“I am the conscience in the heart of all creatures.I am their beginning, their being, their end.I am the mind of the senses.I am the radiant sun among lights.I am the song in sacred lore.I am the king of deities.I am the priest of great seers.Of words, I am the eternal OM, the prayer of sacrifices.I am the measure of what endures.I am the chief of divine sages, the leader of celestial musicians.I am the recluse philosopher among saints.I am the thunderbolt among weapons.Among cattle, the Kamadhenu.I am the procreative god of love.I am the endless cosmic serpent,the Lord of all sea creatures.I am the chief of the ancestral fathers.I am gracious Siva among howling storms.Of restraints, I am death.Of measures, I am time.I am the purifying wind.I am the cleansing Ganga.Of sciences, I am the science of the self.I am the dispute of orators.I am victory and resolve, the lucidity of lucid men.I am the brilliance of fiery heroes.I am the morality of ambitious men.I am the silence of the mystery.I am the seed of all creatures.I am the creation and the annihilation”.
This is how Lord Krishna describes himself in the Bhagavad Gita.
When you look into his eyes..
Even with no words it compliments Her
The way he looks you needs no compliments.
It justifies him, surrendered to her.
Which makes herself feel more beautiful .
Sacrifice today so that you don’t have to Compromise tomorrow.
Very Interesting article written by an Indian Economist about world economy. Amazing logic indeed. This is a crazy world! How valid is it? I leave it to you!
Japanese save a lot. They do not spend much. Also, Japan exports far more than it imports. Has an annual trade surplus of over 100 billion. Yet Japanese economy is considered weak, even collapsing.
Americans spend, save little. Also US imports more than it exports.
Has an annual trade deficit of over $400 billion. Yet, the American economy is considered strong and trusted to get stronger.
But where do Americans get money to spend? They borrow from Japan, China and even India.
Virtually others save for the Americans to spend. Global savings are mostly invested in US, in dollars.
India itself keeps its foreign currency assets of over $50 billion in US securities. China has sunk over $160 billion in US securities.
Japan’s stakes in US securities is in trillions.
The US has taken over $5 trillion from the world. So, as the world
saves for the US – It’s The Americans who spend freely. Today, to keep the US consumption going, that is for the US economy to work, other countries have to remit $180 billion every quarter, which is $2
billion a day, to the US!
A Chinese economist asked a neat question. Who has invested more, US in China, or China in US? The US has invested in China less than half of what China has invested
The same is the case with India. It have invested in US over $50
billion. But the US has invested less than $20 billion in India.
Why the world is after US?
The secret lies in the American spending, that they hardly save. In fact they use their credit cards to spend their future income. That the US spends is what makes it attractive to export to the US. So US imports more than what it exports year after year.
The world is dependent on US consumption for its growth. By its deepening culture of consumption, the US has habituated the world to feed on US consumption. But as the US needs money to finance its consumption, the world provides the money.
It’s like a shopkeeper providing the money to a customer so that the customer keeps buying from the shop. If the customer will not buy, the shop won’t have business, unless the
shopkeeper funds him. The US is like the lucky customer. And the world is like the helpless shopkeeper financier.
Who is America’s biggest shopkeeper financier? Japan of course. Yet it’s Japan which is regarded as weak. Modern economists complain that Japanese do not spend, so they do not grow. To force the Japanese to spend, the Japanese government exerted itself, reduced the savings
rates, even charged the savers. Even then the Japanese did not spend (habits don’t change, even with taxes, do they?). Their traditional postal savings alone is over $1.2 trillion. Thus, savings, far from being the strength of Japan, has become its pain.
Hence, what is the lesson?
That is, a nation cannot grow unless the people spend, not save. Not just spend, but borrow and spend.
Dr. Jagdish Bhagwati, the famous Indian-born economist in the US, told Manmohan Singh that Indians wastefully save. Ask them to spend, on imported cars and, seriously, even on cosmetics! This will put India on a growth curve. This is one of the reason for MNC’s coming down to India, seeing the consumer spending.
