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“Honesty and Integrity are by far the

most important assets of an

entrepreneur.”

Zig Ziglar.

INTEGRITY FIRST

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Cost

S. No. Topic

1.

Mutual Funds

2.

Impact of Digital India on Union Budget 2017

3.

Prandhan Mantri Garib Kalyan Yojna-2016

4.

Benami Transaction (Prohibition) Amendment Act 2016

5.

Amendments in Charitable Trust

INDEX

Yash Jaiswal

This article aims to highlight:

Introduction

Benefits

Objectives

Types of Mutual Funds

Expenses

Mutual Funds

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Mutual Funds

1. Introduction A mutual fund is a pool of money from numerous investors who wish to save or make money

just like you. Investing in a mutual fund can be a lot easier than buying and selling individual

stocks and bonds on your own. Investors can sell their shares when they want. Or in a more

professional way, we can say that A mutual fund is a professionally managed investment

fund that pools money from many investors to purchase securities. While there is no legal

definition of the term "mutual fund", it is most commonly applied to open-end investment

companies, which are collective investment vehicles that are regulated and sold to the general

public on a daily basis.

2. Benefits Professional Management: Each fund's investments are chosen and monitored by qualified professionals who use this money to create a portfolio. That portfolio could consist of stocks, bonds, money market instruments or a combination of those. Fund Ownership: As an investor, you own shares of the mutual fund, not the individual securities. Mutual funds permit you to invest small amounts of money, however much you would like, but even so, you can benefit from being involved in a large pool of cash invested by other people. All shareholders share in the fund' s gains and losses on an equal basis, proportionately to the amount they've invested. Mutual Funds are Diversified: By investing in mutual funds, you could diversify your portfolio across a large number of securities so as to minimize risk. By spreading your money over numerous securities, which is what a mutual fund does, you need not worry about the fluctuation of the individual securities in the fund's portfolio.

3. Objectives There are many different types of mutual funds, each with its own set of goals. The investment objective is the goal that the fund manager sets for the mutual fund when deciding which stocks and bonds should be in the fund's portfolio. For example, an objective of a growth stock fund might be: This fund invests primarily in the equity markets with the objective of providing long-term capital appreciation towards meeting your long-term financial needs such as retirement or a child' s education.

4. Types of Mutual Funds

Depending on investment objectives, funds can be broadly classified in the following 5 types:

Aggressive growth means that you will be buying into stocks which have a chance for dramatic growth and may gain value rapidly. This type of investing carries a high element of risk with it since stocks with dramatic price appreciation potential often lose value quickly during downturns in the economy. It is a great option for investors who do not need their money within the next five years, but have a more long-term perspective. Do not choose this option when you are looking to conserve capital but rather when you can afford to potentially lose the value of your investment.

As with aggressive growth, growth seeks to achieve high returns; however, the portfolios will consist of a mixture of large-, medium- and small-sized companies. The fund portfolio chooses to invest in stable, well established, blue-chip companies together with a small portion in small and new businesses. The fund manager will pick, growth stocks which will use their profits grow, rather than to pay out dividends. It is a medium - long-term commitment, however, looking at past figures, sticking to growth funds for the long-term will almost always benefit you. They will be relatively volatile over the years so you need to be able to assume some risk and be patient.

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A combination of growth and income funds, also known as balanced funds, are those that have a mix of goals. They seek to provide investors with current income while still offering the potential for growth. Some funds buy stocks and bonds so that the portfolio will generate income whilst still keeping ahead of inflation. They are able to achieve multiple objectives which may be exactly what you are looking for. Equities provide the growth potential, while the exposure to fixed income securities provide stability to the portfolio during volatile times in the equity markets. Growth and income funds have a low-to-moderate stability along with a moderate potential for current income and growth. You need to be able to assume some risk to be comfortable with this type of fund objective.

That brings us to income funds. These funds will generally invest in a number of fixed-income securities. This will provide you with regular income. Retired investors could benefit from this type of fund because they would receive regular dividends. The fund manager will choose to buy debentures, company fixed deposits etc. in order to provide you with a steady income. Even though this is a stable option, it does not go without some risk. As interest-rates go up or down, the prices of income fund shares, particularly bonds, will move in the opposite direction. This makes income funds interest rate sensitive. Some conservative bond funds may not even be able to maintain your investments' buying power due to inflation.

