SEBI’s New Norms for Independent Directors and their Implications

Nevin Clinton, Flywork.io TeamFlywork.io.

Who are independent directors?
    Independent directors are directors of a company who neither have a material relationship with the company nor are they a part of the executive team. They are not involved in the day-to-day activities of a company as well. However, they play an important role in corporate governance. This is because they offer advice from the perspective of a third party since they themselves don’t have a material relationship with the company. Further, their opinions and activities will be completely free of bias more often than not due to their non-involvement with the personnel who are involved in the day-to-day activities of the company.

SEBI’s norms on appointment of independent directors and composition of committees
    The Securities Exchange Board of India (SEBI) which regulates the securities and commodity market in India approved amendments relating to new norms and regulations on independent directors of companies on 29 June, 2021. These norms were brought in after a board meeting in early June and they will come into effect from January, 2022. 

    The first and most important change in norms regarding independent directors is that two-thirds of the members of two committees in every listed company – the Nomination and Remuneration Committee (NRC) and the Audit Committee (AC) must be independent directors. The rules before the new norms were brought in stated that a majority in these two committees must be independent directors. So from a majority of 51% being the requirement, SEBI has increased it to 67%.

    There were also changes brought in to the appointment of an independent director. The said appointment must now be approved within three months by shareholders or through an Annual General Meeting (AGM) depending on whichever comes first. At least 75% of the shareholders must approve the appointment. Further, for appointment, there must be disclosure of the skills of candidates along with why he/she is the right person (or not the right person) for the job by the shareholders. Details on the process used for searching and shortlisting candidates must also be revealed. 

     With regard to the resignation of an independent director, the company must make available the contents of the letter of resignation which was submitted. Any transaction that is pending related to the director must be taken up by the fellow independent directors in the Audit Committee.

Meaning of ‘independent director’ clarified
    The meaning of ‘independent director’ is given in the Companies Act, 2013 wherein Section 149(6) provides for various characteristics of an independent director. Now, in the new norms, SEBI has clarified the definition and stated that an independent director is one who adds some value to the company and is not a promoter or relative of a promoter of the company. Further, there should have been no relationship with the company for the director regarding finances in the preceding two financial years. 

    SEBI has also brought in a cooling off period of one year for independent directors becoming full-time directors in the same company or its associates. Further, this cooling off period has been set at three years if managerial personnel or their relatives are to become an independent director.

    Finally, SEBI has also announced through a release that there would be ‘greater flexibility to companies while deciding the remuneration for independent directors which may include profit-linked commissions, sitting fees, ESOPs, etc, within the overall prescribed limit specified under Companies Act, 2013’. A reference to the Ministry of Corporate Affairs has been made in this regard and it is expected that the same will be approved soon.

Implications
    The new norms proposed by SEBI seem sound on paper and if the same are implemented well, this could be a positive change. Independent directors are an integral part of any company as they play a crucial advisory role. By streamlining their appointment and making the process stricter, SEBI has ensured that independent directors will well and truly stay ‘independent’. By also providing for more transparency in the appointment process and the requirement to make information available for scrutiny, a sense of heightened confidence is bound to be directed at the appointed independent directors. By extending similar requirements in case of resignations, there is once again more transparency, confidence and lesser room for unfairness. 

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IGRS (Integrated Grievance Redressal Status) PORTAL UP

By Simran Kaur,  Flywork.io TeamFlywork.io.

IGRS (Integrated Grievance Redressal System) is an online portal that provides services related to land. In other words, It is a state government’s dedicated portal to maintain records while providing many online services to the citizens such as property details, encumbrance details, stamp duty information, etc. 

Each state’s Stamp and Registration Department maintains a specialized portal, IGRS, where individuals can access a variety of property-related online services. The portal allows users to access online certified copies of deeds, stamp duty information, and information on specific properties, among other things. 

According to an analysis by the Central Public Grievance Redress and Monitoring System (CPGRAMS), Uttar Pradesh has become among the top five states in the country for rapid redress of public grievances. By resolving 68.89 percent of concerns in the last ten months under, the state has pushed its way into the top five states. 

Puducherry tops the list with 96.61 percent grievance redressal, followed by Chhattisgarh with 83.91 percent, Delhi with 74.38 percent, and Tamil Nadu with 71.26 percent.

Let’s get to know more about the IGRS portal regarding Uttar Pradesh’s IGRS portal.