‘Saving is sin, and spending is virtue.’
But before you follow this Neo Economics, get some fools to save so that you can borrow from them and spend !!!
The world is in a economical mess 😅- interesting read
Directorate of Income Tax (Intelligence and Criminal Investigation), Mumbai
Submission of Statement of Financial Transactions (SFT) in Form 61A – Due date- 31.5.2017
Section 285BA- Obligation to furnish Statement of Financial Transactions (SFT)
Rule 114E – Furnishing of Statement of Financial Transactions in Form 61A
Form 61A – Format and Instructions
IDENTIFYING TRANSACTIONS TO BE REPORTED – SUB-RULES OF RULE 114E
|Class of persons (reporting person)||Nature and Value of Transaction|
|Banks||Cash payment for purchase of DDs/POs of amount aggregating Rs 10 lakh or more in a year ET|
|Banks||Cash payment of Rs 10 lakh or more for purchase of prepaid RBI instruments (RBI bonds, etc.)|
|Banks||Cash deposit/withdrawal aggregating Rs 50 lakh or more from current a/c of a person|
|Banks/Post Master General||Cash deposit aggregating Rs 10 lakh or more in any one or more accounts of a person (other than current account and time deposit)|
|Banks/Post Master General/Nidhi/NBFC||One or more time deposits (other than those through renewal of another time deposit) of a person aggregating Rs 10 lakh or more|
|Banks||Payment in cash aggregating in a year Rs 1 lakh or more (in cash) or Rs 10 lakh or more (by any other mode) against credit card bill issued to a person during the year|
|Company/Institution issuing bonds/debentures||Receipt aggregating Rs 10 lakh or more in a year from a person for acquiring bonds/debentures|
|Company issuing shares||Receipt from a person aggregating Rs 10 lakh or more for acquiring shares (including share application money)|
|Company listed in recognized stock exchange||Buy back of shares from any person (other than bought from open market) for an amount aggregating Rs 10 lakh or more|
|Mutual Fund Trustee/Manager||Receipt from a person aggregating Rs 10 lakh or more for acquiring units of Mutual Fund|
|Foreign Exchange Dealer||Receipt from a person for sale of foreign currency, including against foreign exchange card or expenditure in such currency against debit/credit card or issue of travellers cheque or draft aggregating Rs 10 lakh or more|
|IG Registration or Registrar/Sub-Registrar of Property||Purchase/Sale by any person of immovable property for Rs. 30 lakh or more or valued by the stamp valuation authority at Rs 30 lakh or more|
|Any person liable for audit u/s 44AB of the Act||Receipt of cash payment exceeding Rs 2 lakh by any person for sale of goods/services (other than those specified above)|
♠ Applicable for all transaction types except SFT- 012 (Purchase or sale of immovable property) and SFT- 013 (Cash payment for goods and services).
