06/06/2018 by Jose Zachariah , FCA & Ajith Kumar, ACA
1. Need for Health check-up in automobile dealerships
The following typical factors and complexities make Automobile Dealership a challenging and highly complex business activity:
Huge investment by way of equity and borrowed funds
Excessive manpower requirement
Stiff competition not only from own brandsbut also from other brands
Inefficiency in Working capital management
Susceptibility to fraud, malpractices and falsification of accounts & documents
Lack of leadership quality among departmental heads
Inadequacy of quality training
Abrupt change in key persons without proper replacement
2. Situations which necessitates health checkups and professional management:
Lack of adequate Internal Control and proper process flow
Excessive stock holding
Diversion of working capital to long term investments
Inefficiency of Top Management
Weak HR department
Lack of proper MIS & Budgetary Control
Excessive salary to unproductive staff
Rampant malpractices, falsification of accounts by sales team in connivance with departmental heads
Non-submission of timely returns for claiming incentives, exchange bonus etc
Excessive finance cost
Inability to generate monthly reports
Many of the factors mentioned above resulted in closure of several viable and highly potential automobile dealers especially in Kerala
A proper Health check-up, professionalism, Internal Control & MIS can make Automobile Dealership a challenging and rewarding experience.
3. The crisis faced by Automobile dealers
a. Increased pressure from OEM to off-take the load from their heads
b.Unhealthy business practice among business competitors
c. Compulsion to provide excessive freebies to secure sales
d. Achieving the sales target of non-performing products
e. Piling up of slow moving parts, accessories & products due to compulsive dumping by OEM
f. Increased pressure to achieve sales targets to maintain premium dealership
g. Increased Labour Turnover compared to other business segments
4. Need for proper process flow and Internal Control
Unless proper and adequate internal control system is in place internal frauds can often occur in automobile dealerships and the financial impact of such frauds could be disastrous.
5. Multiplicity of Profit Centers
A dealership business consists of multiple unconnected business activities within one roof such as:
Sale of New cars
Sale of used cars
Parts & Accessories
Each of this business is being run as independent profit centre and this makes things extremely complicated to monitor and control as each line of business has its fraud risk factors.
6. Statutory Compliances
Harassment from both Direct & Indirect Tax departments and raising of unreasonable demands make the lives of dealers miserable. The only solution therefore is to have foolproof accounts with convincing documentary evidence. Equally important is the need for complying with Labour Laws.
To know more about our business health check up services for automobile dealerships, please contact 9447123625 or firstname.lastname@example.org.
Sounds a bit weird, but most small hospitals will either close down or be acquired by big corporate hospitals if the illness symptoms are not taken seriously. Your small hospital needs an urgent business health check-up if you are facing the following symptoms :
1) Cash handling and internal controls - Cash is received at various points in the hospital including the pharmacy and for issuing OP tickets. There is an evident lack of internal controls in depositing the cash and tallying it with daily sales register, OP ticket register etc.
2) Rising costs, loss of income and resultant issues in managing cash flows - Struggling to do more with less without compromising the quality of patient care. Employee cost has skyrocketed over the years without the ability to increase treatment costs due to competitive pressure even from government hospitals. Drug price control Rules has resulted in significant loss of revenue and Managing cash flows at month end has become a challenge. Compliance with proposed clinical establishment rules and proposed NABH regulations will further add to the cost.
3) Regulatory compliances - Complying with the innumerous laws and regulations including pollution control, AERB, BMW, income tax, GST, renewal of various licences to use X-ray, scanning machine etc. has become a significant challenge. Any small noncompliance will result in hefty fines and penalties apart from the loss of reputation.
4) Inventory control - Staying in control of the inventory at the pharmacy, casualty and on the floor while at the same time ensuring availability of life-saving drugs is a big challenge. Absolute lack of proper inventory control at the pharmacy, at the lab, at the ICU, Casualty results in preventable loss. Medicines taken by the staff for own consumption, X-ray films at the Xray machine, consumables at the lab needs proper control. Verification of physical stock with inventory records is not done periodically.
