INAM/EX-GRATIA PAYMENT:

Inam represents a payment made by the employer to any employee as a reward for the services rendered by him for which he is/was not under obligation to render the same under the contract of service which is expressed or implied but does not include the payment which have been made to an employee in fulfillment of contract of service. This may include exgratia payment.


Where Inam is being paid for special skill or higher responsibilities/additional duties, it may be taken as remuneration and contribution is payable.


Where the employer has introduced the scheme of Inam but according to terms and conditions the employer has no right to withdraw it or revise it, the same may be treated as wages and contribution is payable.


Where the employer has introduced the scheme of Inam and he has right to revise or withdraw it at his discretion, the payment of Inam under such scheme may not be treated as wages and contribution is not payable provided the payment is made at an interval exceeding two months..
Where there is no scheme of Inam in writing but still employer might be making payment under the head Inam on the basis of some understanding between the parties, in such cases, the nature of payment and its periodicity may be ascertained and whether payment of Inam is an exgratia payment which is not covered by the contract of service. In case the periodicity is more than 2 months, no contribution may be charged

What is 401 K ?

401 K plan enables an employees to save money for retirement in a tax deferred manner. Many 401 K plans also have a matching provision where an employer will match a specific amount that the employee contributes.
When an empoyer offers 401k matching, they are guaranteeing that they will match a certain percentage of your contributions. A common match is 50 cents on the dollar. That means if you put one dollar into your 401k plan, they will match your contribution by putting 50 cents in. You just made 50% on your investment!

KINDS OF CENTRAL EXCISE DUTIES

There are three types of Central Excise duties collected in India namely

1. Basic Excise Duty
   
   This is the duty charged under section 3 of the Central Excises and Salt Act,1944 on all excisable goods other than salt which are produced or manufactured in India at the rates set forth in the schedule to the Central Excise tariff Act,1985.
2. Additional Duty of Excise
   
   Section 3 of the Additional duties of Excise (goods of special importance) Act,1957 authorises the levy and collection in respect of the goods described in the Schedule to this Act. This is levied in lieu of sales Tax and shared between Central and State Governments. These are levied under different enactment's like medicinal and toilet preparations, sugar etc. and other industries development etc.
3. Special Excise Duty
   
   As per the Section 37 of the Finance Act,1978 Special excise Duty was attracted on all excisable goods on which there is a levy of Basic excise Duty under the Central Excises and Salt Act,1944.Since then each year the relevant provisions of the Finance Act specifies that the Special Excise Duty shall be or shall not be levied and collected during the relevant financial year. 

SALES TAX

When is Sales Tax payable?

Central Sales tax is generally payable on the sale of all goods by a dealer in the course of inter-state Trade or commerce or, outside a State or, in the course of import into or, export from India.

What is interstate sale?

According to S3, a sale or purchase shall be deemed to take place in the course of interstate trade or commerce in the following cases:

• when the sale or purchase occasions the movement of goods from one State to another;
• when the sale is effected by a transfer of documents of title to the goods during their movement from one State to another.

Where the goods are delivered to a carrier or other bailee for transmission, the movement of the goods for the purpose of clause (b) above, is deemed to start at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Also, when the movement of goods starts and terminates in the same State, it shall not be deemed to be a movement of goods from one State to another.

To make a sale as one in the course of interstate trade, there must be an obligation to transport the goods outside the state. The obligation may be of the seller or the buyer. It may arise by reason of statute or contract between the parties or from mutual understanding or agreement between them or, even from the nature of the transaction, which linked the sale to such transaction. There must be a contract between the seller and the buyer. According to the terms of the contract, the goods must be moved from one state to another. If there is no contract, then there is no inter-state sale.

There can be an interstate sale even if the buyer and the seller belong to the same state; even if the goods move from one state to another as a result of a contract of sale; or, the goods are sold while they are in transit by transfer of documents.

To whom is Sales Tax payable? By whom is it payable?

Sales tax is payable to the sales tax authority in the state from which the movement of goods commences. It is to be paid by every dealer on the sale of any goods effected by him in the course of inter-state trade or commerce, notwithstanding that no liability to tax on the sale of goods arises under the tax laws of the appropriate state.

What are the possible offences, which may be committed, that are liable to be penalized? What are the penalties for such offences?

The offences that may be committed and, the penalties, prescribed for can be summarised as under. Offences, under section10, are punishable with simple imprisonment (up to 6months) with or without fine.

1. Giving false declaration in Form C, E-I, E-II, F or H, which he knows or has reason to believe it to be false.
2. Not getting registered under the CST Act, when required to be registered or not complying with provisions relating to security.
3. False representation by a registered dealer that the goods, purchased are covered under his certificate of registration for a concessional rate.
4. Falsely representing that he is a registered dealer, though he is not.
5. Misusing or using for different purpose, the goods, obtained under C form at a concessional rate.
6. Having possession of form C, which is not obtained as per provisions of the CST Act.
7. Collecting any amount, representing as sales tax, by an unregistered dealer or by a registered dealer in contravention of the provisions of the CST Act.

