#dailyeconomics

[dailyeconomicsnet]

Daily Economics is the largest platform where you can get daily updates of economics related all firms. The vision of this platform is to enhance the EKQ of the common man. EKQ, something we came up with, is the acronym for Economics Knowledge Quotient!

Economics is as ubiquitous and as essential as sunlight. Almost, well almost, nothing moves in today’s modern world without economic push. Every, well again – almost every, human decision and indecision has economic impact. Economics, at the heart of it, is decision making to allocate scare resources. To decide one needs information & and a good understanding of the world he or she lives in.

Visit and Read Economical Updates: http://dailyeconomics.net/

[dailyeconomicsnet]

The rise and rise of bitcoin!

Bitcoin:

The rise and rise of bitcoin! The name Bitcoin evokes a sense of enigma, curiosity, and a possible peep into the future of money.   

Origins of bitcoin can be traced to a blockchain built under an anonymous name – Satoshi Nakamoto. Satoshi was the first to solve the problem of double-spending using peer to peer network. The identity of the brilliant mind who authored the white paper on Bitcoin remains unknown to this day however!

Bitcoin blockchain is a public ledger that records all bitcoin transactions. It is recorded as an addition to the block of transactions without overwriting the earlier blocks. New bitcoins are mined every 10 minutes by generating a code or nonce. Mining of bitcoins refers to solving a computational puzzle and people who solve the puzzle are rewarded with new bitcoins.

Bitcoin has seen a dramatic rise in 2020 – a year marked by events unprecedented both in the real economy and in financial markets. Bitcoin has given a staggering return of 340% in 2020 and 570% from the lows of March 20. Financial markets had a roller coaster ride in 2020 and Bitcoin has been a stellar outperformer beating all asset classes by miles. 

Given the powerful rally and rising investments in the cryptocurrency from traditional investors, there is a growing view that the fair value of one bitcoin will be upwards of 1 mn USD if only 2% of investor wealth in currencies is invested in the cryptocurrency.

Given the advantages of borderless and seamless transactions at nil transaction costs in real-time, a huge influx of liquidity by Federal Reserve in the aftermath of COVID 19, audit trail of all transactions, flawless code with complete transparency of the mining process, added cushion of eventual scarcity in the supply of bitcoins coupled with a rally in the cryptocurrency, the argument that it will gradually replace the hard currencies of today seems a more realistic and likely scenario than it was anytime earlier.

We have attempted to put together our thoughts on whether bitcoin will pass the basic tests for being the next currency of the future or it will fade with the eventual rise of digital currencies backed by sovereign nations –

Popularity of bitcoin is partly because it is not regulated by the Federal Reserve or the Central bank of any country. These are free-flowing transactions that are not subject to review and/or approval of any competent authority. What has however led to the popularity of bitcoin is also an obstacle to its adoption and acceptability by a much wider audience. Submission to a sovereign regulation imparts legitimacy and trust to a currency. Higher the trust in the Central bank of a country, more are the savings and funds deposited in that currency. This explains why US dollar despite its flaws is the preferred currency in which Sovereign funds, pension funds, and individuals park their savings. This is the single biggest reason why bitcoin may never be able to become the alternative currency or replace any major currency.  

One of the basic features of a good currency is low volatility in its exchange rate. This explains why a lot of currencies are pegged to the dollar or a basket of currencies. Central banks of countries like India who have chosen not to peg their currency maintain huge forex reserves and intervene in money markets regularly to manage volatility. Reserve Bank of India has a plethora of instruments in its arsenal such as Repo rate, swap arrangements, and other policy tools to manage currency volatility. There is no Central Authority that exists to manage volatility in Bitcoin which partly explains the highs and lows in its chart. Banks, businesses, and ordinary people are unlikely to park their savings in a currency that runs a risk of 30% overnight fall in its value/purchasing power.     

Existing currencies enable different mediums of payment ranging from online transactions, credit card payments, withdrawal from ATM, and payment of currency notes and coins. Basic feature of a currency is to enable transactions across all these mediums and dimensions. Bitcoin while having certain advantages is not designed for payment via credit card/withdrawal by ATM etc. Though some Bitcoin Credit cards are available, their usage is quite limited due to the limitations cited above.  

Deposits in all currencies earn interest which is largely regulated by the Central bank based on inflation, growth rate, etc. One of the basic functions of currency is to drive economic activity by giving loans to consumers, businesses to invest in capacity expansion, etc. Businesses issue Bonds for different terms and a free debt market determines the interest rate or yield based on the credit worthiness of borrower, risk free rate and rates at which comparable bonds are traded in debt market. Bitcoin resembles a dematerialized asset class that earns no interest and has no underlying cash flows to support the high valuations. There is no regulatory authority which can act as an oversight for issuing loans and / or provide a legal recourse to enforce debt servicing in Bitcoin.

Bitcoin is also referred as Gold 2.0 with the potential to replace and/or complement the traditional yellow metal as a store of value. Until the Bretton wood system was abolished by President Nixon in 1971, US dollar was redeemable in Gold. Gold has been the store of value for centuries across civilizations as it indicates trust, low volatility, and hedge against inflation. It is extremely unlikely that people would change their mindset or behavior shaped by wisdom passed over several generations to abandon gold in any reasonable measure in favor of bitcoin. 

Buoyancy in financial markets, partly driven by the money printing machine of the Federal Reserve in the aftermath of COVID 19 has led to a rally in cryptocurrencies. In a discussion on cryptocurrencies on a business channel a few weeks ago, an “analyst” expressed the fear that economic growth may be impacted as Indians with 20% of the world population own less than 1% of bitcoins. I would not want to debate such comments but cannot resist drawing similarities to the views expressed by analysts in the build up to dot.com boom who suggested companies should be valued based on the number of clicks and that era of valuing companies based on cash flows is passe. 

Buoyancy in financial markets is a more recent phenomenon. So, what explains the success of bitcoin? For one, it is a Technological Leap. Secondly, it can be explained by the psychology of human nature. We are fascinated by the future and want to be early adopters of new technology. If our forecast of future on the adoption of cryptocurrency turns out to be correct, we would be handsomely rewarded financially and would also stand out among our peers as the ones who “out called” the future. We get carried away by our fascination for the future and in the process overlook that most forecasts are inherently off the mark!

Bitcoin also runs the inherent risk of a clampdown by regulatory authorities should a terror attack be financed by underlying transactions in cryptocurrency or if authorities decide to clamp down on the dark web which is a source of illicit transactions. As per a study, 1548 cryptocurrencies are in vogue today with transactions running into billions of dollars. It is similar to euphoria before the meltdown!!

Author:

Nitin Grover ACA

Nitin Grover, a Chartered Accountant with over 20 years of experience in senior roles in ITC & Coca-Cola, with an interest in Financial Markets. He is also active investor/Portfolio Manager. He can be reached at canitingrover1@gmail.com

[dailyeconomicsnet]

Leave Travel Allowance (LTA) benefit entitles an employee to avail tax exemption in respect of travel costs incurred by an employee for himself and his family to any destination within India. Before availing the benefits, analyze the newly introduced LTA Cash Voucher Scheme.