The most cautious investor should opt for the money market mutual fund which aims at maintaining capital preservation. The word preservation already indicates that gains will not be an option even though the interest rates given on money market mutual funds could be higher than that of bank deposits. These funds will pose very little risk but will also not protect your initial investments' buying power. Inflation will eat up the buying power over the years when your money is not keeping up with inflation rates. They are, however, highly liquid so you would always be able to alter your investment strategy.

5. Expenses

There are various types of expenses also which investor has to bear, which are listed below:

a) Management Fee

b) Distribution Charges

c) Securities transaction Fees

d) Shareholder transaction Fees

e) Fund service charges

This article aims to explain

Background

Announcements made in budget

Financial Impacts

Crux

Impact of Digital India

on Union Budget 2017

CA Chandan and

Arihant Jain

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Impact of Digital India on Union Budget 2017

Promotion of a digital economy is an integral part of Government’s strategy to clean the system and weed out corruption and black money.

1) Background

As we all know, Government of India has taken many steps for identification of black money

and making the India DIGITAL. Some of major steps taken are:

1. Income Declaration Scheme,

2. Demonetization, etc.

Hon’ble Finance Minister of India, Mr. Arun Jaitley

has presented the Union budget for 2017-18 keeping

those things in mind and aimed on strengthening

the CASHLESS INDIA.

2) Announcements made in the budget

1. Cash back schemes for merchants using the

government-aided BHIM Aadhar-based mobile wallet. There will be special bonus schemes for the consumers using it.

2. To make citizens internet friendly, all government receipts will be generated on the internet.

3. The government has allocated Rs 2,500 crore benefits for UPI based payments and other digital payments.

4. By March 2017, there will be 10 lakh point-of-sale (POS) machines in the country, and 20 lakh Aadhar-based POS.

5. SIDBI will refinance merchants and businesses based on digital transaction history.

6. Steps would be taken to promote and possibly mandate petrol pumps, fertiliser depots, municipalities, block offices, road transport offices, universities, colleges, hospitals, and other institutions to have facilities for digital payments, including BHIM App.

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3) Financial Impacts

1. S

ervice charges have been withdrawn on reservations through IRCTC and e-tickets.

2. Amended the provisions of Section 44AD to reduce the presumptive rate of deemed total income of 8% to 6% of total turnover or gross receipts, in case the amount is received by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account before the due date for filing return of income for the year. This amendment is proposed to be effective retrospectively from Assessment year 2017-18.

3. Amendment has been made in the provisions of Section 80G where limit of Rs. 10,000 has been reduced to Rs. 2,000 for claiming the deduction for cash donations given.

4. Any payment for acquisition of an asset, otherwise than by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account, exceeding INR 10,000 to a person in a day, shall not be considered as part of the actual cost of the asset and consequently no depreciation will be available in relation to such asset. Moreover, such capital expenditure will also not be considered for any investment linked deduction, available for specified businesses, under section 35AD.

5. In respect of Disallowance u/s 40A(3) for cash payment, it is proposed to reduce the threshold of payment, made otherwise than by an account payee cheque drawn on a bank or account payee bank draft, to a person in a day to INR 10,000 for the purpose of disallowance of expenditure.

6. Omitted the provision relating to tax collection at source at the rate of one percent of sale consideration on cash sale of Jewellery exceeding five lakh rupees.

7. Insertion of section 269ST to provide that no person shall receive an amount of three lakh rupees or more,—

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a. in aggregate from a person in a day; b. in respect of a single transaction; or c. in respect of transactions relating to one event or occasion from a person,

otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account. However, transactions of the nature referred to in section 269SS are proposed to be excluded from the scope of the said section.

8. To provide for levy of penalty on a person who receives a sum in contravention of the provisions of the proposed section 269ST. The penalty is proposed to be a sum equal to the amount of such receipt. The said penalty shall however not be levied if the person proves that there were good and sufficient reasons for such contravention. It is also proposed that any such penalty shall be levied by the Joint Commissioner.

9. No donations of INR 2000/- or more can be received otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account or through electoral bonds, by a Political party.

4) Crux TIME IS MONEY…!

AND MONEY IS OTHER THAN CASH.

All sections mentioned herein pertain to Income Tax Act, 1961.

CA Prakhar Kalani & Kabir Agrawal

This article aims to highlight:

Introduction

Who Can Make Deposits

Tax Surcharge penalty & deposit under the

scheme

Declaration not Eligible in certain cases

Effect of valid declaration

Nomination under Pradhan Mantri Garib

Kalyan Deposit Scheme, 2016

Pradhan Mantri Garib

Kalyan Yojna 2016

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Prandhan Mantri Garib Kalyan Yojna-2016

In the wake of announcement of demonetization, few taxpayers were adopting dubious ways of

converting their black money into white. A need was felt to harness this opportunity to generate

additional revenue for the Government rather than letting black money holders find systemic

loopholes to get around the currency ban. It has been done so by introducing “Taxation and

Investment Regime for Pradhan Mantri Garib Kalyan Yojana-2016 (hereinafter “PMGKY”).