5) Lack of adequate MIS - Most hospitals lack clear MIS showing key ratios is that required to run the hospital efficiently. Inability to generate department wise P&L, metrics to capture the average length of stay, operating margin, patient to staff ratio, occupancy rate, patient satisfaction etc
To know more about our business health check up services, contact us
Business goodwill is a valuable intangible asset that represents the division of the business value which cannot be attributed to other business assets.
Business goodwill unveils the synergy among the various assets used by the business to generate income. The whole number will be higher than the sum of the parts in a well-run business.
If we define, Goodwill is that part of business value over and above the value of identifiable business assets.
What generates business goodwill
Here are the crucial factors that contribute to the creation of business goodwill:
1.Going concern value
Going concern value means the existence of business assets ready for use in generating business income. The value is created because a business can effectively/efficiently apply its capital, labor, and coordination to produce economic benefits for its owners.
2. Excess business income
Excess business income indicates the existence of earnings above a reasonable return on all the other business assets. The theory is that this excess income is due to business goodwill.
3. The expectation of future economic benefits
Owners may believe that the business has extra value because they see it as being capable of creating new products and services, invite new customers, and acquire or merge with other businesses.
Circumstances that may need a valuation of business goodwill
In many business valuation circumstances, the estimation of the whole business is concluded. There are some circumstances, in any case, you may have to calculate the value of Business Goodwill separately. Business purchase price allocation.
Goodwill financial reporting.
a) Business merger or spin-off.
b) Business Reorganization. .
c) Financial solvency verification.
d) Damage analysis
Valuation of business goodwill
The value of business goodwill can be estimated using the methods under the Cost, market and income valuation approaches.
1) Cost approach. Here, the focus is to evaluate the cost required to recreate the business goodwill in today's rupee terms. Let's say it will take three years to build another business that will match the current business income. Let's further assume that your business will generate Rs. 50,00,000 each year in income. Then the present value of this income is the measure of your business goodwill
2) The market approaches.
A common way to determine business goodwill in an actual business sale is to subtract the total value of all recognised assets from the cash-basis business purchase price. We can also use comparative transaction data (of businesses sold) in the industry to estimate goodwill as a percentage of the business sale price.
3) Income approach
Widely used approach to estimate the value of business goodwill. Following are the two methods:
a) Total business value residual method
The DCF valuation method is the preferred choice to determine the overall business value. Goodwill is then estimated as the difference between the business value (DCF method) and the fair market value (FMV) of all recognised business assets.
b) Capitalized excess earnings method
Estimate the FMV of all known business assets.
Determine a reasonable rate of return on these assets.
Deduct the return from the total business earnings. The difference is the excess earnings.
Capitalize the excess earnings to ascertain business goodwill. The correct selection of the capitalisation rate is crucial
The Honorable Finance Minister of India, Mr. Arun Jaitley, delivered the fifth Union Budget on 1st February 2018. As of date, these are proposals only, and if adopted by the Parliament and passed as Finance Act; will come into force for and from Assessment Year 2019-2020 relevant to Financial Year 2018-2019, unless specifically provided otherwise.
Individual tax payers
Tax slabs, rates and rebates remains unchanged for individuals, but with an increase in cess from 3% to 4%. Rebate under section 87A continues at Rs. 2,500 for resident individuals with total income not exceeding Rs. 3.5 lakhs.
Salaried individuals were extended a standard deduction of Rs. 40,000. But this deduction, is at the cost of withdrawal of transport allowance of Rs. 19,200 and medical expenses reimbursement of Rs.15,000 (maximum claim amounts). Transport allowance exemption for differently abled persons to continue.
40% of the withdrawals from National Pension System (NPS) was tax exempt for employees. This has now been extended to all assesses.
Deductions under Section 80D for health insurance premium, preventive health check up or medical expenditure in respect of senior citizens enhanced to INR 50,000 as against current overall limit of INR 30,000. In case of a single premium policy having cover for more than one year, the deduction shall be available on a proportionate basis for the period of cover.
