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Symmetrical Triangle pattern in Axis bank

axis triangle

The banking stocks offlate have been in action mainly due to huge events and buzz around the FM and the fiscal policy in the Economy. Axis bank on the daily chart has formed a symmetrical Triangle pattern which ususally signifies the market is taking a step backwards to move more steps forward a breakout or breakdown from either side could bring in sharp movements on the counter, refer the chart

Punj lloyd breaking above


punj macd punj hns Punj lloyd has recently formed an accumulation breakout patter on the daily charts….the counter has been making an accumulation buying at the 20-25 zone and has recently broken above with an inverted head and shoulder pattern on the daily charts, the counter looks good for the coming times



A- Z of banking terminologies

Anytime Banking : With introduction of ATMs, Tele-Banking and internet banking, customers can conduct their business anytime of the day and night. The ‘Banking Hours’ is not a constraint for transacting banking business.

Anywhere Banking : Refers to banking not only by ATMs, Tele-Banking and internet banking, but also to core banking solutions brought in by banks where customer can deposit his money, cheques and also withdraw money from any branch connected with the system. All major banks in India have brought in core banking in their operations to make banking truly anywhere banking.

ATM : ATMs are Automatic Teller Machines, which do the job of a teller in a bank through Computer Network. ATMs are located on the branch premises or off branch premises. ATMs are useful to dispense cash, receive cash, accept cheques, give balances in the accounts and also give mini-statements to the customers.

Bank Ombudsman : Bank Ombudsman is the authority to look into complaints against Banks in the main areas of collection of cheque / bills, issue of demand drafts, non-adherence to prescribed hours of working, failure to honour guarantee / letter of credit commitments, operations in deposit accounts and also in the areas of loans and advances where banks flout directions / instructions of RBI. This Scheme was announced in 1995 and is functioning with new guidelines from 2007. This scheme covers all scheduled banks, the RRBs and co-operative banks.

Bancassurance : Bancassurance refers to the distribution of insurance products and the insurance policies of insurance companies which may be life policies or non-life policies like home insurance – car insurance, medi-policies and others, by banks as corporate agents through their branches located in different parts of the country by charging a fee.

Banker’s Lien : Bankers lien is a special right of lien exercised by the bankers, who can retain goods bailed to them as a security for general balance of account. Bankers can have this right in the absence of a contract to the contrary.

Banking : Accepting for the purpose of lending or investment of deposits of money from Public, Repayable on demand or otherwise and withdrawable by cheques, drafts, order, etc.

Basel-II : The Committee on Banking Regulations and Supervisory Practices, popularity known as Basel Committee, submitted its revised version of norms in June, 2004. Under the revised accord the capital requirement is to be calculated for credit, market and operational risks. The minimum requirement continues to be 8% of capital fund (Tier I & II Capital) Tier II shall continue to be not more than 100% of Tier I Capital.

Brick & Mortar Banking : Brick and Mortar Banking refers to traditional system of banking done only in a fixed branch premises made of brick and mortar. Now there are banking channels like ATM, Internet Banking,tele banking etc.

Business of Banking : Accepting deposits, borrowing money, lending money, investing, dealing in bills, dealing in Foreign Exchange, Hiring Lockers, Opening Safe Custody Accounts, Issuing Letters of Credit, Traveller’s Cheques, doing Mutual Fund business, Insurance Business, acting as Trustee or doing any other business which Central Government may notify in the official Gazette.

Bouncing of a cheque : Where an account does not have sufficient balance to honour the cheque issued by the customer , the cheque is returned by the bank with the reason “funds insufficient” or “Exceeds arrangement”.This is known as ‘Bouncing of a cheque’ .

Certificate of Deposit :. Certificate of Deposits are negotiable receipts in bearer form which can be freely traded among investors. This is also a money market instrument,issued for a period ranging from 7 days to f one year .The minimum deposit amount is Rs. 1 lakh and they are transferable by endorsement and delivery.

Cheque : Cheque is a Bill of Exchange drawn on a specified banker ordering the banker to pay a certain sum of money to the drawer of cheque or another person. Money is generally withdrawn by clients by cheques. Cheque is always payable on demand.

Cheque Truncation : Cheque truncation, truncates or stops the flow of cheques through the banking system. Generally truncation takes place at the collecting branch, which sends the electronic image of the cheques to the paying branch through the clearing house and stores the paper cheques with it.

Collecting Banker : Also called receiving banker, who collects on instruments like a cheque, draft or bill of exchange, lodged with himself for the credit of his customer’s account.

Consumer Protection Act : It is implemented from 1987 to enforce consumer rights through a simple legal procedure. Banks also are covered under the Act. A consumer can file complaint for deficiency of service with Consumer District Forum for amounts upto Rs.20 Lacs in District Court, and for amounts above Rs.20 Lacs to Rs.1 Crore in State Commission and for amounts above Rs.1 Crore in National Commission.