Visit: https://bit.ly/3pXsZWk . . #leavetravelallowance #allowance #lta #cashbenefits #cashvoucherscheme #ltacashbenefits #accounting #finance #taxation

[dailyeconomicsnet]

Leave Travel Allowance cash voucher scheme – What you must know as an employee

Leave Travel Allowance (LTA):

You can think of a better tit

Covid – 19 pandemics have resulted in a huge disruption of the transport and hospitality sector. Due to this, employees are not able to avail Leave Travel Allowance (LTA) benefit provided by employers. LTA benefit entitles an employee to avail tax exemption in respect of travel costs incurred by an employee for himself and his family to any destination within India. The exemption is available in respect of two travels made in a prescribed block of four calendar years (currently 2018-21). In order to incentivize employees and also boost consumption, the government has come up with an LTA cash voucher benefit.

As per the same, an employee is entitled to a cash allowance of Rs.36,000 per person. So, in the case of a married person having two kids, the maximum amount of Leave Travel Allowance cash benefit would be Rs.1,44,000 (36000*4) i.e., for himself, spouse, and two kids. Since this is the maximum amount, if the employee is entitled to only Rs.1,20,000 as LTA in his salary package, the benefit would be restricted to such amount. Such LTA benefit would be exempt from taxation if the following conditions are fulfilled –

Leave Travel Allowance (LTA) should be forming part of the salary structure.

An employee should not have availed LTA exemption with respect to both the travels made during the current block period.

An employee spends 3 times the value of LTA cash allowance on goods and services which are subject to GST at the rate of 12% or more

The above spending should be during the period from 12 Oct 20 to 31 Mar 21

The payment for such purchases must happen in digital mode. The purchases made by cash payment will not be eligible for this benefit.

The employee must obtain an invoice indicating the GST number and the amount of GST paid.

The invoice should be in the name of the employee.

Points to note

Employees opting for a simplified tax regime are not eligible to avail of LTA cash benefits.

It is optional for the employee to choose between cash benefit and the normal Leave Travel Allowance.

Though 31st March 2021 has been specified as the last date for spending, tax proof submissions in most of the corporates may happen in Jan/Feb. So, employees would need to plan their spending accordingly.

If an employee spends less than 3 times the LTA cash allowance, the income tax exemption would be proportionately reduced.

Example

Here is an example of tax savings in the case of an employee who is married and having two kids.

Suppose if the employee spends only Rs.1,80,000 his benefit would be proportionately reduced as shown below.

Conclusion:

If you observe the above example closely, the tax saving is coming to just above 10% of the total amount spent. That means, in order to save 10% of taxes, one needs to spend 3 times the benefit provided which may not be practical in many cases, especially during these difficult times. Hence, employees need to be cautious before making this choice and exercise their prudential judgment.

Another benefit provided under the normal Leave Travel Allowance(LTA) rules is that, if an employee is unable to claim the exemption with respect to one or more travels in a block of four years, he may carry forward one such journey to the next block. However, such carry forward LTA exemption needs to be utilized in the first year of the subsequent block.  For example, if an employee has availed LTA exemption only once in the current block of 2018-2021, he can avail exemption with respect to the travel undertaken in the first year of the subsequent block i.e., 2022. He can further claim the exemption in respect of two more journeys between the years 2023 and 2025. Employees whoever is eligible could explore the option of carrying over the Leave Travel Allowance(LTA) benefit instead of spending thrice the amount of cash benefit.

Author:

A S Amarnatha B.com, FCA, LLB

Amar is a practicing Chartered Accountant specializing in the field of NRI and expat taxation. His expertise includes various facets of global mobility like expatriate tax, DTAA, social security, ESOPs, etc. He is also specialized in US individual taxation both from expat and foreign national tax compliances perspectives. He can be contacted at amaranathambati@gmail.com

[dailyeconomicsnet]

Who should file ITR and When?

Income Tax Return (ITR) is a form that a person needs to submit to the IT Department of India. It contains information about the person's income and the taxes to be paid on it during the year. But many misconceptions are there among taxpayers regarding ITR filing. This article aims to clear such misconceptions.

Read Now...

[dailyeconomicsnet]

AI technology driven e-commerce platforms – boon or bane for consumers?

AI Technology:

Remember a time when salespeople used to go door to door selling products? From then on, technology has grown leaps and bounds only to make buying products convenient, affordable, and cost-saving for consumers. No doubt, all 3 play a crucial role in making our busy lives more comfortable. While on the one hand, we should thank technology but on the other, are we aware of how this is impacting us? Are consumers exploiting the technology, or is technology influencing the consumers? Is AI technology – a boon or a bane? Read on to see if you can arrive at a decision.

In the first series of the article, we understood what AI technology is and saw a quick glimpse of how retailers leverage AI technology using consumer buying patterns. In this article, let us explore the consumer side of the story. How are the e-commerce platforms impacting consumers like you and me?

Research by the World Retail Congress organization (www.worldretailcongress.com) says 35% of google product searches by consumers turn into a transaction in 5 days. India is expected to see the highest online growth rate between 2018-22.  Out of the top five countries with the highest online shoppers, four are in Asia. The E-commerce industry is a hotbed for building wealth in the upcoming years.

Did our Jeff make fair use of it? What happened to his online store? Did Seema move to the online platform to buy milk? If you don’t follow anything I just said, read the first part of the series Artificial Intelligence powering the golden era for Retailers – Part – 1 real quick!

Trust me. You will enjoy this article much better!

For those who have read part 1 of AI technology, you would remember how Jeff leveraged the AI technology and built his pricing strategy. Let’s see what happened to Jeff, Seema, and Dinesh in 5 simple scenes like the first part!

Part 1 Conclusion: What happened Jeff after he launched his online store?

We ended part 1 with Jeff launching his promotion campaign for his new online store.

Seema grabbed the opportunity and took up a 1-year subscription. Within a month Jeff’s promotion went viral in the neighborhood. Although Jeff sold milk at a lesser price than the price, he sold at his store. His customer base grew to an average of 3,000 active subscriptions. At the end of the year, his sales shot through the roof, and he ended the year earning nearly five times more. At the same time, Dinesh, who was not inclined to move ahead with technology, lost his customer to Jeff, and his sales nosedived to the bottom.

Scene 1:  Sunday – Fast forward three years since Jeff opened his online store for selling milk

On a fine Sunday morning, Seema opened the newspaper while going through the technology news section. She was amazed to see “Amaze Online Platform” valued at 100 million dollars, and there it was Jeff in a crisp suit beaming with pride about his flourishing business. Seema took some time to come to terms with what she had just read. The person who sold milk in a small convenience store is now on a newspaper headline with the title “Upcoming Businessman.”

Seema had moved to a different city a year after Jeff opened his online store. After that, she had not followed Jeff’s story until she saw him on the newspaper cover. After reading the newspaper, she got very curious about how Jeff made this happen. She opened her laptop and searched for “Amaze Store Online.”  She discovered that the Amaze store now not only sells essential commodities, but the categories had expanded to electronics, apparel, daily household, and the list went on.

Scene 2:  Sunday- Seema curious to explore other categories to buy online

Seema remembered the convivence of buying milk online. She was eager to check out what “Amaze Online Store” had to offer now. She quickly browsed through some categories, and some dresses caught her attention. She was impressed with the collection and variety “Amaze Online Store” had. She promptly created her login through Facebook ID and added few to Wishlist, hoping to buy them.

After the initial excitement subsided, she pondered over the quality and fit of the dress. No matter how good they looked in the picture, she was not entirely confident about moving the dresses from Wishlist to the cart. She was tired fighting this thought, and finally, she decided to close the browser and get on with her day.

Scene 3: Monday – Introduction to Nudge theory and Seema typical working day

“A ‘nudge’ is a term used to describe any change in the environment which steers an individual’s behavior predictably while preserving their freedom of choice. It is not a push, nor a shove, but a gentle nudge.”