IGRS UP

IGRS UP is essentially an integrated mechanism for resolving residents' issues in the state of Uttar Pradesh. People can use this service to make complaints, track their IGRS status, and provide comments to the government. Jansunwai UP status can be viewed at jansunwai.up.nic.in using the prescribed steps.

It was launched by the then-Chief Minister in 2016. It is an online system that encourages transparency and ensures that government departments are accountable to the state's citizens.

IGRS UP Complaint and Status Tracking: The public can quickly submit their concerns and issues with any government department through this portal. Jansunwai portal is the name of this integrated system. People can file their complaints at any time and from anywhere. They are not required to go to several government departments and offices to file complaints or register concerns. 

The public and state departmental officers can use IGRS UP since it has a user-friendly interface and use the portal in either English or Hindi, depending on their preference.

JANSUNWAI APP

Along with the online portal, the UP government gives citizens another venue to register their issues. Citizens can also use the Samadhan smartphone application, UP IGRS, to make grievances.

Both civilians and officers can use the Android application. The goal of the smartphone app is to achieve mobile government in the state. Citizens can use this app to send their complaints and track their progress without having to visit the official website. Similarly, departmental officers can use this mobile application to review complaints that have been emailed to them. 

VARIOUS SERVICES AVAILABLE ON IGRS UP

  • Understand your SRO 
  • Property service registration copies that have been certified 
  • Search for encumbrances 
  • E-stamping 
  • Looking for the market value of a commodity
  • Registration of a society 
  • Sale document, bainama and dastavez in Uttar Pradesh 
  • Registration of marriages 
  • Information on chit money 
  • Vendors of stamps and information about stamp

BENEFITS OF THE PORTAL

  • With the assistance of information technology, it facilitated good governance in the state. 
  • It is a simple and user-friendly interface for citizens to register complaints. 
  • It is a transparent common interface for all citizen grievances. 
  • Citizens are given a single username/password to use to register problems with various departments via this single portal.

 

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Will – Essentials and Steps to Draft

Nevin Clinton, Flywork.io TeamFlywork.io.

    A will is essentially a legal declaration stating how one’s property must be disposed of after his death. If a will has been drafted by a person before his death, his property will be governed by testamentary succession i.e. according to what he has stated in the will. If there is no will, intestate succession will come into force wherein the division will be done according to existing laws. 

Definition of will
    Section 2(h) of the Indian Succession Act, 1925 defines a will or testament as a ‘legal declaration of the intention of a person when he wants to distribute his estate as a testator to the people who would be inheriting the estate after his death.

Need for a will
    A will is important as it helps make the process of division of property after one’s death extremely simple. A person can decide who receives his property through a will, the lack of which could create needless confusion and legal complications. A will can also contain details on who should be guardians for minor children, if any, as well as successors for businesses. So if a will is drafted in an effective manner, it would lead to seamless disposition of property. This is exactly why a will must be drafted with the help of legal personnel.

Essentials of a will

  • Intention: First and foremost, the intention of the person making the will must be made clear. The said intention must be to take effect after his death.
  • Capacity: Only a person who has attained majority and is of sound mind can make a will. A will can also be made by a person who is usually of unsound mind if it is done so during a lucid interval. 
  • Manner of disposition of property: A will must clearly mention how the property concerned is to be divided. There must be no ambiguity and just naming successors will not be enough. 
  • Alteration of will during lifetime: A will can be altered during the lifetime of a person so it is the final draft of the altered will that will be valid. 
  • Other necessary details: A will must have complete details on the testator, property, an executor will, shares, signatures and so much more which are discussed below.

How to draft a will?

The following are the details that must be ensured to be given in a will while drafting.

Details on testator: Complete details on the person making the will must be provided including name, age, address, and other documents as proof. The date of making the will must also be specified. The testator must also declare that is of sound mind and that he was not coerced into making the will. If a will has certain statements that lead to doubts that the testator might have been coerced, the executor of the will must prove or satisfy the conscience of the court that it was not the case.

Details on beneficiaries: Apart from details on the testator, complete clarity must be given on who the beneficiaries are. Their name, age, address and the like must be mentioned as well.

Appointment of the executor of a will: It is essential that an executor must be appointed for a will who can ensure that everything mentioned is carried out smoothly. Details on the executor must also be provided in the will.

Details on property: Since the very purpose of a will is to govern the disposition of property after one’s death, details of all the assets and properties of the testator must be mentioned with solid proof. The shares that each beneficiary will get from the property must also be given. If a child gets a share, a custodian must be appointed. Any particular direction on how to share a particular piece of property can also be given.