1. Introduction

As per the Notification No. 116/2016, the Pradhan Mantri Garib Kalyan Yojana, 2016, is a declaration

u/s 199C of the Finance Act, 2016, in respect of the Taxation and Investment Regime for PMGKY.

There are two forms, Form 1 & Form 2.

Form 1 (PMGKY) is a declaration of amount held in cash or deposit in an account maintained with

bank/post office etc.

Form 2 (PMGKY) is an Acknowledgement issued to the declarant by the jurisdictional Principal

Commissioner or Commissioner.

The Scheme provides an opportunity to persons having undisclosed income in the form of cash or

deposit in an account maintained with a specified entity (which includes banks, post office etc.) to

declare such income and pay tax, surcharge and penalty totaling in all to 49.90% of such declared

income. Besides, the Scheme provides that a mandatory deposit of not less than 25% of such income

shall be made in the Pradhan Mantri Garib Kalyan Deposit Scheme, 2016

2. Who can make deposits?

The deposit under this Scheme will be made by any person who intends to declare undisclosed income

under sub-section (1) of section 199C of the Taxation and Investment Regime for Pradhan Mantri

Garib Kalyan Yojana, 2016.

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The deposits will be held at the credit of the declarant in Bonds Ledger Account maintained with Reserve Bank of India.

3. Tax, surcharge, penalty & deposit under the Scheme

The person making a declaration under the Scheme would be liable to pay tax at the rate of thirty per

cent of the undisclosed income as increased by surcharge to be called the Pradhan Mantri Garib

Kalyan Cess calculated at the rate of thirty-three percent of such In addition, penalty at the rate of ten

per cent of the undisclosed income shall be payable.

The declarant shall also be required to deposit an amount not less than twenty-five per cent. of the

undisclosed income in the PMGKY Deposit Scheme. The deposit shall bear no interest and the amount

deposited shall have a lock-in period of four years.

4. Declaration not eligible in certain cases

The provisions of this Scheme shall not apply—

(a) In relation to any person in respect of whom an order of detention has been made under the

Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 subject to the

conditions specified under the Scheme.

(b) In relation to prosecution for any offence punishable under Chapter IX or Chapter XVII of the

Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Unlawful Activities

(Prevention) Act, 1967, the Prevention of Corruption Act, 1988, the Prohibition of Benami Property

Transactions Act, 1988 and the Prevention of Money-Laundering Act, 2002;

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(c) To any person notified under section 3 of the Special Court (Trial of Offences Relating to

Transactions in Securities) Act, 1992;

(d) In relation to any undisclosed foreign income and asset which is chargeable to tax under the Black

Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

5. Effect of valid declaration

Where a valid declaration as detailed above has been made, the following consequences will follow:

(a) The amount of undisclosed income declared shall not be included in the total income of the

declarant under the Income-tax Act for any assessment year;

(b) A declarant under this Scheme shall not be entitled, in respect of undisclosed income or any

amount of tax and surcharge paid thereon, to re-open any assessment or reassessment made under

the Income-tax Act or the Wealth-tax Act, 1957, or to claim any set-off or relief in any appeal,

reference or other proceeding in relation to any such assessment or reassessment

6. Nomination under Pradhan Mantri Garib Kalyan Deposit Scheme, 2016

A sole holder or a sole surviving holder of a Bonds Ledger Account, being an individual, may nominate

in Form III, one or more persons who shall be entitled to the Bonds Ledger Account and the payment

thereon in the event of his death.

Where any amount is payable to two or more nominees and either or any of them dies before such

payment becomes due, the title to the Bonds Ledger Account shall vest in the surviving nominee or

nominees and the amount being due thereon shall be paid accordingly. In the event of the nominee or

nominees predeceasing the holder, the holder may make a fresh nomination.

A nomination made by a holder of Bonds Ledger Account may be varied by a fresh nomination or may

be cancelled by giving notice in writing to the Authorized Bank in Form IV.

Every nomination and every cancellation or variation shall be registered at the Reserve Bank of India

through the authorized bank and shall be effective from the date of such registration.