What is the liability of a Company in liquidation, with respect to payment of Central Sales Tax? What is the liability of the directors of a private company?

If a liquidator or receiver is appointed in the case of a company, he should inform the Sales Tax authorities within 30 days of his appointment. The Sales Tax Authority shall intimate him the amount of tax due from the company in liquidation within 3 months. The Sales Tax authorities are "preferential creditors' in a case of liquidation.

The Liquidator shall not dispose of assets of the company before setting aside the amount of dues as intimated by sales tax department. The liquidator may, however, part with such assets or properties in compliance with any order of a court or for the purpose of payment of the tax, payable by the company under the CST Act or, for making any payment to secured creditors whose debts are entitled under law to priority of payment over debts due to the government, on the date of liquidation or, for meeting such costs and expenses of the winding up of the company, as are in the opinion of the appropriate authority, reasonable.

What is the liability of the directors of a private company with respect to payment of Central Sales Tax?

If a private limited company is in liquidation and, any tax, assessed on the company, cannot be recovered, it becomes the personal liability of the directors, jointly and severally.

Directors can however avoid this liability; if they prove that the non-payment of tax was not on account of neglect, misfeasance or breach of duty on the part of the directors, in relation to affairs of the company.

The power to levy Sales tax

1. No state can levy sales tax on any sale or purchase where such sale or purchase takes place
• outside the state and
• in the course of import of goods into or export of goods outside India.
2. Only the parliament can levy tax on inter-state sale or purchase of goods

Main Principles in State Sales Tax Laws

1. A sale or purchase of goods is said to take place when the transfer of property in the existing goods or future goods takes place for consideration of money.
2. The goods have been divided into different categories and different rates of sales tax are charged for different categories of goods.
3. In most of the cases related to the sales tax, the tax on the sale or purchase of goods is at single point.
4. Under the provisions of some state laws the assesses are divided into several categories such as manufacturer, dealer, selling agent etc. and such as assess is required to obtain a registration certificate to that effect. The sales tax or the purchase tax is levied on that assessee on the basis of his category such as dealer, manufacturer etc. on production of certain forms or certificates (and differential rates of sales tax are levied).
5. Generally , a quarter return of sales or purchases is insisted upon and the assessee is required to furnish the return in the prescribed form.
6. At the time of assessment, the assessee has to furnish all the documentary evidence and satisfy the concerned sales tax / commercial tax officer.
7. The sales tax laws of the states prescribe the procedure to be followed in case an assessee prefers to make an appeal.
8. Every dealer should apply for registration and obtain a registration certificate to that effect. The registration certificate number should be quoted in all the bill / cash memos.

Transactions not amounting to inter-state sales

Not all despatches of goods from one state to another result in inter state sales rather the movement must be on account of a covenant or incident of the contract of sales. There are some instances wherein the goods are moved out of the selling state and yet they are not considered inter state sales :-

• Intra-state sales
• Stock transfer from head office to branch & vice versa
• Import and Export sales or purchases
• Sale through commission agent / on account sales
• Delivery of Goods for executing works contract

Sales Tax ID number

A state sales tax ID number is basically a business version of your Social Security number under which you collect and pay tax for any service or product you sell that qualifies for taxation in your state. The state department of taxation provides sales tax ID numbers and it takes about a month to get one.

The rule of thumb for sales tax is that most services are exempt and most products are taxable except for food and drugs. However, states have been gradually adding to the list of services that are taxable for the last few years. Check with your state department of taxation to determine if the product or service you sell is taxable in your state.

Exception in the sales taxes

• Sales to resellers such as wholesalers and retailers that have a valid state resale certificate.
• Sales to tax-exempt institutions such as schools or charities

Which forms are to be filled?

• Form C;
• Form D;
• Form G;
• Forms E-I & E-II.

TYPES OF ASSESSMENT

Basically assessment is an estimation for an amount assessed while paying Income Tax. It is a compulsory contribution that is required for the support of a government. It is generally of the following types.

Self assessment
The assessee is required to make a self assessment and pay the tax on the basis of the returns furnished. Any tax paid by the assessee under self assessment is deemed to have been paid towards regular assessment.

Regular assessment
On the basis of thereturn of income chargeable to tax furnished by the assessee an intimation shall be sent to the assessee informing him about the tax or interest payable or refundable to him.

