How Georgia Fought Against Corruption!

fight against corruptionGeorgia’s experience in fighting corruption in public sector has had unique success, and many of its aspects could be adapted and applied in countries facing comparable challenges in tackling pervasive  corruption in public services, says a new World Bank report Fighting Corruption in Public Services: Chronicling Georgia’s Reforms,” launched today at the World Bank.

“Corruption is sometimes seen as endemic, a product of traditional local culture, and, as such, inevitable,” said Philippe Le Houérou, World Bank Vice President for Europe and Central Asia Region. “Georgia’s experience shows that the vicious cycle of endemic corruption can be broken and, with appropriate and decisive reforms, can be turned into a virtuous cycle.

Since the Rose Revolution at the end of 2003, Georgia has had notable achievements in fighting corruption in its public services. Little, however, has been written on how it happened. What were the salient features of Georgia’s anti-corruption efforts in this area? Are the achievements to date sustainable? And can Georgia’s experience be replicated elsewhere?

The report attempts to answer these questions through case studies based on data from selected public services — patrol police, tax administration, customs, power supply, business regulations, civil and public registries, university entrance exams, and municipal services, as well as interviews with current and former government officials. It also analyzes the accountability framework between the government, public service providers, and service users.

In 2003, corruption permeated nearly every aspect of life in Georgia. Bribes were needed to obtain most of the public services, such as a driver’s license or a passport, to register property, start a business, build a home or gain entrance to state universities. Since then, measures undertaken under the “zero-tolerance” policy of the government have drastically reduced the prevalence of unofficial payments in various public services with most indicators now closer to those of the more advanced EU countries.

This book takes objective factual case study approach to chronicle how corruption in specific public services was fought,” said Asad Alam, World Bank Regional Director for the South Caucasus, and the primary author of the book. “The book places particular emphasis on documenting the design and implementation of these reforms, attempting to shed light on the decision-making process on reform design, the trade-offs policy makers faced, and the sequencing and complementarities among the various reforms.”

From the case studies, 10 factors emerge that help explain Georgia’s achievements to date: exercising strong political will; establishing credibility early; launching a frontal assault; attracting new staff; limiting the state’s role; adopting unconventional methods; coordinating closely; tailoring international experience to local conditions; harnessing technology; and using communications strategically. While many of these factors may seem obvious, the comprehensiveness, boldness, pace, and sequencing of the reforms make Georgia’s story unique.

The report also lays out the unfinished agenda of institutional reforms, which will be needed to ensure the sustainability of Georgia’s anti-corruption results by putting in place a robust system of checks and balances. It also underscores that while every country has a unique set of initial conditions, nature of the corruption problem, and political economy, there are many elements of Georgia’s story which can be replicated in other countries.

Georgia’s experience destroys the myth that “corruption is culture” and gives hope to all those policy makers, government officials, and concerned citizens in many countries who are aspiring to clean up public services.

Download interesting Full Report Click Here

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Provisions of Income Tax for Women.

indian women in sareeSome of the major provisions under Income Tax Act specially for women are as under :-

1. As per Income Tax Act, for men and women same tax rates are applicable.  Further income upto 2 Lakh [AY 2013-14] is exempt.  If a woman is doing business or job on her own then all rules and exemptions of Income Tax are equally applicable to her also.

2. As per Hindu Law, women have right of all the gold ornaments, valuables and other gifts received on the occasion of marriage from her parents.  It is called as “Stri Dhan”.  Further, valuables and gifts received on any other occasion from the relatives should be kept on record as regards when and how they are received i.e. list should be prepared.  Don’t forget income tax department may inquire about when and how these valuables were received.

If these records are kept properly, then income tax will not be required to be paid.

3. As per Income Tax Circular the person who does not file wealth tax return and there is raid by Income Tax Department, the IT personnel cannot seize 500 gms of gold ornament from married female and 250 gms of gold ornaments from the unmarried female.  Further income Tax Department cannot seize valuables, ornaments disclosed in the wealth tax return.  Therefore all wealth tax payers should file wealth tax return regularly.

4. As per Hindu Succession Act and Hindu Women’s Right to Property Act, a woman has equal right in the property of her husband and father.  Income tax is not applicable on the property received out of such rights.