The following day Seema went back to her work. She had completely forgotten about the dress she wanted to buy.  She opened her g-mail to check her emails, and there she finds an email from the “Amaze Online Store,” asking if she would like to finish her shopping, and in bold, there was a callout saying a 15% discount on the first purchase. There was also an underlying message on her Wishlist products, “Selling Fast.”

Seema was “Nudged” twice if you noticed.

15% Discount to lure her back to the site

“Selling fast” message to create a sense of scarcity (Remember, we always value scarce things).

These nudges were enough for Seema to open the site again and move a product from “Wishlist” to the cart. Just when she was about to check out and pay for the dress, she was surprised to see additional add-on costs such as “shipping,” “tax”. These costs were equivalent to discounts provided. Seema was just not convinced about buying the dress. Despite an additional nudge of “10 People looking at the dress” flashing. Seema just abandoned the cart.

Scene 4: Tuesday – Seema can’t get the dress out of her head

As compared to the casual browsing on Sunday, Seema had invested a lot of time on Monday thinking she would buy the dress. Unable to completely let go of the thought, Seema opened Instagram casually and was scrolling through the updates. Just when she thought she had forgotten about dress; she sees an ad for the same three dresses with the message “flash sale” Buy 2 to get 30% off! This is a classic “Nudge” tactic to create a sense of “Limited Time Offer.”

Finally, 4th nudge did seem to work. Seema again launches the website to purchase the dresses and be done with it! But there was another message called out on the website shop for “Rs 4,999 and get an Rs 899” worth of dress free + avail free shipping!

Seema was now just Rs. 1,779 away from getting another Rs. 899 worth of free products. She had one more dress in her Wishlist that was “Rs. 1,800”. Precisely the difference amount she needed to get an additional Rs. 899 worth of products.

While Seema was processing all this information, there was “Nudge 6”, Amaze store now was showing all “Affordable Fashion Products from Celebrities” that were available to be shopped within Rs. 1,700/-.

Scene 5:  Wednesday – Seema choice validation by peers, influencers, and celebrities

Seema was still feeling overwhelmed by the information and promotion. She decided to put shopping off for a while as she had a birthday party to attend. To Seema’s surprise, her favorite dress that she was thinking of buying, one of the guests was wearing the same dress. She noticed that everyone in the room was talking about her.

The following day, she opens Instagram to see all the photos from the party uploaded to Instagram. Guess what, the girl wearing the dress Seema had liked, received the maximum likes. The comments section was overflowing with compliments.

Seema could not decide if the dress made the girl look beautiful or the complete set of accessories, matching shoes, make up that she was wearing! Social validation is also a kind of “Nudge”. Some other types of these “Nudges” are reviews by influencers, likes, and comments by friends, celebrity endorsements.

Today e-commerce platforms are paying tons of money to Celebrities, to people with the highest numbers of followers, influencers to flaunt their products, and repeatedly keep tagging the brand and posting images of the products on social media.

So, does Seema finally gives in and shops for the whole look, or does she wake up and realize before she spends more money than she has? If a brand or e-commerce platform can pay Rs. 2.18 crore for a single post. You can only imagine how many people on Instagram, seeing the post by celebrities, are ending up buying the product.

In Summary, the e-commerce industry is thoroughly using consumer behavior data coupled with AI technology to ensure every ad, every nudge message, every promotion on the site gets customers one step closer to sale. And it is working, the reason I say that is because today Amazon has valued 1 trillion dollars, Flipkart at 24 billion dollars, and Jio Retail at 55 billion dollars. The list can go on.

But what about us as consumers, is our earnings growing exponentially? Are we spending more than we are earning due to the e-commerce industry? Are we shopping more than we did a decade ago?  The answer to all and more in the final part of the series! Stay tuned to know how AI technology is driving your purchasing patterns.

References:

https://www.financialexpress.com/industry/technology/the-flipkart-story-a-timeline-of-funding-from-2007-to-2017/595740/#:~:text=2010%2D11%3A%20Flipkart%20raised%20%2420,company%20then%20was%20%241%20billion.

https://www.gqindia.com/get-smart/content/how-much-priyanka-chopra-jonas-makes-per-post-on-instagram#:~:text=According%20to%20the%20list%2C%20Priyanka,2.18%20crore%20approximately)%20per%20post

https://blog.edesk.com/resources/ecommerce-marketing/

https://www.convertize.com/how-nudging-boosts-sales/

https://www.worldretailcongress.com/__media/Global_ecommerce_Market_Ranking_2019_001.pdf

https://www.emarketer.com/content/global-ecommerce-2019

https://www.walkersands.com/wp-content/uploads/2018/07/Walker-Sands_2018-Future-of-Retail-Report.pdf

https://www.merkleinc.com/thought-leadership/digital-marketing-report[2]

https://blog.edesk.com/resources/ecommerce-marketing/

https://www.convertize.com/how-nudging-boosts-sales/

https://www.wordstream.com/blog/ws/2016/03/17/shopping-cart-abandonment

[dailyeconomicsnet]

Independence to think and act: First step to nurturing social emotional skills (Part -2)

Social Emotional Skills

Social Emotional Skills: It is common to hear spouses say that they give freedom to their partners; parents say I give my child more freedom than needed. Where and how does this thought of owning another person’s freedom begin?

Soon as a child is born, the parents start building castles in the air about their future that revolves and depends heavily on the child. Even before the child can start thinking for him/herself, expectations and dreams are set by the parents and the family. The parochial attitude to mould the child according to the whims and fancies of the parent starts way too early and the identity of the child is the least of their worries. The free will and independence to form ideas and question existing patterns get restricted are the cornerstones in the development of a child’s social emotional skills. A child becomes a mere tool in satisfying parental dreams.

How do we break this pattern of handing over the same baton to complete the same relay? How do we kill the idea of owning another person’s freedom and identity from our deep-rooted belief system?

Let me give you an example. One of my uncles wanted his son to become an engineer as the uncle had aspired to but could not fulfill due to financial and other issues. When his son was born, he made a promise to ‘make’ his son an engineer and fulfil his dream through his son, come what may.

Now ‘making’ your son an engineer and ‘supporting’ a child’s wish (whatever that may be) are extremes of the same paradigm. Since the father had been dreaming of making the son an engineer, every small thing that he conjured up in the child’s growing up years had an invisible thread to the larger unspoken mission. The boy was artistic and wanted to pursue fine arts. Whenever he found time, he would run to his canvas and his clay moulds. His life came alive through his clay models and canvases. The father chose not to appreciate or encourage his talent, lest the parental dream came crashing. Since the boy was never given the space to express himself, the pent-up feelings and emotions started breaking his inner peace. Each time he tried to explain his lack of interest in physics and metaphysics, promptly came the draconian command to obey the elders. The son became mentally and emotionally detached from his parents and socially withdrawn. By the time, anyone could intervene and make the parents understand, he was already admitted to an engineering college. The first year into college, the son had a mental breakdown. By the time the parents realized their mistake the child had slipped into depression unable to express himself or be true to himself.

