Scheme

The finance minister said during the presentation that our government always works for Gaw Sewa. ₹750 crore will be spent on Kamdhenu scheme.

Gratuity limit has been increased from ₹10 lakh to ₹30 lakh

Goyal announced “Gratuity limit has been increased from ₹10 lakh to ₹30 lakh. Prime Minister Shram Yogi Mudan (Mega Pension Scheme) has been started to give pension to people in the unorganized sector, contributing only 100 rupees per month. After giving the work, workers will get a pension of ₹3,000 after the age of 60. This will benefit 10 million workers in the unorganized sector. India will become the largest pension plan in the world of the unorganized sector”.

Estimates of the fiscal deficit this year will be 3.4 percent of GDP

The fiscal deficit in the current financial year 2018-19 will be 3.4% of the GDP. The current account deficit will be around two and a half percent of GDP this year. The last five years the country has received FDI worth $239 Billion.

Tax assessment processes will be modified

The Finance Minister said today “Do not go to offices for tax assessment now. IT returns will be processed in 24 hours.
If any notice comes manually to the assessee, he can write to department & officials to ask the information only through online mode which will result in the big opportunity for CAs to save time and manpower.
Within almost two years, almost all assessment and verification of IT returns will be done electronically by an anonymized tax system without any intervention by tax officials.

Income Tax free up to ₹5 lakh

The limit of income tax exemption has been increased from ₹2.5 lakh to ₹5 lakh. Now tax will not be levied to the income of five lakh rupees. No tax will be required to invest ₹1.5 lakh the in the provident fund or equity. If so, if a person’s income is ₹6.5 lakh and he invests ₹1.5 lakh rupees then he will not have to pay any kind of tax. Assessee must be clear that Income Slab has not changed. Rebate under section 87A has only been changed from ₹2,500/- to ₹12,500/-.
Simultaneously, standard deduction has been increased from ₹40,000 to ₹50,000 for salaried class people.

TDS limit on interest income increased to ₹40,000

Interim Finance Minister Piyush Goyal on Friday announced to increase the tax deduction limit on the income from interest of ₹10,000 to ₹40,000 per year. In case of senior citizens, the limit has been increased to ₹50,000. Presenting the Budget 2019-20 in the Lok Sabha, he said it will benefit the senior people and the small depositors who depend on the interests of deposits of banks and post offices. So, these depositors could demand a refund of tax deducted at interest income up to ₹10,000 per year.

Few more points to be highlighted from the Budget 2019

● There will be a single window for approval for Indian filmmakers. Anti-camcording provision to be introduced to the Cinematography Act to combat film privacy.

● The vision for 5 lakh digital villages in next 5 years.

● More than ₹3 lakh crore has been announced for the defense sector.

● Those MSMEs who are registered with GST will get 2% interest relief.

● 26 weeks of maternity leave to empower women has been granted in this budget.

● Goyal said our government has delivered 6 crores free LPG connections under Ujjwala Scheme.

● PCA restriction has abolished from 3 major banks namely, BoI, BoM and OBC.

● 22nd AIIMS has to built-in Goyal’s home state Haryana.

● GST has been continuously reduced, resulting in relief of ₹80,000 crores to consumers; most items of daily use for the poor and middle class are now in the 0%-5% tax bracket.

● Benefits under Sec 80(i)BA being extended for one more year, for all housing projects approved till the end of 2019-2020.

● Businesses with less than ₹5 crore annual turnover, comprising over 90% of GST payers, will be allowed to return quarterly returns.

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There was a very cautious man

Who never laughed or played

He never risked, he never tried,

He never sang or prayed.

And when he one day passed away,

His insurance was denied,

For since he never really lived,

They claimed he never really died.

Okay, to begin with, I have to say the poem is nothing to do with what we will be talking about, this was just enough to break the ice.

Robert Shiller stated, Portfolio Management is an alternative to Insurance.

The basic idea about insurance or getting insured to minimize the losses incurred in case of happening of an uncertain event.

A portfolio is pretty much the same idea, it is the diversification of ownership. It’s an idea of managing risk not through purchasing of insurance policy, but through diversification (owning a variety of asset).