Co-operative Bank : An association of persons who collectively own and operate a bank for the benefit of consumers / customers, like Saraswat Co-operative Bank or Abhyudaya Co-operative Bank and other such banks.

Co-operative Society : When an association of persons collectively own and operate a unit for the benefit of those using its services like Apna Bazar Co-operative Society or Sahakar Bhandar or a Co-operative Housing Society.

Core Banking Solutions (CBS) : Core Banking Solutions is a buzz word in Indian banking at present, where branches of the bank are connected to a central host and the customers of connected branches can do banking at any breach with core banking facility.

Creditworthiness : It is the capacity of a borrower to repay the loan / advance in time alongwith interest as per agreed terms.

Crossing of Cheques : Crossing refers to drawing two parallel lines across the face of the cheque.A crossed cheque cannot be paid in cash across the counter, and is to be paid through a bank either by transfer, collection or clearing.A general crossing means that cheque can be paid through any bank and a special crossing, where the name of a bank is indicated on the cheque, can be paid only through the named bank.

Current Account : Current account with a bank can be opened generally for business purpose. There are no restrictions on withdrawals in this type of account. No interest is paid in this type of account.

Customer : A person who maintains any type of account with a bank is a bank customer. Consumer Protection Act has a wider definition for consumer as the one who purchases any service for a fee like purchasing a demand draft or a pay order. The term customer is defined differently by Laws, softwares and countries.

Debit Card : A plastic card issued by banks to customers to withdraw money electronically from their accounts. When you purchase things on the basis of Debit Card the amount due is debited immediately to the account . Many banks issue Debit-Cum-ATM Cards.

Debtor : A person who takes some money on loan from another person.

Demand Deposits : Deposits which are withdrawn on demand by customers.E.g. savings bank and current account deposits.

Demat Account : Demat Account concept has revolutionized the capital market of India. When a depository company takes paper shares from an investor and converts them in electronic form through the concerned company, it is called Dematerialization of Shares. These converted Share Certificates in Electronic form are kept in a Demat Account by the Depository Company, like a bank keeps money in a deposit account. Investor can withdraw the shares or purchase more shares through this demat Account.

Dishonour of Cheque : Non-payment of a cheque by the paying banker with a return memo giving reasons for the non-payment.

Debit Card : A plastic card issued by banks to customers to withdraw money electronically from their accounts. When you purchase things on the basis of Debit Card the amount due is debited immediately to the account . Many banks issue Debit-Cum-ATM Cards.

Debtor : A person who takes some money on loan from another person.

Demand Deposits : Deposits which are withdrawn on demand by customers.E.g. savings bank and current account deposits.

Demat Account : Demat Account concept has revolutionized the capital market of India. When a depository company takes paper shares from an investor and converts them in electronic form through the concerned company, it is called Dematerialization of Shares. These converted Share Certificates in Electronic form are kept in a Demat Account by the Depository Company, like a bank keeps money in a deposit account. Investor can withdraw the shares or purchase more shares through this demat Account.

Dishonour of Cheque : Non-payment of a cheque by the paying banker with a return memo giving reasons for the non-payment.

E-Banking : E-Banking or electronic banking is a form of banking where funds are transferred through exchange of electronic signals between banks and financial institution and customers ATMs, Credit Cards, Debit Cards, International Cards, Internet Banking and new fund transfer devices like SWIFT, RTGS belong to this category.

EFT – (Electronic Fund Transfer) : EFT is a device to facilitate automatic transmission and processing of messages as well as funds from one bank branch to another bank branch and even from one branch of a bank to a branch of another bank. EFT allows transfer of funds electronically with debit and credit to relative accounts.

Either or Survivor : Refers to operation of the account opened in two names with a bank. It means that any one of the account holders have powers to withdraw money from the account, issue cheques, give stop payment instructions etc. In the event of death of one of the account holder, the surviving account holder gets all the powers of operation.

Electronic Commerce (E-Commerce): E-Commerce is the paperless commerce where the exchange of business takes place by Electronic means.

Endorsement : When a Negotiable Instrument contains, on the back of the instrument an endorsement, signed by the holder or payee of an order instrument, transferring the title to the other person, it is called endorsement.

Endorsement in Blank : Where the name of the endorsee or transferee is not mentioned on the instrument.

Endorsement in Full : Where the name of the endorsee or transferee appears on the instrument while making endorsement.

Execution of Documents : Execution of documents is done by putting signature of the person, or affixing his thumb impression or putting signature with stamp or affixing common seal of the company on the documents with or without signatures of directors as per articles of association of the company.

Factoring : Business of buying trade debts at a discount and making a profit when debt is realized and also taking over collection of trade debts at agreed prices.

Foreign Banks : Banks incorporated outside India but operating in India and regulated by the Reserve Bank of India (RBI),. e..g., Barclays Bank, HSBC, Citibank, Standard Chartered Bank, etc.

Forfaiting : In International Trade when an exporter finds it difficult to realize money from the importer, he sells the right to receive money at a discount to a forfaiter, who undertakes inherent political and commercial risks to finance the exporter, of course with assumption of a profit in the venture.