Deduction under section 80DDB in respect of medical treatment of specified diseases relating to senior and very senior citizens has been enhanced to INR 100,000 from the existing limits of INR 60,000 and INR 80,000 respectively
Deduction of INR 50,000 against interest income on deposits held by senior citizens introduced. Current exemption of INR10,000 available for interest on savings account no longer separately available. The threshold for tax withholding on such interest income is also raised to INR 50,000.
No adjustments to sale consideration, in respect of transfer of immovable property, will be required if the difference between the stamp duty value and sale consideration on transfer of immovable property is not more than 5%.
The period of lock-in for specified bonds for investment of capital gains under section 54EC is increased to 5 years from 3 years. For this purpose, long term capital assets are now limited to Land, Building or both.
.Long term capital gains on sale of listed equity shares and equity oriented mutual funds which were exempted have now been brought to the tax net with a tax of 10% for capital gains greater than Rs. 1 Lakh. However, a scheme for exempting gains already accrued till January 31, 2018 has been announced.
Lower corporate income tax for companies at 25% has been extended to companies with an annual turnover of up to Rs. 250 crores from the existing Rs. 50 crores. Tax rates for other companies, firms and LLPs remain unchanged at 30%.
Equity Oriented Mutual funds to be liable to pay tax at the rate of 10% on income distributed to unit holders
Charitable institutions will now be required to be more compliant with respect to deduction of taxes at source and avoiding cash payments in order to avail tax exemption.
Loans or advances extended by companies to shareholders which are treated as deemed dividends are now subject to dividend distribution tax @ 30% which is payable by the company instead of the recipient which simplifies the tax collection machinery. Scope of accumulated profits also widened for purposes of deemed dividend.
Companies which have opted for rehabilitation under the Insolvency and Bankruptcy Code, 2016 can preserve their losses even if their shareholding undergoes a change of more than 51%. Such companies can also claim both unabsorbed losses and depreciation.
Tax benefit to start-ups modified. Benefit of tax holiday extended to start-ups incorporated before 1 April 2021 on satisfaction of specified conditions. Definition of eligible business expanded to include innovation, development or improvement of products or processes or services or a scalable business model with high potential of employment generation or wealth creation Incentive for employment generation.
Proposal to accord 100% tax exemption for profits generated by farm producer companies having turnover less than 100 crores. This exemption is provided for 5 years starting from F.Y 2018-19 to F.Y 2024-25 under section 80PA
Non- resident taxation
Transfer of a capital asset being bond or global depositary receipt under section 115AC of the Act or rupee denominated bond of an Indian company or derivative by a non-resident on a recognized stock exchange located in International Financial Services Center to be exempt where the consideration is paid or payable in foreign currency.
Royalty and fees for technical services payment by National Technical Research Organization to a non-resident to be exempt from tax.
Definition of the term "business connection" under section 9 proposed to be expanded and aligned to the scope of agency PE under the BEPS /MLI provisions. Business connection to also include significant economic presence.
New scheme for scrutiny assessments (e-assessments) to be introduced by way of notification.
Conversion of stock-in-trade to capital asset to be taxable as business income at the fair market value ('FMV') as on date of conversion
Compensation (capital or revenue) for termination or modification of a contract relating to business to be taxable as business income and relating to employment to be taxable as income from other sources.
Certain subjects of frequent litigation such as treatment of compensation received as income and trading in agricultural commodity derivatives as not speculation income, were put to rest
Alternate Minimum Tax for a unit located in International Financial Services Center to be 9% (plus applicable surcharge and cess).
In order to use PAN as Unique Entity Number ('UEN') for non-individual entities, it is proposed that every person, not being an individual, which enters into a financial transaction for an amount aggregating to Rs. 2.5 lakhs or more in a financial year shall be required to apply for PAN. In order to link the financial transactions with the natural persons associated with such aforementioned entities, it is also proposed that the person competent to act on behalf of such entities shall also apply for PAN.
