from the desk of the chairman indian institute of...

NEWSLETTER, March, 2017

With Warm Regards,

CA. ATUL AGRAWAL CHAIRMAN, NOIDA BRANCH Mobile: 9990057390 Email: [email protected]

FROM THE DESK OF THE CHAIRMAN

Respected Professional Colleagues,

It is indeed a matter of proud and privilege for me to have been elected as the

Chairman of NOIDA Branch which is one of the esteemed branches under large category of CIRC of ICAI. I would like to express my sincere thanks and gratitude to all my Professional Colleagues who have shown their confidence in me for taking the charge as the Chairman of the Branch. A very special thanks to all my respected Managing Committee Members.

I would like to congratulate to CA Nilesh Vikamsey ji for being elected as a president of the ICAI and CA Naveen N D Gupta ji for being elected as Vice- President of ICAI.

As you all are aware, NOIDA Branch got awarded as “Highly commendable Branch” for the year 2016-17 in the entire Central region, which could not have been possible without our very dynamic and energetic past Chairman CA Sanjay Sharma Ji and the entire team of the Branch who worked tirelessly day and night in the interest of the profession.

The year 2016-17 was a very challenging year as there were so many major initiatives taken by the Government of India such as Income Declaration Scheme (IDS), Demonetization, Dispute Resolution Scheme (DRS) and Pradhan Mantri Gareeb Kalyan Yojna (PMGKY) and due to these initiatives of the Government of India we, as professionals, have started spreading awareness in the society and its members. For the said purpose, various Seminars, Conferences and Group discussions were organized. Because of the dedicated efforts of the NOIDA branch, various Government Departments in NOIDA have started looking for support of our professional colleagues to spread awareness.

Friends, a lot of professional opportunities are knocking outdoors, it is our duty to avail these opportunities to grow further in the profession. ICAI has come up with various new initiatives specially in the field of Insolvency Act by way of creating Insolvency Professionals for which ICAI has already

formed a company u/s 8 of the Companies Act, 2013 in the name and style- “Indian Institute of Insolvency Professionals of ICAI” and also by way of starting other post qualification courses.

Although as the chairman of NOIDA branch, I, along with my entire team is in the process of planning calendar of events to be organized for member and students.

I am looking forward for your kind support & suggestions, so that we as a team of NOIDA Branch can serve the profession and can hope for a better tomorrow.

In the series of events in the coming year, the first event has been planned as HOLI celebration which is being organized on 10th of March 2017 at RWA Community Center, B-70, Sector 33, NOIDA followed by Holi-special delicacies. Coming up next is a seminar on GST, being organized jointly with the Service Tax Department, NOIDA on the 15th of March, 2017. Successive event is planned on 20th March, 2017; again on a very relevant topic of Statutory Bank Branch Audit, where CA Amarjeet Chopra Ji, past President, ICAI, along with CA Rajesh Sethi Ji will be enlightening us on the subject.

Friends, we are also in the process of shifting in a bigger space in the same premises which will enable us to provide more classes for students, reading room, library and other desired facilities to support the students and members of NOIDA. Last but not the least, I would like to convey that my goal is to serve the profession & take the branch to new heights. Looking forward to a fruitful year ahead!

Bid-adieu!

“Success does not lie in Results but in EFFORTS, Being the

best is not so important, doing the best is all that matters.”


FROM THE DESK OF THE SECRETARY Respected Professional Colleagues, Warm greetings to all of you!

The only thing that never changes is the change itself. And every change offers a new beginning. At the

forefront of this change in our esteemed Noida Branch of CIRC of ICAI, It gives me immense pleasure

to communicate to you all as the new Secretary of the Noida Branch of CIRC of ICAI for the Year

2017-18.

Coming together is a beginning, keeping together is progress, working together is Success..… Henry

Ford.

Let me start my message with this quote as I always believe that we achieve success in a true spirit

while working as a team than just individually. I am very grateful to the respected members of Noida

Branch Managing Committee for reposing faith in me and giving me the opportunity to take the

responsibility of the honourable post of the Secretary of Noida Branch of CIRC and elevating my status

from Executive member to that of a Secretary.

I extend my heartiest congratulations to our immediate Past Chairman of Noida Branch, CA Sanjay

Sharma Ji, and the then Secretary CA Sudhir Kumar Ji under whose dynamic and effective leadership

the Noida Branch has been awarded as the “Highly Commendable Branch” in the entire Central Region.

