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| August 18, 2017 |
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Impact 
Are you a property owner with a clean tax chit?
If yes, you're in the clear.
For those who haven't, there's a storm approaching.
It appears the Government has decided to take action against benami property holders -Operation Clean Money is in full swing.
The Income-Tax (I-T) Department has decided to look into the unaccounted finances of property owners.
Specifically, cases where:
Some naysayers believe this might result in tax-terrorism, as I-T officials could misuse their authority. Tax terrorism is a popular term often used to denote an adversarial tax environment.
However, the Department's assurance is to follow a non-meddling approach during assessments, only enforcing actions with substantial evidence.
By collating spending and investment related information of individuals, the department is identifying trends, which is then being used to create a tax-evader's profile. Irregularities are being flagged. Data on cash deposits obtained during demonetisation is being integrated to check the consistency of existing information. The Department has identified 18 lakh people whose cash deposits during demonetisation didn't conform with their income profile. Nearly 5.5 lakh people are likely to face another round of scrutiny.
Now, let's shed some light on what alludes benami transactions...
The Benami Transactions (Prohibition) Amendment Act, 2016 has explicitly defined 'property' as the "assets of any kind, whether movable or immovable, tangible or intangible, corporeal or incorporeal and includes any right or interest or legal documents or instruments evidencing title to or interest in the property and where the property is capable of conversion into some other form, then the property in the converted form and also includes the proceeds from the property."
Therefore, 'benami property' means any property which is the subject matter of a benami transaction and also includes the proceeds from such property.
So what are the consequences if one is found guilty?
- The beneficial owner will have to serve rigorous imprisonment upto 7 years
- A fine of upto 25% of the fair market value of the property
Any person giving false information (which in all likelihood could be the benamidar) shall also be liable to serve:
- Rigorous imprisonment upto 5 years
- And the fine of upto 10% of the fair market value of the property
What will happen to the property?
After following the due diligence and legal procedures, the authorities can attach, confiscate, and alienate the properties.
Why does this law acquire enormous importance now?
Simply because The Benami Transactions (Prohibition) Amendment Act, 2016 goes much beyond real estate. The Government may invoke this Act to punish citizens who have deposited personal funds in another person's account post demonetisation. Now imagine the powerful ramifications of this Act once it's implemented.
The property won't be classified as a benami property if:
A person standing in a fiduciary capacity holds the property for the benefit of someone else. For example, a trustee, executor, partner, director of a company, a depository or a participant as an agent of a depository under the Depositories Act, 1996 and any other person as may be notified by the Central Government for this purpose.
- A Karta or a member of a Hindu Undivided Family (HUF) holds the property for the benefit of other members of the family
- A person holds property in the name of his wife or children
- A person holds the property in the name of his brother or sister or lineal ascendant or descendant, where the names of a brother or sister or lineal ascendant or descendant and the individual appear as joint-owners in any document.
Can I-T department knock your door any day? Yes, it can, under the conditions given below:
- You frequently travel abroad, but do not pay taxes
- You own high-value assets and show disproportionately low income
- You buy assets in the name of your relatives to minimise your tax liability
- If you live a lifestyle that doesn't justify the income group you claim to fall under
The tables have turned for citizens who bet on the wrong horse. Heads, I-T Department wins; tails, black money holders lose.
This time the I-T department appears unequivocal and resolute in its intent.
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Impact
India's Prime Minister dropped a bomb when he announced demonetisation of high-value currency notes on the eve of November 08, 2016. Many experts believed he was skating on thin ice. The subsequent policy flip-flops fueled their belief even more.
Ironically, the move that didn't gather support from far-famed economists, received prop from the masses.After all, the rich were seen scurrying around to salvage their unaccounted wealth, possibly for the first time.
Nine months on, the moot question is, has it delivered the desired results?
Until recently, the answer of what the economy had gained from demonetisation with facts and figures remained ambiguous.
The report titled 'Mint Street Memo No. 01 Demonetisation and Bank Deposit Growth' authored by RBI officials attempts to solve this mystery. It estimates that demonetisation funnelled approximately Rs 2.8 lakh crore to Rs 4.3 lakh crore into the banking system. And, it believes Rs 1.6 lakh crore to Rs 1.7 lakh crore may stay within the system permanently.
In conclusion, the report states, "Overall, there appears to have been a significant increase in bank deposits due to demonetisation, which if sustained, could have favourable impact on financial savings and their channelisation to capital markets."
To read more about this story and Personal FN's views over it, please click here.
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Impact
Gold Prices share an inverse correlation with the movements of interest rate in the U.S. Similarly, bleak economic prospects across the world cause a rally in gold investments. Though these factors are irrelevant today, gold prices are inching northwards.
You're probably aware that the U.S. Fed (Federal Reserve) has been unwinding its ultra-loose monetary policy stance for over the last 15-18 months now. Job markets in mature economies are showing tangible improvements. Moreover, the International Monetary Fund (IMF) has pegged the global growth estimates at 3.5% for 2017 and 3.6% for 2018, which are higher than the estimate of 3.2% for 2016. In spite of all these positives, gold has firmed up considerably these past few months. Recently, it made a new 3-month high in the international markets (and in India as well).
So the question is what's driving international gold prices up?
The short answer is geopolitical tensions.
Even if you aren't an avid follower of global political news and current affairs, it's nearly impossible to have not read about the rising tensions between the U.S. and North Korea.
To read more about this story and Personal FN's views over it, please click here.
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Impact
2017 has India celebrating its 71st Independence Day.
Today, freedom has morphed to mean different things for us since 1947.
What does freedom mean to you? Does it just mean being able to exercise your rights as a citizen? Or is it living with the freedom to be whoever you choose to be, doing and experiencing whatever you desire? Of course, freedom could mean all this and then some. And though the best things in life are free, these days, it can come attached with a price tag.
Which leads us to the question: What is financial freedom?
Does it mean having the moolah to buy, experience, and enjoy anything you could wish for? Or being self-sufficient, independent enough to take care of yourself and your family graciously? Could it mean being debt-free?
To read more and Personal FN's views, please click here.
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Companies doing business in India have been facing difficulties in some form or the other due to stagnant economic growth. However, there are exceptions. For example, the mutual fund industry. Its asset base is growing at a brisk pace. In fact, during the first four months of the Financial Year (FY) 2017-18; mutual funds have added nearly 30 lakh folios---this has been the best show so far since 2007--acche din setting in.
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Slush Fund: Money earmarked for a loosely defined, but legitimate, purpose that is instead surreptitiously used for an illegitimate purpose. The term "slush fund" indicates a fraudulent use of money. Expenses paid for out of a slush fund may be disguised as legitimate expenses, such as salaries, but not be commensurate with the work performed. Other times, no effort is made to disguise the spending, such as when a corporate executive uses a slush fund to purchase luxury vehicles for family and friends.
(Source: Investopedia)
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Quote:"The most important quality for an investor is temperament, not intellect." - Warren Buffett
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