Signatures: A will must be signed by the testator in the presence of 2 witnesses. It is not compulsory that the witnesses must be aware of the details of the will. In fact, it is advisable if they are not aware.

Revocation of will

It is noteworthy here that a will can be revoked during the lifetime of the testator. This can be done by drafting a document stating the intention to revoke a will. Alternatively, destroying a will and all copies of it would also mean that it would stand revoked.

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Student visa – What does it mean? 

​S. Aditya, Flywork.io TeamFlywork.io.

What is a student visa?

The residence of an individual in a country is based upon their nationality or is authorized by the hosting nation by providing a visa that is attached to the passport. A valid passport and visa are mandatory for any foreign national in order to reside in another nation. The absence of such documents might land an individual in legal trouble. Governments after analyzing the intentions and the financial capability of the applicant permit them a visa for a limited time duration. This also helps in differentiating between illegal immigrants and legal travelers or visitors.

Visas range from tourist visas to student visas, where the former authorizes an individual to visit a foreign nation for tourism purposes, the latter allows an individual to pursue their academic interest in the institutions of high repute in a foreign land. The idea of visas fundamentally aims to balance the interests of various foreign nationals intending to pursue education in another nation and the issue of unchecked migration overpopulating such nations.

When is a Student Visa required?

As the name suggests, a student visa is issued to students intending to pursue academic education in a foreign nation taking into consideration their intention to pursue a better quality of education, career opportunities, or learning better skills, etc. Irrespective of the field of study, ranging from engineering, law, medical, etc., a student needs to receive their visas from the consulates of the respective host nations located in their own nation. 

A student visa is issued by the authority of the hosting nation once they are convinced that the intention of the student is to gain better education and not to settle in the hosting nation, they also take into consideration various factors such as the financial capacity of such students to sustain in the hosting nation, their language efficiency, and in many cases medical insurance are also taken into consideration while issuing such visas. Even UNESCO takes a special interest in this event of migration for education and has termed these students as Internationally mobile students where it takes into consideration the mutual benefit harvested by the hosting nation and the individual by this exchange. There has been a dedicated Education at Glance report published by the Organisation for Economic Co-operation and Development (OECD) which takes into consideration the various facets of international education and standards.
The most popular education destinations opted by the Indian students are the USA, Canada, Germany, UK, Australia, Singapore, France, and New Zealand.

How To Get a Student Visa?

It is pertinent for a student to be selected by an Educational institute in the hosting country which issues an admission letter in the name of the student which can then be used by such student to approach the consulates of the hosting country in India to get a visa. Let us first understand the process of getting a student visa in the United States of America. This visa is called the F1 visa in the United States and the fundamental requirement for issuing an F1 visa for a student by the consulate/embassy of America situated in India is simply the verification of the intention of the student for visiting the United States. Therefore the interview questions probe into the facets like the return of the applicant to India, their statement of purpose or the objective with which they want to pursue their academics in the United States, etc, apart from taking into consideration the issues like financial capability, language proficiency, and medical fitness.

In the United Kingdom, these student visas issued to the Indian students intending to pursue their studies in the UK are known as Tier 4 general student visas. In Canada, there is a practice of taking a Guaranteed Investment Certificate (GIC) Worth 10 thousand Canadian dollars before issuing the visas in order to ensure that the visa candidate can support himself in Canada. There are various Student Partnership Program (SPP) where the formalities involved in the process of government approval have been made a little lenient but such processes have been availed by very few educational institutions of Canada and therefore Non-Student Partnership Program  Visa is also very common.
The student visa issued by the respective consulates of the hosting countries is a limited-term document authorizing the Indians to pursue their academic objective which could be for an undergraduate degree, postgraduate degree, or for doctoral studies, etc. in such a hosting country. The visas must be renewed by such students before their expiry which could otherwise result in strict penalties and in the worst-case scenario, deportation. It is advisable to renew the visa one month prior to the date of expiry so that no difficulty is caused to the applicant.

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How to register your company on your own?

By Nevin Clinton, Flywork.io TeamFlywork.io. 

    Whenever one starts a company, it is mandatory to get it registered. Forms of business like sole proprietorship and partnership can be unregistered, but if one wants his/her company to have a legal existence of its own, registration is a necessity. The process of registration is a bit time-consuming but the benefits outweigh the burden. This is because registration ensures that there is protection for the company in case of crisis, lawsuits, or bankruptcy. Further, it ensures that money can be raised more easily through private equity. And most importantly, registration ensures that the company will go on irrespective of whether a founder, director, or member quits. So very clearly, registration is a process that is of paramount importance and hence, it is essential to understand how to do it.