♠ Reporting person shall, while aggregating the amounts for determining the threshold amount for reporting in respect of any person
(a) take into account all the accounts of the same nature maintained in respect of that person during the financial year;
(b) aggregate all the transactions of the same nature recorded in respect of that person during the financial year;
(c) attribute the entire value of the transaction or the aggregated value of all the transactions to all the persons, in a case where the account is maintained or transaction is recorded in the name of more than one person;
Consequences of non-compliance:Penalty @ Rs.100/- per day of default
Penalty, on non-compliance to notice calling for return, @ Rs. 500/- per day
Penalty ofRs. 50,000/- for providing inaccurate information in the statement
•Notification No. 95 dt 30th Dec 2015
•Notification dt 30th Dec 2016- registration for filers
•Notification dt 17th Jan 2017 (Explanation/Guidance)
|Systems Notification No.1 dated 17 Jan 2017 on SFT||Notification issued by the Directorate of Systems specifying the procedures, data structures and standards for ensuring secure capture and transmission of data, evolving and implementing appropriate security, archival and retrieval policies||E-filing Portal (https://incometaxindiaefiling.gov.in) and National Website (http://www.incometaxindia.gov.in ) of Income Tax Department|
|User Manual for ITDREIN Registration and Upload||User Manual to explain steps in registration of filer and upload of SFT (Form 61A)||User Manuals section under the Help Button on E-Filing portal Home page|
|SFT Report Generation Utility User Guide||User Guide to explain steps in using the Java utility to assist the filer in preparation of SFT (Form 61A) in XML file|
|SFT Quick Reference Guide||One page document with steps for preparation of SFT|
|SFT Report Generation Utility||Java utility to assist the filer in preparation of SFT (Form 61A) in XML file||Forms (Other than ITR) link under the Downloads Section on E-Filing portal Home page|
|Form 61A Schema (For Developers)||XSD file which contains the schema in which SFT (Form 61A) needs to be prepared and uploaded/submitted||Schema link under the Downloads Section on E-Filing portal Home page|
Letters of Undertaking or LoUs are the references that a bank issues as an agreement wherein a bank permits a borrower to raise finance from a foreign branch of an Indian bank as a short-term loan. This loan is used to make payment to the customer’s offshore suppliers in foreign exchange.
These transactions are not retail in nature and are mostly used by businesses for import of goods.
The borrower uses her existing credit relationship with a bank in India to avail the required credit outside the country. “An authorized dealer may give a guarantee, letter of undertaking or letter of comfort in respect of any debt, obligation or other liability incurred by a person resident in India and owned to a person resident outside India (being an overseas supplier of goods, bank or a financial institution), for import of goods, as permitted under the Foreign Trade Policy…,” the Reserve Bank of India (RBI)
As they provide virtual guarantees and do not involve trust receipts, LoUs & LoCs are less genuine modes of payments and can be easily misused by the borrowers. This can have a catastrophic impact on the Indian banking system.
Let’s say you are a customer of an Indian bank and you require a short-term credit in a foreign country to import something. You can approach the foreign exchange department of your bank and ask for an LoU. In return, the bank would ask you for a collateral or a guarantee, which could be in the form of fixed deposits or other assets. This could even be 100% or even more of the credit sought, depending on your relationship with the bank. If your bank is convinced, it will issue an LoU, which when given to an overseas branch of another Indian bank would result in release of the amount in foreign currency. This amount does not come in to your account directly; it goes to a specific bank account of your banker back home. It is called Nostro account. You can then decide in whose favour the payment needs to be done.
The overseas bank lending to the borrower based on the LoU earns interest on the amount, the bank issuing the LoU gets a fee and the borrower gets a credit facility at a place where she may not have banking relationships. Moreover, interest rates in India are higher compared to international benchmark rates. So the effective outgo on interest for the borrower is also beneficial. If the collateral is in the form of a fixed deposit, there is further gain on the interest earned, while the bank also gets some funds to use.
Now as the RBI has banned LOU after the PNB Fraud case.
What does one do when you get a muddy flow from a tap instead of clear water? The knee-jerk reaction would be to shut it and the other more workable option is to fit a high-grade filter to ferret out impurities.
The Reserve Bank of India’s (RBI’s) move to ban the issuance of letters of undertaking (LoUs) for availing of buyers credit is being seen as closing the tap.
But it is nothing but a filter.
In all fairness, there is indeed a drying up of dollars as importers who have been funneling money into their operations through this route have been hit hard.
An LoU guaranteed cheap money and in many genuine small enterprises, it provided an easy means to conduct business. Now, the option to roll over existing LoUs or letters of comfort (LoCs) is no longer available. Hence the demand for dollars has shot up.
Three diamond firms belonging to the Nirav Modi Group and some other firms owned by Gitanjali Gems held current accounts at a domestic branch of Punjab National Bank (PNB). These firms purchased raw gems from overseas firms, and had to make payments to the sellers in foreign currency.