“There are no bad students, only bad teachers” it is said. In the same breadth let us also understand there are no bad children, there are only misinformed parents. The socially accepted gender definitions and gender-defined responsibilities also push parents to dictate do’s and don’ts to their children.  What leads to such incidents and how can we avoid them? The first step is to make the future generation aware of their rights, to make them independent at a young age, and to respect their choices and thoughts. From letting a toddler choose the dress he wants to wear, to not forcing religious practices, space and path to form character and identity for a child are aplenty. Introduce them to as many nuances and facets of life as possible. Discuss at length conflicting ideas, concerns, issues, and beliefs. Encourage them to read, research, interpret, introspect a matter in depth. Inspire them to form opinions and ideas. Handhold them when they tread an unhealthy path. Support, hold and help them back on their feet when they trip and fall. Let them bloom through their ideas, have their falls, and learn from mistakes. Hug them when they least expect it. Tell them you are with them on their journey. This way, you give them chance to evolve beautifully, and in all hue and colour. They will learn to be independent and not be trapped in the shadows of their parents’ wishes or dreams. Unfortunately, economics trumps social emotional skills development in most Indian households’ decision making.

As much as parental care is important and inevitable, the child must be encouraged to think and learn independently. The first step towards building a socially and emotionally stable household starts here. As a first, parents should begin to accept a child as another ‘individual’ and not an extension of them. The thought of giving freedom would organically translate to encouraging them to explore and expand thus. As a parent take these first steps in nurturing your child’s social emotional skills!

 Author: Aparna Viswanathan

Aparna Viswanathan is a serial entrepreneur and founder of Zocio, the company that facilitates socio-emotional skill training. She is a visiting faculty in B-schools and Journalism colleges. Her expertise lies in topics of Communication and Diversity & Inclusion. She is also a mentor in the entrepreneurship space. You can reach her at aparna@zocio.net

[dailyeconomicsnet]

According to the LLP Agreement, in Limited Liability Partnership (LLP), partners hold ownership and management power for Business Operations. But in Private Limited Company, according to the Companies Act, the shareholders (owners) do not necessarily have to have the power of Management. Except for this, there is a lot of differences between LLP and Private Limited Company in case fo Income Tax, Organisation structure, Provident Fund, Labours, Maintenance of statutory records.

[dailyeconomicsnet]

Artificial Intelligence powering the golden era for Retailers – Part – 1

Artificial Intelligence:

From Amazon to upcoming reliance JioMart, e-commerce platforms are riding the golden wave by exponentially multiplying their sales and valuations from billions to trillions of dollars, what is the secret that is powering their growth? How are they capitalizing on the market? How are they able to bring a billion dollars in sales? The answer is “You”, curious how? Read on.

Today, we live in the era where Siri and Alexa (virtual assistants/bots on iOS and Amazon that help answer and perform tasks for you) know more about our choices and routine than our friends and family. Siri and Alexa are a very small part of Artificial Intelligence touted as the 4th industrial revolution that we are experiencing.

Artificial Intelligence is one of the major forces driving many industries towards exponential growth including retail. Research done from Gartner indicates that in 2021 AI augmentation to businesses can create $2.9 trillion business value and 6.2 billion hours of workers productivity [2]

In order to get our head around the trillion-dollar numbers, let’s explore the role of AI in the retail industry.

There are mainly 3 players in the retail industry.

–      Consumers

–      Retailers via brick & mortar stores / Retailers via e-commerce platforms

–      Manufacturers

In part 1 of this article let’s understand what is artificial intelligence and how is it implemented today through a simple story.

What is Artificial Intelligence?

In very simple terms, Artificial Intelligence can be broadly described as the ability to predict the occurrence of certain event/task/sale based on the relevant data gathered in the past over a significant period. 

To help you understand this definition better, read a story below that illustrates the impact of AI with help of just one consumer (Seema) who is buying an everyday commodity (Milk) from two different stores (Amaze Store and Dinesh Store)

For ease of understanding, the story is broken down into 5 different scenes:

Scene 1: Observing Seema’s milk buying behavior over a period of 10 days

Carefully, look at the image below and see if you can answer the questions below. Do not scroll down before recording your observation. (No Cheating)!

1.       What does Seema buy every day?

2.       How many kinds of milk does Seema buy and what are the store names?

3.       What time does Seema usually buy milk?

What price does Seema pay to buy the milk?

The questions were easy enough right? Let’s look at the answers now.

Seema buys Milk Every day.

Types of milk: Seema buys either Amul Milk 1L or Goodlife Spl Milk 1L

Store: Seema buys Milk from one of the 2 stores Dinesh Store or Amaze Store

Time: Seema buys milk anywhere between 6:30 am to 10:00 am

Price: Seema pays between Rs 45 – 65/- per day for buying Milk

Got all of them correct?! Good Job!

Now, based on the above data, try the questions below and see if you can predict Seema’s buying behavior for the next 3 days?

What time would Seema buy milk on 28th Aug Friday?

What kind of milk Seema would buy on Sunday 30th Aug?

In which store will Seema buy milk on Saturday 29th Aug?

Although you may have answer popping up in your mind, there still some ambiguity isn’t it? Let me help you here then.

Here is Seema’s buying behavior for the next 3 days.

Now, I am pretty sure you were able to answers all the 3 questions above.

Since we now know Seema’s buying behaviour for 10 days, let’s combine both the data points and see if we can better answer the earlier set of questions.

As you can see, as we got access to more data, the findings became more precise and we can now find a pattern in Seema’s behaviour. This is nothing but learning patterns in the data.

When machine does this job of learning information out of the data that fed into it without human intervention, it is called “Machine learning”. Pretty Cool! Isn’t it?

Scene 2: Reviewing the Store Operations to understand Seema’s buying pattern

Based on Seema’s buying behaviour, can you answer the questions below?

Why does Seema buy Milk from Amaze Store from Mon-Fri and Dinesh Store on Sat & Sun?

Why does Seema pay a higher price for the same milk in the Dinesh store?

Why does Seema buy Goodlife Spl Milk only from Dinesh Store?

The answer is “No”, we don’t know why!

Now, let’s says we were provided with store information below. The answers are now clear, it is simply because the Amaze store is closed on Sat and Sun & Amaze store does not sell Goodlife Spl milk!

What we did just now, is to combine 2 different sources of information to understand the reason for certain customer behavior. We now personally know Seema’s reason for her choices, don’t we? The insight that we just found out now is invaluable! You will see why.

The more related data you can find to certain data set, the more powerful your insights will be!

Scene 3:  Is there any relation to Seema’s buying pattern to Stores sales performance?

Let’s take a quick look Store Owner’s profile and their sales performance.

Remember the most invaluable insight I mention to you earlier? Now, imagine if Store owner Jeff knew Seema paid a higher price for the Amul 1L milk on Sat? or imagine if Jeff knew Seema went to Dinesh store only because Sham sold one additional product than him?

Scene 4:  Consultant and Data Scientist come to rescue.

Jeff knew if he did not understand the reasons for the drop in sales, very soon he would be out of business. He hired a consultant and data scientist to uncover the problem.

The consultant looked at Jeff’s store and suggested the below solution.

While bringing up an online store is not a new thing anymore, analyzing customer buying pattern is. This is the job of Data Scientist, the person who can analyze the data to find insights.

If you were to suggest below changes to Jeff based on Seema’s buying pattern, would you agree with the Data Scientist recommendation below?

The recommendation above is worth millions of dollars! No amount of worrying and hard work would have helped Jeff improve sales unless he knows what exactly to improve.

This is exactly what Artificial Intelligence is, predicting exactly what price point would interest customer, what products need to recommend to which customer profile? When is the highest probability of converting recommendation into a sale and much more!

All this is possible because companies like Amazon and Flipkart today can store buying patterns of billions of consumers like Seema and then derive insights to improve sales.

Scene 5: Finally, What Strategy does Jeff take after reviewing the recommendation from the data scientist?