5. If husband and his wife has taken home loan in their joint names then both can get the deduction otherwise one who has paid the installments can get the deduction of interest and principal paid.

6. Male taxpayer can get the deduction on the Life Insurance Premium and medical insurance paid for own, wife and children in his Income Tax Return.  Deduction upto Rs.100,000/- can be taken for Life Insurance premium paid and Rs.15,000/- can be taken for the Medical Insurance Premium paid.  Further additional deduction of Rs. 15,000/- can be taken on the medical insurance premium payment of father and mother.

7. As per Latest Judgement from Ahmedabad ITAT, if the house is in the name of wife and if husband is paying rent then husband can get deduction under House Rent Allowance from the Salary income.  But benefit of this judgement should be taken by following regulations of the act.

8. While giving payments of salary, commission, interest etc. to the mother, wife, sister or daughter in law, need of business, her education, experience etc. is to be taken into consideration.  these expenses may be allowable subject to verification by Income Tax Department.

9. If a married woman gets property, valuables from her husband, father in law or mother in law without consideration and income is derived from such property, such income may be clubbed in the income of the person.

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Why should you invest in Fixed Maturity Plans (FMP)



fixed maturity plans

What are FMPs:  FMPs are investment schemes floated as close-ended Debt  mutual funds, and have maturity periods ranging from a month to five years.

Why are they popular: The key to their popularity lies in their ability to generate steady returns over a fixed maturity period, immunising investors against market fluctuations. An investor who does not redeem beforematurity is largely insulated from price risk, defined as the potential to make losses on bonds when interest rates rise. FMPs generally also offer higher tax-adjusted returns than fixed deposits (FDs) do.

Where do they invest:FMPs invest in debt papers of same or lower maturity as that of the fund, with the intent of holding them to maturity. This means interest rates and their impact on market value of the bonds is only notional and will not affect the actual returns that would be realised.In simple terms  FMPs invest largely in certificates of deposit (CDs), commercial papers (CPs), money market instrumentscorporate bonds, even in bank fixed deposits.

FIXED-MATURITY-PLAN-FMPIrrespective of the holding period, FMPs generate better post-tax yield. The length of the holding period matters, especially when one has to decide between growth and dividend options.

*Investors can go for the growth option if the holding period is more than a year, and

*for the dividend option if the holding period is less than a year.

*Mutual fund investors have the option of paying capital gains tax at 10.3% (without indexation) or

* at 20.6% (with indexation).

Indexation helps offer compensation against the rising inflation and, in this case, one is allowed to increase the value of initial investment as per the cost inflation index provided by the Income Tax Department. On the assumption that the inflation is 6%, the capital gain after indexation works out to just 4%. Since the 20.6% capital gains tax is paid only on 4%, the effective is lesser, taking the post-tax yield up to 9.18%.

As per the current law, investors can claim double indexation benefit if the holding period is over three financial years. Consider the case of a 375-day FMP, which starts on 28 March 2012 and matures on 7 April 2013. Since it is spread over three financial years-2011-12 (investing year), 2012-13 (holding year) and 2013-14 (redemption year)-the indexation will be for two years (6%+6%). In this case, one can report a 2% long-term capital loss (instead of gain) and it can be set off against other long-term capital gains reducing the tax liability further. One can come across several FMPs with double indexation benefits in March.


The exit from a fixed maturity plan is very difficult. Though these units are listed on the stock exchanges, most counters are virtually illiquid. Even if random trade takes place, it is usually at a discount to the NAVs. So investors should put in only the money they don’t need till the maturity of FMPs.

Though the FMPs are relatively less risky, investors should not treat these as products that offer high return with zero risk.  Unlike returns from bank FDs and risk-free investments, FMP yields are indicative and not assured. Reliable in-house or third-party evaluations of credit risks, such as CRISIL’s Credit Quality Ratings (CQRs), allow investors to evaluate the credit risks in FMPs,and help them take investment decisions that are appropriate for their objectives and risk appetite.

While the structure eliminates interest rate and reinvestment risk, the credit risk (or the default risk) still exists. So one should only opt for reputed fund houses.