Steps to register a company

  • DIN and DSC: To register a company, first and foremost, it is essential to apply for and obtain the Director Identification Number (DIN) and Digital Signature Certificate (DSC). The former is a unique identification number given to the director who is applying for registration while the latter is a digital key that has details about the director and the company. This can be done on the official website of the Ministry of Corporate Affairs (https://www.mca.gov.in/content/mca/global/en/home.html) where these options can be found under ‘MCA Services’. Various details will be required such as identity proof, residence, contact details, passport, and so on. 
  • Name of the Company: After obtaining the DIN and DSC, one must get the name of the company approved. For the same, eForm 1A which can be found on the website must be filled. There are a total of six names that can be selected in order of preference. These names must be chosen carefully and it must be ensured that there is no overlapping with an already registered company. The provisions of the Prevention of Improper Use Act, 1950, and its directions on names must also be adhered to. Rs. 500 must be paid as a fee here and a digital signature must be attached.
  • MOA, AOA, and Certificate of Incorporation: After getting the name approved from the Registrar of Companies, one must fill in Forms 1, 18, and 32 within 60 days to obtain the certificate of incorporation. The Memorandum and Articles of Association must be drafted in this period and they must be printed and stamped. They must also be signed by at least two subscribers. These must be sent as a physical copy to the concerned Registrar of Companies. Once every detail is verified, the Certificate of Incorporation will be provided by the RoC.
  • Commencement: After registration, Form 19 has to be filled and the prospectus must be attached. There is an alternative in this regard which is to file Form 20 and provide a statement instead of the prospectus. Applications for GST number, Permanent Account Number, and Tax Deduction Account Number can then be made. A certificate of commencement will finally be issued following which the company can begin functioning. 

The process might vary depending on the nature of the enterprise

     It is noteworthy that the procedure discussed above is for a private company and the documents to be submitted and the various compliance mechanisms vary depending on the nature of the enterprise. For example, entities covered under Part IX of the Companies Act, 2013 must file two extra forms for registration – eForm 37 and 39. Meanwhile, for smaller entities like micro, small and medium enterprises (MSMEs), just furnishing details of PAN and Aadhaar Card is sufficient to register. In the case of a sole proprietorship, there is no need for registration and it is the same with partnerships. 

MCA21 V3 provides for ease of registration

      For ease of use, the MCA has planned to revamp its website (MCA21 V3) to ensure that it is user-friendly and all the forms required for the registration of a company are easily available and accessible. A tutorial document has been released in this regard (https://www.mca.gov.in/bin/dms/getdocument?mds=mSnkNJBMIaj3qhkshCvlhA%253D%253D&type=open) and the changes are expected to be made very soon.

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A Complete Guide on Power of Attorney

Nevin Clinton, Flywork.io TeamFlywork.io. 

    A Power of Attorney (hereinafter referred to as POA) is an important document that allows a person to appoint an attorney or an agent to act on his behalf. The agent can then make decisions on behalf of the principal on matters like finances, medical care, property, etc. Now, there are various types of POAs and each one gives varying degrees of power or control to the agent. 

Definition of Power of Attorney

     Section 2(21) of the Indian Stamp Act, 1899 defines ‘Power of Attorney’ as one that includes any instrument (not chargeable with a fee under the law relating to court-fees for the time being in force) empowering a specified person to act for and in the name of the person executing it.

Types of POAs

      POAs are of two types broadly –

General and Specific. In the former, a vast amount of power is given to the agent whereas in the latter he is empowered in just a particular aspect. Therefore, the power granted to the agent is expressly limited in specific POAs. There are also other types such as durable POAs. Here, the principal empowers the agent to act on his behalf even if he reaches a stage where he can’t communicate. This can be due to serious illness or injury. Yet another type is a medical POA. These empower the agent to make decisions on behalf of the principal specifically in cases of medical illness. 

Uses of POA

 Following are the decisions and legal aspects for which a Power of Attorney can be used.

  • Agreements: A POA can empower an agent to enter into contracts and to sign, execute or deliver any agreement.
  • Property: An agent upon being empowered by a POA can make decisions on the properties of the principal. He can lease, sell, collect rents, and so on. He can also execute contracts in this regard. 
  • Stocks: An agent can sell and buy stocks and enter into contracts for the same.
  • Tax: Filing and signing of tax returns and other tax-related documents can be done by the agent. 
  • Banking: An agent can execute cheques and security agreements on behalf of the principal. He can also deposit and withdraw funds. 