Forgery : when a material alteration is made on a document or a Negotiable Instrument like a cheque, to change the mandate of the drawer, with intention to defraud.

Garnishee Order : When a Court directs a bank to attach the funds to the credit of customer’s account under provisions of Section 60 of the Code of Civil Procedure, 1908.

General Lien : A right of the creditors to retain possession of all goods given in security to him by the debtor for any outstanding debt.

Guarantee : A contract between guarantor and beneficiary to ensure performance of a promise or discharge the liability of a third person. If promise is broken or not performed, the guarantor pays contracted amount to the beneficiary.

Holder : Holder means any person entitled in his own name to the possession of the cheque, bill of exchange or promissory note and who is entitled to receive or recover the amount due on it from the parties. For example, if I give a cheque to my friend to withdraw money from my bank,he becomes holder of that cheque. Even if he loses the cheque, he continues to be holder. Finder cannot become the holder.

Holder in due course : A person who receives a Negotiable Instrument for value, before it was due and in good faith, without notice of any defect in it, he is called holder in due course as per Negotiable Instrument Act. In the earlier example if my friend lends some money to me on the basis of the cheque, which I have given to him for encashment, he becomes holder-in-due course.

Hypothecation : Charge against property for an amount of debt where neither ownership nor possession is passed to the creditor. In pledge, possession of property is passed on to the lender but in hypothecation, the property remains with the borrower in trust for the lender.

Identification : When a person provides a document to a bank or is being identified by a person, who is known to the bank, it is called identification. Banks ask for identification before paying an order cheque or a demand draft across the counter.

Indemnifier : When a person indemnifies or guarantees to make good any loss caused to the lender from his actions or others’ actions.

Indemnity : Indemnity is a bond where the indemnifier undertakes to reimburse the beneficiary from any loss arising due to his actions or third party actions.

Insolvent : Insolvent is a person who is unable to pay his debts as they mature, as his liabilities are more than the assets . Civil Courts declare such persons insolvent. Banks do not open accounts of insolvent persons as they cannot enter into contract as per law.

Interest Warrant : When cheque is given by a company or an organization in payment of interest on deposit , it is called interest warrant. Interest warrant has all the characteristics of a cheque.

International Banking : involves more than two nations or countries. If an Indian Bank has branches in different countries like State Bank of India, it is said to do International Banking.

Introduction : Banks are careful in opening any account for a customer as the prospective customer has to be introduced by an existing account holder or a staff member or by any other person known to the bank for opening of account. If bank does not take introduction, it will amount to negligence and will not get protection under law.

JHF Account : Joint Hindu Family Account is account of a firm whose business is carried out by Karta of the Joint family, acting for all the family members.. The family members have common ancestor and generally maintain a common residence and are subject to common social, economic and religious regulations.

Joint Account : When two or more individuals jointly open an account with a bank.

Karta : Manager of a Hindu Undivided Family (HUF) who handles the family business. He is usually the eldest male member of the undivided family.

Kiosk Banking : Doing banking from a cubicle from which food, newspapers, tickets etc. are also sold.

KYC Norms : Know your customer norms are imposed by R.B.I. on banks and other financial institutions to ensure that they know their customers and to ensure that customers deal only in legitimate banking operations and not in money laundering or frauds.

Karta : Manager of a Hindu Undivided Family (HUF) who handles the family business. He is usually the eldest male member of the undivided family.

Kiosk Banking : Doing banking from a cubicle from which food, newspapers, tickets etc. are also sold.

KYC Norms : Know your customer norms are imposed by R.B.I. on banks and other financial institutions to ensure that they know their customers and to ensure that customers deal only in legitimate banking operations and not in money laundering or frauds.

Mandate : Written authority issued by a customer to another person to act on his behalf, to sign cheques or to operate a bank account.

Material Alteration : Alteration in an instrument so as to alter the character of an instrument for example when date, amount, name of the payee are altered or making a cheque payable to bearer from an order one or opening the crossing on a cheque.

Merchant Banking : When a bank provides to a customer various types of financial services like accepting bills arising out of trade, arranging and providing underwriting, new issues, providing advice, information or assistance on starting new business, acquisitions, mergers and foreign exchange.

Micro Finance: Micro Finance aims at alleviation of poverty and empowerment of weaker sections in India. In micro finance, very small amounts are given as credit to poor in rural, semi-urban and urban areas to enable them to raise their income levels and improve living standards.

Minor Accounts : A minor is a person who has not attained legal age of 18 years. As per Contract Act a minor cannot enter into a contract but as per Negotiable Instrument Act, a minor can draw, negotiate, endorse, receive payment on a Negotiable Instrument so as to bind all the persons, except himself. In order to boost their deposits many banks open minor accounts with some restrictions.

Mobile Banking : With the help of M-Banking or mobile banking customer can check his bank balance, order a demand draft, stop payment of a cheque, request for a cheque book and have information about latest interest rates.

