COMPANY PROFILE

LIBERTY
Established in 1954, today the company through its six manufacturing units collectively produces, 50,000 pairs of footwear a day, sold through 6,000 multi-brand outlets and 350 exclusive showrooms, and has a presence in 25 countries, with 50 showrooms outside India.[2] Adesh Gupta became the CEO of LSL in July 16, 2001 The company was incorporated on the 3rd September ,1986 as a Public Limited Company and obtained the Certificate of Commencement of Business on 11th March 1988. The company has been set up to manufacture and sell leather and non leather shoes ,leather shoe uppers and leather garments Presently the company is engaged in the manufacturing of leather and non leather shoes. It has also set up a joint venture in Russia to manufacture shoes in 1991 under the name of M/S Liberty &Go ,with M/S Gorky Production & shoes Unit,Gorky. The Company is marketing its product nationally and internationally under the brand name "LIBERTY" and is well established in the national and international market. The company has entered into an agreement with one of the group firms M/S Liberty Enterprises for using the established brand name "LIBERTY". The company has commenced its commercial production for non leather shoes on 25th December 1993. Initially one direct injection soiling machine was installed with a capacity of 240000 pairs per annum on single shift basis .The second direct injection soiling machine was installed in March 94.From the commencement of commercial production till 31st March 1994,the company has been operating on full capacity. As the promoters ar in this line for the last five decades ,the company is confident of maintaining this level of operations in the future.The company has been promoted by P.D.Gupta and R.K.Bansal and belongs to the LIBERTY Group .Liberty Group has completed Five decades of its existence in the shoe industry in 1994. 'Force 10', Liberty's first sub-brand, was launched in August 1990, a time when a casual footwear wave sweeping the Indian market. By 1994-95, Force 10 became Liberty's flagship brand in value, notching up sales of Rs 32 crore, it the coming years, it not only help the company establish its name the domestic footwear market, but also paved the way for nine other sub-brands and a firm foothold the mass family footwear segment, till now led by Bata, now Liberty was the country's second largest footwear company after it The company saw major expansion in the 2000s, both in retail and manufacturing bases, leading to a sharp growth, in the year 2002-03, the company posted a retail turnover of Rs 400 crore. Also in April 2003, the Liberty Group underwent an important restructuring and its product portfolio was also revamped. As a part of the restructuring process, the company split its manufacturing and retail business in January 2004, with Liberty Shoes as the holding company for its shoe business and a subsidiary Liberty Retail Revolution Ltd for its retail business, which established a new retail channel through "Revolutions Stores", which were set up at in Mumbai, Kolkata, Hyderabad and Chennai. At the same time it ventured into high fashion, by tying up with fashion designers including Rohit Bal, Rajesh Pratap Singh, Rina Dhaka, Rohit Gandhi, Ashish Soni and Suneet Verma to develop footwear to match their clothing lines. LSL produces more than 50,000 pairs of footwear a day covering virtually every age group and income category. Products are marketed across the globe through 150 distributors, 350 exclusive showrooms and over 6000 multi-brand outlets, and

sold in thousands every day in more than 25 countries. After 50 years of its existence, today Liberty produces footwear for the all age groups. Currently, LSL is headed by Mr. Adesh Gupta as its CEO. It is a part of the 'Liberty Group' which includes other associate companies - Liberty Retail Revolutions Limited and Liberty Whiteware. 2000 - The Company is to enter into an agreement for sale/purchase of goods and/or taking on franchise basis the production on franchise basis the production facilities and/or acquire movable and immovable property including plant and machinery, building etc. with Liberty Group Marketing Division and/or Liberty Enterprises, partnership firms. - The Company is all set to venture into the e-commerce activities which will cater to the B2B and B2C requirements. 2003 -Liberty Footwear has introduced its innovative Liberty Footstylers collection. It is also unveiling a slew of shoes whose price will range between Rs 1,500 and Rs 2,500, higher than its other products such as Gliders, Windsor and Senorita. Pearl Academy inks pact with Liberty Shoes 2004 -Liberty Shoes Board approves setting up of Subsidiary Company -Mr. Adesh Gupta presently working as Executive Director of the Company since July 16, 2001, has been elevated as 'Chief Executive Officer' (CEO) of the Company. - Liberty Shoes Ltd launched its retail format, Revolutions -Liberty Footwear Company Ltd's claim to use brand name 'Revolution' for its new footwear retail chain has been challenged by a Delhi-based women's wear chain Revolution Clothings, which too, has claimed ownership of the same brand name. 2005 -Liberty unveils new range of footwear -Liberty Shoes has given the Bonus in the Ratio of 1:1 2006 -Liberty Shoes joins hand with Pantaloon 2007 - Liberty Shoes achieved sales of Rs 300 crore last fiscal and has a 30-per cent marketshare in the branded footwear segment. 2010 -Liberty Shoes Ltd as considered approval for re-appointment of Sh. Adesh Kumar Gupta, Sh. Adarsh Gupta and Sh. Shammi Bansal as Executive Directors of the company.

2012 -The Company has appointed Sh. Ramesh Chandra Palhan as Additional Director of the Company with effect from March 28, 2012..

MANUFACTURING
Liberty's manufacturing base includes six facilities spread across the numerous states, two in Gharauna and Liberty Puram (Haryana) where its primary and the largest manufacturing units are situated, Paonta Sahib, (Himachal Pradesh) with two units and Roorkee (Uttarakhand). The company has avoided locations in the conventional Indian shoe manufacturing locations such as Agra, Kanpur, Noida, Chennai etc. [8] BRANDS

FOR MEN: Coolers, Fortune, Force 10, Gliders and Windsor FOR WOMEN: Force 10, Gliders, Senorita and Tiptopp FOR KIDS: Footfun, Force 10, Gliders, Prefect SAFETY SHOES: Freedom, Warrior and Workman

Business Details
Liberty Shoes is one of the most successful home grown brands of the country. Conceptualized in 1954 in the city of Karnal, the brand has always emphasized on delivering great products at great prices.

In the present times, Liberty has become one of the worlds top five manufacturers of leather footwear with a presence in more than 25 countries including France, Italy, Germany, Finland, UK, USA, Canada, Austria, Czech Rep, Austria, Spain, Finland, Denmark, Saudi Arabia, Sri Lanka, Thailand, Qatar and Bangladesh providing the best quality at a competitive price.

Liberty Shoes is the first company in India to envision a multi brand strategy covering all segments from kids to youth to adults. The reason being, Liberty always wanted to promote itself as a family brand and cater to each and every member of the family. At a time when India was evolving, each segment needed a different brand connect. So, the company went into creating separate brand for each segment and thereby added 10 sub-brands in a span of 10 years, each catering to a specific target group and becoming successful within its own space. Today, Liberty has a wide portfolio of brands which is the largest in the industry comprising 10 distinctive sub-brands such as Senorita, Fortune, Gliders, Force10, Coolers, Footfun, Tiptopp, Windsor, Prefect, and Warrior professional gear.

Doing well in the urban market, Liberty spread its operations in various parts of northern India by opting for a

franchisee route in the year 1990 which enabled it to reach out to the target consumer base as well as offer a profitable franchise opportunity to aspiring entrepreneurs. The idea turned out to be a success as is evident with 65 per cent of the business coming from franchise outlets. Liberty expects to add 100

The Liberty brand is drawing in a younger, more fashion-focused target customer but more importantly, with the companys operating expertise -- from footwear design to the retail floor they are able to identify emerging footwear trends and deliver the hottest styles that consumers want right now.
In this scheme of customer centric marketing priority is accorded to the needs and wants of the customer, and not on what the company or the retailer, would want the customer to buy. The marketing focuses on understanding the concerns, needs and wants of the customer. There is recognition that the sale is the natural result of forging a solid relationship built on listening and delivering solutions, not forcing someone to buy. It begins with building customer rapport and ends with a lasting association. Today the companys ever-burgeoning franchisee network covers the entire country and has shown a striking growth especially in South India. Yes, with the momentum on its side Libertys penetration also covers tier two cities. Creating growth opportunities for the franchisees in a market where lower tariffs help draw in much higher returns. Of course it helps that Libertys brand portfolio makes it the most comprehensive choice in footwear. In a nutshell whats in the offing is a win-win situation for the company and the franchisees. Liberty was the pioneer of footwear retail franchising in India. The reason why we chose to go for the franchisee retail model was to tap on the local market knowledge of the franchisee and use that as a base for strengthening and broadening our retail network.

We were recently recognized for developing the best business model for franchising across industries in the country as well as for demonstrating excellence through the successful operation of satisfied franchisees over a sustained period.

Liberty Shoes Ltd Investment Details

Where are you looking for expansion?