I am particularly indebted to both our respected members, whose able guidance greatly boosted my

experience and abilities to take on future challenges. I humbly acknowledge that I have learnt a lot from

them. Working with them gave a good exposure to the critical challenges concerning the profession.

Oh behalf of the members of Noida Region, I heartily congratulate CA Nilesh Shivji Vikamsey,

Hon’ble President, ICAI and CA Naveen N. D. Gupta Hon’ble Vice-President, ICAI for having taken a

fresh guard for the term 2017-2018.

I know you all have dreams for our Institute, to see it reach the pinnacle of glory. Noida Branch will

put in the best efforts to fulfil all your dreams. We shall work as a team and give our very best to take

the Institute to the heights of success.

Team Noida Branch is determined to continue in the right earnest to ensure fulfilment and support for

all their endeavours. Our aim is to provide the best services to our members and students to ensure that

there isn’t any grievance from their end.

It is my pleasure sharing with you that we are continuing with the scheme of Annual Enrolment of

Members of Noida Branch for attending CPE Hours Seminars for the financial year 2017-18 (Period 1st

April, 2017 to 31st March, 2018). The Fee is as follows:


FOR MEMBERS

1

2

3

4

4000

7500

10000

12500

FOR ONE MEMBER

FOR TWO PARTNERS

FOR THREE PARTNERS

FOR FOUR PARTNERS + 2500/- PER PARTNER & ABOVE

FOR CORPORATES

5

6

15000

20000

CORPORATE MEMBERS UPTO 5

CORPORATE MEMBERS UPTO 7

FOR STUDENTS

7 2500 FOR EACH STUDENT/ARTICLES

The Union Budget has recently been announced by the Hon’ble Finance Minister, Government of India.

In the wake of demonetisation, the Union Government’s strong resolve to fight against the Black money

and GST round the corner, it is observed that the current economic scenario has opened up plethora of

opportunities for the Chartered Accountants (CAs). Demonetisation is looked upon as a welcome step

as it would help in channelizing the national resources to the growth and development of the nation.

CAs have good opportunity to guide and assure the public in the right direction and contribute towards

curbing the parallel economy. Noida Branch plans to conduct a series of seminars throughout the

coming year to keep its members updated and enlightened about the latest professional developments.

These will be intimated to the members from time to time.

On the festive occasion of Holi, I wish each one of you and your family members a bright and colourful

Holi and hope each day is as colourful as ever. I would like to conclude by saying…

“The Canvas of life is waiting for some bright colours. Let us add some shades of Joy, Love, Peace

and Happiness”.

With Warm Regards,

CA TANUJ KUMAR GARG

SECRETARY- NOIDA BRANCH

CONTACT NO- 9899508755

EMAIL: [email protected]


Photo Name and designation Phone Number Email Id

CA ATUL AGRAWAL

CHAIRMAN +91-9990057390 [email protected]

CA PRAVEEN KUMAR SINGHAL

VICE- CHAIRPERSON +91-9313088386 [email protected]

CA TANUJ KUMAR GARG

SECRETARY +91-9899508755 [email protected]

CA PAWAN KUMAR BANSAL

TREASURER +91-9810224621 [email protected]

CA SANJAY SHARMA

CICASA CHAIRMAN +91-9899709954 [email protected]

CA GAURAV AGARWAL

EXECUTIVE MEMBER +91-9810042424 [email protected]

CA GIRISH KUMAR NARANG


CA SUDHIR KUMAR


CA MUKESH BANSAL

EX-OFFICIO, NOIDA BRANCH +91-9350774515 [email protected]

mailto:[email protected]


How to execute the assignment of Statutory Audit

at the Bank Branch

Objective Statutory Audit

Sub-section (1) of section 29 requires every banking company to prepare a balance sheet and a profit

and loss account in the forms set out in the Third Schedule to the Act or as near thereto as the

circumstances admit. These financial statements have to be prepared as on the last working day of each

financial year (i.e., 31st March) in respect of all business transacted during the year. A foreign banking

company (i.e., a banking company incorporated outside India and having a place of business in India)

has to similarly prepare a balance sheet and a profit and loss account every year in respect of all business

transacted through its branches in India. As per Accounting Standard 3, the bank should prepare the cash flow

statement also. Hence the financial statements of the bank shall include the cash flow statement along with the

balance sheet and profit and loss account as well.