Best judgement assessment
In a best judgement assessment the assessing officer should really base the assessment on his best judgement i.e. he must not act dishonestly or vindictively or capriciously. There are two types of judgement assessment :

1. Compulsory best judgement assessment made by the assessing officer in cases of non-co-operation on the part of the assessee or when the assessee is in default as regards supplying informations.
2. Discretionary best judgement assessment is doen even in cases where the assessing officer is not satisfied about the correctness or the completeness of the accounts of the assessee or where no method of accounting has been regularly and consistently employed by the assessee

Income escaping assessment or re-assessment
If the assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year assess or reassess such income and also nay other income chargeable to tax which has escaped assessment and which comes to his notice in course of the proceedings or any other allowance, as the case may be.

Precautionary assessment
Where it is not clear as to who has received the income, the assessing officer can commence proceedings against the persons to determine the question as to who is responsible to pay the tax.

USEFUL DEFINITION FOR INCOME TAX

Assessee

Income Tax Act 1961 (Act no. 43) defines 'assessee' as a person by whom any tax or any other sum of money is payable under this Act, and includes -

• Every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or the amount of refund due to him or to such other person;
• Every person who is deemed to be an assessee under any provision of this Act;
• Every person who is deemed to be an assessee in default under any provision of this Act;

Assessment year

Assessment year means the period of twelve months commencing on 1st April every year and ending on 31st March of the next year. Income of previous year of an assessee is taxed during the following assessment year at the rates prescribed by the relevant Finance Act.

Company

Section 2(17) of the act defines company. The term company includes:

1. any Indian company
2. any corporate incorporated by or under the laws of country outside India
3. any institution, association or body which is or was assessable or was assessed as a company for any assessment year under the 1922 Act or under the 1961 act any institution, association or body, whether incorporated or not and whether Indian or non Indian, which is declared by general or special order of the board to be a company only for such assessment year or assessment years

Convertible Foreign exchange

This mean foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 and any rules made there under.

Foreign Exchange Asset

This mean any specified asset which the assessee has acquired, purchased with or subscribed to, in convertible foreign exchange.

Gross Total Incom

Under the scheme of computation of total income under the Income Tax Act, the income falling under each head is to be computed as per the relevant provisions of the Act relating to computation of income under that head. The aggregate of income under each head is known as 'Gross Total Income'

Income

There is no specific definition of income but for statutory purposes there are certain items which are listed under the head income. These items include those heads also which normally will not be termed as income but for taxation we consider them as income. These items are included under section 2(24) of the income tax act, 1961. As per the definition in section 2(24), the term income means and includes:

• profits and gains
• dividends
• voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes
• the value of any perquisite or profit in lieu of salary taxable under clause (2) and (3) of section 17 of the act
• any special allowance or benefit, other than those included above
• any allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profits are ordinarily performed by him or at a place where he ordinarily resides or to compensate him for the increased cost of living
• capital gains
• any sum chargeable to income tax under section 28 of the income tax act
• any winnings from lotteries, crossword puzzles, races, including horse races, card games and games of any sort or from gambling or betting of any form or nature whatsoever
• any received as contribution to the assessee's provident fund or superannuation fund or any fund for the welfare of employees or any other fund set up under the provisions of the emplyees state insurance act
• profits on sale of a licence granted under the imports (control) order, 1955 made under the imports and exports (control) act, 1947

Indian company

Indian company means a company formed and registered under the companies act, 1956. Any company formed and registered under any law relating to companies formerly in force in any part of India, other than Jammu and Kashmir and the union territories as specified or a corporation established by or under a central, state or provincial act or any institution, association or a body which is declared by the board to be company under section 2 (17) are referred as Indian company. In the case of state of Jammu and Kashmir, a company formed and registered under any law for the time being in force in the state. Similarly in case of union territories.

Investment Income

This mean any income other than dividends derived from a foreign exchange asset.

Long term Capital Gains

This mean income chargeable under the head "capital gains relating to a capiatl asset being a foreign exchange asset which is not a short term capital asset.

Manufacture

To "manufacture" is to produce new out of the existing materials.It further implies transformation in to new and different articles having a distinct name,character or use.Section2(f) of the Central Excises and Salt Act,1944 gives statutory definition for "manufacture".

Non Resident Indian (NRI)

NRI means an individual being a citizen of India or a person of Indian origin who is not a resident. A person shall be deemed to be of Indian origin if he or either of his parents or any of his grand parents was born in undivided India.

Person

The income tax is charged in respect of the total income of the previous year of every 'person'. Here the person means--

1. an individual : a natural human being i.e male, female minor or a person of sound or unsound mind
2. a Hindu undivided family (HUF)
3. a company :
• any Indian company
• any body corporate incorporated by under the laws of a country outside India
• any institution, association or body whether Indian or non Indian, which is declared by general or special order of the board to be a company
• any institution, association or body which is or was assessable or was assessed as a company for any assessment year under the Indian Income tax Act, 1922 or which is or was assessable or was assesses under this act as a company for any assessment year commencing on or before the 1st day of April. 1970
4. a firm i.e a partnership firm
5. an association of persons or a body of individuals whether incorporated or not
6. a local authority-- means a municipal committee, district board, body of port commissioners, or other authority legally entitled to or entrusted by the government with the control and management of a municipal or local fund.
7. every artificial, juridical person, not falling within any of the above categories.

