ICAI tense over move to set up new watchdog

A turf war is brewing in the accounting regulation space, currently governed by the Institute of Chartered Accountants of India (ICAI). A government plan to usurp the two big powers of ICAI — to set accounting standards and take disciplinary action against its 200,000 members — has raised hackles in the institute and triggered fears among auditors of over-regulation.

The contours of this shift lie in a clause of the new Companies Bill, which is presently awaiting clearance from one of the two houses of Parliament. This clause proposes the formation of a National Financial Reporting Authority “to provide for matters relating to accounting and auditing standards”, and details the NFRA’s jurisdiction, functions, powers, penalties and staffing, among other things. Although the Companies Bill doesn’t state so explicitly, the reading of accounting professionals is that the NFRA will supersede ICAI. “Clearly, a land grab is going on. The institute (ICAI) is not happy about the government encroaching on its territory,” says a senior ICAI member who has worked closely with the institute and government. He spoke on the condition of anonymity.

ICAI president Jaydeep Narendra Shah did not respond to several phone calls and text messages. ICAI vice-president Subodh Kumar Agrawal declined comment, saying only the institute’s president was authorised to speak on this matter. According to Sachin Pilot, minister of corporate affairs (MCA), ICAI and NFRA will “co-exist”. “It (NFRA) will be an overarching authority, with a larger canvas to operate,” he told ET over telephone. “NFRA will be a nodal agency for financial reporting with quasi-judicial powers and the powers to suspend auditors.” He added the division of work between ICAI and NFRA would be spelt out after the Companies Bill is passed in Parliament.

Notably, the NFRA will have the power to act against audit firms. This is a step up over the ICAI, which can suspend individuals, but not a firm. This separation is perceived to be a failing of the ICAI, as was exposed in recent cases of accounting frauds.

The most prominent accounting fraud was the 2008 Satyam Computer case, where the company’s promoter over-stated cash balances by about $1 billion and revenues by about $1.1 billion. The audit firms that prepared the company’s accounts — Price Waterhouse, Bangalore, and Lovelock & Lewes, Kolkata— were never booked. Only the partner who signed off the accounts and two employees were. In the US, however, the audit firms and their parents coughed up $7.5 million to two regulators and $25 million to shareholders.

The bill says the NFRA will be headed by a person “of eminence and having expertise in accountancy, auditing, finance or law” and will be appointed by the Central government; there will be up to 15 full-time and part-time members.

Further, the chairperson and fulltime members cannot be associated with any audit firm (including related consultancy firms) during their tenure and till two years after demitting office. “We can have a mix of people from both government and private sectors in running these bodies,” says Pilot.

N Venkatram, managing partner with Deloitte Haskins and Sons, another audit firm, has concerns over a super-regulator sitting on top of a regulator. “My fear is that we are over-regulating the profession,” he says. “The question is whether a third-party regulator will be fair and fearless.” There is some consternation among accounting professionals over the government having a greater say in directing and regulating their profession. “The new provisions would raise a number of practical issues apart from questioning the validity of the concept that a professional should be judged by his peers,” says a document prepared by KPMG, an audit firm, on the Companies Bill in January 2013.

“More and more, the MCA is getting involved in setting standards,” adds the ICAI member quoted earlier. “The ministry is notifying changes that are contrary to accounting standards — like not requiring companies to provide for mark-to-market losses in their profit and loss account on derivative contracts.” In the policymaking and regulatory domains, the ICAI currently does three big things. One, ICAI drafts accounting standards. It sends these to the National Advisory Committee on Accounting and Auditing Standards (NACAAS), a body that resides in the MCA and notifies these standards. NFRA would now supersede NACAAS. Two, ICAI sets internal auditing standards. Three, ICAI regulates its members. In all these three domains, NFRA could supersede ICAI or NACAAS, as the case might be.

A similar appropriation of powers happened in the US in 2002, in the wake of the accounting failings at WorldCom and Enron. The US drafted the Sarbanes-Oxley Act, which set new or enhanced standards for all US public company boards, management and public accounting firms.

The following year, the US also formed the Public Company Accounting Oversight Board (PCAOB) to oversee auditors of public companies. Prior to the PCAOB, the American Institute of Certified Public Accountants was setting accounting standards, but now it only conducts examination and gives certificates, says Jamil Khatri, global head of KPMG’s accounting advisory services.

A former ICAI president, who spoke on the condition of anonymity, says the comparison with AICPA is not correct. “AICPA is an association or a society, whereas ICAI is a statutory body created by an act of Parliament except that there is an autonomy to operate the institute,” he says. He adds the government should have tweaked ICAI’s existing disciplinary mechanism to increase its independence, rather than have another body supersede it.

How and when TDS Deductions can be avoided

Even though many of us are familiar with tax filing, the process of TDS deduction is still confusing for many. When and where TDS is applicable, what are the procedures to reduce it and how to claim the deducted amount at the time of filing tax returns are few of the queries we have. So, here we discuss TDS deductions with a focus on how and when it can be reduced to help you in everyday life.

Understanding TDS:

The Indian tax structure is broadly a two dimensional approach towards payment of tax liabilities. In the first method- self assessment, taxes can be paid voluntarily after evaluation of income during a financial year. In the second method, Tax Deductions at

Source or TDS, as the name suggests, is the spot deduction of tax from the income source itself, at the time of earning. This is to simplify the taxation procedure for the government and to ensure that the payment making and receiving individual / company is accounting the same without fail.

TDS is applicable for earnings from several financial instruments and business transactions like sale of property, interest income from banks, commissions and incentives, payment received for contracts and services, vendors, dividends and awards or prices earned as money.