Currently an employee contributes 12% of his or her basic salary as the statutory monthly contribution to the employees provident fund and a matching contribution is made by the employer. Government has proposed to contribute to EPFO (subject to conditions) with respect to new employees for entities in all sector for the next three years.
Cryptocurrencies continued to be considered as not "legal tender". Government to consider exploring the Blockchain technology
Indirect tax proposals
The basic customs duty rate has been increased almost across the board, presumably to encourage local manufacturing. Items such as mobile phone components, fruit juices, TVs, silk fabric, etc. were prominent targets.
The existing Road Cess has been replaced with the new Road and Infrastructure cess with an increase of Rs.2/- per litre of motor spirit. To off set this increase, a reduction of Rs.2/- per litre on CVD of import of motor spirit has been proposed.
Following the near abolition of excise duties, the Central Board of Excise & Customs has been renamed as the Central Board of Indirect Taxes and Customs.
The time limit for the Authority for Advance Rulings to rule on applications has been reduced from 6 months to 3 months. Further, an appellate authority has been constituted to appeal against orders of the Authority for Advance Rulings
The Tax rate for income between Rs.2.5 lakh to Rs.5 lakh has been reduced from 10% to 5%.
10% surcharge introduced for income between Rs.50 lakhs to Rs.1crore.
Tax Rebate – section 87 A
The tax rebate reduced to Rs.2,500 for income up to Rs.3.5 lakhs.
TDS on Rent – section 194 IB
TDS of 5% applicable if the monthly rent paid is more than Rs.50,000/-
Loss from HP – section 71(3A)
The new section restricts the set-off of loss from house property to maximum of Rs.2 lakhs irrespective of the house is rented or self-occupied.
Penalty – section 234F
Additional fee shall be levied for delay in filing the tax return beyond the due date. The fees payable shall be Rs. 5,000 where the return is filed post the due date but on before 31st Dec and Rs.10,000 in other cases. It is restricted to Rs.1000 for tax payers whose income is up to Rs.5 lakhs.
Income tax slabs
Super Senior Citizens
Up to Rs.2.5 lakh
Up to Rs.3 lakh
Rs.2.5 – 5 lakh
Rs.3 – 5 lakh
Up to 5 lakh
Rs.5 – 10 lakh
Rs.5 – 10 lakh
Rs.5 – 10 lakh
Above Rs.10 lakhs
Above Rs.10 lakhs
Above Rs.10 lakhs
Financial Year and Assessment Year
The Financial Year (FY) is the year in which you earn an income. The Assessment Year (AY) is the year following the FY in which the income is evaluated and filing is made.
Return of Income
The particulars of income earned by a person in a financial year and taxes paid on such income are communicated to the Income-tax Department through a return of income.
The return forms are known as ITR forms (Income Tax Return Forms).
Benefits of e-filing the return of income
Save time and efforts.
The e-filed returns are generally processed faster.
Easy to maintain the copies of the return filed.
Paper returns can only be filed by those who are above 80 years of Age or by an individual or HUF whose income does not exceed five lakh rupees and who has not claimed any refund in return of income.
e-Return can be filed by IDT portal or through ERIN such as integrated.
ITRV form to be sent to CPC, Bangalore within 120 days, from the e-filing date.
By verifying the return electronically (EVC), there is no need for sending the ITRV to CPC.
EVC can be done using assesse's Bank Account, AADHAAR, Demat Account or by directly logging in e-filing portal.
Due date for filing the return
The due date for filing of return of income in case of individuals/HUF is 31st of July.
Income Sources and available Deductions
Income: Income from employer
Deductions : HRA, Medical Reimbursement, LTA, Conveyance allowance, etc.
Income : Gain or Loss from property owned
Deductions : Standard deduction of 30% and interest on loan for buying/construction of property.
Income: Profit/Loss from sale of Capital Assets (Property, Jewellery, Shares, MFs)
Deductions : Depends on assets, holding period, cost of indexation, carried forward losses and investment in specified options.
Income : Any income, other than the above
Tax Free : Dividends up to Rs.10 lakhs/SB interest up to Rs.10,000, Gift from Relatives, Interest from NRE accounts, PPF account etc.