Previous year

The Financial Year in which the income is earned is known as the previous year. Any financial year begins from 1st of April and ends on subsequent 31st March. The financial year beginning on 1st of April 2003 and ending on 31st March 2004 is the previous year for the assessment year 2004-2005.

Principal Officer

Any public body or association of persons or any body of individuals or a company or a local authority is referred as the principle officer. They include the secretary, treasurer, manager or agent of the authority, company, association or body. Also any person connected with the management or administration of the local authority, company, association or body upon which the assessing officer has served a notice of his intention of treating him as the principal officer.

Specified Asset

This includes any of the following assets-

1. Shares in an Indian company
2. debentures issued by an Indian company which is not a private company as defined in the companies act, 1956
3. deposits with an Indian company which is not a private company
4. any security of the central government
5. units of the unit trust of India
6. Such other assets as the central government may specify in this behalf by notification in the official gazette

Where does HR in India go from here?

India has witnessed a revolution in the field of Human Resource; it has gone from being just a support function to being a strategic partner in the growth of businesses. It has transformed itself being merely Personnel Management – maintain records and ensure statutory compliances, while doing the bare minimum to keep employee satisfaction on an even keel to being an integrated part of the corporate machinery.
The HR function of 21st century India has made a transition from being ‘behind-the scenes’ support appendage to becoming the critical differentiator in business. Rapid globalization has made companies realize people are the key to growth, the only strategic resource that any enterprise truly needs. This has led to companies routinely using their innovative HR practices as their USP (Unique Selling Proposition) to keep up with the times in the wake of a rapidly changing labor landscape. Companies now recognize that a ‘Highly engaged employee’ the key to success, across business sectors.
An analysis of the main HR problems in India could be done based on the certain challenges that mould the contours of the various sub-functions of HR. The ‘attract, motivate and retain’ mantra that the HR function seeks to deliver for the organization are based on these HR sub-functions.
Employee Sourcing: It is the basis on which the Human resource survives. A large part of the mind space of HR head honchos is committed head hunting. With the opening up of an economy which is not only expanding at a frenetic pace, but also maturing in terms of width and depth of options available to professionals, the war for talent has reached a crescendo. Talent acquisition is now akin to a battle where recruitment professionals are now virtual sales persons selling an alluring employee experience to prospective candidates. In sectors like IT and BPOs, as well as financial services, high attrition levels have become mandatory.
Quality of manpower is another issue needs paying attention to, in India. While millions of graduates and post-graduates pass out of Indian universities each year, the actual number of employable talent is severely limited. Employers have to adopt innovative modes of recruitment to ensure that it can separate the wheat from the chaff.
Employee Motivation: In a market which job-hopping has become the name of the game, keeping the workforce motivated is one of the key challenges of HR. Motivation no longer comes from just a lucrative pay package. Nowadays companies have to walk that extra mile to make the employee feel special to ensure that he doesn’t walk out and into the arms of competition. Talent segmentation and segregation with performance appraisal and rewards is essential to a good team of workers. In essence, as industries evolve, employers have to ensure that apart from the basics of ‘roti, kapda and makaan’, employees also expect job satisfaction, learning and development facilities.
Employee Engagement and Talent Retention: Winning the hearts and minds of talent is of prime importance in the current context. Employees are no longer committed to their companies. Their dedication is towards their own professional growth and careers. Employee engagement means that HR has its eyes and ears close to the ground realities that an employee faces in the job. Issues like work-life balance, fun at work are considered part of the employee experience. And the day and age of cut-throat competition and lack of talent – it’s HR prime function to ensure that it is clued in to the needs of employees. Employee Satisfaction Surveys cannot just remain an exercise and results cannot simply be ignored. Specific ATRs (Action Taken Reports) have to be presented and acted upon as proof of developmental intentions of HR. Addressing grievances is another area that has to be robust so that issues do no escalate. Nip the problem in the bud and ensure productive workplace.
“Attraction, motivation and retention” define the essence of HR deliverables. As the economy booms and industries mature – age old personnel management fundamentals do not remain applicable. Creativity and innovation by HR function can make a big difference in how an employee can actually be attracted, motivated and retained.

Chillibreeze's disclaimer: The views and opinions expressed in this article are those of the author(s) and do not reflect the views of Chillibreeze as a company. Chillibreeze has a strict anti-plagiarism policy. Please contact us to report any copyright issues related to this article.