The sellers of the raw gems held accounts at foreign branches of Indian banks.
A junior official at PNB fraudulently issued ‘letters of undertaking’ (LoUs), allowing Niravi Modi group companies to get short term loans (buyers’ credit) from overseas bank branches to pay the sellers. Under the terms of the LoU, PNB was the guarantor of these loans.
The Nirav Modi and Gitanjali Gems firms would ask the corrupt PNB official to issue LoUs and get the foreign branches of the Indian banks to make payments to the sellers.
Interestingly, the transaction request was not routed through the core banking system, but instead through SWIFT, the global financial messaging service. As a result, the higher authorities at PNB were unaware of the fraud.
The fraud came to light when the corrupt PNB official retired. When the Nirav Modi and Gitanjali firms requested for fresh LoUs, they were denied, since the records did not mention any such arrangement. The firms said they had been availing of the facility for years. On scrutiny, the fraud was exposed.
Interestingly, PNB alleges that some officials at the foreign branches too were hand in glove with the Nirav Modi and Gitanjali firms.
This can probably be deemed as the second most radical step by the central bank after the demonetization move in 2016. As an ad hoc policy measure, the Reserve Bank of India has barred all the commercial banks from issuing Letters of Undertaking (LoUs) to the borrowers. Apart from that, the issuance of the Letters of Comfort has also been banned with immediate effect. The import financing market took a distinctly different turn after the LoU ban was triggered
The decision that really shaken the whole nation, has come in the wake of the recent extortion and misappropriation of funds by some notorious companies through various overseas branches of Indian banks on the basis of a few doubtful Letters of Undertaking.
The cost of borrowing for Indian importers has climbed about 200-250 basis points after the banking regulator banned guarantees such as Letter of Undertaking (LoU) and Letter of Comfort, instruments that were used before the country’s biggest banking fraud became widely known in February.( One basis point is equal to onehundredth of a percentage point.)
Banks are offering foreign currency term loans for more than one year at LIBOR (London Interbank Offered Rate) plus 250-300 basis points. Earlier, funds were available against LoUs at LIBOR plus 50-80 bps.
Banks are compelling importers to hedge these loans, so there is also a hedging cost for them, which certainly increase the bank hedging revenue.
In the absence of LoUs, importers are availing SBLC mostly from local branches of bigger foreign banks, They discount such instruments in overseas branches of those foreign banks that charge about 1% extra compared to what they used to against LoUs.
According to Param Sarma, chief executive at NSP Forex, a Mumbai-based firm that advises local importers to avail credit SBLC and FCNR credit lines are a bit expensive for importers.In absence of LoUs, some importers are availing those credit lines, while others are taking suppliers’ credit facilities from offshore Indian banks.
Importer cash flows had contracted immediately after the ban on LoUs. They needed dollars for immediate payments to offshore vendors. Foreign banks are offering dollar-funds to importers directly through their offshore branches but at a higher cost
Moreover, it will have a sweeping effect on the exporters who have been through online GST registration process in India and have applied for a refund of IGST that they have paid on the purchase of inputs for manufacturing. Owing to the gross delay in the refund process, the only way they could operate seamlessly was by signing Letters of Undertaking with the revenue authorities as to move their merchandise on a zero-rated basis.
Overseas branches of Indian banks will have to rejig (Rearrange) their business model after the Reserve Bank of India (RBI) decided to ban letters of undertaking (LoUs) as a trade finance instrument, since most of their assets abroad are linked through this instrument.
LoUs were liberally issued, especially by PSU banks instead of letters of credit (LCs), because it helped them earn fees for just issuing a guarantee. This wasn’t an international banking practice but used by Indian bank branches abroad. But as these instruments are wound down in the next three months, these banks will also have to reduce their liabilities to balance their books.