NorthNew Delhi, Haryana, Himachal Pradesh, Jammu and Kashmir, Punjab, Uttaranchal, Uttar Pardesh WestGujarat, Rajasthan, Maharashtra, Goa EastAssam, Meghalaya, Mizoram, Tripura, Arunachal Pradesh, Manipur, Nagaland, West Bengal, Sikkim, Orissa SouthKerala, Karnataka, Tamil Nadu, Andhra Pardesh CenterChhattisgarh, Madhya Pradesh, Bihar, Jharkhand Union TerritoriesAndaman and Nicobar, Pondicherry, Chandigarh, Lakshadweep, Daman and Diu Is there exclusive territorial rightsgiven to a unit franchise?

BRANDS
Fortune provides the perfect blend of elegance, comfort and quality giving you the freedom to express yourself with a statement thats entirely your own. A definitive male fashion brand, Fortune has the latest styles in formal footwear for men. Dressed in genuine leather uppers, the brand has both leather soles and extra light poly soles that give the brand a hint of flamboyance making it suitable for occasions.

With Force 10 discover the sporty and vibrant style crafted to put you in a zone with a mix of casual elegance and effortless ease. This range of sportswear for Men, Women and Kids is made of leather and other breathable fabric uppers. Constant technological up-gradations has made it one of the more desirable brands in the country.
Footfun, childrens fashion brand for kids up to age 10 come in a range of rainbow colours . Colorful, light and comfortable, the range includes smart sandals, elegant sports shoes and brightly colored lycra uppers with no laces that ensure a snazzy look for children.

With Senorita, walk tall, walk light and walk with amazing style. Senorita is for the fashion and style conscious young woman of today who can step into a pair of Senorita and be ready for any occasion.
The workforce which builds a better tomorrow not only requires, but deserves footwear which protects them. This is the inspiration behind Workman, a range of Safety Shoes from Liberty. Especially designed for those working for the construction, engineering, services and other sectors employing contractual labor, Workman is a tribute to the hard working feet.

Professionals, undertaking high impact, electrical, thermal, chemical or even slippage risks, walking over surfaces or operating in environments that expose them to dangers related to these, use a pair of Boots that they completely rely on. Whether you are a power plant technician, alkali unit worker, or even an X-treme sports practitioner, you will appreciate the safety of FREEDOM Protective Professional Boots. This is what a woman desires! There wont be a moment of dullness in your wardrobe this season, and thats a promise of the Divarange by Gliders. Get ready to witness a colour blast in every step you take both back home or when stepping out for a fun evening.Diva is an explosion of colours To colour your imagination, visit your nearest Liberty Exclusive Showroom and Liberty Retail Revolutions. Product Range Liberty has developed a spectrum of exclusive brands for both males & females across all age groups, each of which has been given that extra edge to cater to a specific target requirement. Today the new range from Liberty is all about style, design, and comfort. The range imbibes the spirit of fun and is stylish in accordance with the recent fashion trends.

Design / R & D
Our footwear is a fashion statement and needs constant updating in terms of technology and worldwide trends. Our R & D team is always ready and open to experimentation that will help improve the products catering to the demands of a varied customer base. A group of 50 young designers are working round-the-clock at the factory looking at products and ideas for the next seasons' footwear. Each of these designers is a trained professional from leading fashion institute across the globe.

Manufacturing Excellence

We call them Humantech Centers. When people visit us they see them as centers of Excellence for manufacturing shoes where technology works in perfect tandem with human creativity. Liberty has Humantech centers at four locations in India- the latest being the Uttaranchal project which was launched recently to boost the production of world-class footwear. This Greenfield plant near Dehradun will increase the company's existing production capacity of 20 million units pa by 200,000 units.

Guide to Footwear Purchase

Look at an old pair of shoes to see where the most wear is. If the shoe is mostly indented on the inside edge, you probably have low arches or Flat Feet and need a shoe with the maximum amount of support.

If your shoes are worn on the outside edge, you have High Arches and need a cushioned shoe.

Perform this foot test regularly over time. The shape of one's feet changes over time, especially with age.

Go footwear shopping at the end of the day because your feet will be at their largest at that time. The same is true when you are walking, so this is a good way to ensure that you buy the shoe with the best fit.

Make sure the heel of the walking shoe you choose is no more than 1 inch above the sole under the fleshy portion of your foot. This part is called the ball of your foot.

Avoid flared soles. Buy flexible, lightweight footwear. These shoes are considered the best type for the fast gait required for power walking.

Shoe Care

Remember happy shoes ensure happy feet. So do take proper care of your shoes. Select a polish that matches the leather color of your shoe.

Polishes are available as liquids, pastes and creams. Although liquid polishes are easiest to work with they can dry out shoe leather and cause cracking. Although liquid polishes are easiest to work with they can dry out shoe leather and cause cracking. Shoe repair experts recommend the protection and conditioning offered by creams and pastes. Shoes with a nap, such as suede or nubuck, shouldnt be polished. Gently brush suede and footwear to remove loose dirt and restore nap on a regular basis For oiled shoes, apply conditioner to preserve them.
Stains should be treated immediately with solvent-based suede cleaner. If they prove hard to remove, take the shoe to a shoe repair professional. Athletic shoes with fabric or suede uppers and trim can be cleaned the same way as suede or shoes. Special sneaker shampoos, used with brush applicators, help cleaning stains and dirt from leather sneakers .Cover scuff marks with matching polish. Sneakers made from canvas can be washed by hand using a toothbrush, mild soap and water Liberty Premium shoes care products are formulated to take utmost care of your pair of shoes. The range is available at all Liberty Showrooms. Find the nearest Liberty

Domestic Market
RetailWe believe that every segment of our wide customer base has a right to fashionable footwear which makes
them look good, and feel good. Hence, while we devote the most fashionable selections to those with high tastes in style; our offerings also blend fashion with affordability. At the same time, a wide range of industries are able to function more effectively, benefiting from the safety shoes offered by Liberty which is operating 400 exclusive stores and 6000 multi brand outlets.

DistributionThe world chooses to step ahead in our footwear. And so we, in turn, step ahead with a
strong distribution network that reaches out to the most far flung areas of India, and beyond to more than 25 countries across the world. This strong and ever expanding network is a reflection of our commitment to dress more feet fashionably.

Institutional sales With increasing construction and development activity taking place across the
world, the need to ensure safe working conditions for the workforce is at an all time high. The answer comes in the form of the world class range of Warrior Safety Shoes from Liberty that helps industries around the globe work safe, work better. Conforming to Euro Safety Norms (EN 345), this safety footwear is recognized as standard professional gear for workers in light and heavy engineering units as well as defense forces. So the feet the world moves on, moving in Liberty Footwear.

International Market
Dressing feet across the World

Even as globalization opens up new opportunities, the visionaries at the helm of affairs at Liberty had seen it coming almost 50 years ago. In 1964, Liberty sent its first export consignment of 50,000 pairs to Czechoslovakia, thus marking the commencement of a new phase. Soon, Liberty climbed to the top position amongst footwear exporters to Russia. 1977 saw Liberty marking its first international presence by setting up a Liberty Showroom in Hungary. Since then, Liberty has grown to achieve a presence in more than 25 countries including France, Italy, Germany, Finland, UK, USA, Canada, Austria, Spain, Finland, Denmark, Saudi Arabia, Sri Lanka, Thailand, Qatar and Bangladesh.

Why Liberty
Liberty helps the world step out in style. And Liberty walks ahead because of its people, a 3500 member strong team of professionals. Stationed across 7 state-of-the-art Humantech Centers, they combine an imaginative sense of creativity with sound analytical skills to drive not just Liberty, but the entire Indian Footwear industry, now second only in size to the Chinese Footwear Industry. And with the rising brand and fashion awareness, the Liberty team has found a global playground. At the same time, we are always eager to join hands with like-minded individuals who love dressing up the feet with quality and fashionable footwear. So if you think you possess that creative streak, analytical aptitude and a passion for footwear, then we would love to explore the possibilities of working together. Please check the Current Openings available presently. We at Liberty Shoes have been fashioning footwear, for well over 50 years now, for the style- conscious people around the globe. Currently with an annual turnover exceeding INR.600 crore (U.S. $150 million), we figure amongst the top 5 manufacturers of leather footwear of the world producing more than 50,000 pairs a day using a capacity of more than 3 lacs square feet of leather per month. Helping us dress up the feet of the fashion-driven and quality-seeking customers in more than 25 countries, which includes major international fashion destinations like France, Italy and Germany, is our worldwide distribution network of 150 distributors, major international fashion destinations like France, Italy and Germany, is our worldwide distribution network of 150 distributors, 400 exclusive showrooms and more than 6000 multi-brand outlets. Our committment to quality is also evidenced by our ISO 9001: 2000 certification.