Money Laundering : When a customer uses banking channels to cover up his suspicious and unlawful financial activities, it is called money laundering.

Money Market : Money market is not an organized market like Bombay Stock Exchange but is an informal network of banks, financial institutions who deal in money market instruments of short term like CP, CD and Treasury bills of Government.

Moratorium : R.B.I. imposes moratorium on operations of a bank; if the affairs of the bank are not conducted as per banking norms. After moratorium R.B.I. and Government explore the options of safeguarding the interests of depositors by way of change in management, amalgamation or take over or by other means.

Mortgage : Transfer of an interest in specific immovable property for the purpose of offering a security for taking a loan or advance from another. It may be existing or future debt or performance of an agreement which may create monetary obligation for the transferor (mortgagor).

NABARD : National Bank for Agriculture & Rural Development was setup in 1982 under the Act of 1981. NABARD finances and regulates rural financing and also is responsible for development agriculture and rural industries.

Negotiation : In the context of banking, negotiation means an act of transferring or assigning a money instrument from one person to another person in the course of business.

Non-Fund Based Limits : Non-Fund Based Limits are those type of limits where banker does not part with the funds but may have to part with funds in case of default by the borrowers, like guarantees, letter of credit and acceptance facility.

Non-Resident : A person who is not a resident of India is a non-resident.

Non-Resident Accounts : Accounts of non-resident Indian citizens opened and maintained as per R.B.I. Rules.

Notary Public : A Lawyer who is authorized by Government to certify copies of documents .

NPA Account : If interest and instalments and other bank dues are not paid in any loan account within a specified time limit, it is being treated as non-performing assets of a bank.

Off Balance Sheet Items : Those items which affect the financial position of a business concern, but do not appear in the Balance Sheet E,g guarantees, letters of credit . The mention “off Balance Sheet items” is often found in Auditors Reports or Directors Reports.

Online Banking : Banking through internet site of the bank which is made interactive.

Pass Book : A record of all debit and credit entries in a customer’s account. Generally all banks issue pass books to Savings Bank/Current Account Holders.

Personal Identification Number (PIN) : Personal Identification Number is a number which an ATM card holder has to key in before he is authorized to do any banking transaction in a ATM .

Plastic Money : Credit Cards, Debit Cards, ATM Cards and International Cards are considered plastic money as like money they can enable us to get goods and services.

Pledge : A bailment of goods as security for payment of a debt or performance of a promise, e.g pledge of stock by a borrower to a banker for a credit limit. Pledge can be made in movable goods only.

Post-Dated Cheque : A Cheque which bears the date which is subsequent to the date when it is drawn. For example, a cheque drawn on 8th of February, 2007 bears the date of 12th February, 2007.

Power of Attorney : It is a document executed by one person – Donor or Principal, in favour of another person , Donee or Agent – to act on behalf of the former, strictly as per authority given in the document.

Premature Withdrawals : Term deposits like Fixed Deposits, Call Deposits, Short Deposits and Recurring Deposits have to mature on a particular day. When these deposits are sought to be withdrawn before maturity , it is premature withdrawal.

Prime Lending Rate (PLR) : The rate at which banks lend to their best (prime) customers.

Priority Sector Advances : consist of loans and advances to Agriculture, Small Scale Industry, Small Road and Water Transport Operators, Retail Trade, Small Business with limits on investment in equipments, professional and self employed persons, state sponsored organisations for lending to SC/ST, Educational Loans, Housing Finance up to certain limits, self-help groups and consumption loans.

Promissory Note : Promissory Note is a promise / undertaking given by one person in writing to another person, to pay to that person , a certain sum of money on demand or on a future day.

Provisioning : Provisioning is made for the likely loss in the profit and loss account while finalizing accounts of banks. All banks are supposed to make assets classification . and make appropriate provisions for likely losses in their balance sheets.

Public Sector Bank : A bank fully or partly owned by the Government.

Rescheduling of Payment : Rearranging the repayment of a debt over a longer period than originally agreed upon due to financial difficulties of the borrower.

Restrictive Endorsement : Where endorser desires that instrument is to be paid to particular person only, he restricts further negotiation or transfer by such words as “Pay to Ashok only”. Now Ashok cannot negotiate the instrument further.

Right of Appropriation : As per Section 59 of the Indian Contract Act, 1972 while making the payment, a debtor has the right to direct his creditor to appropriate such amount against discharge of some particular debt. If the debtor does not do so, the banker can appropriate the payment to any debt of his customer.

Right of Set-Off : When a banker combines two accounts in the name of the same customer and adjusts the debit balance in one account with the credit balance in other account, it is called right of set-off. For example, debit balance of Rs.50,000/- in overdraft account can be set off against credit balance of Rs.75,000/- in the Savings Bank Account of the same customer, leaving a balance of Rs.25,000/- credit in the savings account.

Safe Custody : When articles of value like jewellery, boxes, shares, debentures, Government bonds, Wills or other documents or articles are given to a bank for safe keeping in its safe vault,it is called safe custody.. Bank charges a fee from its clients for such safe custody.

