News

The Hindu : NRI/PIO investments come with restrictionsN.C.S RAGHAVANARVIND RAGHAVANInvestments made abroad by a proprietary concern in India and investments made by Non-Resident Indians (NRI) or Persons of Indian Origin (PIO) resident outside India in a proprietary concern in India are highlighted here.The definition of the term “person” under FEMA includes a proprietary firm resident in India also and hence all provisions relating to a person resident in India (discussed earlier) are also applicable to the proprietary concern. However, there are specific provisions applicable to a proprietary concern.Direct investments abroad by a proprietary concern in India (vide Regulation 19 FEM {Transfer of issue of any Foreign Security}{Amendment} Regulation 2004):The concern is permitted to invest in shares of a company outside India, in lieu of fees due to it for professional services rendered to the said company, subject to the following conditions:The value of shares taken shall not exceed 50 per cent of the value of the fees receivable. Further, the concern’s share-holding in any one company outside India by such acceptance of shares shall not exceed 10 per cent of the paid-up capital of the foreign company.For the above, a general permission is granted subject to the condition that a Form OBD shall be filed with the Reserve Bank of India for obtaining the permission.Investments by an NRI or PIO resident outside India in a proprietary concern in India (vide Regulation 4 FEM (Investments in firm or proprietary concern) Regulation 2000):An NRI or PIO is prohibited from investing in any proprietary concern in India engaged in any agricultural/plantation/real estate business or print media. He/she is permitted to invest in a proprietary concern by way of capital contribution in any business other than the aforesaid businesses. This is subject to the condition that no repatriation benefits are available. However, if such benefits are required, the NRI/PIO should obtain prior approval.Matters relating to investments which can be made abroad by…More

The Hindu : Builders and service taxThe levy of service tax is applicable where the total number of residential units within a premises is more than 12, writes C.H. Gopinatha RaoBuilders who utilise the services of architects, structural engineers and auditors have to pay service tax along with the fees to be paid for their services. In addition to the above, service tax is payable for the following works undertaken by them.a) Commercial or industrial construction services with effect from 10-9-2004.b) Site formation and clearance, excavation and earthmoving and demolition services with effect from 16-6-2005.c) Construction of residential complex services with effect from 16-6-2005.d) Works contract services with effect from 1-6-2007.The rate of service tax is 12 per cent. Along with is an education cess of 2 per cent and secondary and higher education cess of 1 per cent of service tax, totalling 12.3 per cent of the gross amount.• Commercial and industrial construction services: This includes new building or civil structure or a part thereof, pipeline or conduit or completion and finishing services such as glazing, plastering, painting, floor and wall tiling, metal joinery and carpentry, fencing and railing, work on swimming pools etc.•Site formation and clearance: The activities include (i) drilling and core excavation services,(ii) soil stabilisation, (iii) horizontal drilling for the passage of cables or drain pipes, (iv) land reclamation work, (v) contaminated top soil stripping work and (vi) demolition and wrecking of building structure or road.Such services provided in relation to activities including agriculture and irrigation are not included.• Construction of residential complex services: This covers housing complexes developed by promoters or builders.The levy of service tax is applicable where the total number of residential units within a premises is more than 12, having common areas, common facilities or services and the layout approved by the appropriate authority. Common area includes roads, staircases and other areas where the residents of the complex have easement…More

The Hindu : Another burden?Will Capital Value System find acceptance among property owners, wonders K. SukumaranResource mobilisation is a pre-requisite for developmental activities of the State. Yet, an asset with the citizen is being squeezed to such an extent that the owner may be compelled to abandon it due to exorbitant and excessive taxation. Let us discuss this aspect covering real estate especially in the wake oftheCapital Value System-based taxation set to be implemented in Bangalore.Have we ever thought of the number of times the owner of a property is asked by the State to pay taxes and levies? Let us make a count.The buyer of a property has to first pay stamp duty and registration charges.As long as he holds the property, annual tax has to be paid to the revenue collection authority such as panchayat, municipality, corporation or SEZ.If the owner wishes to construct a building on his land, plan approval fees will be required to be paid depending on the type of building. Once the property is completed, annual tax will be levied on the basis of the system of tax in vogue. The system undergoes change from time to time. Thankfully, life tax is yet to be levied for real estate unlike in the case of transport vehicles.Taxation methodsThe administrators, from time to time, introduce norms for valuing property for purposes of determining the tax. While money paid by the buyer to the seller must reasonably be the basis for stamp duty and registration, under the guise of preventing tax evasion, guideline value is prescribed, which is again revised at irregular intervals. The guidance value then becomes the market value!Property valuation methods in earlier days were based on the type of construction like brick, mortar, mosaic, granite, marble etc. In recent times, Self-Assessment System and Capital Value System have been evolved by some municipal corporations as innovations. The SAS was found acceptable as it…More