Salient Features of the Third Schedule

Form A of the Third Schedule to the Banking Regulation Act, 1949, contains the form of balance sheet and Form

B contains the form of profit and loss account.

The balance sheet as well as the profit and loss account is required to be presented in vertical form. Capital and

liabilities are to be presented under the following five broad heads

Sub-section (2) of section 29 of the Act requires that the financial statements of banking companies incorporated

in India should be signed by the manager or principal officer of the banking company and by at least three

directors (or all the directors in case the number is less than three). The financial statements of a foreign banking

company are to be signed by the manager or agent of the principal office in India. It may be noted that the

accounts of a branch are usually signed by the manager of the branch and/or the accountant.

Role of the Statutory Branch Auditor Auditor's Report In the case of a nationalized bank, the auditor is required to make a report to the as mentioned in the engagement

letter in which he has to state the following:

(a) whether, in his opinion, the balance sheet is a full and fair balance sheet containing all the necessary

particulars and is properly drawn up so as to exhibit a true and fair view of the affairs of the bank, and in case he

had called for any explanation or information, whether it has been given and whether it is satisfactory;

(b) whether or not the transactions of the bank, which have come to his notice, have been within the powers of

that bank;

(c) whether or not the returns received from the offices and branches of the bank have been found adequate for

the purpose of his audit;

(d) whether the profit and loss account shows a true balance of profit or loss for the period covered by such

account; and

(e) any other matter which he considers should be brought to the notice of the Statuary Central Auditor.

Format of Audit Report

The auditors, central as well as branch, should also ensure that the audit report issued by them complies with the

requirements of Revised SA 700, “Forming an Opinion and Reporting on Financial Statements”, and where

required with the SA 705, “Modifications to the Opinion in the Independent Auditor’s Report” and/or SA 706,

“Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report”, as may be

applicable.


Further, in accordance with the Announcement issued by the Institute of Chartered Accountants of India, the

bank branch auditors need to mention the total number of debits/ credits and amounts in the Memorandum of

Changes submitted by them, under the Other Matters Paragraph in the their audit report.

This would help in ensuring that all adjustments suggested by the branch auditors in the Memorandum of

Changes, including those which have not per se been accepted by the bank branch managements, have been duly

brought to the knowledge of the statutory central auditors. It may be noted that the information in respect of

Memorandum of Changes under the "Other Matters Paragraph" would include both such MoCs which have been

accepted as well as those not accepted by the bank branch management, though this distinction need not per se be

brought out in the audit report.

2.26 The auditor of a banking company is required to state in his report the followings in terms of provisions of

Section 30(3) of The Banking Regulation Act, 1949:

(a) whether or not the information and explanations required by him have been found to be satisfactory;

(b) whether or not the transactions of the company which have come to his notice have been within the powers of

the Bank;

(c) whether or not the returns received from the branch offices of the Bank have been found adequate for the

purpose of his audit;

(d) whether the profit and loss account shows a true balance of profit or loss for the period covered by such

account; and

(e) any other matter which he considers should be brought to the notice of the shareholders of the company.

In addition to the aforesaid, the auditor of a banking company is also required to state in his report in respect of

matters covered by Section 143(2) & (3) of the Companies Act, 2013.

2.27 As per reporting requirements cast through Rule 11 of the Companies (Audit and Auditors) Rules, 2014 the

auditor’s report shall also include their views and comments on the following matters, namely:

Long Form Audit Report

Besides the audit report as per the statutory requirements discussed above, the terms of appointment of

auditors of public sector banks, private sector banks and foreign banks [as well as their branches],

require the auditors to also furnish a long form audit report (LFAR). The matters which the banks

require their auditors to deal with in the long form audit report have been specified by the RBI.

The LFAR is to be submitted before 30thJune every year. To ensure timely submission of LFAR, proper

planning for completion of the LFAR is required. While the format of LFAR does not require an

executive summary to be given, members may consider providing the same to bring out the key

observations from the whole document.

Cash Verification Procedure The Statutory Auditors are required to verify the branch cash as at the end of 31

st March. But as we cannot reach

at every auditee branch before opening the cash on 2nd

April (1st April being bank holiday), we have to check the

cash of the day opening/ closing and arrive at the balance as on 31st March by adding and subtracting the

transactions as per branch records. Besides, we are required to verify the following security aspects also -

1. Whether the branch has been opening on time as per guidelines and BM / BOM is present at the time of opening of the branch.