Savings Bank Account : All banks in India are having the facility of opening savings bank account with a nominal balance. This account is used for personal purposes and not for business purpose and there are certain restrictions on withdrawals from this type of account. Account holder gets nominal interest in this account.

Teller : Teller is a staff member of a bank who accepts deposits, cashes cheques and performs other banking services for the public.

Underwriting : is an agreement by the underwriter to buy on a fixed date and at a fixed rate, the unsubscribed portion of shares or debentures or other issues. Underwriter gets commission for this agreement.

Universal Banking : When Banks and Financial Institutions are allowed to undertake all types of activities related to banking like acceptance of deposits, granting of advances, investment, issue of credit cards, project finance, venture capital finance, foreign exchange business, insurance etc. it is called Universal Banking.

Virtual Banking : Virtual banking is also called internet banking, through which financial and banking services are accessed via internet’s world wide web. It is called virtual banking because an internet bank has no boundaries of brick and mortar and it exists only on the internet.

Wholesale Banking : Wholesale banking is different from Retail Banking as its focus is on providing for financial needs of industry and institutional clients.


About GAAR

What is full form of GAAR ?  or What is GAAR ?

 The full form of GAAR is : General Anti-Avoidance Rules


What is GAAR in simple terms ?

Tax Avoidance is an area of concern across the world.  The rules are framed in different countries to minimize such avoidance of tax.  Such rules in simple terms are known as  ” General Anti Avoidance Rules ”  or GAAR.   Thus GAAR is a set of general rules enacted so as to check the tax avoidance.


Why News for GAAR has been prominent in India in recent times ?

News for GAAR has been in prominence in last few years as Indian Government has taken initiative to introduce GAAR or General Anti Avoidance Rules with a view to increase tax collections.


Background for GAAR :

Lord Tomlin has well said “Every man is entitled to order his affairs so that tax attaching under the appropriate Acts is less than it otherwise would be” (IRC v Duke of Westminster).   People adopt various methods so that they can reduce their total tax liability.  

The methods adopted to reduce their tax liability can be broadly put into four categories : “Tax Evasion”;  “Tax Avoidance”,  “Tax Mitigation” and “Tax Planning”.  The difference between these four methods some times becomes blurred  owing to the perception of the tax authorities and / or tax payer.    

GAAR refers to the second category i.e. tax avoidance.


What is Difference between GAAR and SAAR ?

Anti Avoidance Rules are broadly divided into two categories namely “General” and “Specific”.   Thus, legislation dealing with “General” rules are termed as GAAR, whereas legislation dealing with “Speicifc  avoidnace are termed as “SAAR”

In India till recently SAAR was in vogue i.e. laws were amended to plug specific loopholes as and when they were noticed or were misused enmasse.  However, now Indian tax authorities wants to move towards GAAR but are facing severe opposition as tax payers fear that these will be misused by tax authorities by giving arbitrary and wide interpretations.  We can say SAAR being more specific provide certainty to taxpayers where as GAAR being general in nature can be misused and is subject to arbitrary interpretation by tax authorities.


 GAAR Definition :

 GAAR is a concept which generally empowers the Revenue Authorities in a country to deny the tax benefits of transactions or arrangments which do not have any commercial substance or consideration other than achieving the tax benefit.    Whenever revenue authorities question such transactions, there is a conflict with the tax payers.   Thus, different countries started making rules so that tax can not be avoided by such transactions.   Australia introduced such rules way back in 1981.  Later on countries like Germany, France, Canada, New  Zealand, South Africa etc too opted for GAAR.   However, countries like USA and UK have adopted a cautious approach and have not been aggressive in this regard.


Thus, in nutshell we can say that GAAR usually consists of a set of broad rules which are based on general principles to check the potential avoidance of the tax in general, in a form which can not be predicted and thus can not be provided at the time when it is legislated.


GAAR in India


In India, the real discussions on GAAR came to light with the release of draft Direct Taxes Code Bill (popularly known as DTC 2009) on 12th August 2009.  It contained the provisions for GAAR.  Later on the revised Discussion Paper was released in June 2010, followed by tabling in the Parliament on 30th August, 2010, a formal Bill to enact the law known as the DirectTaxes Code 2010.  The same was to be made applicable wef 1st April, 2012.   However, owing to negative publicity and pressures from various groups, GAAR was postponed to at least 2013, and was likely to be introduced alongwith the Direct Tax Code (DTC) from 1st April 2013.   Moreover, an Expert Committee has been set by Prime Minister (Manmohan Singh) in July 2012 to vet and rework the GAAR guidelines issued in June 2012.   The latest reports (September 2012) indicates, it may not be implemented even for 3 years i.e. this will be postponed for 3 years (2016-17).   Some of recent developments about GAAR are :-


    (a) 16th March, 2012 : Finance Minister, Pranab Mukherjee takes a tough stand and announces that the government will crack down on tax avoidance effective from fiscal year 2012-13

    (b) 7th May, 2012 : Finance Minister, Pranab Mukherjee forced to eat his words and agreed to defer GAAR by a year as his announcements spooked oversea investors

    (c) 28th June, 2012 : Finance Ministry releases first draft on GAAR;   There is wide criticism of the provisions.