A risk is inherent in investing, thus we diversify the investment by buying different assets and not putting “all our eggs in one basket”. I guess you have heard a lot of times about that phrase, but I like the history of thought, so I tried to find out when was this phrase used at the earliest, the best I could find that it itself was used by Alexander Crump in 1874, in his book on how to invest, where he wrote, “It is an old saying that is unwise to put all your eggs in one basket”.

A later insight –

If all people are like me, thinking the same thing and trying to hold the same kind of portfolio, then still why is it different from one person to another? The core insight of the theory is, you know what, even if I calculate the optimal portfolio, the best-diversified portfolio, then how is it different from others?

Well, you could be different from others because you might be more risk-averse than others. You might have a greater or lesser risk tolerance. But that tolerance to risk could be adjusted by leveraging your portfolio up and down.

I have a rather interesting explanation for leverage though! So a lever is something used to move things, and leverage is how you move people. Imagine, if  I was in need of money, and then I go to a bank for a loan, then the bank will have leverage over me and the will charge me with high-interest rates. Similarly, before 2010 when there was no Obamacare policy in the US, only people who were sick or who knew they were going to be sick, bought health insurance and thus the insurers had leverage over them and they charged high rates. Same is with your portfolio, you get leverage over the risk. If you are a rational economic person, you will have portfolio management so that you don’t have to worry about a stock going down, it’s the total that matters to you.

Conclusively, if we compare portfolio management and insurance it’s basically the same idea to minimize the risk. Investors do it by diversification, and insurance companies do it with what they call as risk-pooling, where insurance companies come together to form a pool, which can provide protection to insurance companies against catastrophic risks such as floods or earthquakes.

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In a more simple way,  Competitive Advantages are conditions which allow the productive entity to generate more sales or superior margins compared to its market competitors. When the competitive advantages are sustainable, it is difficult for the rivals to neutralize the advantage.

To create a competitive advantage, you’ve got to be clear about, firstly, What is the real benefit your product provide? You must know not only your product’s features but also its advantages how they benefit your customers. Secondly, Who are your customers? What are their needs? You’ve got to know exactly who buys from you, and how you can make their life better. Thirdly, Have you recognized your real competitors? That’s more than just similar companies or products. It includes anything else your customer could do to meet the need you can fulfill. These three determinants got to be cleared by an organization to create a competitive advantage.

The two main types of competitive advantages are comparative advantage and differential advantage.
A firm’s ability to produce a good or service more efficiently than its competitors, which leads to greater profit margins, creates a Comparative advantage.  And, a Differential Advantage is when a firm’s products or services differ from its competitors’ offerings and are seen as superior.

A country can also create competitive advantage.

Why Chinese products are so cheap and at a reasonable quality level? It can do this because its standard of living is lower, so it can pay its workers less. It also fixes the value of its currency, the yuan, at a value lower than the dollar. China uses cost leadership. It’s called national competitive advantage or comparative advantage.

Data Source: Investopedia

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~BENJAMIN GRAHAM~

New development such as the rapid development of conglomerate companies, franchise operations, and other relative novelties in business and finance, which include a number of tricky devices such as the letter stock, proliferation of stock-option warrants, misleading names, use of foreign banks, and others have been there since the 1960s.

Our recent reading what brought this upon was the enigma of why the US Securities and Exchange Commission (SEC) brought down a private transaction and is now no longer of concern to the investors. Quite engrossing isn’t it?

“Letter Stock” is a stock not registered for sale with the Securities and Exchange Commission for which the buyer supplies a letter stating the purchase was for investment. But this isn’t the same now. As said earlier it is now no longer of concern to investors. So as of now “Letter Stock” is known as ‘Restricted Stock’ or ‘Section 1244 Stock’. Restricted stock is used as a form of employee compensation, in which case it typically becomes transferrable (“vests”) upon the satisfaction of certain conditions, such as continued employment for a period of time or the achievement of particular product-development milestones, earning per share goals or other financial targets. It typically becomes available for sale under a graded vesting schedule that lasts several years.

These are unregistered shares of ownership in a corporation that are issued to corporate affiliates, such as executives and directors. Restricted stock is non-transferable and must be traded in compliance with special Securities and Exchange Commission (SEC) regulations.