2. Whether the cash vault & FRFC / cash safe are opened by the joint custodians. 3. Whether any unrecorded security items (including undelivered cheques/ returned deliverables) /

important documents/ valuables are kept inside the vault /vault room 4. Whether Burglary alarm system is working properly. 5. Whether all doors are closed at the time of opening the cash room. 6. Whether the gun man remains outside the gate of cash room at the time of opening and closing the

cash. 7. Whether cash is carried out in a locked box from the cash room to the counter

8. Whether U V Lamps and counting machines are operational at the branch.


Handling Mutilated notes – Exchange of Mutilated notes from Public.

1. Whether branch is maintaining records for acceptance of currency from the Public), (Register of mutilated notes received, paid & rejected), (Claim on mutilated notes) & mutilated note register.

2. Whether the notes are stamped as per the value and recorded in the Register 3. Whether branch is maintaining counterfeit note register in the format prescribed & the details

of counterfeit notes are recorded & notes are held in joint safe custody with BM being one of the custodians.

Demonetization of SBN (Specified Bank Notes) The SBA should go through the reports of Concurrent Auditors and Bank’s own auditors and include their observations in his report relating to SBN.

Maintenance of Complaint register/Display of notices 1. Whether the complaint register is available and details of complaints are entered in the

complaint register and the resolution is updated in the register. 2. Whether the complaint box is placed prominently (which can be viewed easily by the

customers). 3. Whether the notice "Customers can also tender the cheques at the counter and obtain

acknowledgment on the pay-in-slips" is displayed at the Branch. 4. Whether the keys of the Complaint box are available with the BH and BOM only & not with

other officials.

Tax related activities

Timely Deduction and remittance of TDS

a) Whether tax is deducted at appropriate rates on monthly payments made by the branch towards interest debited on deposits, rent, payments to contractors, Professionals etc.

b) Whether tax deducted is paid within stipulated time? c) Whether challans for TDS paid are maintained by the branch? d) Whether Quarterly ETDS return has been filed? e) Whether 15G & 15H forms collected are uploaded to IT Dept. site regularly within time f) Whether TDS certificates are issued? g) Ensure periodical adjustment from the advance rent has been done at the time of monthly

payment of rent (If adjustable in future monthly rent as per agreement)

h) Verify advance payment of rent details with the lease deed or advance payment of contract

payment with contracts. Whether TDS has been deducted at the time of advance payment of

rent/contract payments

i) Compliance of Service Tax, Trade Tax, other duties and taxes

Compliance of RBI/Concurrent Audit Reports 1. Whether any RBI audit has been conducted during the audit period, if yes, whether the same

has been closed and the comment on the quality of compliance to be seen. 2. If the branch is under concurrent audit, comment on the quality of compliance 3. Whether pending issues are regularly complied with and compliance certificate is submitted in

time. Whether any pending issues beyond 60 days are observed at the time of statutory audit.


Miscellaneous aspects relating to safety & security of the Branch

Insurance of Assets of the Branch-Whether a copy of the Insurance policy obtained by

corporate office is held at the branch. Validity of the lease deed of the branch- Whether the lease deed of the branch is still in

force and the rent of the premises is being paid according to the terms and conditions

mentioned in the lease deed. Audit of clearing account/transactions:

i) Whether or not the branch has taken balance confirmation from other Banks in which it

is maintaining the account.

ii) Whether or not the branch is doing Periodical reconciliation of clearing account. If there

is any whether the same has been adjusted or not.

iii) Is there is any delay in debit to party account- Check reason for delay/Approval for TOD

if required/recovery of leakage of income if any

iv) Whether the branch has debited the clearing house charges for the current year.

v) Whether there is any entry outstanding in System Suspense Account.

vi) Whether or not the Branch has paid the amount of Bank Guarantee invoked, if any, to the

beneficiary, if yes, is there any entry relating to Bank Guarantee invoked outstanding for

more than 3 months.

vii) Whether or not the Branch has paid the amount of LC devolved to the concerned bank, if

yes, is there is any entry outstanding for more than 3 months.

viii) Whether or not all the overdue usance bills (including foreign bills purchased/

negotiated) have been crystallized by the branch on due dates, if yes, is there any entry

outstanding for more than 3 months.

ix) Whether there is any loan account at the Branch in which the security documents have

expired and the account is still being treated as standard.