    (d) 14th July, 2012 : PM, Manmohan Singh, forms review committee under Parthasarathi Shome, for preparing a second draft by 31st August and final guidelines by 30th September, 2012


    (e) 1st September, 2012 : Shome Committee recommends to defer GAAR by three years.   It also recommends some more investor friendly measures

    (f) 14th January, 2013 : GoI partially accepts the recommendations of Shome Committee and has decided to defer the same for 2 years and will now be effective from the year 2016-17


If investment
date is…
and transaction
date is…
Before Aug 30, ’10 Before Apr 1, ‘16 Not apply
Before Aug 30, ’10 After Apr 1, ‘16 Not apply
After Aug 30, ’10 Before Apr 1, ‘16 Not apply
After Aug 30, ’10 After Apr 1, ‘16 Apply
After Apr 1, ’16 After Apr 1, ‘16 Apply


The modified GAAR provisions say an arrangement the main purpose of which is to obtain tax benefit would be considered impermissible. The earlier provisions considered impermissible an arrangement “one of the main purposes” of which was tax benefit. It would apply when the tax benefit in an arrangement is more than Rs 3 crore.




What was the Basic Criticism of GAAR ?  Why GAAR is dreaded ?


Many provisions of GAAR have been criticised by various people.   However, the basic criticism of GAAR provisions is that it is considered to be too sweeping in nature and there was a fear (considering poor record of IT authorities in India) that Assessing Officers will apply these provisions in a routine manner (or read misuse) and harass the general honest tax payer too.   There is only a fine distinction between Tax Avoidance and Tax Mitigation, as any arrangement to obtain a tax benefit can be considered as an impermissible avoidance arrangement by the assessing officer.   Thus, there was a hue and cry to put checks and balances in place to avoid arbitrary application of the provisions by the assessing authorities.   It was felt that there is a need for further legislative and administrative safeguards and at least a minimum threshold limit for invoking GAAR should be introduced so that small time tax payers are not harassed.


Two Examples to Understand GAAR provisions : (Source GAAR Committee)

Example 1:

Facts: A business sets up an undertaking in an under developed area by putting in substantial investment  of  capital,  carries  out  manufacturing  activities  therein  and  claims  a  tax deduction  on  sale  of  such  production/manufacturing.  Is  GAAR  applicable  in  such  a  case ?

Interpretation: There is an arrangement and one of the main purposes is a tax benefit. However, this is a case of tax mitigation where the tax payer is taking advantage of a fiscal incentive offered  to  him  by  submitting  to  the  conditions  and  economic  consequences  of  the provisions in the legislation e.g., setting up the business only in the under developed area. Revenue would not invoke GAAR as regards this arrangement.


Example 2:

Facts: A business sets up a factory for manufacturing in an under developed tax exempt area. It then diverts its production from other connected manufacturing units and shows the same as manufactured in the tax exempt unit (while doing only process of packaging there). Is GAAR applicable in such a case ?

Interpretation: There is an arrangement and there is a tax benefit, the main purpose or one of the main purposes  of  this  arrangement  is  to  obtain  a  tax  benefit.  The  transaction  lacks commercial substance and there is misuse of the tax provisions. Revenue would invoke GAAR as regards this arrangement.


How Far Are the Recommendations of the Shome Commitee Accepted (As per statement of FM on 14th January 2013) :


(a) With the deferment of GAAR implementation by 2 years, the Government has also accepted most of the Shome Commitee recommendations, which was set up to look into the grievances on GAAR provisions.

FM  issued a statement on 14th January, 2013 that the GAAR provisions shall now apply only to arrangements having tax benefit as ‘the main purpose’ as against ‘one of the main purposes’ as per the extant GAAR provisions. This could provide substantial relief since it is expected that only those arrangements which are completely devoid of a commercial substance shall attract GAAR.


(b) A threshold of Rs 3 crores of tax benefit has been fixed for setting in GAAR.

(c) The government has also soothened the nerves of anxious foreign investors by excluding investments made before August 30, 2010 from the clutches of GAAR.

(d) Moreover, now the  GAAR provisions is exclusion of non resident investors in an FII structure in respect of investments in Indian listed securities and to FIIs not opting for tax treaty benefits.


(e) The statement of FM has also indicated that in a given situation either Specified anti avoidance rules (‘SAAR’) or GAAR will apply and not both.

(f) Also certain other key clarifications like same income shall not get taxed twice under the GAAR regime, advance ruling can be sought on applicability of GAAR to an arrangement, etc. have been provided in FM’s statement.