EXECUTIVE SUMMARY
Someone has rightly said that practical experience is far better and closer to the real world than mere theoretical exposure. The practical experience helps the students to view the real business world closely, which in turn widely influences their perceptions and arguments their understanding of the real situation. The phenomenon of creation is a long process requiring time, energy and dedications as well as skill and experience of those people engaged in the task, ultimately in the outcome as the final form of embodiment of the creators vision. Research work constitutes the backbone of any management education program. A management student has to do research work quite frequently during his/her entire span. As we know working capital is very important for any and every organization, so my research work is done on WORKING CAPITAL of a private limited organization LIBERTY . Working Capital is the life blood and controlling nerve of an organization. LIBERTY being a large organization, dealing in bank sector and one of the leading company in banking sector requires a large amount of funds. Hence there is a need for proper management of working capital, so that day to day operations do not hamper; at the same time there would not be any idle investment in working capital.

NEEDS AND OBJECTIVES OF WORKING CAPITAL

The need for working capital cannot be over emphasized every business needs some amount of working capital. The need for working capital arises due to the time gap between production & realization of cash from sales. There is an operating cycle involved in the sales and realization of cash.

The working capital is needed for the following purposes.

1. For the purchase of raw materials, components & spares. 2. To pay wages and salaries. 3. To incur day-to-day expenses & overhead cast such as fuel, power and office expenses, etc. 4. To meet the selling costs are packing, advertising etc. 5. To provide credit facilities to the customers. 6. To maintain the inventories of raw material, work-in-process, stores and spares and finished stock.

ABOUT WORKING CAPITAL MANAGEMENT

WORKING CAPITAL
Working capital in short may be said as the capital required in meeting the short tem needs. The requirement of working capital differs from firm to firm. The firm may require large amount of working capital or may be less, it depends on the kind of work done by the particular organization.

CLASSIFICATION OR KINDS OF WORKING CAPITAL

Kinds of working capital

On the basis of concept

On the basis of time

Gross working capital

Net working capital

Permanent or fixed working capital

Temporary or variable working capital

Regular working capital

Reserve working capital

Seasonal working capital

Special working capital

GROSS WORKING CAPITAL: Total current assets

1. Gross working capital: Gross working capital refers to the firms investment in current assets. Current assets are the assets which can be converted into cash within an accounting year and include cash, short term securities, debtors, (account receivable or book debts) bills receivable and stock (inventory).

NET WORKING CAPITAL: Change in current assets and current liabilities

Thus Working capital= current assets- current liabilities Net working capital: - Net working capital refers to the difference between current assets and current liabilities. Current liabilities are those claims of outsider which are expected to mature for payment within an accounting year and include creditors (account payable), bills payable, and outstanding expenses. Net working capital can be positive. Or negative. A positive net working capital will arise when current assets exceed current liabilities. A negative net working capital occurs when current liabilities s are in excess of current assets.

The two concepts of working capital gross and net-are not exclusive rather, they have equal significance from the management viewpoint.

Permanent or fixed working capital: It is the minimum amount which is required to

ensure effective utilization of fixed facilities and maintaining the circulation of current assets. For example every firm has to maintain a minimum level of raw material, work-in-progress, finished goods and cash balance. This minimum level of current asset is called permanent or fixed working capital as this part of capital is permanently blocked in current asset.

Temporary or variable working capital: It is the amount of working capital which is

required to meet the seasonal demand and some exigencies. Variable working capital can be further be classified as Seasonal working capital: the capital required to meet the seasonal needs of the enterprises is called as seasonal working capital.

Special working capital: That part of working capital which is require d to meet special exigencies such as launching of extensive marketing campaigns for conducting research etc.

OPERATING CYCLE OF WORKING CAPITAL

Sufficient working capital is necessary to sustain sales activity. Technically this is referred to as a operating/ cash cycle. It can be said to be at the heart of the need of working capital. Cash/operating cycle is the length of time necessary to complete following event. Convert cash into raw material. Raw material into goods in process. Goods in process into finished goods. Finished goods into debtors through credit sales, and debtor into cash.

The cycle is a continuous process

DEBTORS

CASH

SALES

RAW MATERIAL

FINISHED GOODS

WORK IN PROGRESS

OPERATING CYCLE

The Working Capital cycle or Cash Conversion cycle as it is also called is usually expressed in terms of the number of days. This figure is the average time that it takes to turn investment in books into cash and profit. Payback expresses the number of days required to recoup the original investment on a single title. In the organizations Balance Sheet there will be the costs of paper, titles still under development, and author advances of books already and not yet published. In addition there will be the cost of stocks of unsold books, Accounts Receivable, and Accounts Payable.

Determinants of working capital

The requirements of working capital generally vary from industry to industry, concern to concern and time to time. Comparing the production cycle of BHEL with any of the FMCG Company we will notice that, BHEL takes considerably longer period to manufacture a turbine while in FMCG companies like HLL or P&G takes few minutes to manufacture their product. Working capital in these companies can be even negative as they take credit from suppliers and sell their products on cash. So current liabilities are higher due to which figure of working capital can be negative. The various factor which influence the amount of working capital required by a business enterprises, may be grouped under two heads.

1) Internal factor: - The factor which are within the control and competence of management. These may include the risk taking attitude of management, turn over of receivable and inventories terms of purchase and sale s and credit rating etc. 2) External factor: - these may include the nature of business, volume of production and sales and business cycle.

PERMANENT AND TEMPORARY WORKING CAPITAL

The operating cycle thus crates the need for current assets (working capital).however this need does not come to an end after the cycle is completed. It continues to exist. Thus the distinction between permanent and temporary working capital should be known. Business keeps on going even after the realization of cash from customers, which creates the need for regular supply of working capital. However the magnitude of Working capital required is not constant, but fluctuating. To carry on business, a certain minimum level of Working capital is necessary on a continuous and uninterrupted basis. For all practical purpose, this requirement has to be met permanently as with other fixed assets. This requirement is referred to as Permanent or fixed Working capital. Any amount over or above the permanent level of Working capital is temporary, fluctuating or variable Working capital. This portion of the required Working capital is needed to meet fluctuation in demand consequent upon changes in production and sales as a result of seasonal changes. The basic distinction between these two is:

30 25 20 15 TEMPORARY 10 5
PERMANENT WORKING CAPITAAL
5

FINANCING OF WORKING CAPITAL The various sources for the financing of working capital are as follows:

Sources of Working capital

Permanent or fixed 1. Shares 2. Debentures 3. Public deposits 4. Ploughing back of profits 5. Loans from Financial institutions.

Temporary or variable 1. Commercial banks 2. Indigenous bankers 3. Trade creditors 4. Installment credit 5. Advances 6. Accounts ReceivablesCredit/Factoring 7. Accrued expenses 8. Commercial papers

CALCULATION OF WORKING CAPITAL

Working capital is the excess of current assets over current liabilities. Information regarding current assets and current liabilities is available from the balance sheet. Working capital should be sufficient to meet routine requirement of the business. The two concepts of working capital are current assets and current liabilities. They have a bearing on the cash operating cycle. In order to calculate the working capital the working capital needs, what is required is the holding period of various types of inventories, the credit collection period and credit payment period. Working capital also depends on the budgeted level of activity in terms of production/sales. The calculation of working capital is based on the assumption that the production/sales is carried on evenly throughout the year and all costs accrue similarly. As the working capital requirements are related to the cost excluding and not to the sale price. Working capital is computed with reference to cash cost. The cash cost approach is

comprehensive and superior to the operating cycle approach based on holding period of debtors and inventories and payment of creditors. The computation of working capital can be summarized as follows: (I) Estimation of current asset : a) Minimum desired cash and bank balances b) Inventories Raw material Work-in-progress Finished goods c) Debtors*

Total current assets (II) Estimation of current liabilities : a) Creditors** b) Wages c) Overheads Total current liabilities

(III)

Net working capital (I-II) Add: margin for contingency

(IV)

Net working capital required

* If payment is received in advance, the item would be listed in current liabilities. ** If advance payment is to be made to creditors, the item would appear under current asset. The same would be treated for advance payment of wages and overheads.

IMPORTANCE OR ADVANTAGES OF WORKING CAPITAL

Working capital is the blood and nerve centre of a business. Just as circulation of blood is essential in the human body for maintaining life, working capital is very essential to maintain the smooth running of a business. No business can run successfully without an adequate amount of

working capital. The main advantages of maintaining adequate amount of working capital are as follows: Solvency of the business. Goodwill Easy loans Cash discounts Regular supply of raw materials Regular payment of salaries, wages and other day-to-day commitments. Exploitation of favorable market conditions. Ability to face crisis Quick and regular return on investments

High morale. WORKING CAPITAL MANAGEMENT

Working Capital is the money used to make goods and attract sales. The less Working Capital used to attract sales, the higher is likely to be the return on investment. Working Capital management is about the commercial and financial aspects of Inventory, credit, purchasing, marketing, and royalty and investment policy. The higher the profit margin, the lower is likely to be the level of Working Capital tied up in creating and selling titles. The faster that we create and sell the books the higher is likely to be the return on investment. Thus when we have been using the word investment in the chapter on pricing, we have been discussing Working Capital.