Window dressing in deposits and advances as on 31st March We can verify the General Ledger Balance statements as on the preceding Friday of

annual closing and as on 2nd

or 3rd

April (these statements are available on the system on

daily basis) and ensure that there is no sharp rise or fall in deposits/advances at the

branch otherwise it will be a case of window dressing which need be looked into deeply.

Similarly in system suspense accounts, BG invoked, L.C. devolved etc., the branches

adjust the long outstanding entries just one day before the annual closing and these

entries reappear on the next working day to avoid the notice of the Statutory Auditors.

FOREX

a) Sale of foreign currency(FC/TC/PO/DD/etc) in cash by bank – just on sample basis or cursory

look to ensure proper working of FOREX and that there is no hanky- panky.

Maximum Limit up to Rs.50000/-

All sales to one person in a month will be treated as single transaction.

Further in case of traveling, where rupee equivalent of foreign exchange drawn exceeds Rs.

50000 either for any single drawl or more than one drawl reckoned together for a single

journey/visit, it should be paid by cheque or draft.

Purchase of foreign currency by payment in cash by bank From Resident Individuals -

Upto USD 1000/- or equivalent

From NRIs & Foreign Nationals - Upto USD 3000/- or equivalent

All purchases in a month from one person will be treated as single transaction


Verify rates applied for purchase and sale of currency by bank, discount if any given is

approved by appropriate authority as per bank guidelines Verify, whether CDF is obtained in case of currency purchased exceeding USD 5000 and in

case of currency & TC put together USD 10000. Ensure endorsement has been done by

branch on CDF for deposit of currency/TC

b) Check FCNR, NRE, EEFC, NRO and other non resident accounts, whether the debits and

credits are permissible as per prescribed FEMA guidelines. Some Instances for credits in NRE

account are given below:

i. Verify the credits in NRE accounts is as permissible by FEMA and proof is available with

branch

ii. Verify credits of pay order/draft/cheques issued for encashment of foreign currency are

supported by encashment certificate issued by AD category-1/AD category-II

iii. Checking of loan accounts against NRE FDR. Proceeds of loans should not be credited to

NRE Account

iv. Transfer of Funds from Non-Resident Ordinary (NRO) account to Non-Resident External

(NRE) Account -NRI shall be eligible to transfer funds from NRO account to NRE account

within the overall ceiling of USD one million per financial year subject to payment of tax,

as applicable (i.e. as applicable if funds were remitted abroad).

v. Verify the funds sent through RTGS/NEFT/NECS/ECS to other bank with a message for

credit to NRE account. Ensure the funds have been released by bank are eligible for credit

to NRE account

c) Operation in FCRA account. i. Verify the credit of any foreign contribution to the account of an association/NGO/Trust

without any documentary evidence of having obtained registration/prior permission from

the Central Government for the same.

ii. Check whether operations in FCRA accounts are as permitted by Ministry of Home Affairs

(MHA) and FCRA guidelines.

iii. Permission from MHA sometimes can be restricted to proceeds from some specific source

or permission is available for specific amount only. Ensure conditions are complied with.

iv. Ensure in all operative accounts, original letter from MHA is available with branch.

Account should be kept in total freez till letter from MHA received

v. Verify validity period of MHA registration certificate. It should not be expired. vi. Packing Credit / Export Packing Credits limits should be adjusted after the due dates if the

validity has not been extended. If the validity of EPC is extended beyond 180 days then

commercial rate of interest will be recovered for the overdue period. If for any reason the

EPC remains outstanding for more than 360 days or the amount is adjusted from the local

funds then commercial interest will be recovered from the day one.

vii. Inspection charges, processing charges have to be recovered manually as these are not

recovered by the system. This is an area of potential revenue leakage

Regards:-

CA Atul Agrawal, FCA Founder Partner A A A M & CO., Chartered Accountants An ISO 9001:2008 Certified Co. Mob. : +919990057390


Budget 2017 - An Analysis of its impact on Individuals

After demonetisation the country was expecting major tax reliefs in Budget 2017 and it was also expected that the Finance Minister would tighten the screws on black money/ revenue leakages. Though relief is provided but not up to the people expectation. Here are a few changes proposed in the Budget which would impact the individual assessees:

1) The Income tax rate has been slashed for the initial tax bracket of Rs.2.5 lakhs to Rs.5 lakhs. The existing rate of taxation for individual assesses between income of Rs.2.5 lakh to Rs.5 lakh will be reduced to 5% from the present rate of 10%. What this means is that anybody above a taxable income of Rs.5 lakhs would most certainly save Rs.12,500 in taxes every year. This is a welcome move. The maximum one can save irrespective of the tax bracket is Rs.12,500 per year. 2) A surcharge of 10% of tax payable on categories of individuals whose annual taxable income is between Rs. 50 lakh and one crore, will be levied. 3) A simple one page form to be filed as Income Tax Return will be made for the category of Individual having taxable income upto Rs. 5 lakh other than business income. 4) Also, a person of this category to file Income Tax Return for the first time would not be subjected to any scrutiny in the first year unless there is specific information available with the Department regarding his high value transactions.

5)Time limits for filing returns has also been reduced in order to expedite assessments It is hence proposed to amend the provisions of sub-section (5) of section 139 to provide that the time for the furnishing of revised return shall be available up to the end of the relevant assessment year or before the completion of an assessment, whichever is earlier," said the memorandum to the Finance Bill 2017. Taxmen Can Reopen Up To 10-Year-Old cases In Big Transactions This effectively means that people filing Income Tax returns have to file it with the department by March end of the assessment year i.e return for fiscal 2017-18 has to be filed by March 2019.

6)The time limit for completion of assessments has also been sought to be reduced from 21 months from the end of the assessment year to 18 months for the assessment year 2018-19 and the said time limit shall be further reduced to 12 months for the assessment year 2019-20. Thus, it is proposed to expedite the assessments by utilizing the overall efficiency due to use of technology and massive computerization.

7) TDS on rent payments made by Individuals and HUFs has been introduced.

Currently, rent payments by individuals and HUFs not subject to tax audit under section 44AB are outside the ambit of TDS. The FM has tried to widen the tax base by inserting a new section 194(IB) which provides that individuals and HUFs paying rent in excess of Rs 50,000 per month or part thereof need to withhold TDS on such payments at the time of payment of rent or credit to the payee's account, whichever is earlier. It may be noted that such TDS deduction would not require a tax deduction account number and the compliance can be made only once in a previous year thus reducing the compliance burden.


8)A new section 71(3A) has been introduced proposing to restrict the set-off of loss from house property to a maximum of Rs 2 lacs in any assessment year. Thus, home buyers who had taken a loan and let out their property can no longer claim the entire interest as a deduction against the property income. Hence taxpayers who had invested in second homes and had let it out or were offering it as a deemed let-out property for offsetting the loss on account of interest on home loan against salary income will be adversely impacted by these provisions.

9)Land and building held for more than 24 months to qualify as "long term" capital asset. To provide a boost to the real-estate sector, the holding period for investments in land or building or both has been proposed to be reduced from more than 36 months to more than 24 months thereby making the sector more attractive for investment.

10) A new section 234F has been introduced which provides fee for late filing of income tax returns. In the case of people whose total income does not exceed Rs. 5 lakh, Rs. 1,000 fee would be charged. If the income exceeds Rs. 5 lakh, a fee of Rs. 5,000 shall be payable if the return is filed after July but on or before December 31 of the Assessment Year. A fee of Rs. 10,000 shall be payable if ITR is filed after December.

11)To curb the black economy, a new provision section 269ST has been introduced which seeks to levy a penalty in respect of any specified transaction. Specified transaction means

any person receiving Rs 3 lacs or more in aggregate from a person in a day

in respect of a single transaction, or

in respect of transactions relating to one event from a person,

otherwise than by way of an account payee cheque or bank draft or through the use of electronic clearing system through a bank account. The penalty amount shall be the amount of such receipt to be paid by the recipient. Consequentially, provisions pertaining to tax collection at source at 1% on cash sale of jewellery exceeding Rs 5 lacs is proposed to be withdrawn.

Thus, it can be seen that the Government is keen in its resolve to fight against the black money and ensure tighter compliance of the tax laws.

Regards:-

PREETI GUPTA (PROP.) 304, LIKHI RAM MARKET SECTOR-27, NOIDA M: 8447033883; 7011028136 WWW.TAXYOJNA.IN [email protected]

mailto:[email protected]


DEMONITISATION & ITS IMPACTS

November 8, 2016 a day when the Indian Government launched a “surprise attack”/ “Surgical strike”/ “Surgery” against black money in the economy.