Pros and cons of POAs

    A Power of Attorney helps make things simple for the principal. With a trustworthy agent to take care of important aspects relating to property, tax, and contracts, the principal need not go through the burden of having to take care of each of the above. Further, even if there is scope for misuse of power by the agent, a POA can always be revoked.

    A disadvantage as mentioned above is the possibility of misuse of power by the agent. If the POA is not drafted well or the agent decides to go rogue, several risks are involved. But then, it is worth noting that even if an agent commits fraud, the principal cannot be held responsible for it. 

Points to remember while drafting POAs

  • Complete details on agent and principal: A POA must have the name, address, property owned, and such details on the principal and the agent. It must also be signed by both and there must be two witnesses of sound mind. 
  • Granting power: The POA must then have details on what powers the agent will have and can exercise on behalf of the principal. While granting such powers, the POA must be strictly construed. Thus, there must be complete clarity and no room for ambiguity. 
  • Registration: Registering a POA is not compulsory, but it is advisable. The Registration Act, 1908 mandates that it is the Sub Registrar who must authenticate it. 

Revocation of POA

     The principal has the right to revoke a POA through a written statement. Further, the death or bankruptcy of the principal would also lead to the automatic revocation of the POA. Also, in cases of specific POAs, if the objective for which the agent was appointed is satisfied, it would be revoked by itself. There can also be a mutual agreement between the principal and agent agreeing that the POA will get revoked to broaden the happening of an event. 

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Withdrawal of safe harbour for failure to comply with IT rules: What it means for Twitter and its users

Nevin Clinton, Flywork.io TeamFlywork.io. 

    There is a huge conflict that has been brewing for quite some time between American social networking giant Twitter and the Indian government. A lot of this has to do with the failure of the company to comply with certain provisions of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (hereinafter referred to as ‘IT Rules’). This has led to the government withdrawing ‘safe harbor’ provisions under the Information Technology Act, 2000 (hereinafter referred to as ‘IT Act’) for Twitter, meaning that the site will now be directly responsible for all the content that it displays. News portals including ANI and the Minister for Law & Justice, Communications, Electronics, and Information Technology Ravi Shankar Prasad have confirmed the same and this could have a plethora of serious implications.

What caused the current standoff?

    First and foremost, it is essential to understand was the situation before the current standoff. Twitter was officially recognized by the Indian government under Section 79 of the IT act as an ‘intermediary. An intermediary can’t be held liable for information that is provided or made available on its platform unless the platform itself initiated the said information in question.

    The IT Rules were then announced in February 2021. With various other obligations like identifying the originator of particular content and taking down flagged content, it required all technology companies in India to appoint three officers. This was because of increasing cases of false information, rumours, and propaganda being spread on social media. It was mandated that these three people who are appointed – a chief compliance officer, nodal officer, and grievance officer must be Indian employees of the company. There was also a warning issued by the central government that if this rule was not complied with, the companies would lose their status as an intermediary with the possibility of a criminal action also being open in case of complaints being filed.

    After this ruling, tech companies like WhatsApp and Google complied with the IT rules and appointed the three officers. Twitter however did not do so and asked for more time. Even after the completion of the extra time allotted, Twitter appointed just one person as a nodal and grievance officer. Further, it was alleged by the government that the person appointed was not an employee of the company but was clarified to be a contractual employee. But with no appointment of a grievance officer, the company lost its status as an intermediary.

What this means for Twitter and its users?

   The withdrawal of the ‘safe harbour’ status of an intermediary has serious implications for Twitter. The platform is now open to a lot of penal action as it will become responsible for its users' posts. Let’s say there is a tweet that is put up by an anonymous account defaming the government. Twitter will then be responsible for the tweets and liable for penal action. However, this does not mean that the user won’t be responsible. Nothing changes with regard to the responsibility of Twitter users, but there is an added responsibility on the site and a huge one at that.

After the statements by Minister Ravi Shankar Prasad, actions against the company have already started in full swing. One such action came about on the 16th of June when an FIR was filed against Twitter for not removing ‘misleading tweets’ that incited communal disharmony with regard to an incident where a Muslim man was allegedly beaten up at Loni in Uttar Pradesh. 

What next?