AFFECT OF BUSINESS TRANSACTIONS ON WORKING CAPITAL

In preparing a statement of changes in financial position, on working capital basis, it is convient to classify business transactions into three categories: 1. Transactions Affecting only Current Asset or Current liabilities Accounts: These transactions produce changes in working capital accounts but do not change the account of working capitals. For example, the purchase of merchandise increases inventory and accounts payable but has no effect on working capital; it may therefore be ignored in preparing the

statement of changes in financial positions. Similarly, paying accounts payable affects cash, so this transaction would be reflected in cash basis statement of changes in financial position. However, the transaction has no effect on working capital since a current asset (cash) and a current liability (accounts payable) decrease by the same amount. Hence, the transaction would not be reflected as a source or use in a working capital basis statement of changes in financial position. Other transactions like collection of receivables, short-term borrowing, purchase of short-term government securities also fall in this category of transactions. Thus, when funds are defined as working capital, there is no need to show the details of the more or less continous movement of resources between current liabilities and current assets which results from the manufacture and sale of goods and the collection of receivables from customers. Indeed, the focus is on the usually more significant flows affecting non-current assets (i.e. long term investments) and permanent capital, the name given to the sum of long-term liabilities and owners equity. Thus the funds statement, i.e. Statement of Chances in Financial Position based on changes in working capital position, is a better and useful tool for highlighting the changes that have taken place in the financial operations between two balance sheet dates.

2. Transactions Affecting Current Asset or Current Liability Account and a Non-Working Capital (Non-current) Account: These transactions bring about either an increase or a decrease in the amount of working capital. The issue of long-term bonds, for example, increases current assets and increases loan on bonds, a non-working capital account; therefore the issue of bonds is a source of working capital. Similarly when the bonds approach maturity they are transferred to the current liability classification in the balance sheet. This causes a reduction (a use) of working capital. If changes in non-working capital accounts are analyzed, these events are brought to light, and their effect on working capital will be reported in the statement of changes in financial position. 3. Transactions affecting only Non-current Accounts: These transactions have no direct effect on the amount of working capital. The entry to record depreciation is an example of such a transaction. Other transaction in this category, such as issue of share capital in exchange for plant assets, are called exchanged transactions involving only non-current accounts and are viewed as both a source and a use of working capital, but do not change the amount of working capital.

Alternatively, such exchange transactions may not be considered in preparing a statement of changes in financial position on working capital basis.

WORKING CAPITAL ANALYSIS OR MEASURING THE WORKING CAPITAL

The working capital is a means to run the business smooth and profitably, and not an end. Thus, concept of working capital has its own importance in a going concern. A going concern, usually, has a positive balance of working capital i.e., the excess of current assets over current liabilities, but sometimes the uses of working capital may be more than the sources resulting into a negative value of working capital. This negative balance is generally offset soon by gains in the following periods. A study of changes in the uses and sources of working capital is necessary to evaluate the efficiency with which the working capital is employed in the business. This involves the need of working capital analysis. The analysis of working capital can be conducted through a number of devices, such as: 1. Ratio analysis 2. Funds flow analysis 3. Budgeting

Ratio Analysis: A ratio is a simple arithmetical expression of the relationship of one number
to another. The technique of ratio analysis can be employed for measuring shot-term liquidity or working capital position of the firm. The following ratios can be calculated for this purpose:

Current ratio Acid test ratio Absolute liquid ratio or cash position ratio Inventory turnover ratio Receivables turnover ratio

Payables turnover ratio Working capital turnover ratio Working capital leverages Ratio of current liabilities to tangible net worth

Asset Usage
The assessment of asset usage is important as it helps us to understand the overall level of efficiency at which a business is performing. The basic equations for this section are:

Turnover Total Asset Turnover = Total Assets

Average Stocks Stock Turnover = Credit Sales/365

Debtors Turnover

Average Debtors = Credit Sales/365

Creditors Turnover

Average Creditors = Credit Sales/365

The assessment of asset usage is important as it helps us to understand the overall level of efficiency at which a business is performing.

DIFFERENCE BETWEEN CASH FLOW AND FUND FLOW STATEMENT

BASIS OF DIFFERENCE MEANING CASH FLOW STATEMENT It is a statement of changes in the financial position of business due to the inflow and outflow of cash. PLANNING PERIOD Statement of cash flow is required for short range planning. RELIABILTY Plans for more immediate future can rely upon information supplied by cash flow statement. TREATMENT OF CURRENT ASSETS It does not treat all current assets as cash. Plans for more immediate future cannot rely upon information supplied by funds flow statement. It treats all current assets at par with funds, although debts are collected within months and stock is sold within 6 months. TREATMENT OF CURRENT LIABILITIES CASH/FUNDS FROM OPERATION Increase in bank overdraft and increase in outstanding expenses are treated separately. While making cash flow statement cash from operation is calculated. BASIS Prepared on cash basis. Prepared on accrual basis. While making funds flow statement funds from operation is calculated. Increase in outstanding expenses is treated as increase in overdraft. Funds flow statement is required for long range planning. FUNDS FLOW STATEMENT It is a statement of changes in the financial position of business due to the inflow and outflow of funds.

Working capital budget:

A budget is a financial and/or quantitative expression of business plans and policies to be pursued in the future period of time. Working capital budget, as a part of total budgeting process of a business, is prepared estimating future long-term and short-term working capital needs and the sources to finance them, and then comparing the budgeted figures with the actual

performance for calculating variances, if any, so that corrective actions may be taken in the future. The objective of working capital budget is to ensure the availability of funds as and when needed, and to ensure effective utilization of these resources. The successful implementation of working capital budget involves the preparing of separate budgets for various elements of working capital, such as cash, inventories and receivables, etc.

Working Capital Management (Debt vs. Equity)

Working capital is the money you will need to keep your business going until you can cover your operating costs out of revenue. As a small business owner, it will be wise to have enough working capital on hand to cover items such as the following during the first few months that you are in business: Replacing inventory and raw materials: you will need to fund the purchase of inventory out of working capital until you start to see cash from sales, which could take months. Paying employees: even the most loyal worker wants to get paid on time, regardless of how much or how little cash your firm earns during its first months. Paying yourself: unless you have made other arrangements, you will need to withdraw some money to support yourself. Debt payments: if you have borrowed money to get started, you probably have to begin repaying it right away. Missing your first loan payments will not do your credit rating any good. An emergency fund: you need some cash on hand to cover unforeseen shortfalls that may result from any number of factors such as delays in getting your space ready, a slow paying client, or slow business.

Debt vs. Equity Assessments

It is essential that you assess the relative merits of each form of funding for your specific business.

DEBT
Take on Creditors Low Expected Return Smaller Funding Amounts Periodic Payments Maturity Date More Restrictions ADVANTAGES OF USING DEBT Debt is not an ownership interest in the business. Creditors generally do not have voting power.

EQUITY
Take on Partners High Expected Return Larger Funding Amount No Short-Term Payments Open-Ended Exit Date Less Restrictions DISADVANTAGES OF USING DEBT Unpaid debt is a liability of the business. If it is not paid then the creditors can legally claim the assets of the firm. This action can result in liquidation or reorganization.

The payment of interest on debt is considered a cost of doing business and is fully tax deductible.

Your business must earn at least enough money to cover for the interest expense, otherwise you may not be able to pay you interest which may lead to default (financial distress).

The creditors will only be concerned that the business will be able to generate cash flow to cover interest expenses.

ADVANTAGES OF USING EQUITY Unlike obligation of debt, your business will not have any contractual obligation to pay for equity dividend. Equity financing also allows your business to obtain funds without incurring debt, or without having to repay a specific amount of money at a particular time.

DISADVANTAGES OF USING EQUITY Equity is an ownership of the business. So an equity partner will have a direct say about your business.