There is no uniform rate for TDS deduction. Depending on the source of earnings, it can range from 1% for sale proceeds to 30% .

From Salary and Commissions

It is mandatory as per Indian Income Tax rules that companies as well as working professionals who earn above the aforementioned figure should deduct tax at source from the payments they make.

Employers normally will ask employees to fill an investment declaration form. If you have done an early homework to save your TDS deduction by investing in several tax saving instruments under Sections 80C, 80D, or planning to do within that financial year, do declare the details in the form with required proofs to save TDS. If despite all your investments, your salary is still above the exemption limit, TDS will be deducted monthly.

The employer will issue a TDS certificate (also referred as Form No.16 (a)) at the end of the financial year which can be produced while filing income tax return to get the credit of the TDS ( if applicable) during the personal income tax assessment.

TDS is applicable for payments including commissions, service fees, professional fees and payment via contracts. Here the TDS certificate issued will be Form 16 B which like Form 16 A, can be produced while filing income tax return to get reversed if applicable.

TDS from Property, Awards and Incentives:

TDS is applicable in case of earnings sale of property, rental / lease income, cash prizes, lottery winnings etc. The amount of deduction may vary from 1% in case of sale proceeds to nearly 30% in case of cash awards.

Individuals seeking TDS refund in the above mentioned situations can submit form 15G/H which is a self deceleration that your income is below taxable limit. This is applicable only for Indian residents including senior citizens and Hindu Undivided Families (HUF’s). Form 15G can be filed by all Indian residents whose total financial income for the designated financial year is below the threshold limit while senior citizens need to avail Form 15H for the same purpose. It is imperative to note that Non resident Indians are not allowed the use of forms 15G and 15H and need to apply separately.

In case of rental income, TDS will be deducted only if the rent you receive is not less than Rs1.8 lakh a year. In case of joint ownership of rented / leased property, where the specific share of the property is decided, the limit of Rs 1.8 lakh can be claimed separately by each owner.

Income generated through bank deposits-

TDS is deductable on interest income paid by banks and financial institutions in respect of FDs (exceeding Rs.10000 in a FY) and term deposits (exceeding Rs.5000 in a FY).

If your income is below the taxable limit, but the interest earned from your deposits is above Rs 10,000, you can request your bank not to deduct tax by submitting form 15 G and 15 H to the bank at the beginning of the financial year.

Another effective way is to opt for multiple smaller fixed deposits across various banks.

Splitting the interest earned across two financial years in such a way that the overall annual interest earned from any of the FD not exceeding Rs 10,000 is another workable option.

In certain cases, dividing fixed deposits under two different heads can also be useful in avoiding. Individuals can divide deposits in their names and have some under a HUF account to avoid interest generation cross the taxable limit.

And never forget to carry your PAN card for all fixed deposits over Rs.50000, because on not receipt of PAN number banks may deduct 20% TDS which is non reversible.

Reversing TS collected

As you file your tax returns, you will know the tax bracket you are which determines the balance tax to be paid or that can be reversed. So do keep a track of the TDS that you have paid with Form 26AS or annual tax statement. All the taxes deducted on your behalf will be listed in it and it can be availed from the concerned sources along with Form 16. Otherwise missing taxes will be considered unpaid by the income tax authorities.

Samsung shows off 'unbreakable' phone which rolls up like paper

Samsung wowed an audience in Las Vegas this week with a working mobile phone screen which can be rolled and unrolled like a sheet of paper.

The screen kept working as it was rolled and unrolled - showing off that it is far more flexible than previous 'bendable' screens.

The screen uses the same OLED - organic LED - technology as many current smartphones, but encased in plastic instead of glass.

The prototype device is built to be "virtually unbreakable", Samsung claims.

The device was shown off by Brian Berkeley, senior vice-president of Samsung Display, at a presentation at the Consumer Electronics Show in Las Vegas.

“Our team was able to make a high resolution display on extremely thin plastic instead of glass, so it won’t break even if it’s dropped,” said Berkeley. 

“This new form factor will really begin to change how people interact with their devices, opening up new lifestyle possibilities.”

The new display is called “Youm."

Berkeley also showed off a smartphone prototype equipped with a curved edge, which works almost like a 'second screen' around the edge of the device.

The Korean technology company remained quiet on when flexible phones might go on sale

Home News Accounting firms Accountants beat banks as most trusted source of advice

ACCOUNTANTS are the most trusted business advisor, following a breakdown in honesty between companies and their bank managers.

A fifth (21%) of businesses say they are more open and honest with their accountants than their bank managers, according to a Sage Omnibus survey of more than 1,000 of its customers.

Exactly half, 50%, of those surveyed believe their accountant provides the most valuable business advice, with 4% believing this to be the case with friends, 2% family, and bank managers sloping in at 2%, alongside solicitors 2%.

The latest statistic is indicative of the detachment of business owners with their banks.

Honesty is also the best policy, with 15% of small business owners also claiming they are more honest with their accountant than even friends, family or spouse.

About 44% turn to their accountants first for business advice, 21% to the internet and 18% to business groups or Chamber of Commerce associations.

Jim Scott (pictured), managing director of Sage Accountants Division, said: "Accountants have played a key role in the success of many businesses, but it is in challenging times that the value they bring really comes to the fore. More business owners than ever are turning to accountants for guidance as the regulatory landscape evolves, and the fact that over one in seven are more honest with their accountant than they are with their nearest and dearest underlines just how valued their counsel and advice really is.

"Businesses that view accountants more as trusted partners and less as mere service providers when accounts need to be filed are also better placed to make the most of new technologies, including cloud-based software and mobile apps that provide access to up-to-the-minute information anytime, anywhere."