Restricted stock became more popular in the mid-2000s as companies were required to expense stock option grants. Insiders are given restricted stock after merger and acquisition activity, underwriting activity, and affiliate ownership in order to prevent premature selling that might adversely affect the company. An executive may have to forfeit restricted stock if he leaves the company, fails to meet corporate or personal performance goals, or runs afoul of SEC trading restrictions. The SEC regulations that govern the trading of restricted stock are outlined under SEC Rule 144, which describes the registration and public trading of restricted stock and the limits on holding periods and volume.

But this information can be availed from anywhere, why are we reading this?

During the mid- 1960s, the mutual funds bought the “Letter Stock” in a private transaction, then immediately revalued these shares at a higher price. This enabled these “go-go” funds to report unsustainably high returns in the mid-1960s. The U.S. Securities and Exchange Commission cracked down on this abuse in 1969 and brought upon some regulations and restrictions making it no longer a concern for fund investors.

Let us understand the enigma how these privately placed shares were giving such unsustainably higher returns.

Earlier, In case of letter stocks, the companies had the sole discretion in the method adopted for valuing the shares. Therefore, in order to inflate return the companies used to value their shares at a price substantially lower than the market value of the share. For e.g. a company declares dividend of INR100,000 and the market price of share is 1,000 then Return on Investment will be 100% , However in case of letter stock where the valuation is done by the company, and the shares are valued at INR500, then Return on Investment takes a stride to reach 200%, indicating erroneously high return by the company. The agenda behind this false defalcation has been only lure investors to infuse capital, for their future ventures.

Following is the one of the prominent cases arose during that period:

In June 1969, the Commission established an administrative proceeding against Frederic S. Mates (“Mates”), Mates Financial Services, Among other matters, it was alleged that, contrary to representations to Fund shareholders, Mates caused the Fund (a) to possess a considerable amounts of restricted securities, (b) to impede its shareholders’ right to redemption, and (c) to obtain from banks loans of more than $7 million secured by a lien on the Fund’s entire portfolio.

It was further alleged that Mates inflated the restricted securities and defalcated Fund of shareholders and clients, as well as prospective clients of Mates Financial Services subsequently, leads to an increase in the net asset value per share.

Security Exchange Commission came into notice of this fact and in order to curb this scenario of false returns, the Commission made a conscious effort of studying the valuation of restricted securities by investment companies, giving attention also to the correlated problems of liquidity and restraint of investment judgment which may arise when open-end companies acquire restricted securities. Consequent to the end of the fiscal year, the Commission issued a statement setting onward its views regarding the issues integral in the acquisition of restricted securities by investment companies.

Henceforth, we can settle with the fact that even in the financial history of the world there have been instances to deceive investors, but in one or other way, whether it is SEBI/RBI/NCLAT in India or the SEC in the US, find its way to fill up the breaks, in order to strengthen the pillar and  at times, warrant the financial security of the depositors.

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Source:

 https://www.sec.gov/about/annual_report/1969.pdf

Investopedia

The Intelligent Investor – Benjamin Graham

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image source – pib

Mr. Arun Jaitley, Finance Minister presented the budget for the financial year 2018-19 in Parliament on 01^st February, 2018 which was to strengthen various sectors like agriculture, MSME, health and education. He further added a series of structural reforms which will push India forward among the fastest growing economies of the world. Country firmly on course to achieve over 8 % growth as manufacturing, services and exports back on good growth path.

Agriculture and Rural Economy

• Government proposed to raise volume of Institutional Farm Credit for agriculture sector to Rs.11 lakh crore for the year 2018-19 from 8.5 lakh crore in 2014-15.
• MSP for all unannounced kharif crops will be atleast one and half times of their production cost.
• Two New Funds with a total corpus of 10,000 crore announced for Fisheries and Animal Husbandary Sectors under the name of Fisheries and Aqua culture Infrastructure Development Fund (FAIDF) sector and an Animal Husbandry Infrastructure Development Fund (AHIDF).
• “Operation Green” (a new scheme) launched to address price fluctuations in potato, tomato and onion for benefit of farmers and consumers with a corpus of 500 crore.
• Proposition for developing existing 22,000 rural haats into Gramin Agricultural Markets (GrAMs) to protect the interests of 86% small and marginal farmers.
• Re-structured National Bamboo Mission (termed Bamboo as “Green Gold”) gets 1290 crore.
• Proposition has been made to extend the facility of Kisan Credit Cards to fisheries and animal husbandry farmers to help them meet their working capital needs.

image source – pib

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Air Transport

              hawaai chappal wale bhi hawa mein udenge..