Making more efficient use of Working Capital

The table below lists items, which influence Working Capital levels favorably and adversely Items that reduce Working Capital levels for publishers - Increased profit margins - Customers who pay promptly - Advance payments by customers Items that increase Working Capital levels for publishers - Lower profit margins - Long print runs except where all the books are required on publication e.g. School and university textbooks - Inventory which is sold and paid for quickly by customers after publication - Lower Inventory levels by reducing print quantities and working with printers who will deliver quickly and produce low print runs economically - Slow authors who deliver late and whose manuscripts require substantial editing - Holding paper stock unless market conditions demand and the savings are large - Slow schedules for the development of new titles - Successful promotion that speeds up - Making advance payments to

the rate of sale

printers - Seasonal sales except where the publishers prints only for the season

- Licensing (but problematic in young economies) - Paying suppliers on completion with credit - Authors who deliver manuscripts on disk ready for computer make-up - Incentives to staff , authors , suppliers, customers , sales staff and agents to speed up the rate of sale and of developing new books, delivering manuscripts on schedule

Measures to Improve Working capital management

The essence of effective Working capital management is proper cash flow forecasting. This should take into account the impact of unforeseen events, market cycles, loss of a prime customer and actions by competitors. The effect of unforeseen demands of Working capital should be factored in. It pays to have contingency plans to tide over unexpected events. While market-leaders can manage uncertainty better, even other companies must have risk-management procedures. These must be based on objective and realistic view of the role of Working capital Addressing the issue of Working capital on a corporate-wide basis has certain advantages. Cash generated at one location can well be utilized at another. For this to happen, information access, efficient banking channels, good linkages between production and billing, internal systems to move cash and good treasury practices should be in place. An innovative approach, combining operational and financial skills and an all-encompassing view of the companys operations will help in identifying and implementing strategies that

generate short-term cash. This can be achieved by having the right set of executives who are responsible for setting targets and performance levels. They are then held accountable for delivering, encouraged to be enterprising and to act as change agents. Effective dispute management procedures in relation to customers will go along way in freeing up cash otherwise locked in due to disputes. It will also improve customer service and free up time for legitimate activities like sales, order entry and cash collection. Overall, efficiency will increase due to reduced operating costs. Collaborating with your customers instead of being focused only on own operations will also yield good results. If feasible, helping them to plan their inventory requirements efficiently to match your production with their consumption will help reduce inventory levels. This can be done with suppliers also. Working capital management is an important yardstick to measure a company operational and financial efficiency. This aspect must form part of the companys strategic and operational thinking. Efforts should constantly be made to improve the Working capital position. This will yield greater efficiencies and improve customer satisfaction

Structure of Working Capital of BIL

The analysis of structure of working capital enables management of an enterprise to know as to how the working capital is being administered. It also furnishes valuable information to the short term creditors and others regarding the strength of working capital of the undertaking. The structure of working capital can also be analyzed by measuring the change the proportion of cash, receivable, inventory and other items to the total current assets in course of time. This analysis points out the components which have over grown and where unduly high fund has been tied up. This analysis may be carried further to each component of current assets to study the changes in its sub-divisions. Investment in working capital is generally considered as dead investment as it, does not contribute towards companys profit generating capacity but are also required, so it should be done in such a way that it does not create any side-effects like blockage of money. In comparison to working capital, investments should be more in fixed assets which are productive and contribute towards firms profit.

WORKING CAPITAL PATTERN OF BIL

(In 000)

CURRENT ASSET Inventory Sundry debtors Cash & bank balance Other C.A. Loans & advances TOTAL C.A. CURRENT LIABILITIES Current liabilities Provision TOTAL WORKING CAPITAL TURNOVER W.C. CONVERSION PERIOD (in days)

2006-07 2149406 286070 486460 1709 890016 3813661

2005-06 1847956 208516 353395 5558 940652 3356077

2004-05 1341899 443147 163062 2185 631468 2581761

2381169 849097 3230266 583395

2247006 783313 3030319 325758 14525.49 151

2059717 973431 3033148 (451387) 10336.4 173

(Working Capital = Total current assets Total current liabilities)

Working capital pattern of BIL of last 2 years

800000 600000 400000 200000 0 -200000 -400000 -600000 -451387
2004-05 2005-06 2006-07

583395 325758

SHAREHOLDING PATTERN OF LIBERTY

Category A. Promoters Holding 1. Promoters - Indian - Foreign 2. Persons acting in concert B. Non-Promoters Holding 3. Institutional Investor a. Mutual Funds and UTI No. of shares held 2004-05 2005-06 %age of share holding 2004-05 2005-06

750 750 12173219 12173219 Sub Total 12173969 12173969 11716194 11716194 861938 653796

0.00 50.96 50.96 49.04 3.61 17.32 5.87 26.80 1.42 20.30 0.50 0.02 22.24 100.00

0.00 50.96 50.96 49.04 2.74 13.66 12.46 28.86 0.98 18.70 0.48 0.02 20.18 100.00

b. Banks, Financial institutions, insurance 4137370 3263233 companies (Central/State Govt. Institutions/ Non-Govt. Institutions) c. Foreign Institutional Investors (FIIs) 1402489 2977656 Sub Total 6401797 6894685 4. Others a. Private Corporate bodies 338934 235253 b. Indian Public 4851195 4467818 c. NRIs/OCBs 120388 114148 d. Any Other 3880 4290 Sub Total 5314397 4821509 GRAND TOTAL 23890163 23890163

PIE CHART SHOWING SHAREHOLDING PATTERN OF BILFOR THE YEAR 2005-06

0.02 0.48 0 0.98 12.46 18.7 50.96

13.66

2.74
Foreign Promoters Banks Private corporate bodies NRIs/OCBs

Indian Promoters Mutual funds & UTI FIIs Indian Public Other

PIE CHART SHOWING SHARE HOLDING PATTERN OF BIL FOR THE YEAR 2004-05

0.02 0.5 0 1.42 5.87 20.3 17.32 3.61 50.96

Indian Promoters Mutual funds & UTI FIIs Indian Public Other

Foreign Promoters Banks Private corporate bodies NRIs/OCBs

WORKING CAPITAL FOR THE YEAR 2005-06 LIBERTY INDUSTRIES LTD. PANTNAGAR (UTTARAKHAND)
G/L PARTICULARS AMOUNT TOTAL

CURRENT ASSETS

CLOSING STOCK 205001 205002 205003 205004 206000 206001 206002 207003 207013 207019 INVENTORY FO INVENTORY HSD INVENTORY LDO INVENTORY ENGG.STR INVENTORY INGREDIENT INVENTORY PACKING INVENTORY CBBS,CLSG INVENTORY FG BISCUITS INVENTORY WIP- GOOT CLOSING STOCK INV FG 2386279.87 1319357.44 775863.92 3090080.16 29191221.91 20387586.5 2245570.54 5614899.25 151412.25 552790.21

A/C RECEIVABLE 210000 ACCOUNTS RECEIVABLE DOMESTIC 12048.89

CASH IN HAND 211002 211043 CASH IN HAND-DEL BR CASH IN HAND-UA 0 34476

CASH AT BANK 213052 213053 213111 CITI BANK DELHI MAIN CITI BANK DELHI DISB HDFC DISB BANK-UA 0 0 233637.48

PREPAID EXPENSES 220002 220003 PREPAID EXPENSES MISC PREPAID INSURANCE 5836 132845

220009 220039

PREPAID RATES & TAXES ADVANCE STAFF TRAVEL DOM TOTAL CURRENT ASSETS

50000 0 66183905.42

CURRENT LIABILITIES
BILLS PAYABLE 111000 111001 111002 111003 111004 111005 111007 104143 104127 104118 104165 104004 104202 104203 104030 104039 ACC PAYABLE DOMESTIC ACC PAYABLE EXPORT ACC PAYABLE ONE VD ACC PAYABLE STATUT ACC PAYABLE EMPL ACC PAYABLE SSI ACC PAYABLE AW VENDOR DEPOSIT PAYABLE VENDR DEPOSIT PAYABLE CUST OTH C.S.T PAYABLE WORK CONT TAX PAYABLE ACCUED ELECTRICITY GR/IR-CLEARING-PRO FREIGHT CLEARING (MM) ACCRUED TELEPHONE ACCRUED SECONDARY FRT 29455872.51 0 4445 66114 2029 90272 0 250000 175000 11266.5 52104.55 0 30647374.02 3987064.02 0 0

ACCRUED & O/S EXPENSES 104016 104017 104023 104025 ACC MISC EXPENSES ACC ONWARD FREIGH ACCR PRIMARY FREIGHT ACCR SALARIES & WAGES 4365821.21 102624.71 13153620.11 253974

104220 104207 104209 104210 104218

ACCR TAX SERVICE TDS CONTRACTOR S 194 C TDS RENT SEC 1941 TDS- PROF.FEES 194 J TCS CUST SCRAP SALE

0 352159 0 7830 2863.14

104244 104245 104246

VAT PAYABLE VAT INPUT CREDIT RM VAT INPUT CREDIT CG

78154.01 0 0

CREDITORS 104050 CO CONTR GPF LIA A/C 0

104154

RET. PAYABLE VENDOR

6628158.47

104124 104125 104126

ENTRY TAX TDS INT DEP SEC 194 A AACO DEP PAYABLE CUSTM

257029.2 0 0

PROVISIONS 110002 110006 110011 104014 PROV FOR BONUS PROV GRATUITY FUND PROV. FOR LTA PROV LEAVE ENCASHMENT 262826 257223.44 4800 46318

TOTAL CURRENT LIABILITIES

90514942.89

WORKING CAPITAL(CA-CL)

-24331037

WORKING CAPITAL FOR THE YEAR 2006-2007

OF LIBERTY INDUSTRIES LTD. Pantnagar (Uttarakhand)