(g) GAAR approving panel would now include an expert member on matters such as direct taxes, business accounts and international trade practices.
Thus, we can say that statement of FM has given some solace to the investor community, but certain grey areas remain like applicability of GAAR provisions to investments made in the interim period from August 2010 to April 2016, etc.  The ministry has also not given its verdict on the expert committee’s certain other key recommendations like prescription of negative list of transactions for non applicability of GAAR,  GAAR should not be applied to examine the genuineness of tax residency of Mauritius entities, etc.

The investor community would now eagerly await to see how the government eventually gives shape to this landmark development in the history of Indian tax diaspora. As they say, devil lies in the details.



GAAR vs Union Budget 2013-14 (Presented on 28th Feb 2013):

Para 150 of the Union Budget reads as under : “Hon’ble Members are aware that the Finance Act, 2012 introduced the General Anti Avoidance Rules, for short, GAAR.  A number of representations were received against the new provisions.  An expert committee was constituted to consult stakeholders and finalise the GAAR guidelines.  After careful consideration of the report, Government announced certain decisions on 14.1.2013 which were widely welcomed.  I propose to incorporate those decisions in the Income-tax Act.  The modified provisions preserve the basic thrust and purpose of GAAR.  Impermissible tax avoidance arrangements will be subjected to tax after a determination is made through a well laid out procedure involving an assessing officer and an Approving Panel headed by a Judge.  I propose to bring the modified provisions into effect from 1.4.2016.”.  


Thus, we can say that as per FM statement in the Budget, GAAR will become effective wef 1.4.2016, and changes proposed in January 2013 will be now incorporated in the Income Tax Act.



What is Grandfather clause :

Grandfather clause is a situation in which an old rule continues to apply to some existing situations, while a new rule will apply to all future situations. Frequently, the exemption is limited; it may extend for a set period of time, or it may be lost under certain circumstances.   An exemption that allows persons or entities to continue with an activity they were engaging in before but the same activity is not allowed to new entities. For example, a car manufacturer is allowed to produce cars with certain environment norms, but new entities are required to fullfil strictly norms. 



Cheque Truncation System

What is Cheque Truncation System or CTS 2010 :

 The full form of CTS is Cheque Truncation System.  RBI has decided to launch this system and all banks across India are required to follow RBI guidelines in this regard.  As per RBI guidelines, now all banks have to issue cheques conforming to the CTS 2010 standards with uniform features.

 How is CTS 2010 will be different from earlier system of cheque clearance?

 Under the CTS system, the physical movement of cheques between banks will be elminated.  At present , when you issue a cheque to someone,  he has deposit the cheque in his bank to get credit.  Then  this cheque moves physcially  from his bank to your bank which involves a lot of time and risk.     Now under CTS, instead of physical movement of the cheque, an electronic image of the cheque will be transmitted to the drawee branch / bank.    The presenting bank will  retains the physical cheque.    Along with the electronic image, certain key relevant information is also transmitted, such as date of presentation, presenting bank details, data on the MICR band.

 What is the purpose of CTS 2010  or What are the benefits of CTS?

The new process is being adopted to reduce the scope of frauds as the new standardized cheque will have number of security features.   The system will also help in speed clearance of cheque and thus customers will be able to get faster credit to their accounts.   This will happen as there will be no physical movement of the cheque  and hence time is saved and risk of loss of cheques in transit are totally eliminated. 


When will the CTS begin ? :

RBI has originally decided that CTS will be effective from 1st January 2013, but then it was announced that it will be effective from 1st April, 2013.   However, as per RBI guidelines dated 18th March, 2013,

“RBI will review the deadline in June 2013. “Cheque issuing banks shall make all efforts to withdraw the non-CTS-2010 Standard cheques in circulation before the extended timeline of 31 July 2013 by creating awareness among customers through SMS alerts, letters, display boards in branches/ATMs, log-on message in internet banking, notification on the web-site etc,” RBI said.

What are the features of cheques issued under CTS ? :

 (a) Cheque printer details: This is printed on the extreme left hand side of the cheque.  The printer details along with the words ‘CTS-2010’ is mentioned along the area where you tear off the leaf from the cheque book.

 (b) Rupee symbol: The new symbol of the Indian rupee is printed beside the area where the amount in figures needs to be written.

(c) Details of the bank and its logo: The bank details and its logo are printed on the face of the cheque. However, it is printed in invisible ink.

(d) Signature space indicator: The words ‘please sign above’ are mentioned indicating the space where you will need to sign the cheque.

(e) VOID pantograph: This is a wavelike design, which is visible to the naked eye and seen below the area where the account number is printed.

The above set of minimum security features would ensure uniformity across all cheque forms issued by banks in the country  which in turn will help presenting banks while scrutinising / recognising cheques of drawee banks in an image-based processing scenario. The homogeneity in security features is expected to act as a deterrent against cheque frauds, while the standardisation of field placements on cheque forms would enable straight-through-processing by use of optical / image character recognition technology.

The benchmark prescriptions are collectively known as “CTS-2010 standard”.  Indian Banks Association (IBA) and National Payments Corporation of India (NPCI) are co-ordinating with the banks on implementation of the new standard. Accordingly, the cheques issued are tested and certified by NPCI and only after such cerification the cheques would be issued to the customers.