PSU banks which are already in the ICU will be hit further by this ban. Half the asset side of their business in their overseas branches is in LoUs and these will have to be wound down in the next three months, which means that they will also have to pay back liabilities to match their balance sheet. This will not be easy,” said a senior banker from the SBI group, the country’s largest lender.
Depleted assets would mean banks will have to balance their books by finding new assets to invest in or reduce their liabilities where they can. Liabilities of banks include deposits from customers, inter bank borrowings and also market borrowings such as dollar bonds issued from their branches abroad which cannot be recalled easily.
–Compiled for Speech At BHUJ Branch of WIRC on today.
while taking loans and accepting deposits one also has to keep in mind the restrictions imposed under the Income Tax Act on the mode of taking such loans and deposits. Such provisions regulating the mode of accepting or taking loans or deposits and mode of repayment of certain loans and deposits are contained under section 269SS and 269T of the Income Tax Act 1961.
Finance is the important part and need of every business. The own capital of a person may not be always sufficient to meet the needs of finance of the business. Therefore the Loans and deposits become necessary and important to meet the financial needs of the business. But while taking loans and accepting deposits one also has to keep in mind the restrictions imposed under the Income Tax Act on the mode of taking such loans and deposits.
Such provisions regulating the mode of accepting or taking loans or deposits and mode of repayment of certain loans and deposits are contained under section 269SS and 269T of the Income Tax Act 1961.
Section 269SS: Section 269SS provides that any loan or deposit shall not be taken or accepted from any other person otherwise than by an account payee cheque or account payee bank draft if,
(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit ; or
(b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid and the amount or the aggregate amount remaining unpaid ; or
(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more :
Thus it is clear that no person can accept any loan or deposit of Rs 20000 or more otherwise than by way of an account payee cheque or an account payee draft. The limit of Rs 20000 will also apply to a case even if on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from such depositor is remaining unpaid and such unpaid amount along with the loan or deposit to be accepted, exceeds the aforesaid limit.
This can be explained with an example: If Mr X has a credit balance of a loan of Rs 19000 from Mr Y. Now in this case Mr X cannot take loan in excess of Rs 999 more from Mr Y except with an account payee cheque or account payee bank Draft.
Exemptions from section 269SS: The Following persons are exempted from the purview of section 269SS:
a) Government ;
(b) any banking company, post office savings bank or co-operative bank ;
(c) any corporation established by a Central, State or Provincial Act ;
(d) any Government company as defined in section 617 of the Companies Act, 1956
(e) other notified insititutions
(f) where the depositor and the acceptor are both having agricultural income and neither of them have any taxable income.
Consequences of contravention of section 269SS:
Section 271D of Income Tax Act 1961 provides that if a loan or deposit is accepted in contravention of the provisions of section 269SS then a penalty equivalent to the amount of such loan or deposit may be levied by the Joint commissioner.
Section 269T : Section 269T of Income Tax Act provides that any branch of a banking company or a cooperative society, firm or other person shall not repay any loan or deposit
otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person, who has made the loan or deposit, if
(1) The amount of the loan or deposit together with interest is Rs 20000 or more, or
(2) The aggregate amount of loans or deposits held by such person, either in his own name or jointly with other person on the date of such repayment together with interest, is Rs 20000 or more.
For example if X is having loan of Rs 30000 outstanding to Y. Then X cannot repay such loan in cash to Y.
Exemptions from Section 269T: The Following persons are exempted from the purview of section 269T:
a) Government ;
(b) any banking company, post office savings bank or co-operative bank ;
(c) any corporation established by a Central, State or Provincial Act ;
(d) any Government company as defined in section 617 of the Companies Act, 1956
(e) other notified insititutions
Consequenses of contravention of section 269T: Section 271E of Income Tax Act 1961 provides that if a loan or deposit is repaid in contravention of the provisions of section 269T then a penalty equivalent to the amount of such loan or deposit repaid may be levied by the Joint commissioner.