G/L

PARTICULARS

AMOUNT

TOTAL

CURRENT ASSETS

CLOSING STOCK 205001 205002 205003 205004 206000 206001 206002 207003 207013 207019 INVENTORY FO INVENTORY HSD INVENTORY LDO INVENTORY ENGG.STR INVENTORY INGREDIENT INVENTORY PACKING INVENTORY CBBS,CLSG INVENTORY FG BISCUITS INVENTORY WIP- GOOT CLOSING STOCK INV FG 1250901.87 1737552.76 1322501.12 6571934.32 84432770.4 16249728.09 2444207.44 19911752.57 132982.7 166906.11

209000

LOOSE TOOLS A/C RECEIVABLE

905051.8

210000

ACCOUNTS RECEIVABLE DOMESTIC

4896050.28

CASH IN HAND 211002 211043 CASH IN HAND-DEL BR CASH IN HAND-UA 0 15917

PREPAID EXPENSES 220002 220003 220004 220006 220009 PREPAID EXPENSES MISC PREPAID INSURANCE PREPAID LEASE RENTAL PREPAID MEDICAL INSUR. PREPAID RATES & TAXES 14446.68 59052 0 0 0

220041 220039

PREPAID GROUP INSUR ADVANCE STAFF TRAVEL DOM

5515 54417

WIP 202000 202001 CWIP AUC- D&M(CWIP) 0 5369271.68

TOTAL CURRENT ASSETS

145540958.8

CURRENT LIABILITIES
BILLS PAYABLE 111000 111001 111002 111003 111004 111005 111007 104143 104127 104118 104165 104201 104202 104203 ACC PAYABLE DOMESTIC ACC PAYABLE EXPORT ACC PAYABLE ONE VD ACC PAYABLE STATUT ACC PAYABLE EMPL ACC PAYABLE SSI ACC PAYABLE AW VENDOR DEPOSIT PAYABLE VENDR DEPOSIT PAYABLE CUST OTH C.S.T PAYABLE WORK CONT TAX PAYABLE APMC CLEARING A/C GR/IR-CLEARING-PRO FREIGHT CLEARING (MM) 45606390.3 0 51391 525202 2030 135300 0 275000 150000 4154.89 28377 0 2721309.9 12046697.98

ACCRUED & O/S EXPENSES 104016 104017 104023 104025 104033 104220 104207 104209 ACC MISC EXPENSES ACC ONWARD FREIGH ACCR PRIMARY FREIGHT ACCR SALARIES & WAGES ACCR LOADING ACCR TAX SERVICE TDS CONTRACTOR S 194 C TDS RENT SEC 1941 8076499.86 669362.71 26697238.71 614091 81934 0 517762 21004

104210 104218 104244 104245 104246 104152

TDS- PROF.FEES 194 J TCS CUST SCRAP SALE VAT PAYABLE VAT INPUT CREDIT RM VAT INPUT CREDIT CG MISC RECOVERY

729 6646.51 86142.02 0 0 0

CREDITORS 104050 104053 104154 104064 104128 104067 CO CONTR GPF LIA A/C CO CONTR ESI LIA A/C RET. PAYABLE VENDOR EMPL CONTR ESIC STALE CHJEQE /AC EMPL CONTR GPF 71111 33200 8426606.06 12256 70946.07 62697

104124 104125 104126

ENTRY TAX TDS INT DEP SEC 194 A AACO DEP PAYABLE CUSTM

102750.37 0 0

PROVISIONS 110002 110006 110011 104014 PROV FOR BONUS PROV GRATUITY FUND PROV. FOR LTA PROV LEAVE ENCASHMENT 925276.44 635064.63 0 114398.16

TOTAL CURRENT LIABILITIES

108771568.6

WORKING CAPITAL(CA-CL)

36769390

* AS PER CHANGE IN THE POLICY OF THE ORGANISATION LOOSE

TOOLS HAVE BEEN CONVERTED INTO FIXED ASSETS FROM CURRENT ASSETS WITH AFFECT FROM APRIL 2007.

TAX

We offer expert consultancy to individuals, businessmen, organizations, partnership firms and all other Indian citizen who are liable to pay Tax according to the Indian legislation authority. We can develop tax strategies that can help our clients in managing new tax laws according to our legislation. Our expert services include - Tax Planning, Reducing Tax Liabilities & Risks, Finalization of Accounts, Filing of Returns, Preparation of Tax planning and preparation. Below mentioned our Income Tax related service that we offer to our clients:

Preparation of return Getting Assessment done Consultancy in tax matters & tax planning Foreign taxation consultancy Transfer Pricing matters Withholding tax compliance Fringe benefit tax compliance Income tax Appeals before CIT (Appeals) and ITAT

FRINGE BENEFIT TAX Finance Act, 2005 has introduced a new tax in the form of Fringe Benefit Tax (FBT). FBT is a tax payable by the employer on benefits other than salary or wages (provided/ deemed) that employees (past or present) receive as a consideration of their employment. FBT is applicable on all type of assesses as mentioned above in Income Tax except the following:

Individuals Hindu Undivided Family and certain charitable institutions

Every assessee who is liable to pay the Fringe Benefit Tax is required to follow the certain below mentioned formalities:

Advance payment of FBT at regular period prescribed the Act. Filing of FBT returns annually.

FBT audit which is along with the Income Tax Audit

TRANSFER PRICING Businesses need to maintain extensive documentation to support their inter-company pricing, especially with reference to third party comparables to meet the transfer pricing provisions. Transfer pricing policy balances opportunity and risk management, weighing effective tax-rate optimizations against fiscal-authority challenges and the costs of compliance. This responsibility, together with the measure of taxes involved and the considered nature of inter-company pricing makes it essential for businesses to maintain robust and safe transfer pricing documents. We have expert economists, legal, finance and tax professionals with extensive experience in transfer pricing and international tax issues to take care of your Transfer Pricing. We provide the following transfer pricing services Multinational Transfer Pricing, Transfer Pricing Guidelines, Transfer Pricing Documentation, Transfer Pricing Guidelines In India, Transfer Pricing Regulation Services:

Transfer pricing related advisory services Transfer pricing studies and analysis Litigation support and representation before tax authorities

Transfer Pricing Regulation for Indian Companies All Indian companies are required to analyze their international transaction with respect to the Transfer Pricing Regulation and adhere to it by maintaining proper transaction records and documents. INCOME TAX SERVICES Resident Companies According to the Income Tax Law, the Indian resident companies have been made legally responsible to be taxed at 33.66 per cent on net basis. Moreover, companies have also been regulated to pay dividend distribution tax (DDT) at 14.025 per cent on the amount of profits distributed to shareholders. Non-resident Companies On the other hand, the Non-resident companies have been made accountable legally to tax at 41.82 per cent on net basis. Such companies may perhaps be taxed on a gross basis or on a presumptive basis in certain cases. Though, income from long-term capital gains might well have to pay at the rate of 20.91 per cent.

KINDS OF TAXES Annual Tax An annual tax is charged on income earned, for a financial year, as per the rates mentioned by the annual budget. The rates tend to be different with each budget. The annual tax is generally paid in advance through quarterly instalments at some point in the financial year. The quarters may also show a variation according to the taxpayer involved.

Minimum Alternate Tax (MAT) The domestic tax law has been made in the way to entail companies to pay MAT in lieu of the usual corporate tax, where the usual corporate tax is lower than the MAT. MAT gets calculated on the book profits; at the rate of 8.415 per cent for domestic companies and 7.841 per cent for non-resident companies.

Dividend Distribution Tax (DDT) The tax payable on the dividend declared, distributed or paid is called as DDT. Dividends at present get exemption from being taxed in India. However, the company paying the dividends has been made liable to pay DDT at the rate of 14.025 per cent on the sum of dividends declared. Direct Tax Code The New Direct Tax Code (DTC) is said to replace the existing Income Tax Act of 1961 in India. DTC bill was tabled in parliament on 3oth August, 2010. There are big changes now in monsoon session and There are now much less benefits as compared to what were in the original proposal. During the budget 2010 presentation, the finance minister Mr. Pranab Mukherjee reiterated his commitment to bringing into fore the new direct tax code (DTC) into force from 1st of April, 2011, but same could not be fulfilled.

Highlights of Direct Tax code 1. Removal of most of the tax saving schemes: DTC removes most of the categories of exempted income. Unit Linked Insurance Plans (ULIPs), Equity Mutual Funds (ELSS), Term deposits, NSC (National Savings certificates), Long term infrastructures bonds, house loan

principal repayment, stamp duty and registration fees on purchase of house property will loose tax benefits. 2. New tax saving schemes: Tax saving based investment limit remains 100,000 but another 50,000 has been added just for pure life insurance (Sum insured is atleast 20 times the premium paid) , health insurance, mediclaims policies and tuition fees of children. But the one lakh investment can now only be done in provident fund, superannuation fund, gratuity fund and new pension scheme (NPS).