If the nominee is a minor, the holder of Bonds Ledger Account may appoint any person to receive the

Bonds Ledger Account or the amount due in the event of his death.

The transferability of the Bonds Ledger Account shall be limited to nominee or to the legal heir of an

individual holder, in the event of his death.

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Benami Transaction

(Prohibition)

Amendment Act, 2016

This article highlights:

eaning & History

Rationale of introduction of

Amendment Act

Types of transactions

Consequences

CA Shubham Gattani & Divya Gupta

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Benami Transaction (Prohibition) Amendment

Act 2016

Meaning of Benami Transaction

The term “Benami” has its origin from the Persian language which implies “without a name”. According

to Merriam Webster Dictionary the term “benami” implies “made, held, done, or transacted in the

name of (another person) —used in Hindu law to designate a transaction, contract, or property that

is made or held under a name that is fictitious or is that of a third party who holds as ostensible owner

for the principal or beneficial owner.”

In simple terminology, benami transactions are transactions where property is purchased in the name

of one person but the consideration for the said purchase is paid by other person therefore the former

will be the nominal owner and the latter will the real owner of the property. The Privy Council in the

case Pether Perumal v Muniandy held that the person who lends his name for the purchase of

property and has ostensible title, i.e., the benamidar is nothing but an alias for the real owner who is

has beneficial ownership of the property.

History

Rationale behind introduction of Benami Transaction(Prohibition)

Amendment Act, 2016

In the recent past, there have been various instances in which people use their unaccounted money to

purchase property in name of a fictitious or non-existent person therefore the need for a strong

mechanism to combat such activities has become inevitable. The object and purpose of the Benami

Transactions (Prohibition) Amendment Bill, 2016 (hereinafter referred as the “Amendment Bill”) is not

only to efficaciously prohibit benami transactions but also to prevent evasion of law by illegal practices.

The most significant aspect of the Amendment Bill is that all the benami properties shall be confiscated

after following due procedure of law. However, the law extends immunity under the Income

Declaration Scheme to those who make a declaration in respect of their benami properties.

Section 81 and 82 of IndianTrust Act,1882 recognisedbenami transactions

Parliament introduced Section281A in Income TAx Act 1961 toprohibit institution of suits withregard to benami properties

Following the recommendationsof the 57th Law Commissionreport the Benami Transaction(Prohibition of the Right toRecover Property) Ordinance,1988(hereinafter referred as the“Ordinance”) was promulgatedby the President on 19th May,1988.

Various recommendations ofLaw Commission wereincorporated and BenamiTransactions (Prohibition) ActBill was passed by both theHouses of Parliament and on5th September 1988 it becamethe Benami Transaction(Prohibition) Act, 1988

On 13th May, 2015 the BenamiTransactions (Prohibition)Amendment Bill, 2015(hereinafter referred as the“Amendment Bill, 2015”) wasintroduced in Lok Sabha inorder to amend and incorporatecertain very importantprovisions of the Act

The Amendment Bill receivedthe presidential assent on 10thAugust, 2016 and the BenamiTransactions (Prohibition)Amendment Act, 2016(hereinafter referred as the“Amendment Act, 2016”) wasbrought into force

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Type of Transactions as per Benami Transactions (Prohibition)

Amendment Act, 2016

As per Section Clause 2(9) of Benami Transactions (Prohibition) Amendment Act, 2016 Benami

Transactions are as follow:

S. No. Transactions considered as benami transaction

a) (i) A Transaction or an arrangement:

where a property is transferred to, or is held by, a person, and

the consideration for such property has been provided, or paid by, another person; and

(ii)The property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration

b) A transaction or an arrangement in respect of a property carried out or made in a fictitious name.

c) A Transaction or an arrangement in respect of a property where the owner of the property is not aware of, or, denies knowledge of, such ownership;

d) A transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious

S. No. Transactions that are not classified as benami transactions

1) If the property is held by a Karta or any member of the HUF and the property is held for the benefit of the members of the HUF and the consideration for such property has been paid through known sources of the HUF.

2)

A person standing in the fiduciary capacity for the benefit of another person towards whom he stands in such capacity. Ex: A trustee, a director of the company.

3)

In case of an individual, where the property is in the name of the spouse or in the name of any child of the individual and the consideration for such property has been paid out of known sources of the individual.

4)

In case of an individual, in the name of his brother or sister or lineal ascendant or descendant and where the names of the individual and brother/sister or lineal ascendant or descendant appear as joint owners.