Copy of PAN Card is essential document required while filing FMP Applications.

jayshree2Jayshree Chaumal is a Financial Advisor and can be contacted on for any advice related to Tax Free Investments, Financial Instruments etc.She can also be contacted on +91-9825074030.

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Married Couple goes smart : Husband gets HRA exemption on rent paid to wife

HRA ExemptionIncome Tax Appellate Tribunal, Ahmedabad Bench recently held in the case of BAJARANG PRASAD RAMDHARANI V ACIT (2013) 37 186 (Ahmedabad -Trib) that the assessee was entitled to exemption under section 10(13A) of Income Tax Act.

In this case the AO disallowed assessee’s claim for HRA exemption on the ground that the assesee and his wife were living together and claim for payment of rent by the assessee to his wife was made to reduce his tax liability.  The CIT(A) confirmed the addition on the ground that the tenant (Assessee) and landlord (i.e. his wife) were staying together which indicated that the whole arrangement was a colorable device.  Aggrieved the assessee filed the instant appeal.

The Tribunal held in favor of assessee as under :-

1) The Section 10(13A) provides that exemption would be allowable to an assessee for any allowance granted to him by his employer to meet expenditure actually incurred on payment of rent in respect of residential accommodation occupied by him.

2) However, the exemption is not available in case the residential accommodation occupied by the assessee is owned by him or the assessee has not actually incurred expenditure on payment of rent;

3) Admittedly, the AO had given a finding of the fact that the assessee and his wife were living together as a family.  Therefore, it could be inferred that the house owned by wife of the assessee was occupied by the assessee also;

4) The assessee had submitted that the rent receipt(s) and payments had been duly verified.  Therefore, the assessee had fulfilled the twin requirements of the provision, i.e. occupation of the house and the payment of rent.  Thus, he was entitled to exemption under section 10(13A). 

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Govt. considering to set up separate Pay Commission for Armed Forces.

After the announcement of 7th (seventh) Pay Commission for Central Government Employees, Indian Armed Forces will have a separate pay commission that will deal with the pay revision and benefits granted to the defense personnel only. 

Giving in to the demands of the three services chiefs, who had written to the Defense Minister AK Antony last year complaining about the anomalies in the sixth pay commission, the Central government has agreed to de link the pay revision of defense personnel from the civilian employees and constitute a separate pay commission for the military personnel this year. 

The reports of a first exclusive pay commission for the military comes as the government has today announced the Seventh Pay Commission for 80 lac central government employees and pensioners. Its recommendations are likely to be implemented with effect from January 1, 2016. 

Though the government had agreed to cater to the demands of Armed Forces, the three services chiefs registered strong objection to the fact that there was no military representative on the panel set up by the Prime Minister to look into demands of the forces for pay parity with civil servants. 

The panel set up by the PM in July had four IAS officers as its members and was headed by the Cabinet Secretary. 

The main demand of the Armed Forces is granting of Non-functional upgrade in the pay to the armed forces on the lines of the Indian Administrative Service (IAS) and the fact that it would be decided only by the IAS officers did not go down well with the military chiefs. 

“Unlike IAS where all civil servants retire as Additional Secretaries, the hierarchy structure in the armed forces is very steep. Not more than 20 percent of the people make it beyond the rank of Brigadiers,” reports quoted a Army personnel as saying. 

The military personnel’s other demands are granting of One Rank One Pension for retired personnel and One Rank One Pay for those still serving. 

The Armed Forces also clamored for fixing rank pay and fixing pay structure for Personnel Below Officer Rank (PBOR) and junior commissioned officers (JCOs). 

Reacting to the complaint, the Defense Minister had written to the Prime Minister saying there was “growing discontentment among the services personnel due to the anomalies in fixation of payment and salaries.” 

Antony conveyed to the PM that the defense personnel, ex-servicemen and the pensioners were “agitated” over the pay anomalies and “corrective measures” must be taken soon. 

The government has so far constituted six pay commissions but it will be the first time since independence that a separate pay commission will be created to look into the pay revisions of defense personnel.

The government constitutes Pay Commission almost every ten years to revise the pay scales of its employees and often these are adopted by states after some modification. 

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Employees Union demands merger of DA before 7th Pay Commission.