      It is expected that Twitter will comply with the IT Rules very soon as the burden of appointing a compliance officer is far lesser than being responsible for each and every tweet on the site. There could be sanctions for the delay in the appointment for Twitter and till the same is done, it will not be recognized as an intermediary, meaning that it will be exposed to action that can be taken for the content on its site. Therefore, the quicker Twitter acts, the more damage it will save itself from. This saga has turned out to be one with serious implications and it remains to be seen how it pans out in the future. 

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Income Tax Law in India in 2021

The interim budget got announced in January by Finance Minister Piyush Goyal had seem to have bought series of changes in Tax Rules. The changes can be seen from a full rebate on personal income up to ₹ 5 lakh in a year to a 25% hike in standard deduction threshold.

He was quoted saying, “This is not just an interim budget, this is a vehicle for the developmental transformation of the nation.”

Making a bold move, the government proposed a full tax rebate to individual upto ₹5 lakh income/year. The move made to benefit “the great Indian middle class” in words of Arun Jaitley will cost Government ₹18, 500 crore.

Income Tax Act: The provisions of income tax are contained in the Income Tax Act, 1961 which extends uniformly to the whole of India and has been effective since 1962. The act contains provisions for determining taxable income, tax liability, procedure for assessment of penalties, etc.

1. Annual Amendments – Since the Income Tax Act is a revenue law, it requires amendments whenever the government wants to make changes in it. Under the annual amendment of existing revenue generation requirements, the Government proposes its finance bill, which directly decides the threshold limits for various tax rates which are commonly referred to as Income Tax.

2. Income – Income in broad terminology is defined as any receipt in the form of money or money’s worth which occurs with a certain regularity or expected regularity from a definite source.

key takeaways from the income tax changes proposed in budget 2020-20:

1. “Straight” income tax rebate of Rs. 12,500

The most breaking announcement has been the Government’s decision to full rebate to individuals with annual income up to ₹5 lakhs/ annumn.

Though the income-tax slab applicable to other individuals remain same.

Government has clarified its stance as to the move was made to strengthen the purchasing power of the middle-class who holds the key to India’s future.

According to existing income tax rules, applicable till Assessment Year 2020-20, personal annualincome up to ₹2.5 lakh is exempt from Income Tax. Section 87A of the Income Tax Act provides option for a rebate to individuals on income up to a certain limit.

The Income Tax Department will give a ‘straight rebate’ of ₹12,500 to those having an annual income of ₹5 lakh from the beginning of next fiscal year. It will nullify their tax-liability.

CBDT clarifies that for those earning more than ₹5 lakh annually, the oldtax rates will continue.

Here is an example to explain what the income tax proposals mean for assesses below 60 years of age:

Budget 2020 tax calculation examples

Taxable annual income in rupees (after adjusting deductions) 3,50,000 4,00,000 5,00,000 10,00,000
Tax 5,000 (@ 5% on 1,00,000) 7,500 (@ 5% on 1,50,000) 12,500 (@ 5% on 2,50,000) 1,12,500 (@5% on 2,50,000, 20% on 5,00,000)
Rebate under Section 87A of I-T Act 5,000 7,500 12,500 NA
Tax liability 0 0 0 1,12,500
Cess @ 4% 0 0 0 4,500
Tax payable (after cess) 0 0 0 1,17,000
         

 

2. Standard deduction hike

The second change that was talked about is that standard deduction limit in which employees & pensioners are given a straight relief from taxable income – from ₹40,000 to ₹50,000in a year.

As per the new rules prevailing in assessment year 2020-20, persons having gross income up to ₹6.5 lakh may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance etc.

Taxable income will be derived by adjusting all exemptions & deductions applicable under the income tax laws against the gross income.

Besides deduction available under Section 80C of the Income Tax Act, which provides for tax relief against a variety of investments – such as life insurance and savings scheme Sukanya Samriddhi , Section 80D (medical insurance), Section 80E (education loan) and Section 80TTA (savings account interest) provide for a range of deductions to the assesses.

3. TDS (tax deducted at source) relief

The interim Budget 2020-20 also proposed a four-fold increase in the limit for TDS applicable on interest income (from post office/bank deposits) to ₹40,000 per annum. The move is calculated to benefit Senior Citizens and small depositors who depend on interest income from deposits in banks and post offices.This will benefit small depositors and non-working spouses.

4. Hike in TDS threshold on rent

The Government proposed to increase the TDS limit applicable to rental income by 1/3rd to ₹2.4 lakh, compared to the existing threshold which means households earning income in form of rent are likely to benefit, say financial advisors.