Consequences of entering into Benami Transaction: 1. This Act further provides that whosoever enters into any benami transactions shall be

punishable with rigorous imprisonment for a term which shall not be less than

one year and shall not exceed seven years.

2. In addition to this, fine of 25% of the fair market market value of the property

shall be payable.

3. The Act further prohibits recovery of the benami property from the benamidar

by the real owner and where the benamidar re-transfers the property to the beneficial owner,

then the transaction for such re-transfer shall be deemed to be null & void.

4. Properties that are held as benami are liable to be confiscated by the Government without

payment of any compensation.

Conclusion:

This new Benami Transactions (Prohibition) Act 2016 offers a wider scope. With its wider scope the

new act will be a great help to deal with this social fallacy i.e. benami properties. The popular perception

of “Benami property” has now undergone to sea change and it will include all transactions and

arrangements beyond the transactions in respect of immovable property. There is a saying of Justice

Holmes “Taxes are what we pay for civilized society. I like to pay taxes, with them I buy civilization.”

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Proposed Amendments For

Charitable Trust By

Finance Bill 2017

CA Chandni Chandak & Amit Gupta, Shivam Agrawal

This article aims to:

Proposed amendments for Charitable

Trust In Finance bill 2017

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Amendments in Charitable Trust

1st Amendment

In clause (x) section 56(2) has been introduced to widen the scope and to cover trust under its ambit. In order to prevent the practice of receiving the sum of money or the property without consideration or

for inadequate consideration, it is proposed to insert a new clause (x) in sub-section (2) of section 56 so

as to provide that receipt of the sum of money or the property by any person without consideration or

for inadequate consideration in excess of Rs. 50,000 shall be chargeable to tax in the hands of the

recipient under the head “Income from other sources”. It is also proposed to widen the scope of existing

exceptions by including the receipt by certain trusts or institutions and receipt by way of certain

transfers not regarded as transfer under section 47. Therefore, now if any property is received by trust (charitable or private) without

consideration or for inadequate consideration in excess of Rs. 50,000 then it will be

taxable in the hands of recipient under the head “Income from other sources” u/s

56(2)(x)1.

2nd Amendment Till FY 2016-17 donations made by a trust to any other trust is considered as application of money in

the hands of donor even if donation is made to other trust with specific direction that it shall form part

of corpus. Therefore, it is proposed to insert a new Explanation to section 11 of the Act to provide that any amount

credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1) of section 11,

being contributions with specific direction that they shall form part of the corpus of the trust or

institution, shall not be treated as application of income. Therefore, from FY 2017-18 any trust made donation to other trust with the specific

direction that it shall form part of corpus then such donation will not be treated as

application of income in the hands of donor trust.

3rd Amendment If any trust which is registered u/s 1244A and wants to modify its object clause then from FY 2017-18

onwards it has to obtain fresh registration by making an application within a period of thirty days from

the date of such adoption or modifications of the objects in the prescribed form and manner. Earlier such trust did not require fresh registration certificate upon modification of its object clause,

But now it is proposed that such trust shall require fresh registration by making an application within a

period of thirty days from the date of such adoption or modifications of the objects.

Earlier such trust did not require fresh registration certificate upon modification of its

object clause, but now it is proposed that such trust shall require fresh registration by

making an application within a period of thirty days from the date of such adoption or

modifications of the objects 4th Amendment As per the existing provisions, the entities registered under section 12AA are required to file return of

income under sub-section (4A) of section 139, if the total income without giving effect to the provisions

of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. However,

there is no clarity as to whether the said return of income is to be filed within time allowed u/s 139 of

the Act or otherwise.

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In order to provide clarity in this regard, it is proposed to further amend section 12A so as to provide

for further condition that the person in receipt of the income chargeable to income-tax shall furnish the

return of income within the time allowed under section 139 of the Act.

Therefore, trust will have to file their return of income within the time allowed u/s 139

of the Act.

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Contact Name E-mail Mobile Mr. Anuj Somani anujsomani@kgsomani.com +91 9871098777 Mr. Bhuvnesh Maheshwari bhuvneshmaheshwari@kgsomani.com +91 9810031993

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Disclaimer

• This material and the information contained herein prepared by the authors is of a general nature and does not exhaustively deal with the subject discussed. • Although the authors have put their earnest effort in providing accurate and appropriate information, the article is not intended to be relied upon as the sole basis for any decision which may affect you or your business. The authors recommend you take professional advice before acting on specific issues. • KGS is neither responsible for any views, opinions and statements made by the authors nor is liable for consequences, if any, arising from actions based on such views or opinion.

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