Jeff implemented the below plan combining recommendations and his own business tactics.

What happened to the Amaze store after the changes were implemented did the business sore high or crash down? Did Seema continue to visit Dinesh Stores?  How are giants such as Amazon and Flipkart monetizing the billions of users’ Buying Patterns?

Find out more in Part 2 of this series.

AUTHOR:

Preethi Nanda Kumar

Preethi Nanda Kumar, in her latest role as Account Director for leading image recognition technology company Trax, works with top FMCG manufacturers and retailers around the world in their digital transformation journey. She is a passionate advocate of gender equality, believes that every girl can break the glass ceiling if given equal opportunity and representation. In her free time, she likes to write about her travel escapades and motivational anecdotes. Her latest obsession is building positive habits, inspired by the famous quote from Aristotle “We are what we do, Excellence is not an act but a habit”

[dailyeconomicsnet]

Provident Fund Act and Foreign Nationals working in India

Provident Fund:

Are you a Foreign National worked in India post-2008? You may have large sums lying in your India Provident Fund Account.

Background on Provident Fund regulations

Employees’ Provident Fund Act is one of the important labour legislation in India which provides for retiral benefit in the case of non-government employees. The applicability of this Act is mandatory in case of an entity having 20 or more employees at any time during the year. Both employer and employee need to contribute 12% of salary each to this fund. A portion of the employee contribution may go to the pension funds depending on the date of joining, wage level, and age of the employee. Salary for this purpose excludes House Rent Allowance, Overtime Allowance, Bonus, Commission, and similar allowances, perquisites, and gifts by the employer. In the case of an employee whose, Provident Fund (PF) wages exceed INR 15,000 has the option to restrict the contribution to 12% of INR 15,000 or can opt-out of the contributions subject to conditions. The employer would make a matching contribution.

Applicability to Foreign Nationals

Indian Provident Fund laws were amended to make the contributions mandatory in the case of foreign nationals effective 01 Nov 2008 with very few exceptions. Accordingly, an International Worker (IW) working for a covered establishment in India would need to make a compulsory contribution to this fund irrespective of their wage level. This means that even if the salary exceeds INR 15,000 it is mandatory for him to contribute to this fund. An IW is defined as a foreign national working for an establishment in India to which the Provident Fund (PF) Act applies.

So, in the case of foreign nationals, 24% of salary (12% employer and 12% employee) would be contributed to the fund without any cap which could be a sizeable amount. As an illustration, if the monthly salary is INR 500,000 approximately INR 120,000 per month will be contributed to this fund. Further, the fund would fetch a very good interest (8.5% for FY 2019-20) as well. However, there could be a slight variation in the interest rates year on year.

Exceptions

If any of the following applies to an IW, it is not mandatory for him to contribute to the Provident Fund in India.

·         IWs working for an establishment to which the PF Act does not apply, basically an entity having less than 20 employees

·         IWs from social security agreement (SSA) countries contributing to their home country social security

·         Singapore Nationals / Permanent Residents eligible for exemption under the Comprehensive Economic Agreement

Social Security Agreements are bilateral agreements entered by Indian government to avoid double social security contributions. Currently India has effective SSAs with 18 countries and the list of such countries and effective dates are provided in the annexure below. If a foreign national has worked in India prior to the effective date of the SSA, there could have been contributions to the PF fund in India.  As you observe, India still does not have a social security agreement with the US and UK.

Withdrawals of Provident Fund

So, what happens to this fund? Can a foreign national withdraw the amount lying in the PF account?    

Definitely ‘Yes’. However, there are certain conditions attached to this. Let us understand what these conditions are.

·         Foreign nationals from an SSA country can withdraw the amount lying in his Provident Fund account at or after repatriation from India. May also be eligible for a monthly pension after retirement as per the SSA. The amount could be credited to the foreign bank account if there is no bank account in India.

·         Foreign nationals from non-SSA countries can withdraw the PF accumulations on attaining the age of 58 years or at the time of repatriation whichever is later. May be eligible for a pension if he has contributed for a period of 10 years. The amount will be credited to the Indian bank account only.

Further, if the contributory period is less than 5 years, the withdrawals may be taxable in India as per Indian tax laws subject to relief under the Double Taxation Avoidance Agreement. Further, the interest accumulations post repatriation may be taxable even if the contributory period is more than 5 years. However, the treaty relief could be explored here as well.

Annexure – Social Security Agreements with India

The write-up is for general understanding. We suggest the readers discuss with their consultants before deciding on their eligibility for withdrawal and related Tax Implications.

AUTHOR:

A S Amarnatha B.com, FCA, LLB

Amar is a practicing Chartered Accountant specializing in the field of NRI and expat taxation. His expertise includes various facets of global mobility like expatriate tax, DTAA, social security, ESOPs etc. He is also specialized in US individual taxation both from expat and foreign national tax compliance perspectives. He can be contacted at amaranathambati@gmail.com

[dailyeconomicsnet]

MOVIE DISTRIBUTION – DIFFERENT ERA DIFFERENT METHODS

Movie Distribution:

Long before the multiplex era, all that existed were single screens. Single screens ranged anywhere from 300 seats up to 1,300 seats from small screen to large 70mm screens. The world of movie distribution has seen huge changes in terms of logistics and transparency.

Also read about dramatic changes brought in by emergence of OTT platforms.

Distributors had two ways to deal with the theatre owners, outright rent for a specified number of shows per week or a revenue sharing basis where the distributor took 70-75% of the total net collections (after taxes).

Moreover, since the movies came in film rolls, they had access to limited number of prints for multiple screens spread across the length and breadth of the region for which the distribution was undertaken.

Theatres sharing the prints would strategically space the shows in a manner in which the film rolls could be transported from one screen to another which was a logistical nightmare. Any glitch would end up in interruption of the movie screening much to the ire of the audience, even worse would be rolls jumbled up practically hampering the experience of the movie watching audience.

Digital era has changed all this and with the advent of multiplexes, movie prints and distribution have become logistically simpler. All you need is a hard drive or a satellite feed that can be decrypted with the help of a KDM (Key Delivery Message), for specific theatres and number of shows.

Distribution is by and large still an unorganized sector in large parts of India. Ticket collections have however, become more transparent in the last decade or so, mainly thanks to consolidation by large multiplex chains. As for single screens, doubts still exist on transparency.

Types of Movie Distribution:

Outright Purchase 

 A distributor signs an agreement with the producer for a fixed amount for a certain geographical area. The price is arrived at taking into consideration, the population, number of screens and the budget of the movie. Once the distributor has bought the rights, the onus of promoting the movie by way of propaganda is entirely the distributors responsibility. The distributor has to book the theatres well in advance for a specified period and number of shows. Generally, a big budget movie with bigger stars would command a higher price considering the viability of releasing the movie in larger number of screens during the first week of the release. Any profit or loss, would be absorbed by the distributors. In this method, If the movie ends up with a good theatrical run, the distributors end up making more money than the producers.

If the net proceeds (after deduction for taxes) from the theatres exceeds 14 Crores, the distributor makes a profit. Similarly, he will absorb the loss. Sometimes, the theatre rentals are substituted with sharing of the proceeds between the theatre owners and the distributors. 

Minimum Guarantee

In this method, producer gives the rights of distribution for an agreed amount. In case, the distributors profit share crosses this amount, the producer and the distributor will share the profits made over and above the agreed amount. In case of a good run, producers and distributors both make money. This is typically used by huge production houses. Price at which a territory sold to the distributor, say 10 crores . In case the proceeds exceed 10 crores, the distributor and producer share the profits at an agreed percentage.