Components of Salary
Dearness Allowance (DA)
Medical Reimbursement up to Rs. 15,000 per year is exempted.
Transport Allowance up to Rs.1600per month is exempted
Leave Travel Allowance (LTA)
House Rent Allowance (HRA)
Newspaper / Journal Allowance – amount up to Rs. 12,000/- p.a.
Telephone / Mobile Allowance for office use.
Meal Coupons up to Rs.2200 per month.
Particulars of deduction
Investment /Tuition Fees/Housing Loan principal - Section 80C
National Pension System - Section 80CCD(1B)
Over and above 80C Limit
Additional Limit : Rs.50,000
Medical Insurance Premium - Section 80D
Limit : Rs.25,000/Rs.30,000
Educational Loan Interest - Section 80 E
Donation - Section 80G
Limit : 10% of Gross Total Income
Rent Paid - Section 80GG
Limit : 5000 per month
Interest on Home Loan - Section 24
Limit : Rs.2,00,000
Additional deduction of Rs 50,000 under section 80EE
Subject to conditions
Long term Capital gains exempted from tax in respect of STT paid equity shares/MF under section 10(38)
Dividend Income exempted under Section 10 (34)
Limit : Rs.10 lakhs
80C - Tax Saving Options
Section 80C of Income Tax Act, allow deduction of investment or spending from income tax. But here's how you can maximise your savings by making some common investments.
Market linked investments:
ELSS - Mutual Fund Equity Linked Savings Scheme (MF ELSS) : This has lowest lock-in period of 3 years. In case of a monthly SIP, each instalment has a 3 year lock-in.
ULIP - Unit Linked Insurance Plans (ULIPs) : ULIPs are market linked investments offered by insurance companies; lock-in period of 5 years and gain post lock-in tax free.
NPS - National Pension System (NPS) : Investments of up to Rs.1.5 lakh can be claimed for tax deduction in a financial year. Besides, an additional deduction of up to Rs.50,000 can be claimed under section 80CCD (1B).
Fixed income investments :
Employee Provident Fund : This is your contribution towards provident fund that gets deducted from your salary. Contributions towards Voluntary Provident Fund can also be considered for deduction.
Public Provident Fund : This investments has one of the longest tenures of 15 years with further extension of 5 years allowed each time. The interest rates are linked to that of government securities.
National Saving Certificate (NSC) : Investment in NSC can be claimed as deduction.
Bank Fixed Deposits : Fixed deposit of 5 years with a scheduled bank are eligible for deduction
Tax saving fixed deposits/post office time deposit
Senior Citizen Savings Scheme (SCSS) : Investments in SCSS can also be claimed as deduction
Life insurance Premium: You can claim this deduction when you pay the life insurance premium for yourself, your spouse or your children.
Tuition Fees: If you have paid tuition fees towards full-time education of your children, you can claim deduction for up to two children.
Home loan principal repayment: Repayment of principal amount towards a Housing loan can be considered.
Form 26AS is known as annual statement which contain all tax related information of a tax payer. The details give a clearer picture of the tax commitments of the tax commitments of a tax payer. It is associated with PAN.The form also contains details of
Tax Deducted at Source (TDS)
Tax Collected at Source (TCS)
Details of Advance Tax, along with Refunds and
High value Transactions done by the tax payer.
Form 16 (known as TDS certificate) is an important document that contains details of salary income received, quantum of deduction the employee has availed of and how much of tax has been deducted by the employer during the financial year. The employer has to issue Form 16 to the employees showing the total TDS deducted on income.
Form 16A is also a TDS Certificate. Form 16 is for salary income, where as Form 16A is applicable for TDS on Income other than salary. Banks issue a Form 16A when TDS is deducted by them on interest earned by you in fixed deposits. If you are freelancer, your clients will issue you form 16A if they have made TDS deductions from payment they make to you. Form 16A is also issued for TDS deductions on insurance commission paid. This certificate also has details of name & address of deductor / deductee, PAN/TAN details, and details of TDS deducted & deposited. The income on which TDS is deducted is also specified.
