Moneylife Events
Ameet Patel decodes tax issues at Moneylife Foundation workshop

Filing your tax return is only a part of the income-tax procedure that could get more troublesome if the officer decides to pick your return for scrutiny

Click here for more pictures of the workshop

Perhaps no other domain in finance involves as many hassles and complications as does taxation. The salaried class knows how cumbersome tax matters are-weighed down by endless paperwork and having to stand in long queues to submit returns. After the hard part is done and over, there's still a chance that your tax return may be the one handpicked for scrutiny. So, how should one deal with the issue? Is there a simple way out? Moneylife Foundation invited Ameet Patel, tax partner at SKP Group, to address these and other concerns of taxpayers at the Moneylife Knowledge Centre on Tuesday.

Mr Patel said that the main objective of his address was to help people understand the difficulties that could crop up after filing tax returns. The problem arises when a tax-payer's return is picked up for scrutiny by the Income-Tax officer. The aim of the scrutiny is to determine whether all the income earned during the year is duly reflected in the tax return, whether deductions claimed are genuine and whether the appropriate tax has been genuinely paid or not. (Read Mr Ameet Patel's article, 'Pay Tax, Na Karo Relax' in the edition of MoneyLife magazine dated 27 January 2011, now on the stands.)

He pointed out that to avoid getting caught in the scrutiny, one must have at hand all documentary proof relating to the return. Among the documents required to be produced are the bank statement or pass book. Other important documents that a taxpayer must preserve are dividend receipts, records of salary, interest income, gifts received and loans taken, proceeds from sale of shares/mutual fund units credited to the bank account and other credits.
The audience listened intently as Mr Patel described issues that could create problems for taxpayers. He pointed out that a salaried person should match the salary deposited in the bank with the amount entered in Form 16. The gross salary in the salary certificate, minus recoveries such as provident fund, profession tax, loan, TDS, etc, and non-monetary perks should ideally tally with the amounts deposited in the account. He also explained the importance of Form 26AS, which contains details about tax payments credited in the investor's name in government records.

Another major issue that he addressed was AIR or Annual Information Return. Tax officers can access this information on the basis of a taxpayer's PAN. Mr Patel said that an investment is to be reported only if it crosses Rs2 lakh.

Another stumbling block is TDS information. Taxpayers are expected to match every TDS entry-gross amount, date of deduction, etc, with their records. He also talked about business income versus capital gains, which has been a bone of contention for several years.

Mr Patel also answered questions from the participants in a lengthy Q&A session.  The queries ranged from how a particular file is picked up for scrutiny, to the debate over the classification of capital gains and business income.

One participant inquired what differentiated a 'trader' from an 'investor'. Mr Patel explained that it is the tax officer who decides whether a taxpayer is a 'trader' or an 'investor'. While some IT officers consider even 10 share transactions in a year as indicative of business, others might decide that even 100 such transactions constitute investment. The main points that differentiate a trader from an investor are the frequency and volume of transactions, whether funds use are owned or borrowed, and the holding period of the investment.

Another participant asked whether one could set off a loss from speculative trading against gains from other investments. Mr Patel clarified that such losses could only be set off against speculative gains.

Mr Patel is a former president of the Bombay Chartered Accountants Society, which has over 8,000 members. He is a tax partner at SKP Group and was earlier partner at Kanu Doshi Associates. Mr Patel is an occasional columnist for Moneylife.



nagesh kini

6 years ago

as one present at the talk i must say ameet threw a lot of light to the lay tax payer on the grey areas relating to scrutiny, as26, air, taxation of mf switches and when perceived personal share investment can be construed as income from business.


6 years ago

Thanks for the workshop which I attended. The workshop was very interesting and educative as well. Very relevant and full of practical details. When people are able to relate to the subject, the participation is very much and the session becomes lively as we saw.

SBI Life ‘Smart Horizon’ ULIP charges are smart for the shorter horizon

The investment methodology is debatable; returns will be average due to shift from equity to debt 

SBI Life has introduced 'Smart Horizon' ULIP with stated objective of providing long-term capital appreciation. "The unique automatic asset allocation (AAA) feature makes Smart Horizon ideal for many evolving Indian investors who do not have the time to make fund allocation decisions on an on-going basis," said MN Rao, managing director, SBI Life.

AAA is an algorithm-based active investment allocation mechanism. This IT-based system, developed through testing over 5,000 potential scenarios in the Indian equity and bond markets, determines the optimal risk-return combination, the company explained in a statement.

The investment will be done in such a manner that initially there will be higher exposure to equities, followed by increasing exposure to debt and money markets as the plan nears maturity. AAA mechanism ensures better returns for investors, while protecting capital, the company said.

We have our reservations about the working of this methodology. The returns, too, will be average due to the shift from equity to debt.

The product also provides the customer flexibility to actively manage his investment. We found the premium allocation charge and policy administration charge to be the lowest among new ULIPs for the first five years and on the lower side for 10 years. The charges beyond 10 years are not on the lower side. The mortality charges for the product are much lesser than other ULIPs we came across. We hope that other insurers will take note.

Premium allocation charge: 2% of annualised premium in the first policy year only.

Policy administration charge: An initial policy administration charge equal to 0.70% of the annualised premium will be deducted at the inception of the policy. A monthly policy administration charge equal to 0.45% of the annualised premium will be deducted throughout the term of the policy.

Age at entry: Seven years to 60 years.

Age at maturity: (Maximum) 70 years.

Plan type: Regular premium.

Policy term: 10 years and any term between 15 years and 30 years, both inclusive.

Premium frequency: Yearly/half-yearly/quarterly/monthly.
Monthly frequency is available only through the electronic clearing system (ECS) or standing instructions (where payment is made either by direct debit of bank account or credit card).

Premium paying term: Same as policy term.

Premium range: Minimum - yearly Rs24,000, half-yearly Rs15,000, quarterly Rs8,000, monthly Rs3,000.
Maximum - yearly Rs74,000, half-yearly Rs37,000, quarterly Rs18,500, monthly Rs6,200.

Minimum sum assured: For age below 45 years - higher of [(10×AP) or (0.50×term×AP)]* and for age 45 and above - higher of [(7×AP) or (0.25×term×AP)]

Maximum sum assured : 20 × AP

(*AP stands for annualised premium)


Inflation situation difficult, but manageable: Chakrabarty

Mumbai: Reserve Bank of India (RBI) deputy governor, KC Chakrabarty today said that inflation is a difficult situation but "manageable".

"Inflation-wise, it is a difficult situation, but then manageable," Mr Chakrabarty told reporters at a banking event here.

Earlier this week, RBI governor D Subbarao had said that the monetary policy management has become difficult because of a surging inflation and the demand for supporting growth.

The central bank is set to announce its monetary policy on 25th January and is expected to hike the rates to arrest high inflation.


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