Distribution 

 This is a method where the burden is totally on the producer. In this case, a distributor pays a fixed amount of money (refundable) to the producer to screen the movies in a certain geographical area. On screening the movies, the net collections from the theatres are given back to the producer. The producer gives an agreed amount of commission on the collections. At the end of the theatrical run, the advance is returned to the distributor. This method is usually adopted for small budget movies, with limited prints and small number of screens. The commission to the distributor differs based on the collections. If the collection exceeds the advance amount initially paid, the commission would also be higher. Based on the response to the movie, the producer has the liberty to change the method of distribution for other geographical areas.

In case the net proceeds are less than 2 crores, the distributor gets back the advance in full either without interest or a minimum rate of interest. In this case, the distributor is more like a financier. 

[dailyeconomicsnet]

More pointers in filing IT Returns

Our efforts at Daily Economics is aimed at simplifying the complex legal and financial jargon and present the information in an easy to understand manner. We have been trying to achieve that objective in all our articles especially in “Know Your Taxes” column. Previously we covered Selection of Correct ITR Form and Common Mistakes in filing Income Tax Returns in as simple English as possible. We received many queries from the readers regarding the TDS and 26AS. Both the articles had plenty of easy to understand pointers in deciphering income tax requirements. We have made a list of more such pointers in filing IT returns.

TDS and IT returns

There is a misconception among some taxpayers that if TDS has been deducted, then there is no need to file IT return or declare the same while filing the IT Return. It is to be noted that TDS is not the final Tax.

As per the provisions of Income tax Act, it is mandatory to file IT return if income is more than basic exemption limit i.e Rs.2.5 lakhs for individuals other than senior citizen and Rs. 3 lakhs for senior citizen. So, if your income is more than the specified limit, you are liable to file IT returns otherwise you will receive notice for non-filing of IT return, and this leads to penalties as well.

The taxpayer should consider the income on which TDS has been deducted and compute the final tax payable. Let us see this with an example for better understanding.

e.g: Mr. Naveen is a resident taxpayer. During the year, he earned fixed deposit interest of Rs. 1,00,000/- from SBI and the bank had deducted Rs. 10,000/- as TDS at the rate of 10%. He is also having income from other heads amounting to Rs. 12,00,000/-. The final tax can be computed as follows:

His total income for the year is Rs. 13,00,000/- (12 lakhs + 1 lakh). Tax on the same is Rs. 2,10,600/- (including cess). He can claim the TDS of Rs. 10,000/- and remaining tax Rs. 2,00,600/- has to be paid.

Since his income is more than Rs. 10 Lakhs, the income is subject to 30% tax slab. Hence the interest income which is earned is also subject to 30% tax. The tax payable on interest income is Rs. 31,200/- (including cess). He can claim Rs. 10,000/- which is TDS deducted by the bank and remaining tax has to be paid.

Reconciliation of information available in 26AS

CBDT has mandated certain persons including government agencies to report to income tax authorities on transactions like sale/purchase of immovable property, investment in securities, cash deposits more than 10 lakhs during the year.

It is imperative for the taxpayer to consider the following:

·         Reconciliation of income

·         Whether TDS claimed is matching with the amount reflecting in Form 26AS.

·         Income from securities have been offered to tax if the same is subject to tax under income tax act like dividends, capital gain on redemption of mutual funds.

If your employer/payer had deducted TDS but if the same is not reflecting  in Form 26AS ensure that the concerned parties files the necessary forms with IT department so that TDS is reflected in Form 26AS before filing the IT return.

TDS credit should be availed in the year in which the corresponding income is offered to tax.

e.g: Mr. Sai has bought a property of Rs. 60,00,000/- from Mr. Manoj and he has given an advance of Rs. 29,70,000/- by deducting Rs. 30,000/- as TDS in the year 2018-19. And in the year 2019-20, they have executed the sale deed and Mr. Sai has paid remaining amount of Rs. 29,70,000/- by deducting additional TDS of Rs. 30,000/-.

Now, Mr. Manoj has to declare income in the year 2019-20 and should claim the entire TDS of Rs. 60,000/- as the sale deed executed in the year 2019-20. He should not claim the TDS of Rs. 30,000/- in the year 2018-19 just because it is deducted and reflecting in 26AS.

There may be instances where some TDS credits are reflecting in Form 26AS which are not related to you, then the credit for same should not be taken.

The tax payer has to comply with requirement while filing the IT return to report the head of income under which income is offered to tax for every TDS credit. It is important that the correct head of income is selected against every TDS credit to avoid receiving notices from IT department for mismatch.

For example, when you are taking a credit for TDS on rental income, then the head of income should be income from house property and not income from other sources. 

Non-disclosure of exempt income

There is a misconception about disclosure of exempt incomes. The taxpayer has to disclose all incomes including exempt incomes. This includes agricultural incomes, savings bank interest, PPF interest and income from mutual funds.

Verification of IT returns

Just filing of IT return, will not end the process. It shall be verified manually or electronically within 120 days of filing of IT return. If you wish to verify manually, then you have to sign and send the IT return acknowledgment to the CPC. An electronic verification can be done through one of the four options, (a) through Aadhaar OTP (b) through net banking (c) through demat account (d) pre-validation of bank account number.

If you do not verify the return within 120 days from the date of filing, then the IT Return will be treated as invalid and considered as if you have not filed the return.  

There are multiple tools and online applications available which are provided by private players and income tax department for filing tax returns online, where information is captured from Form 26AS and Form 16. However, due caution should be exercised by taxpayer before submitting the tax return, particularly those who are filing on their own as the process will be completed instantly. Also, it is important to note that the taxpayer is responsible for all the information provided in the IT return.

  AUTHOR:

CA Govinda Reddy. M, ACA

Govind is a Chartered Accountant, presently working as Audit Manager in Venkatesh, Bhaskar & Associates, Chartered Accountants, Bangalore. He is specializing in the field of Direct Taxation and Corporate Laws. He can be contacted at govind@vbaca.co.in.

[dailyeconomicsnet]

Insurance – Cover Your Risk

Insurance – Cover Your Risk

Ramesh aged 35 Years, an IT professional, has an annual income of around Rs.15 lakhs. He lives with his spouse, a homemaker, and a daughter of 4 years age. One of his close friends, Suresh, met with an accident. The hospital bill came to Rs. 3 lakhs and unfortunately Suresh did not have any insurance. To foot the bill, he had to close his bank FD. This FD was earmarked to fund his child’s educational needs, which is not a possibility now. His child’s educational needs remain underfunded.

Suresh was the sole bread winner of his family and was asked to take complete rest for four months. This is a double whammy for people like Suresh – one being uncovered medical expense and another being loss of income. Suresh was rightfully worried as to how he would manage his family expenses for the next four months without any income. Looking at the situation of Suresh, Ramesh felt its high time, he takes up insurance cover. But he was not sure what kind of risk he is exposed to and how does he go about estimating and managing his risk?

So, let us analyse the above situation and understand how to “Cover Your Risk“

Step 1 – Cover Your Risk – Life Insurance

Ramesh is a very energetic and positive person; he takes good care of his health and strongly believes he will live longer. But let’s be realistic, death is certain and only the timing is uncertain. Ramesh has another 25 years of work life. Assuming he will earn the current income for the next 25 years (without taking any growth), he has the potential to earn Rs 3.75 Crore (Rs 15 lakhs/year X 25 years). Ramesh should take coverage of Rs 3.75 Crore to protect the income loss for the family in case of his demise either natural or accident. So, let’s see the different kinds of products available in life insurance for Ramesh to safeguard his family’s financial position in case of his demise.