Confederation of Central Government Employees & Workers demanded the merger of Dearness Allowances as practiced previously before the 7th pay commission.  The confederation announced that the Central Government Employees and workers has been raising their demand for setting up Seventh Pay Commission since 2011 and also conducted number of agitational programmes including March to Parliament and one day nationwide strike on 12th December, 2012.

Mr. M. Krishnan, Secretary General of Confederation while welcoming the decision of the Government informed that they are disappointed to note that their demand for five years wage revision w.e.f.01.01.2011 and merger of DA has not been considered favorably by the Government. Every time the Government appointed pay commission merger of DA was also granted. This time Government has not acceded the demand for merger of DA with pay while announcing seventh (7th) pay commission.

Thus by appointing pay commission employees will not be getting any financial benefit now. The demand for inclusion of Gramin Dak Sevaks under the purview of the 7th CPC and grant of merger of DA to GDS is also pending.

In view of the above, the National Secretariat of the Confederation of Central Government Employees and workers urge upon the Government to consider the above demands also favourably failing which the confederation shall be constrained go for further agitational programmes.


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Prime Minister approves the constitution of 7th Pay Commission

Finance Minister Mr. P Chidambaram announced today i.e. 24th September that Prime Minisater Mr. Manmohan Singh has given his nod for setting up 7th Pay Commission.

Allowing about two years for the seventh pay commission to submit its report, the recommendations are likely to be implemented with effect from January 1, 2016, Chidambaram said in a statement here.

The average time taken by a Pay Commission to submit its report has been around two years. Therefore it is expected that Seventh Pay Commission will submit its report in 2016.

The approval of  seventh Pay Commission is likely to impact at least 85 lakh central government employees and pensioners.

The names of the chairperson and members, as well as the terms of reference, of the Pay Commission will be finalized and announced shortly.  The 7th Pay Commission pay scales will be determined after consultations with interest groups once the chairperson and members are appointed and starts functioning.  

There are at present around 50 lakh central government employees and 35 lakh pensioners, who stand to benefit from the recommendations from the 7th Pay Commission.

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9 Smart Saving Options apart from Saving under section 80C

Tax Saving exercise is a smart exercise and if properly done it not only helps to save tax but also provides solid protection for future liabilities. Here we have provided information on 9 saving options apart from saving under section 80c.


Tax deduction under section 80D qualifies for mediclaim policies. The premium, which is paid for medical insurance policy for self and family members to protect them from sudden medical expenses, comes under this section. The maximum amount allowed for exemption annually for self, spouse and dependent parents/children is Rs. 15,000. In case of a senior citizen, the maximum amount extends up to Rs. 20,000. If you are paying the premium for your parents (whether dependent or not), you can claim an additional maximum deduction of Rs. 15,000.

According to the Income Tax Act, if you are paying a premium to LIC or any other insurance company (approved by the Income Tax board) for the medical treatment of a dependent physically disabled person, you can avail exemption under the section 80DD. Here, the dependent should be none other than your spouse, children, parents or sibling. If the person is suffering from 40 per cent of any disability, a fixed sum of Rs. 50,000 can be claimed in a year. Similarly, if the disability is 80 per cent, the fixed sum goes up to Rs. 1,00,000 per year. For initiating the process of deduction you need to submit the medical certificate issued by a medical authority along with the return of income.

If you have incurred expenses for the medical treatment of self or your dependents, you can claim a deduction of up to Rs. 40,000 or the actual amount paid, whichever is less, under the section 80DDB. For a senior citizen, the maximum exempted amount is Rs. 60,000, or the amount actually paid for medical expenses. To claim a deduction under this section, you need to submit a medical certificate from a doctor working in a government hospital.

The interest paid on loan taken for pursuing higher education of self or any dependent is exempted from tax under section 80E. An education loan can be taken for wife, children and minors for whom you are the legal guardian. This deduction is applicable for a period of eight years or till the interest is paid, whichever is earlier. The deduction is only approved for higher studies, which means full-time graduate or postgraduate courses in engineering, management or applied sciences, pure sciences including mathematics or statistics. However, from 2011 onwards, the scope of this exemption has been extended to cover all fields of studies including vocational studies pursued after completing the senior secondary examination or equivalent. No exemption is applicable for part-time courses.