3. Tax slabs: The income tax rates and slabs have been modified. The proposed rates and slabs are as follows: Annual Income Up-to INR 200,000 (for senior citizens 250,000) Between INR 200,000 to 500,000 Between INR 500,000 to 1,000,000 Above INR 1,000,000 Men and women are treated same now 4. Home loan interest: Exemption will remain same as 1.5 lakhs per year for interest on housing loan for self-occupied property. 5. Short and long term gains: Only half of Short-term capital gains will be taxed. e.g. if you gains 50,000, add 25,000 to your taxable income. Tax Slab Nil 10% 20% 30%

6. EEE and EET: As per changes on 15th June, 2010, Tax exemption at all three stages (EEE) savings, accretions and withdrawalsto be allowed for provident funds (GPF, EPF and PPF), NPS (new pension scheme administered by PFRDA), Retirement benefits (gratuity, leave encashment, etc), pure life insurance products & annuity schemes. Earlier DTC wanted to tax withdrawals. 7. Education Cess: Surcharge and education cess are abolished. 8. Income arising from House Property: Deductions for Rent and Maintenance would be reduced from 30% to 20% of the Gross Rent. Also all interest paid on house loan for a rented house is deductible from rent. Before DTC, if you own more than one property, there was provision for taxing notional rent even if the second house was not put to rent. But, under the Direct Tax Code 2010 , such a concept has been abolished.

9. LTA (Leave travel allowance): Tax exemption on LTA is abolished. 10. Education loan: Tax exemption on Education loan to continue. 11. Corporate tax: Corporate tax reduced from 34% to 30% including education cess and surcharge. 12. Taxation of Capital gains from property sale : For sale within one year, gain is to be added to taxable salary. For long term gain (after one year of purchase), instead of flat rate of 20% of gain after indexation benefit, new concept has been introduced. Now gain after indexation will be added to taxable income and taxed at per the tax slab.

Base date for cost of acquisition has been changed to 1st April, 2000 instead of earlier 1st April, 1981. 14. Medical reimbursement : Max limit for medical reimbursements has been increased to 50,000 per year from current 15,000 limit. 15. Tax on dividends: Equity mutual fund will attract 5% dividend distribution tax (DDT). DDT has been removed from debt and non-equity based mutual funds but now dividends on nonequity funds will be taxable in investors hand as per his slab rates. There will also be a TDS 0f 10% (20% in case of NRI and companies) if dividend is more than 10,000 Rs for non-equity funds. 15. News for NRIs : As per the current laws, a NRI is liable to pay tax on global income if he is in India for a period more than 182 days in a financial year. But in new bill, this duration has been changed to just 60 days. An NRI will be deemed as resident only if he has also resided in India for 365 days or more in the preceding four financial years, together with 60 days in any of these fiscal years. Even if an NRI becomes a resident in any financial year, his global income does not immediately become liable to tax in India. Global income would become taxable only if the person also stayed in India for nine out of 10 precedent years, or 730 days in the preceding seven years. This is very unfair to Seafarers. To avoid any income tax, an Indian sailor employed with a foreign ship will have to stay maximum for 60 days in India

Like very year on the budget day, we are again here with all new income tax calculator for financial year 2012-13, or for assessment year 2013-14, along-with budget updates for common man. Budget 2012 updates: Some of the important changes done this year are given below: 1. Rajiv Gandhi Equity Savings scheme: It will provide income tax deduction of 50% for those who first time invest up to Rs.50,000 directly into equities and whose annual income is less than Rs.10 lakh, subject to a three -year lock in. Exchange-traded funds (ETFs) and mutual funds listed on stock exchange and invested only in BSE 100, CNX 100 and blue chip public sector stocks would also be allowed tax rebate under the scheme. 2. Implementation of Direct tax code has again been deferred and wont be applicable from 1st April, 2012.

3. Exemption limit raised to Rs 2 lakhs from Rs 1.8 lakh. 30% slab now starts from 10 lakh rather than 8 lakh earlier. Men and women now have same tax slab. No gender bias! 4. Within the existing limit for deduction allowed for health insurance, Rs 5000 deduction for preventive health checkup is allowed.

1. Deduction of upto 10,000 for interest from savings bank accounts under a new section 80TTA. 2. Senior citizens not having income from business proposed to be exempted from payment of advance tax. 3. Securities Transaction tax (STT) reduced to 0.1% from 0.125% 4. Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SME for purchase of new plant and machinery. 5. Service tax rate increased to 12% from current 10%. This would mean more taxes in your mobile, telephone, internet, restaurant bills and life insurance premium etc. 6. Import duty free amount limit raised to Rs 35000 from 25000. So guys coming from abroad can bring more stuff. 7. Gold to be more expensive. Customs duty on standard gold raised from 2 per cent to 4 per cent. 8. Duty on large cars raised to 27%, so cars would be more expensive now. 9. Tax saving mutual funds (ELSS) deduction to continue. 10. 80C deduction on insurance policies purchased after 1st April, 2012 only if premium is less than 10% of sum assured. Benefit for existing purchased policies to continue. 11. 1% TDS on any immovable property sale above 50 lakh (20 lakh in case of non-urban areas). 12. 1% tax at source on cash purchases of jewellery over Rs 2 lakh. 13. 80CCF deduction for infrastructure bonds not valid anymore.

14. Income tax return filing would be now mandatory for every resident having any asset located outside India irrespective of the fact whether the resident taxpayer has taxable income or not. 15. 80G deduction not applicable in case donation is done in form of cash for amount over Rs 10,000. Income tax calculator: The below provided, excel based computation tool is based on slabs and recommendations proposed by Finance Minister Pranab Mukherjee in budget presented on 16th March, 2012.

Any person who has basic knowledge of Microsoft excel can use this tool easily. Income Tax Rates for financial year 2012-2013 (Assessment year: 2013-14) For Men Upto Rs. 2,00,000 Nil Rs. 2,00,001 to Rs. 5,00,000 10 per cent Rs. 5,00,001 to Rs. 10,00,000 20 per cent Above Rs. 10,00,000 30 per cent For Women Upto Rs. 2,00,000 Nil Rs. 2,00,001 to Rs. 5,00,000 10 per cent Rs. 5,00,001 to Rs. 10,00,000 20 per cent Above Rs. 10,00,000 30 per cent For resident individual of 60 years or above (Senior Citizens) Upto Rs. 2,50,000 Nil Rs. 2,50,001 to Rs. 5,00,000 10 per cent Rs. 5,00,001 to Rs. 10,00,000 20 per cent Above Rs. 10,00,000 30 per cent For resident individual of 80 years or above (Very Senior Citizens) Upto Rs. 5,00,000 Nil Rs. 5,00,001 to Rs. 10,00,000 20 per cent Above Rs. 10,00,000 30 per cent

House Rent Allowance (HRA): Rent receipts can be shown for taking tax benefit for living in a rented house. Income tax exemption for HRA will be least of following: 1. The actual amount of HRA received as a part of salary.

2. 40% (if living in non-metro area) or 50% (if living in metro area) of (basic salary+Dearness allowance (DA)). 3. Rent paid minus 10% of (basic salary+DA). In some cases, deduction for both HRA and home loan interest (u/s 24) can be taken together in case owned house is not in same city or not at a commutable distance to office. Transport/Conveyance allowance: Rs 800 per month is non taxable if salary has this component. This would not be exempted in case employee also avail car reimbursement. No proofs/bills required to submit for this exemption. Children education allowance: Per school going child 1200 per annum is non-taxable. Maximum for 2 children, so max 2400 per annum becomes non-taxable. Grade/Special/Management/Supplemementary Allowance: Thats general component in industry to complete CTC amount after putting 35-40% into basic and 20% in HRA. This is not an expense, but this head is kept just to put the rest of CTC amount into some component. Arrears: Generally arrears are fully taxable, but employee may claim exemption u/s 89(1). One would need to compute income tax on the arrears if it would have been received in actual year. Now difference of income tax between payment year and actual year would be allowed for deduction. Gratuity: If amount is received before completion of five years of service with employer, it should be taxable. Else it would be non-taxable up to Rs 10 lakh in case of non-government servants. In case of Government service employees, it would be fully non taxable. Leave travel allowance (LTA): Two trips on a block of four years can be claimed for exemption for travel done inside India. Following amount would be non-taxable:

1. Where journey is performed by rail; railway-fare in first AC class by shortest route to destination. 2. Where places of origin and destination are connected by rail but the journey is performed by any other mode then first AC class fare by shortest route to the place of destination. 3. Where place of origin of journey and destination, or part thereof, are not connected by rail and journey is performed by any other transport; then (i) If a recognised public transport system exists between such places the first class or deluxe class fare of such transport by shortest route, or, (ii) If in other case, first AC class fare for the distance of the journey by the shortest route, as if the journey has been performed by rail.