·         Term Insurance — Term insurance is a pure risk cover and a very good product. The premium would depend on age, health condition, and other factors. This product gives very good coverage for a very small premium amount, for example, it would cost approximately Rs 35,000 per annum for Rs 1 crore coverage, and if he pays a premium of around Rs 1.30 lakhs he will get a coverage of Rs 3.75 crores.

·         Insurance cover + Savings (Conventional product/Non-market linked) — These products specify the returns for the investors which can be either fixed or variable. The coverage varies between 10 to 15 times the premium. Here Ramesh shall pay a premium of Rs 1 lakh per year, to get a coverage of Rs 10 to 15 lakhs. In the case of his demise, the family will get an amount between Rs 10 to 15 lakhs. It is equivalent to Ramesh’s one-year earnings. How can his family survive on this amount for the rest of their life? It is not possible. So always treat this product more like a savings product and less as an insurance product.

·         Insurance + Investment (Market Linked or ULIP) – ULIP products are the flavour of the day, it is an investment product that invests in Equity & Bond market. The investment return depends on the market performance and the re-balancing strategy you deploy to move funds between bond and equity markets. In terms of coverage, it’s like a savings product where the coverage varies between 10 to 15 times the premium. If Ramesh pays Rs. 1 lakh premium, the coverage would be between Rs. 10 to 15 lakhs. So, again this is more of an investment product and less of an insurance product.

Step 2 – Cover Your Risk – Health Insurance (Disability Cover) – Income loss due to sickness or accident

Ramesh, realized life insurance will only cover for death; but what if Ramesh falls sick or meets with an accident which might reduce his earning ability?

·         Critical Illness Cover—Health Insurance companies offer critical illness cover policy. Critical illness products cover pre-specified critical illnesses. In case the policyholder is diagnosed with any pre-specified critical illness under the policy, then the policyholder will get the sum assured or pre-specified amount. This can be used towards the hospitalization expenses or can be invested to create a regular source of income.

·         Personal Accident Cover (PAC)—Personal Accident Cover can offer financial support in case of loss of income due to accident. Ramesh can get a PAC for Rs 1 crore at an approximate annual premium of Rs 8,000. In case Ramesh meets with an accident and it leads to either disability or death, based on the extent of disability he will get compensation. This can be invested and that can offset the income loss due to disability either fully or partially.

Step 3 – Cover Your Risk – Health Insurance – Hospitalization Expenses due to sickness and accident

Health cost in India is on the rise. A report by Mercer Marsh Benefits said the forecasted Medical trend rate will be 10% in India, higher than the general inflation. Ramesh, when he heard Suresh had to close his bank FD to make the payment towards hospital expenses – he could see that happening to him too if he fails to take adequate cover. If he opts for a family cover (himself, spouse & child) of Rs. 10 lakhs for hospitalization expenses, it would cost him close to Rs 20,000-25,000 per annum. But he can have peace of mind, that in case of medical emergency he does not have to sell his investments, assets or borrow money.

Conclusion

Insurance is one of the most important financial products which mostly gets lower priority compared to other products. Buy an insurance product with the primary objective of covering risk and not for returns or tax benefits. If you can pen down five friends or relatives, who will financially support you and your family for the rest of the life, in case of your income loss due to disability or death, then you don’t have to consider insurance. If you cannot pen down the names, then insurance is a product you should look at seriously and Cover Your Risk.

  AUTHOR:

Aiyappan V R CFA

Aiyappan is a CFA Charter-holder and a certified Financial Risk Manager. He specializes in personal finance and founder of www.merafunds.com. He strongly believes in the concept of financial freedom and loves to spread and help people achieve financial freedom. For any queries related to personal finance, you can reach him on aiyappan.vr@gmail.com.

[dailyeconomicsnet]

Selection of Correct ITR Form

Selection of Correct ITR From:

India has been seeing double digit growth in its taxpayers’ base for the past few years. For the financial year 2018-19 number of returns filed was around 6 crores. It is estimated this year it should be upwards of 6.5 crores. Many of them will be filing their returns for the first time. Technology has made newcomers’ and old timers’ life easy in terms of filing the returns. Gone are the days when the taxpayer had to stand in the queue for hours to file returns. With the advent of online Income Tax Platforms filing of income tax returns is much easier. However, one must be careful while filing returns online. For example, as simple as selection of correct ITR Form – however trivial it may sound, is one of the important aspects of filing the returns. This will help you avoid unnecessary notices from the income tax department. Convenience of online filing could be lost in long chain of communications with the department.

The following table depicts the Form to be selected while filing IT Returns in the case of Individuals:

By selecting the wrong ITR form, your return will be treated as defective return by the income tax department. The department will send a notice asking to rectify the same within 15 days from the date of receipt of the notice. If you do not respond to the notice within the specified time, the filed return will be treated as Invalid, which effectively means that you have not filed your tax returns. And that will open a big can of worms.

Consequences of choosing a wrong ITR can be illustrated as follows:

Ms. Sravani had income from salary of Rs. 40 lakhs and was eligible for a refund of Rs. 2 lakhs. She inadvertently chose ITR-4, while filing, which is applicable to a taxpayer having income from business or profession and who opts to pay taxes under presumptive taxation.

CPC processed the tax return as defective, as no income was declared under the head income from business or profession and gave her an opportunity to rectify the defect within 15 days of receipt of notice.

 In case if she had failed to comply with notice, apart from return being considered as invalid she also would have lost her refund amount of Rs.2 lakhs

If Ms. Sravani had selected ITR-1, which is applicable to her, she would have not received the notice from the department and, she would have received the refund amount early.

Let us see some more illustrations for a better understanding:

Selection of Correct ITR Form – More Illustrations

·         Mr. Raju is a resident taxpayer having an income from salary of Rs. 52 lakhs and income from savings bank interest of Rs. 8,500/-. Which ITR Form he should choose?

Ans:  Form ITR -2. Since his total Income is more than Rs. 50 lakhs Form ITR-1 cannot be used. 

 ·         M/s. Ramu Enterprises is a proprietary concern of Mr. Ramu. His turnover during the financial year is Rs. 90 lakhs and he is also a Director in M/s. Ram Solutions Private Limited. He wishes to declare his income under presumptive taxation (44AD- 6%/8% of Turnover). Which form he should choose?

Ans: Form ITR -3. Since he is a director in a company Form ITR – 4 cannot be used.

 ·         Dr. Abhishek earned an income of Rs. 26 lakhs from his clinic during the financial year and he does not have any other income during the year and wishes to offer income under normal provisions. Which ITR form he should choose?

Ans: Form ITR -3. As Mr. Abhi is a Doctor and his income from clinic falls under income from specified profession, the applicable Form is ITR 3. Also, he is not offering his income under presumptive taxation.

 ·         Mr. Mahesh is a salaried employee earned Rs. 12 lakhs during the year.  He is also having rental income from three house properties. Which ITR form he should choose?

Ans: Form ITR-2. Since he is deriving income from more than one house property so Form ITR-1 cannot be used.

 ·         Ms. Shanti is a partner in S&A Associates. During the year, she is having income from salary of Rs. 40 lakhs and income from two house properties amounting to Rs. 4 lakhs. Which ITR form she should choose?

Ans: Form ITR -3. Since she is a partner in partnership firm, Form ITR- 2 cannot be used.