No Penalty to be levied u/s 271D or 271E if there is reasonable cause : As per Section 273B of Income Tax Act no penalty shall be levied if the failure to comply with the provisions of section 269SS or 269T is due to some reasonable cause. Now the question arises what can be a reasonable cause to justify the violation of the provisions of section 269SS and 269T. Some of the reasonable causes based upon judicial decisions are provided as follows:
Repayment or receipt of amount to partners: If a partner introduces capital in cash in the firm or withdraws the same to the tune of Rs 20000 or in excess of Rs 20000, then Provisions of section 269SS or 269T shall not be attracted as the introduction of capital or withdrawl from firm cannot be called as loans or deposits.
Amount paid by firm to partners or vice versa- is payment to self and doesnot partake the character of loan or deposits in general law. Provisions of section 269SS are not applicable to such facts( CIT v. Lokhpat Film Exchange (Cinema)  304 ITR 172 (Raj.)
Deposit assessed as income, No penality can be imposed u/s 271D in such case: It was held by Jodhpur tribunal in Bajrang Textiles v. Additional CIT  122 (JD.) 190that where the A.O having treated the impugned amount of deposit as income, he is precluded from treating the same amount as deposit or loan for the purpose of section 269SS and levy penalty u/s 271D. The penalty ought to be cancelled.
Acceptance or repayment through Journal entry donot attract section 269SS or 269T: Acceptence or repayment through Journal Entry would not come within the ambit of the words ‘loans or deposits’-section 269SS applies only where money passes from one person to another by way of ‘loan or deposit’[CIT v. Noida Toll Bridge Co. Ltd. 262 ITR 260 (Del.)]
A genuine transaction made in an emergency, doesnot attract penalty u/s 271D: held in Mrs Rupali R. Desai v. ACIT 88 ITD 76 (Mum.). In ITO v. Shree Mahaveer Industries 82 TTJ 549 (Jd.) it was held that cash paid to meet medical treatment expenditure in emergency, does not attract penalty u/s 271D.
In ITO v. Prabhulal Sahu  99 TTJ (Jd.) 177 it was held that Assessee was not aware of provisions of section 269SS or 269T. His councel did not apprise him about the provisions. No penalty u/s 271D shall be attracted.
Where Depositors residing in rural areas are not having access to banking facility and are ignorant of relevant provisions of law, it would constitute bonafide reasons for payment in cash. (ACIT v. Vinman Finance & Leasing Ltd.  306 ITR (AT) 377 (Visakha.)
Loan given by relatives on Sunday for safe custody and for use in business. No contravention of section 269SS takes place– ITO v. T.R. Rangarajan  279 ITR 587 (Mad.)
Cash Transaction made on Sunday. No penalty could be imposed in such a case.- ITO v. Narsing Ram Ashok Kumar 47 ITD 38(Pat)
Transfer of money exceeding Rs. 20000 by way of bank voucher instead of a/c payee cheque or draft doesnot attract penalty u/s 271D as the transaction are through banking channels onlyheld in Asst. CIT v. Jag Vijay Auto Finance (p) Ltd. 68 TTJ (Jp) 44
Loan in cash under compelling circumstances have been held to be reasonable cause: Industrial Enterprises v. DCIT  68 TTJ (Hyd) 373
Where the Lenders did not have any bank account which compelled the assessee to accept the loan in cash. This has been considered as reasonable cause in Balaji Traders v. DCIT  73 TTJ (Pune) 246
Although the provisions of section 269SS and 269T have been enacted with a view to prevent the increase in black money and to stop the tax evasion. Still the amount of Rs 20000 is very small in the present scenario considering the rate of inflation resulting in decrease in value of money and the rise in prices of various goods, which in turn also has enhanced the working capital needs of every businessman.Therefore the limits u/s 269SS and 269T also need to be raised similar to the increase in the audit limit u/s 44AB which has been done to benefit the small assessees in the current budget by the Finance minister.