One often donates on philanthropic grounds to help the destitute. Such an amount can be donated to trusts, charitable institutions and approved educational institutions, and qualifies for deduction under Section 80G. The exemptions can be up to 50 per cent or 100 per cent of the donations made. Funds in which the donations are eligible for tax exemptions include the National Defence Fund, Prime Minister Drought Relief Fund, National Foundation for Communal Harmony, National Children’s Fund, Prime Minister’s National Relief Fund, etc.

If a salaried or self-employed person staying in a rented house does not receive any kind of HRA, they can claim a deduction under this section. However, you cannot avail any such benefit if you, your spouse and/or your child owns any residential accommodation in India or abroad. You can claim the least of the following under Section 80GG: 25 per cent of the total income, or Rs. 2000 per month, or excess of rent paid over 10 per cent of total income.

Any monetary contribution to any political party or electoral trust is eligible for tax exemption. Thus, your contribution, as a matter of appreciation for their work, will serve both the purposes.

A resident of India suffering from any kind of specified disability is eligible to claim tax deduction under this section. In order to enjoy this opportunity, one should be suffering from not less than 40 per cent of the following diseases: blindness, low vision, mental illness, mental retardation, hearing impairment. The deduction provided is flat Rs. 50,000, irrespective of the expense incurred. If the disability is severe, the deduction can be up to Rs. 1 lakh. One needs to provide a copy of all the certificates issued by a medical authority in order to avail this benefit.

The Finance Act 2012 introduced a new Section 80CCG to offer 50 per cent tax break to new investors who invest up to Rs. 50,000 and whose GTI is less than or equal to Rs. 10 lakh. It has been introduced for budding investors entering the equity markets for the first time and is a once-in-a-lifetime benefit.

Hence, there are several sections apart from 80C that can help an individual benefit from tax exemptions. It is time to start looking beyond 80C for tax savings.

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Attractive REC Tax Free Bonds! Last Date 23rd September 2013.

Rural Electrification Corporation has entered into Tax Free Bonds Market for FY 2013-14. The issue opened on 30th August, 2013 and will remain open till September 23,2013. These bonds offer a tax-free interest at the end of the tenor but no tax deduction at the time of investment. These are usually issued by government entities. 

REC Tax Saving Bond Last Date September 23,2013This time there are three series to choose from. If you are a small investor, which means your application does not exceed Rs.10 lakh across all series, then the applicable annual coupon rate is 8.26% for 10-year maturity, 8.71% for 15-year maturity and 8.62% for 20-year maturity. If you are an individual investor but your application exceeds Rs.10 lakh, then you fall in category III of “high net worth individual” and the respective coupon rates for you are 8.01%, 8.46%, 8.37% per annum.

Interest is paid out only annually in December every year. The bonds are proposed to be listed on BSE Ltd and you will be able to trade them in the secondary market, thereafter.


Interest from the bond does not form part of total income, and hence it’s a tax-free bond. But, when you sell the bond on the exchange, you will have to pay capital gains tax. If you sell the bond post 12 months, the capital gain will be calculated as per 10 percent without indexation. If you are not the original allot tees of the bond and bought it later in the secondary market, the coupon rate will be lower by 25 bps then the applicable coupon rate for the retail investor.

Low Risk High Return

The issue is rated AAA by rating agencies Crisil, CARE and Icra. This reflects the security of ownership as it is a government company. REC is a public financial institution under the Ministry of Power, Govt. of India. It provides financing to all segments of the power sector, including power generation projects as well as independent power projects.
REC finances and promotes companies operating in the area of power generation, transmission and distribution, including renewable energy projects, throughout India. The company’s loan sanctions and disbursements are seen in the power generation business and transmission and distribution. The sector it lends to isn’t always seen as the most efficient; nevertheless, it is a growing sector.
REC Ltd’s operating profit has grown at a compounded annual growth rate of 26% in the last three years and so far the company’s cash balances are comfortable. It has consistently paid dividends at least for the last five years, which again bodes well.

The bonds represent secured debt and you will have a claim on specified book debts of the company in case it fails to fulfill its financial obligations and payments to you.
Who can apply: Resident individuals, HUFs, partnership firms, companies and body corporates, banks, public financial institutions, national investment funds, mutual funds, venture capital, insurance companies, commercial banks, co-operative banks, public/private charitable trusts, industrial research organizations and other eligible categories.
What should you do?