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• Proposition has been made to expand the airport capacity more than 5 times to handle a billion trips a year under a new initiative – NABH Nirman.
• Under the Regional connectivity scheme of UDAN (Ude Desh ka Aam Nagrik) initiated by the Government last year, 56 unserved airports and 31 unserved helipads would be connected.

Digital Economy

• NITI Aayog will initiate a national program to direct efforts in artificial intelligence.
• Department of Science & Technology will launch a Mission on Cyber Physical Systems to support establishment of centres of excellence for research, training and skilling in robotics, digital manufacturing, big data analysis, quantum communication and internet of things.

image source – pib

Defence

• Proposition has been made to develop two defence industrial production corridors recognizing the sacrifices made by the Armed Forces.

image source – pib

Disinvestment

• The Finance Minister announced disinvestment target of 80,000 crore for 2018-19.
• 3 Public Sector Insurance companies- National Insurance Co. Ltd., United India Assurance Co. Ltd., and Oriental India insurance Co. Ltd., will be merged into a single insurance entity which will boost the insurance sector.
• Proposition to revise emoluments to 5 lakh, Rs. 4 lakh and Rs. 3.5 lakh per month for the President, the Vice President and to Governor respectively. These emoluments were last revised in 2006.

image source – pib

Education, Health and Social Protection

• Estimated budgetary expenditure on health, education and social protection for 2018-19 is Rs.1.38 lakh crore against estimated expenditure of Rs.1.22 lakh crore in 2017-18.
• Tribal students to get Ekalavya Model Residential School with Navodaya Vidyalayas to provide the best quality education with special facilities for preserving local art and culture in each tribal block by 2022. Welfare fund for SCs gets a boost.
• Government would launch the Prime Minister’s Research Fellows (PMRF) scheme this year which would help 1,000 best B.Tech Students to avail the facilities to do Ph.D in IITs and IISc, with a handsome fellowship.
• World’s largest Health Protection Scheme covering over 10 crore poor and vulnerable families launched with a family limit upto 5 lakh rupees for secondary and tertiary treatment.

image source – pib

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Employment Generation

• Government will contribute 12% of the wages of the new employees in the EPF for all the sectors for next 3 years.
• Proposition to make amendments in the Employees Provident Fund and Miscellaneous Provisions Act, 1952 to reduce women employees’ contribution to 8% for first 3 years of their employment against existing rate of 12% or 10% with no change in employers’ contribution.
• To create more employment, deduction of 30% on emoluments paid to new employees under Section 80-JJAA to be relaxed to 150 days for footwear and leather industry.