According to current rules applicable in assessment year 2020-20, the lessee – or tenant – is required to deduct TDS on annual rent above ₹1.8 lakh. This tax is applicable to lessees other than individuals or Hindu Undivided Families (HUF), unless the entity is subject to tax audit.

5. Relief on notional rent

Government proposed to allow house owners to claim relief on a second property as self-occupied. This means the assesses will not have to pay tax on the second property on the basis of notional rent. As per current rules applicable in assessment year 2020-20, assesses having more than one house have to pay income tax on the basis of notional rent.

6. Long-term capital gains relief

The Government proposed to allow a profit of up to ₹2 crore from sale of residential property to be invested in not one but two properties to avoid paying tax on capital gains, subject to certain conditions.

The benefit of rollover of capital gains under Section 54 will be increased from investment in one residential house to two residential houses for a taxpayer having capital profits up to ₹2 crore.

According to the current rules applicable in assessment year 2020-20, individuals are allowed to utilize the gains from sale of property on purchase or construction of one new property to avoid tax.

7. Easy processing of income tax refunds

Making the conclusion out of the budget speech it is very clear that Income tax refunds will be processed within 24 hours and released immediately.

Non-Disclosure Agreement and It’s essentials

Nevin Clinton,Flywork.io TeamFlywork.io. 

    A non-disclosure agreement (hereinafter referred to as NDA) is an agreement where the parties agree to not disclose content or the information in the agreement. Such agreements can be entered into between two companies, individuals, an individual and a company, and so on. NDAs are customary around the world when information is required to be kept confidential. In India as well, the agreement is quite common. It is governed by the Indian Contract Act, 1872 here and such an agreement becomes valid and enforceable when stamped. 

Why is a non-disclosure agreement signed?

An NDA is signed in order to protect trade secrets while entering into business deals. This becomes extremely important especially in the case of protecting intellectual property rights and more so for modern-day startups. Let’s assume that a company has to hire an adviser from outside the company to help give inputs for a novel product. In such a case, the adviser can be asked to sign an NDA so that he does not disclose information about the product to the company’s competitors or anybody else. 

An NDA could be unilateral, bilateral, or multilateral

An NDA can be both unilateral where just one party agrees not to disclose sensitive information and bilateral where both parties agree to maintain secrecy. There can also be multilateral NDAs that are signed by three or more parties. These help in doing away with the need for multiple agreements. Also, it does not have to be only business deals where an NDA can be signed as it can be signed even between an employee and employer of a company or a non-disclosure clause can be inserted in just about any contract. 

Essentials of a non-disclosure agreement

  • Must be an agreement: First and foremost, an NDA must have all the essentials of an agreement. For this, broadly, there must be an offer, acceptance, creation of a legal relationship, and consideration. 
  • Protected information: With regard to the non-disclosure part of the agreement, it must have the information that is protected. The parts of the agreement to be kept confidential also have to be mentioned. This can be done so by marking certain documents as ‘confidential. Along with the same, a time period must also be mentioned up to which the agreement must be maintained.
  • Imposition of duties: Certain duties can be imposed with regard to the information in the agreement. For example, mentioning how to convey sensitive information and whom to. Consequently, failing to adhere to the said duties must result in punishments and the same must be mentioned as well. Certain exceptions can also be given where sharing the information would not attract consequences. 
  • Dispute resolution: Referencing as to how to settle disputes arising out of the agreement can be provided, though it isn’t of too much importance. Here, a ‘jurisdiction clause’ that mentions the court to have jurisdiction in case of a dispute can also be inserted. There can also be clauses mentioning that disputes must be settled through arbitration only and so on. It is worth noting that such jurisdiction clauses are not ‘essentials’ as such as an NDA can do without them as well, but including them can make things easier if a dispute arises in the future.

Importance of a well-drafted non-disclosure agreement

Firstly, a non-disclosure agreement is important as it helps maintain the confidentiality of information that could be misused. Further, such agreements help in building trust and confidence among the parties thereby further benefiting the business. This is because they help in knowing obligations and adapting to them. If confidentiality is kept, there is bound to be an increase in trust. 

    Due to the importance of NDAs, it is important that they are well-drafted. If such an agreement lacks sharpness, it could result in a lack of clarity leading to the confidentiality being broken or causing a confusing situation. If that happens, it could result in lengthy litigation to resolve the issues. This is exactly why legal personnel should be the ones to draft a Non-Disclosure Agreement. It is an absolute must for the parties concerned to read and understand each and every term in the agreement. If there are terms that are difficult to understand, they must be clarified as this might lead to a number of issues or disputes in the future. 