 ·         Mr. Anand is a Non-resident having rental income of Rs. 8 lakhs from one house property. Which ITR Form he should choose?

Ans: Form ITR-2. Since he is a Non-Resident, form ITR-1 cannot be used.

The write-up is for general understanding. We suggest the readers to discuss with their CAs before deciding on tax implications.

 AUTHOR:

CA Govinda Reddy. M, ACA

Govind is a Chartered Accountant, presently working as Audit Manager in Venkatesh, Bhaskar & Associates, Chartered Accountants, Bangalore. He is specializing in the field of Direct Taxation and Corporate Laws. He can be contacted at govind@vbaca.co.in

[dailyeconomicsnet]

Taxability of Dividends – NRIs

Taxability of Dividends in case of NRIs:

Further to the article on NRI residential status, there were a couple of queries raised by the readers on the taxability of dividends.  Here are some of those queries and answers for the benefit of the readers.

Are dividends received by NRIs from Indian shares/mutual funds taxable in India?

Till 31 Mar 2020, dividend income from an Indian source was completely exempt in the hands of NRIs. However, from 01 April 2020, such dividends would be taxable in India and NRIs would need to pay tax at applicable rates. If there is a Double Taxation Avoidance Agreement (DTAA/tax treaty) between India and the country of residence, a beneficial rate as per the treaty could be applied. Taking the UK as an example, most dividends are taxed at 10% as per India-UK DTAA. This is subject to the availability of TRC from the country of residence.

What is TRC? Is it mandatory to avail treaty relief?

TRC stands for Tax Residency Certificate. This will be issued by the tax authorities of the respective country certifying that the individual NRI is a resident of such country. Most countries have a specific form prescribed for this purpose and an NRI who wishes to avail the treaty benefit would need to apply for the same to the respective country’s tax authorities. As per the Indian tax laws, TRC is a mandatory document required to avail any treaty relief by a non-resident.

Is withholding tax/Tax Deduction at Source (TDS) applicable in case of dividends paid to NRIs?

Yes, the dividends paid to NRIs would generally be subject to 20% withholding tax in India. However, the actual tax on dividends may vary depending on the total income of an individual and applicable slab rates. So, the differential taxes would get adjusted at the time of filing the tax return.

Can an NRI avail the beneficial rate as per the treaty at the time of tax withholding itself?

Yes. An NRI can avail of the beneficial rate on dividends at the time of tax withholding. In order to avail this, the individual needs to submit the TRC and other prescribed documents to the company. Some companies are contacting individual shareholders to confirm their residential status and other documentation to avail of the treaty benefit. Please ensure that this information is submitted to the companies so that the beneficial rate is availed at the time of withholding itself. In this way, refunds on the tax return could be avoided as well.

Can an NRI avail Foreign Tax Credit in his home country on taxes paid on dividends in India?

Generally, yes. However, this may also depend on any specific conditions/documentation requirement specified in the tax treaty or domestic tax laws of such resident country. It is advisable to go through the same and ensure that those requirements are met before availing the credit.

The write-up is for general understanding. We suggest the readers to discuss with their CAs before deciding on tax implications.

AUTHOR:

A S Amarnatha B.com, FCA, LLB

Amar is a practicing Chartered Accountant specializing in the field of NRI and expat taxation. His expertise includes various facets of global mobility like expatriate tax, DTAA, social security, ESOPs etc. He is also specialized in US individual taxation both from expat and foreign national tax compliances perspectives. He can be contacted at amaranathambati@gmail.com.

[dailyeconomicsnet]

COVID-19 and ENTERTAINMENT

COVID-19 and ENTERTAINMENT:

COVID-19 has made a mess of 2020 and has been cruel to a lot of them. However, for a select few this has come as a blessing in disguise. I am not talking about Mukesh Ambani or Aditya Puri, but the producers of some inferior Cinema that have gone on to make good profits at the cost of unaware OTTs and the ‘Work from Home’ poor souls, who switched on their respective gadgets for a break to catch on these movies.

Direct release on the small screen is not new to Indian Cinema, a quarter century ago Mahesh Bhatt started the trend with ‘Phir Teri Kahani Yaad Aayee’ which was directly released on Zee TV, after it struggled to get a theatrical release.

First Indian movie marketed as made for small screen

In 2013, Kamal Haasan tried a different strategy, he wanted a simultaneous theatrical as well as Direct to Home release for Vishwaroopam. Theatre owners subsequently threatened to drop the film from the theatres altogether fearing reduced foot falls and this plan was shelved, thus releasing only in the theatres not before it went through a different struggle with a few protest groups.

Cut to 2020, with the advent of COVID, the avenues of entertainment slowly started dwindling with malls, theatres, airports shut and with travel curbs confining people between the four walls of their dwelling places.

A few of them saw an opportunity here to get rid of their stock on which there was an Investment, thus beginning the trend of direct OTT releases which bought them sizeable profits. There was no noise from March until mid-April, when producers were hopeful of a return to normal life soon. Lockdown after lockdown only made matters worse and the pandemic only grew stronger with time spreading across major cities, thus making return to normal life a long-drawn process.

Amazon was quick to act with 2D Studios (owned by Actor Surya), for a release of their venture ‘Ponmagal Vandhal’ starring Jyotika. Presumably made on a budget of 4.5 Crores (one look at the movie and one needs to search for every penny spent beyond 2.5 crores), this was picked up by Amazon for a whopping 9 crores.

In the days that followed, a slew of movies started hitting the OTT space, with bigger productions like Gulabo Sitabo, which was made on a budget of 45 crores and sold at a profit of around 20 crores to Amazon again. With Disney+Hotstar coming into this space with a splash, breaching the 100-crore barrier and having picked up some huge productions, the game is getting even bigger.

Who were the losers in this gamble? Theatres (Food & Beverage sales rather than ticket sales for obvious reasons) and the Government which is losing on the revenue from GST on the ticket sales. So far going by the quality of the movies that have come on air, OTTs are the new distributors in distress.

There could be much better movies from smaller production houses and rookie directors, that find it hard to get a theatrical release. What could have been a blessing in disguise for such movies, looks like a blank here too considering even OTT’s are looking out for bigger productions and bigger names. A small movie like ‘Choked’ is a very good example.

With stakes this high, we can soon see the ‘pay-per-view’ model becoming more prevalent. This model which mostly started off for professional Boxing, soon branched out to Wrestling and other sports. Soon even movies followed this path with a similar model known as ‘Video on demand’. However, keeping the prices competitive is the key here to ward off any kind of piracy.

Currently, India has 22 OTTs catering to different viewers, right from movies, web series, soap operas, and some specifically for adult and regional content. If you think this space is getting saturated, remember in 1990 all we had was one channel and today we have close to a thousand. This was probably the biggest positive outcome of the 1990 Gulf War.

There is no dearth of excitement online – a fan celebrating FDFS

Let’s see how this game evolves in the days to come, with the theatres all set to open doors with 50% capacity.

Trivia: Streaming media became practical only because

of data compression. A breakthrough in this technology was first proposed in 1972 by Bangalore born Nasir Ahmed along with Chennai born K.R. Rao and T. Natarajan.

AUTHOR:

Anand Gangadharan

Anand is a Finance Professional based out of Kuwait. His interest in movies, as he puts it is hereditary in nature. He is also language agnostic when it comes to movies - covering Tamil, Telugu, Kannada, Malayalam, Hindi and English. He probably owns the record of watching the most number of movies in Kuwait Cinemas and the OTTs have only made his interests in this media grow wider.