Fiscal Management & Taxation

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• Fiscal Deficit of 3% of GDP for the year 2018-19 has been projected.
• Proposition to provide 100% deduction to companies registered as Farmer Producer Companies with an annual turnover upto 100 crore on profit derived from such activities, for a period of 5 years from financial year 2018-19 which will promote post harvest agriculture activities and also encourage “Operation Greens” announced earlier and would give a boost to the Sampada Yojana.
• Turning to the real estate sector, the Finance Minister has proposed that no adjustment shall be made in respect of transactions in immovable property, where the Circle Rate value does not exceed 5% of the consideration. This would minimize hardship in real estate transactions.
• No changes in Tax Rate of all persons except Companies.
• Education Cess is being increased from 3% to 4% to be known as Education and Health Cess.
• Long Term Capital Gain exemption allowed previously under section 10 (38) in respect of listed STT paid shares being withdrawn. However, capital gain upto 31^st January, 2018 shall not be taxed as cost of acquisition will be taken as Fair Market Value as on 31^st January, 2018.
• Tax on STT paidLong Term Capital Gain will be 10% under section 112A. Further such tax will be liable for TDS.
• Standard Deduction of Rs 40,000 for salaried employees. However, benefit of transport allowance of Rs 19,200 and Medical Reimbursement of Rs 15,000 under Section 17(2) are being withdrawn resulting into net benefit to salaried class only Rs 5,800.
• Provision of Section 43CA, 50C and 56(2)(x) being amended to allow 5% of sale consideration in variation vis a vis stamp duty value on account of location, disadvantage etc.
• Provision of section 40(ia), 40A(3) and 40A(3A) are being made applicable to Charitable Trust.
• Agriculture Commodity Derivates income /loss also not to be considered as speculative under section 43(5).
• Income Computation and Disclosure Standards(ICDS) being given statutory backing in view of decision of Delhi High Court decision. Marked to market loss computed as per ICDS to be allowed under section 36. Gain or loss in Foreign Exchange as per ICDS to be allowed under new section 43AA.
• Construction Contract income to be computed on percentage completion method as per ICDS.
• Valuation of Inventory including Securities to be as per ICDS.
• Conversion of stock in trade to capital asset to be charged as business income in the year of conversion on Fair Market value on the date of conversion.
• 54EC benefit of investment in Bonds to be restricted to Capital gain on land and building only. Further period of holding being increased from 3 years to 5 years.
• PAN to be obtained by all entities including HUF other than individuals in case aggregate of financial transaction in a year is Rs 2,50,000 or more. All directors, partners, members of such entities also to obtain PAN.
• All companies irrespective of income need to file income tax return and in case it is not filed, such companies will be liable for prosecution irrespective of the fact whether it has tax liability of Rs 3,000 or not.
• Assessments to be E-assessed under new section 143(3A). No adjustment under section 143(1) while processing on account of mismatch with 26AS and 16A.
• Deemed dividend to be taxed in the hands of the company itself as Dividend Distribution of tax @ 30%.
• Penalty for non filing financial return as required under section 285BA being increased to Rs 500 per day.

Relief to Senior Citizens has also been proposed. The proposals are :-

• Increase in deduction limit for medical expenditure for certain critical illness from 60,000 (in case of senior citizens) and from Rs. 80,000 (in case of very senior citizens) to Rs. 1 lakh for all senior citizens under section 80DDB.
• Hike in deduction limit for health insurance premium and/ or medical expenditure from 30,000 to Rs. 50,000 under section 80D.
• Exemption of interest income under section 80TTA on deposits with banks and post offices are proposed to be increased from 10,000 to Rs. 50,000. TDS shall not be required to be deducted under section 194A. Benefit will also be available for interest from all fixed deposit schemes and recurring deposit schemes.
• Concessions will give extra tax benefit of 4,000 crore to senior citizen. It is also proposed to extend the Pradhan Mantri Vaya Vandana Yojana up to March, 2020. The current investment limit is also proposed to be increased to Rs. 15 lakh from the existing limit of Rs. 7.5 lakh per senior citizen.

Medium, Small and Micro Enterprises (MSMEs) and Employment

• A corpus fund of 3794 crore has been provided for giving credit support, capital and interest subsidy and for innovations.
• Proposition of 3 lakh crore for lending under MUDRA Yojana for 2018-19 after having successfully exceeded the targets in all previous years. MUDRA Yojana launched in April, 2015 has led to sanction of Rs.4.6 lakh crore in credit from 10.38 crore MUDRA loans. 76% of loan accounts are of women and more than 50% belong to SCs, STs and OBCs.

image source – pib

Sources:

• PIB
• FM’s Budget Speech

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The 25th GST Council Meeting was held at New Delhi on the 18th of January 2018. There was a higher rate, complexities & various other measures which made business difficult; so the committee has taken steps to improve ease of doing business. GST rates have also be reduced for various goods and services.

Amendment in GST rules & regulations are as under:

1. Penalty Reduction:

The penalty for late filing of GST returns has been further reduced by the 25th GST Council Meeting. Now, any business that failed to file GSTR1 return, GSTR5 return or GSTR5A return will only have to pay a penalty of Rs.50 per day of default. In case of failure to file NIL GST return, the penalty has been reduced to just Rs.20 per day. Nandan Nilekani made a detailed presentation on simplification of GST returns filing to avoid penalty on late filings. We can see his videos on GST website.