Last year tax-free bonds were not a big favorite among investors as the interest rate was lower and equities looked more attractive at that point.
Things have changed now and investors are once again able to take advantage of high interest rates. If you are in the highest tax bracket of 30.9%, on a gross basis, the coupon on this issue is equivalent to a pre-tax interest rate of around 12.0-12.5% (depending on the series you consider). This is surely a very good return, especially considering that the risk of default is minimal.
However, you have to keep in mind that these are very long-term bonds and liquidity is limited. Selling in the secondary market may not always yield the result you want as the sale won’t happen on face value.

We highly recommend these bonds for risk-averse, long-term investors.

Effective yield and Maturity: 

Category/ Yield Tenure 10 Years  15 Years 20 Years
Institutional Investors 8.01% 8.46% 8.37%
Corporates 8.01% 8.46% 8.37%
HNIs 8.01% 8.46% 8.37%
Retail investors 8.26% 8.71% 8.62%


As mentioned earlier, the bond is suitable if you are looking for regular sources of income. Even if you do not need the money, with some amount of discipline, you can ensure that you reinvest the interest income in short-term debt funds or income funds, based on your time frame. You can consider the 10 or 15-year option as they provide superior returns.

Points to Remember :
  • You can apply in DMAT Form or Physical Form.
  • For DMAT Form please mention your PAN No. & DMAT details correctly.
  • For Physical Form – Submit your PAN CARD COPY AND ADDRESS PROOF COPY


jayshree2 Jayshree Chaumal is a Financial Advisor and can be contacted on for any advice related to Tax Free Investments, Financial Instruments etc.She can also be contacted on +91-9825074030.
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Online Monitoring of Tax Evasion under Money Laundering Act

tax evasionUnder the provisions of the Prevention of Money Laundering Act, 2002 and the rules framed there under, it is the responsibility of the banks and other financial institutions to detect suspicious transactions and report such transactions to the Financial Intelligence Unit-India (FIU-IND) under the Ministry of Finance. FIU-IND is responsible for receiving and analyzing such Suspicious Transaction Reports (STRs) and disseminating information to relevant intelligence and law enforcement agencies. FIU-IND has established an information technology based mechanism for online filing Suspicious Transactions Reports (STRs) and other statutory reports and for online dissemination of the information to the intelligence and law enforcement agencies.

The STRs received by FIU-IND from the banks and other financial institutions are disseminated by it to various intelligence and law enforcement agencies including agencies administering direct and indirect taxes for taking further action. However, information disseminated by FIU-IND may or may not lead to detection of evasion of direct and indirect taxes. Moreover separate data with regard to evasion of direct and indirect taxes detected by various enforcement agencies on the basis of information shared by FIU-IND is not maintained.

Through the mechanism of Economic Intelligence Council and Regional Economic Intelligence Councils, various law enforcement agencies share information and coordinate action relating to various economic offences, including tax evasion.

It is pertinent to note that recently Finance Ministry’s unique initiative to set up online monitoring system of suspicious transactions, named ‘Virtual Office’ for real-time coordination among revenue intelligence agencies and dissemination of various inputs pertaining to movement of illegal funds.

Central Board of Direct Taxes (CBDT) has detected unaccounted income and assets of Rs 1,408 crore using this platform.

The Directorate General of Central Excise Intelligence (DGCEI) and Directorate General of Revenue Intelligence (DGRI)–two leading agencies under the Central Board of Excise and Custom (CBEC)–have together detected indirect tax evasion of at least Rs 750 crore.

These agencies, which are part of the Virtual Office programme, detected the evasion after following up the leads in form of Suspicious Transaction Reports (STRs) passed on to them by Financial Intelligence Unit (FIU)–an agency tasked with analysing and disseminating information relating to dubious financial exchanges.

An STR is a transaction of Rs 10 lakh and above believed to be proceeds of crimes including drug trafficking and black money.

The Virtual Office was set up in January to monitor the feedback on the STRs disseminated by FIU-Ind, which is also providing administrative support to it.

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