Let the qualified curated professionals at Flywork.io assist you to resolve any legal and allied issues. For more details visit us at Flywork.io.

 

Gratuity under the Social Security Code, 2020 and its implications 

Priyasha Sen Gupta, Flywork.io TeamFlywork.io. 

Introduction

The term ‘Labour’ falls underneath the Concurrent List of the Indian Constitution. The Code on Social Security,  2020 arose from the recommendations of the 2nd National Commission on labor, which stated in its report that the existing labor laws must be amalgamated based on the subject matter. The Code came into effect in  December 2019, while the Parliamentary Standing Committee submitted its report on July 31, 2020, and subsequently proposed a new draft law, the Code on Social Security 2020, which aims to review and integrate the Social Security Law in order to extend social security to all employees and workers, be it organized, unorganized sectors or any other sectors. Another major objective of the Code is to promote technology to ensure compliance and enforcement of its regulations are easily achieved. 
Currently, unorganized workers are not covered by the Employee Provident Fund and Employees' State Insurance.  According to the Social Security Code, 2020, the Central and State Government will issue the special schemes to ensure that the gig workers and others in the non-organized sectors have tangible social security and benefits in the form of pensions, benefits for accidents at work, funeral allowances, etc. 

Amalgamation and Improvement of Various Laws regarding Gratuity

One of the nine laws that the Code subsumes is the Payment of Gratuity Act, which is a major retirement benefit for employees in India and applies to all organizations with more than ten employees (including unorganized workers) (i.e., MNC, schools, and other companies) because employees sacrifice the prime moments of their lives for the development, prosperity, and betterment of their employers, an employer pays his employee gratuity as a  graciousness or gift. Gratuity is a statutory obligation of the employer to promptly tip their employees when they are due. Previously, gratuity was applicable only to employees who had worked in the company for five consecutive years, based on their 15-day salary for a full year. In the event of death, disability, etc., it can deviate from the five-year rule. 
The mandatory minimum five-year gratuity was abolished in the Bill of the Social Security Code, but different threshold structures were introduced for various categories of employees. The prerequisite for this is that the regular and permanent employees must have worked for at least five years to be eligible. Although no such restriction applies to employees with fixed-term contracts, the employer pays gratuity on a pro-rata basis i.e., it is linked to their tenure of the employment. If an employer fails to pay any amount of gratuity to which an employee is entitled,  he shall be sentenced to imprisonment for a term which may extend to one year or with a fine which may extend to Rupees fifty thousand or with both. 

Current Scenario

This move is in sync with the changing dynamics of the Indian labor force. Since the duration of service has generally been reduced, most workers are now employed on a contractual basis. Further, it additionally allays the concern raised by trade unions, that certain employers retrenched employees before the completion of 5 years,  solely to avoid making gratuity payment. 
Under the existing Payment of Gratuity Act, wages include the basic salary and dearness allowance and exclude all other allowance. However, under the Social Security Code, a new concept of deemed wages has been introduced, which means that if an employee receives more than 50% of the total remuneration in the form of allowances and other amounts not included within the definition of wages, then the excess amount would be considered as wages for the purposes of contributions towards Employee Provident Fund. The prospect of social security would, as an immediate consequence, increase the financial burden on employers and also reduce workers' cash. However, this could be mitigated if the Central Government stipulates a lower contribution rate for employees within the framework of the provisions of the Social Security Code. 
Gratuity is exempt from taxation, as long as every full year of service does not exceed 15 days salary, calculated based on the last salary received (up to Rs.2 million). It should be noted that employers can pay additional gratuity to employees, which is known as ex-gratia and is a voluntary contribution. Ex-gratia is subject to tax.

Conclusion 

Overall, the enactment of the Code on Social Security, 2020 is a welcome step by the Labour Ministry, which has made it easier to understand the scope and the ambit of the social security laws by consolidating the preexisting laws. The Code also defined various terms such as gig workers, unorganized workers which were not previously defined. This will help increase employment opportunities by engaging workers on a temporary basis and also make organizations responsible for the social security of these segments of workers, which will help combat exploitation while improving their overall compensation.

Let the qualified curated professionals at Flywork.io assist you to resolve any legal and allied issues. For more details visit us at Flywork.io.