2. Cancellation of GST Registration obtained after 1^st July 2017:

Persons who registered voluntarily on GST Portal can now surrender their GST Registration. Previously they were barred from surrendering their GST registration before end of one year from date of registration. The rules have now been modified to allow cancellation of voluntary GST registration before 1 year.

3. Cancellation of Migrated GST Taxpayers:

Persons who obtained GST registration mandatorily due to migration from VAT or Service Tax or Central Excise can cancel their GST registration before 31^st March 2018.

4. Introduction of E-Way Bill:

The Government expects to roll out a nationwide GST e-way bill system for interstate movement of goods from 1sFebruaryry 2018. The Government expects to rollout eway bill system for intrastate movement of goods on later than 1st June 2018. However, no date has been announced by the Government mandating eway bill for intrastate movement of goods. 15 states have informed the Council that they will start intra-state the e-way bill from the same month.

The Government has begun rolling out the e-way bill mechanism on a trial basis through ewaybill.nic.in. Stakeholders can login to ewaybill.nic.in and generate, cancel or modify GST eway bill on a trial basis. Once the system is ready, the GST eway bill system will be made available on ewaybillgst.gov.in.

5. Rate Changes of Various Goods

The following are the GST rate changes for goods announced in the 25th GST Council Meeting:

6. Exemption of Various Services

• Exemption of supply of services by way of providing information under RTI Act, 2005.
• Exemption of legal services provided to Government, Local Authority, Governmental Authority and Government Entity.
• Exemption of services relating to admission to, or conduct of examination provided to all educational institutions, as defined in the notification.
• Exemption of services by educational institution by way of conduct of entrance examination against consideration in the form of entrance fee.
• Exemption of services by way of fumigation in a warehouse of agricultural produce.
• Exemption of subscription of online educational journals/periodicals by educational institutions who provide degree recognized by any law.
• Exemption of service provided by way of renting of transport vehicles provided to a person providing services of transportation of students, faculty and staff to an educational institution providing education upto higher secondary or equivalent.
• Exemption of services provided by and to FIFA and its subsidiaries directly or indirectly related to any of the events under FIFA U-20 World Cup in case the said event is hosted by India.
• To exempt government’s share of profit petroleum from GST and to clarify that cost petroleum is not taxable per se.
• Exemption of reinsurance services in respect of insurance schemes exempted under S. No. 35 and 36 of notification No. 12/2017-CT (Rate).
• Exemption of service by way of transportation of goods from India to a place outside India by air upto 30th September, 2018.
• Exemption of service by way of transportation of goods from India to a place outside India by sea and provide that value of such service may be excluded from the value of exempted services for the purpose of reversal of ITC upto 30th September, 2018.
• Exemption of services provided by the Naval Insurance Group Fund by way of Life Insurance to personnel of Coast Guard under the  Group Insurance Scheme of the Central Government retrospectively e.f. 01^st July, 2017.
• Exemption of IGST payable under section 5(1) of the IGST Act, 2017 on supply of services covered by item 5(c) of Schedule II of the CGST Act, 2017 to the extent of aggregate of the duties and taxes leviable under section 3(7) of the Customs Tariff Act, 1975 read with sections 5 & 7 of IGST Act, 2017 on part of consideration declared under section 14(1) of the Customs Act, 1962 towards royalty and license fee includible in transaction value as specified under Rule 10 (c) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
• Exemption of dollar denominated services provided by financial intermediaries located in IFSC SEZ, which have been deemed to be outside India under the various regulations by RBI, IRDAI, SEBI or any financial regulatory authority, to a person outside India.
• Exemption of

  (a) services provided by government or local authority to governmental authority or government entity, by way of lease of land, and

  (b) supply of land or undivided share of land by way of lease or sub lease where such supply is a part of specified composite supply of construction of flats etc. and   to carry out suitable amendment in the provision relating to valuation of construction service involving transfer of land or undivided share of land, so as to ensure that buyers pay the same effective  rate of GST on property built on leasehold and freehold land.