Demonetization was a massive step taken by the Hon'ble Prime Minister through an unscheduled live

televised address to the nation announcing the circulation of all INR 500 and INR 1000 banknotes of the

Mahatma Gandhi series as invalid with the immediate effect and issuing new INR 500 and INR 2000

banknotes of Mahatma Gandhi New Series in exchange of Old banknotes. The Indian government had

demonetized bank notes on two prior occasions —once in 1946 and then again in 1978 —and in both

cases, the goal was to combat tax evasion by "black money" held outside the formal economic system.

This time it was huge and giving exert impact on individuals, businesses and economy with 85% of

currency out of system. The process choked terror funding, shutting down of fake currency press and 60% dip in violence. This

move aims to spur a change in spending habits of the economy. The move would have long term

benefits classified in various direct and indirect impacts. Direct impacts like throwing fake currency out

of circulation in one stroke, dip in real estate prices, reduction in inflation, reduction in fiscal deficit,

reduction in lending rates and increase in GDP.

In the first four days after the announcement of the step, about ₹3 trillion (US$45 billion) in the form of

old ₹500 and ₹1,000 banknotes had been deposited in the banking system and about ₹500

billion (US$7.4 billion) had been dispensed via withdrawals from bank accounts, ATMs as well as

exchanges over the bank counters. Within these four days, the banking system has handled about 180

million transactions. The State Bank of India reported to have received more than ₹300

billion (US$4.5 billion) in bank deposit in first two days after demonetization. A spike in the usage of

debit card and credit card post demonetization was also reported. Up to 97% of the demonetized bank

notes have been deposited into banks which have received a total of ₹14.97 trillion ($220 billion) as of

December 30 out of the ₹15.4 trillion that was demonetized. This is against the government's initial

estimate that ₹3 trillion would not return to the banking system.

Of the ₹15.4 trillion demonetized in the form of ₹500 and ₹1000 bank notes of the Mahatma Gandhi

Series, ₹9.2 trillion in the form of ₹500 and ₹2000 bank notes of the Mahatma Gandhi New Series has

been recirculated as of 10 January 2017, two months after the demonetization.


The decision met with mixed initial reactions. Several bankers like Arundhati

Bhattacharya (Chairperson of State Bank of India) and Chanda Kochhar (MD & CEO of ICICI Bank)

appreciated the move in the sense that it would help curb black money. Businessmen Anand

Mahindra (Mahindra Group), Sajjan Jindal (JSW Group) also supported the move adding that it would

also accelerate e-commerce. Infosys founder N R Narayan Murthy praised the move.

The move also added to the motive of digital India as it precipitate towards electronic mode of

payments, making India cashless. The demand for point of sales (POS) or card swipe machines has

increased. E-payment options like PayTM, PayUMoney has also seen a rise. According to data of Pine

Labs, the demand for its POS machines doubled after the decision. Further it states that the debit card

transactions rose by 108% and credit card transactions by 60% on 9 November 2016.

It also brought Kashmir to normalcy with less stone patters blowing insurgency. It led to increase in

revenue collection by government authorities giving the tax payers equal opportunity to safely disclose

their undisclosed income through Income Disclosure Scheme, which keeps the source of income and

other related facts confidential.

As the taxpayers were allowed to use INR 500 and INR 1000 old series banknotes to pay municipal

taxes and local taxes. Restraining the flow of hawala money, Cash storage being a huge obstacle for

human traffickers and also crippled naxalities. There are various evasion attempts made by Gold

purchases, Donation in temple, multiple banking transactions for exchange and other transactions, back

dated accounting. Looking forward for the traces of the decision taken and its impact on the economy and success as

desired and expected by the nation. Prompting India towards being a Cashless Society, with minimum

corruption and enrich economy.

Regards:-

CA Atul Agrawal, FCA Founder Partner A A A M & CO., Chartered Accountants An ISO 9001:2008 Certified Co. Mob.: +919990057390


Views expressed in the articles are of the writers and do not necessarily reflect the official views of the Branch/ICAI

Designed By:- MRS. MEERA KISHORE-(BRANCH HEAD)

MR. OM PRAKASH YADAV–( IT FACULTY) MR. JITENDRA KUMAR YADAV

from the desk of the chairman indian institute of...

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