 What Should Cheque Book Holders Should Do :

 (a) You should  ensure that you use only CTS-2010 compliant cheque leaves from April 1, 2013.

(b) You can check if you hold a CTS compliant cheque book by verifying if the cheque leaves have the features mentioned above. You need to apply in your bank for the same and it is available free of cost.

(c) If you have any unused cheque leaves with you, these must be surrendered in your bank.

(d) In case you have given old post dated cheques (like for your Housing Loan or Auto Loan) to some body, you must exchange them with the CTS-compliant cheques immediately.


RBI has advised that though non CTS-2010 standard cheques will continue to be accepted post July 31,  2013, they will be cleared at less frequent intervals and may incur additional charges.  RBI has advised to preferably use dark coloured ink while writing CTS cheques.


What does ‘ Tapering by Fed’ means

The term “tapering” has been going around for quite sometime in the financial market.  In last few weeks, this term of tapering has played havoc with Indian financial markets and made even our regulator, Reserve Bank of India, nervous.    The financial pundits even in India will be closely watching Federal Reserve Board Chairman Ben Bernanke when he testify before the Senate Banking, Housing  and Urban Affairs Committee hearing on “The Semiannual Monetary Policy Report to the Congress” at Capital Hill in Washington on 18th July, 2013   For the benefit of our readers, I am giving below some details which I am sure will make the subject easier for bankers and students and they will be able to appreciate the term better.

Background :

 After 2008 financial crisis, Fed has been takings steps to bring the US economy out of woods by cutting rates to ultra low levels.   Such a policy  provided stimulus to the sagging economy through two programmes popularly known as (a) Operation Twist; and (b) Quantitative Easing or QE..   Out of the two, the latter one ie QE is more relevant  for our discussions today.    Under QE, Fed is purchasing  $85 billion of fixed income securities per month ($40 billion of mortgage backed securities, and $45 billion of US Treasuries).   Usually, the central banks do such activities across the world, for a limited periods say two-three months (or upto a fixed dead line).   However, in view of the deep crisis in US economy,   Fed’s QE programme  did not set any end dates, but the consensus was that Fed will begin to wind down i.e. “taper” the size of its purchase before the year is over with the goal of ending the programme at some point in 2014.   Since December, 2008, the Fed had been trying  to maintain a target rate not exceeding 0.25%.   It intends to keep the rates at this level until inflation rises to an annualized rate of 2.5% or unemployment falls to 6.5%.   Thus, Fed will continue with the current QE till incoming economic data does not meet the above targets. 

 What is Tapering :

 “Tapering” has come to financial jargon when in  May 2013, Ben Bernanke stated that Fed may taper the bond-buying program known as quantitative easing (QE) in the coming months.   What he meant by tapering was that Fed will start reducing the amount of bonds being currently purchased by Fed.    At that time, Fed was purchasing $85 billion of bonds  per month.   The next meeting is on 18th September and thus there were wide speculations that after 18th September, 2013, Fed may reduce the size ofmonthly bond purchases to  $70 or $75 billion i.e. tapering to the extent of  $10 to 15 billion  Such a step is reducing the size of QE is being termed as “tapering”.


What are its implications for US and India :

Everybody knew from beginning that QE is not meant to last forever.   Thus, it has to come to an end once US economy signs of recovery.  Fed has rightly thought to bring the change slowly rather than stop the same abruptly.   Thus, it will be brought to end through ‘tapering’.

The mere statement of ‘tapering’ has sent shock waves in financial markets not only in US but also in India.   The shrinking of pumping of more money through regular purchase of bonds, will squeeze the liquidity and will impact the stock markets immediately.   The follow up of the tapering will show hardening of interest rates in US, which may even touch 3% in the medium range.   This increase in interest rates in US is likely to result in shifting of capital from India to US.   This can badly hit Indian stock and bond markets, and interest rates are likely to go up affecting the growth prospects of Indian corporate.   Moreover, the flight of capital from India will put additional pressure on Rupee which can again see sharper  depreciation and move towards Rs70-Rs75 range.


AuroPharma-Riding on the health…

auroAurobindo pharma is riding the pharma wave, the counter after a huge resisted struggle on the daily chart has decisively, broken above the multiple resistance zone of 192-205 and is currently smartly afloat above the line…. the future could be healthy and/ or wealthy…..see the chart

Inverted Head and shoulder in arvind ltd

arvindInverted head and shoulder formation is being seen in the arvind ltd the counter has seen a huge spike in the volumes on the daily charts and positive Inverted head and shoulder break up on the counter is being seen, the 21DMA breached decisively acts as support for the counter, refer the chart

Head and shoulder in Natural gas


NG hns

There is a head and shoulder bearish formation seen in the Natural Gas – MCX daily chart, the counter seems to be struggling to stay afloat amidst rupee strengthening and slow demand from US and other emerging markets, see the chart below