7. Rate Changes of Various Services

The following are the GST rate changes for Services announced in the 25th GST Council Meeting:

The post SUMMARY OF GST 25th COUNCIL MEETING appeared first on Kailasha Foundation.

The world is witnessing the rise of a new currency system, which goes by the name of Bitcoin. It is destined to be the future currency of the world. Currently, 1 bitcoin is worth almost 8,50,000 rupees, which changes very frequently.

What is Bitcoin?

Bitcoin is a cryptocurrency, which roughly means that it is a digital currency which is generated and regulated by using encryption techniques. Moreover, it operates independently of any institution or government.

How can a currency be valid if it doesn’t require any certification or validation from the government?

This is more of a philosophical than a technical question. For understanding this, we must think about the origin of money or what was there before money. Indeed there was the barter system, now we have currency notes or paper with some value accorded to them. The role of government is to merely regulate and control this money. We can conclude that anything which has some value and more importantly the trust of its users is money. A currency loses all its importance once people stop trusting it. Let’s start trusting Bitcoin, a digital currency. Presently more than hundred thousand merchants deal in Bitcoins. The idea of decentralizing currency is very energetic and has the potential to revolutionise the way we think of money.

The rise of Bitcoin:

image source – the internet

In August 2008, the domain name Bitcoin.org was registered by Satoshi Nakamoto. The face behind this name is still a mystery. No one has ever seen or met Satoshi Nakamoto, though some have claimed to have known him. Nakamoto implemented the bitcoin software as open source code and released it in January 2009.

How does it work?

It is a peer-to-peer payment system. This means that no third party is involved in any manner. Since no third party is involved, transaction cost is zero and it also maintains the anonymity of the people involved. No authority is keeping track of the payments.

The network is designed in such a way that it hands all the transactions by itself.

How can you get Bitcoins?

1. Bitcoin Exchanges: These are special platforms where you can buy bitcoins in exchange for money. There may be many exchange platforms working in a country. In India, you can buy bitcoins on Zebpay and Unocoin in exchange for India Rupee.
2. Mining: There are people who solve intricate mathematical riddles to generate new bitcoins. Relatively few people have managed to decipher the codes needed to extract bitcoins from the 21 million locked inside the mathematical problems set by its creator, the software engineer whose true identity is unknown but who goes by the name Satoshi Nakamoto.
3. Payment: You can get bitcoins as payment from any other bitcoin user.

Advantages of Bitcoins:

image source – the internet

Control – Bitcoin users have full control of their transactions; it is impossible for merchants to force unwanted charges as can happen with other payment methods.

Privacy and security – Bitcoin payments can be made without personal information tied to the transaction. This offers strong protection against identity theft. Bitcoin users can also protect their money with backup and encryption.

Freedom of payment – It is possible to send and receive bitcoins anywhere in the world at any time. No bank holidays. No borders. No bureaucracy. Bitcoin allows its users to be in full control of their money.

Disadvantages:

image source – the internet

Anonymity – Even though every transaction in listed in a ledger which is open to all, only the Wallet IDs are visible, which makes it impossible to trace the transaction to the user. This feature has made bitcoin the currency of drug dealings and other illegal activities.

Insecure future – Like any other asset, the value of Bitcoins fluctuates with time, there is no certainty. An early investor in Snapchat has been quoted on the Web as saying that by 2030, the value could be as high as $500,000. Whereas  JP Morgan’s Jamie Dimon was seen quoting that it is a fraud which will soon blow up.

Volatile nature of currency – The value of bitcoin changes very drastically and frequently. These changes can be attributed to the fact that very less number of people use bitcoin hence small events have a great impact on its value. As its user base will grow the stability will be induced.

The pain of the government – The government has its own worries when it comes to bitcoins, though not very prominent right now. Governments are known to keep things under control and a commodity as currency is always under tight surveillance. Losing control over money is the worst nightmare for a government.

Experts also suspect that government agencies have started finding ways to suppress the rise of Bitcoins as it is a serious threat to the dominance of government and its control on the economy.

With all speculations and fancy dreams, Bitcoin promises of a decentralized global currency. At present we cannot say much, but philosophically a government free currency is a need in a free world.

References:

• bitcoin.org
• theguardian.com

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