Due Dates for Advance Tax Payments
There is no need for payment of advance tax for a senior citizen who does not have income from business / profession.
15% of estimated tax - June 15, 2017
45% of estimated tax - September 15, 2017
75% of estimated tax - December 15,2017
100% of estimated tax - March 15, 2018
Advance taxes and final tax can be paid at authorized bank branches and remember that all tax payers have to file their ITR.
MCA has notified a scheme for defaulting companies and directors named "Condonation of Delay scheme 2018" in Circular No.16/2017 dated 29.12.2017. The scheme is in force with effect from 01-01-2018 and shall remain in force up to 31.03.2018.Companies registered under the Companies Act, 2013 (or its predecessor Act) are required to file their Annual Financial statements and Annual Returns with the Registrar of Companies and non-filing of such reports is an offence under the said Act.
MCA had recently identified 3,09,614 directors associated with the companies that had failed to file financial statements or annual returns in the MCA21 online registry for a continuous period of three financial years 2013-14 to 2015-16 and they were barred from accessing the online registry and a list of such directors was published on the website of MCA. With a view to giving an opportunity for the non-compliant, defaulting companies to rectify the default, in exercise of its powers conferred under sections 403, 459 and 460 of the Companies Act, 2013, the Central Government has decided to introduce a Scheme namely "Condonation of Delay Scheme 2018" [CODS-2018]
Applicability of the scheme
This scheme is applicable to all defaulting companies (other than the companies which have been stuck off/whose names have been removed from the register of companies under the Act). A defaulting company is permitted to file its overdue documents which were due for filing till 30.06.2017 in accordance with the provisions of this Scheme.
Procedure to be followed
TheDINs of the disqualified directors de-activated at present shall be temporarily activatedduring the validity of the scheme to enable them to file the overdue documents.
The defaulting company shall file the overdue documents in the respective prescribed e-Forms paying the statutory filing fee and additional fee payable as per the Act and Rules.
The defaulting company after filing documents under this scheme, shall seek condonation of delay by filing form e-CODS 2018attached to this scheme along with a fee of Rs. 30,000/-
The DINs of the Directors associated with the defaulting companies that have not filed their overdue documents and the eform CODS, and these are not taken on record in the MCA21 registry and are still found to be disqualified on the conclusion of the scheme in terms of of the Act shall be liable to be deactivated on expiry of the scheme period.
In the event of defaulting companies whose names have been removed from the register of companies under the Act and which have filed applications for revival under the Act up to the date of this scheme, the Director's DIN shall be re-activated only NCLT order of revival subject to the company having filing of all overdue documents
Scheme not to apply for certain documents
This scheme shall not apply to the filing of documents other than the following overdue documents :
Form Number 20B/MGT-7- Form for filing Annual return by a company having share capital.
Form 21A/MGT-7- Particulars of Annual return for the company not having share capital.
Form 23AC, 23ACA, 23AC-XBRL, 23ACA-XBRL, AOC-4, AOC-4(CFS), AOC (XBRL) and AOC-4(non-XBRL) – Forms for filing Balance Sheet/Financial Statement and profit and loss account.
Form 66- Form for submission of Compliance Certificate with the Registrar.
Form 23B/ADT-1- Form for intimation for Appointment of Auditors.
The Registrar concerned shall withdraw the prosecution(s) pending if any before the concerned Court(s) for all documents filed under the scheme. However, this scheme is without prejudice to action under section 167(2) of the Act or civil and criminal liabilities, if any, of such disqualified directors during the period they remained disqualified.
At the conclusion of the Scheme, the Registrar shall take all necessary actions under the Companies Act, 1956/ 2013 against the companies who have not availed themselves of this Scheme and continue to be in default in filing the overdue documents.
Managing the day to day operations of your business along with complying the corporate and other laws can be little hectic for any entrepreneur. Hence, it is essential to understand such legal requirements to ensure timely fulfillment of compliances, without any levy of interest or penalty.