Leave encashment: Payment by way of leave encashment received by Central & State Govt. employees at the time of retirement in respect of the period of earned leave at credit is fully exempt. In case of other employees, the exemption is to be limited to minimum of all below: 1. The actual amount received 2. The cash equivalent of leave balance (max 30 days per year of service) 3. Maximum of 10 months of leave encashment, based on last 10 months average salary 4. Rs. 3 Lakh Performance Incentive/Bonus: This component would be fully taxable. Medical allowance/Reimbursement: This component is on-taxable up to 15000 per year (or Rs 1250 per month) on producing medical bills. Food Coupons Non-taxable upto 50 Rs per meal. So a 22 working month and one meal per day would make Rs 1100 as non taxable. Sodexo or Accor ticket coupons may also be provided by employer for same. Periodical Journals: Some employers may provide component for buying magazines, journals and books as a part of knowledge enhancement for business growth. This part would become non taxable on providing original bills. Professional Development Allowance : If original bills are submitted to employer, this allowance may become non-taxable. Generally payment done towards any technical course fee, certification etc done to enhance professional knowledge can be reimbursed. Uniform/Dress Allowance: Some sections of employees mat get allowance for purchase of office dress/uniform. In such case, the component would become non-taxable. Telephone reimbursements In some of the cases, companies may provide a component for telephone bills. Employees may provide actual phone usage bills to reimburse this component and make it non-taxable. Internet Expenses - Employer may also provide reimbursement of internet expenses and thus this would become non taxable.

Car expense reimbursements In case company provides component for this and employee use self owned car for official and personal purposes, Rs 1800 per month would be non-taxable on showing bills for fuel or can maintenance. This amount would be Rs 2400 in case car is more capacity than 1600cc. Driver salary If employee pays driver salary for self owned or company owned car, Rs 900 per month may become non-taxable if employer provides component for it. Gift from relatives vs non relatives: Gifts from relatives would be non-taxable with no limits attached. Following relations are covered under non-taxable rule: 1. Spouse of the individual 2. Brother or sister of the individual 3. Brother or sister of the spouse of the individual 4. Brother or sister of either of the parents of the individual 5. Any lineal ascendant or descendant of the individual 6. Any lineal ascendant or descendant of the spouse of the individual, Spouse of the person referred to in clauses (2) to (6). If gifts received from non-relative persons is worth more than Rs.50000, one is liable to pay the tax on whole value. Gift can be in form of a sum of money (in cash/cheque/bank draft/electronic transfer) or any articles. Agricultural Income: If one has only only agricultural income, then it is fully exempt from income tax. If other income also there, rebate on agricultural income would be provided at 1030% rate depending on actual amount of agricultural income. House rent Income: 30% of the rental income can be reduced as a standard deduction for repairs, maintenance etc. irrespective of the actual amount spent. Bank/Fixed deposit/Post Office/NSC/SCSS interest: Interest earned on bank account, fixed deposits, post office, debt mutual funds/fixed maturity plans(kept less than one year) would be added to taxable income and taxed as per slab rates. Short Term Gains from Share Trading/Equity Mutual funds: if stocks/equity mutual funds are sold before one year, 15% tax would be payable on such gains. STT should have been on transaction.

Long term gains from Share Trading/Equity Mutual funds: If stocks/equity mutual funds are kept for more than a year before sale, it would be long term gains and such gains would be fully exempt from income tax. Securities transaction tax (STT) must have been paid on transactions for availing this exemption. Section 80C, 80CCD and 80CCC deductions- One can claim his investments/payments under section 80C, 80CCC and 80CCD, up to 1 lakh combined limit. Amount can be invested in: 1. Tax saving mutual funds (ELSS) with three years lock-in 2. Five year tax-saver bank Fixed deposits 3. Public provident fund (PPF) 4. National Savings Certificate (NSC) or National Service Scheme (NSS) 5. Employer contribution into New Pension Scheme (NPS) (Section 80CCD) 6. Life insurance/Unit Linked Insurance Plan (ULIP) premium 7. Employees contribution towards Employee provident fund (EPF) 8. Home loan principal amount payment (only if you have got possession of house) 9. Senior citizen savings scheme (SCSS), if your age is more than 60 years 10. Post office tax saving deposit or tax saving bonds 11. Pension scheme/Retirement plans (Secion 80CCC) 12. Tuition fees paid for children education Section 80D : Maximum deduction of up to 15,000 under mediclaim or health insurance offered by life insurers taken for self and family. An additional deduction of up to 15,000 for buying cover for dependent parents. If parents/assessee are senior citizens, they can claim deduction up to Rs 20,000. Section 80DD : Deduction of 50,000 for maintenance of a disabled dependent. If the disability is severe, the deduction amount will be 100,000. Section 80E : Tax relief on interest payments on education loan taken for higher studies for self, spouse or child. There is no maximum limit on this deduction. Section 80G : The eligibility is 50% or 100% of the donation amount subject to overall ceiling of 10% of your gross total income to certain funds and charitable institutions.

Section 24/Home loan interest payment : The maximum limit is of 1.5 lakh on interest payments of a home loan for a self-occupied house. There is no ceiling on the amount of deduction if the house is let out or deemed to be let out. House rent would needs to shown in income in case house is not self-occupied. Section 80U (Disabled/Handicapped person): Deduction can be claimed if person has a disability. The allowed dedudtion if for Rs 50,000. This deduction goes up to Rs. 75,000 in case disability is severe. Section 80DDB deduction (Medical treatment expenses): Expenses done for medical treatment for self, spouse, dependent children, parents, brothers and sisters. Maximum deduction can be Rs 40,000 (goes up to 60,000 in case patient is senior citizen). Deduction is only allowed in case of following diseases: 1. Neurological Diseases where the disability level has been certified to be of 40% and above, (a) Dementia (b) Dystonia Musculorum Deformans (c) Motor Neuron Disease (d) Ataxia (e) Chorea (f) Hemiballismus (g) Aphasia (h) Parkinsons Disease 2. Malignant Cancers 3. Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) 4. Chronic Renal failure 5. Hematological disorders : (a) Hemophilia ; (b) Thalassaemia. Professional tax: Professional tax deducted from salary by employer should be removed from taxable salary before computation of income tax. Employer contribution of EPF/New pension scheme(NPS): Employer contribution does not become part of employees income and hence income tax is not payable on this part.

Tax deducted at Source (TDS) deduction: As per income tax rules, all payment which are taxable in nature should be done after deduction of taxes at the source itself. Hence employer compute income tax on salary payment and deduct it every month. This TDS is based on employees saving/investment declaration at the start of year. If investments for tax saving is not done, large amount may be deducted in last few months. In Hand monthly salary: After deduction of all components like TDS, EPF etc in hand monthly salary is computed. In Hand monthly salary without reimbursements: Some of the employees get reimbursements components separately in a different payment other than salary, So this figure shows in hand salary w/o reimbursement components like medical, telephone, internet bills, driver salary etc. Total income this year: This figure shows whole years income from all sources combined. Advance tax schedule: As per income tax rules, 30% of income tax should be paid by 15th Sept, 60% by 15th Dec and rest by 31st March. If its not followed one may be charged interest penalty u/s 234C.

New Direct taxes code

The new Direct taxes code has been published by Finance ministry, which would replace current Income Tax structure from 2011-12. This draft is put for public opinion and will be presented to parliament by Winter session. If passed, this will be applicable from Financial Year 2011-12. (Starting from 1st Day of April 2011). But transitional changes will be expected from 2010-11. This means the coming budget will bring in more measures to streamline the transition procedure.

A brief of the same is provided below: In General: 1. Earlier Income Tax Act and Wealth tax Act (Covering Income Tax, TDS, DDT, FBT and Wealth taxes) are abolished and single code of Tax, DTC in place. 2. Concept of Assessment year and previous year is abolished. Only the Financial Year terminology exists. 3. Only status of Non Resident and Resident of India exits. The other status of resident but not ordinarily resident goes away. 4. Earlier the terminology of assessee was meant for the person who is paying tax and/or, who is liable for proceeding under the Act. Now it has been added with 2 more definitions namely a person, whom the amount is refundable, and/or, who voluntarily files tax return irrespective of tax liability. 1. This helps any person to file his returns and maintain the record of tax return filing. 5. No changes in the system of Advance Tax, Self Assessment Tax and also TDS. Amendment of TDS goes in line with earlier Notification 31/2009 which speaks of Form 17/UTN/etc. 1. In TDS, a new return, if found required, will be introduced for Non TDS payments. 6. Government assessee is covered in Direct Tax Code. Even though they are not liable for Income Tax / Wealth Tax, Government Assessees are required to Comply with provision of TDS and TCS. (Current act was not covered with Government Assessees)

New Tax rates: (For Ordinary source of income) Slab 1 2 3 4 Income Between 0 - 1.60 Lakhs 1.60 Lakhs to 10 Lakhs 10 Lakhs to 25 Lakhs Above 25 Lakhs Tax rate 0% 10% 20% 30%

1. For Female, second slab begins from 1.90 Lakhs and for Senior citizen it begins from 2.40 Lakhs 2. Companies tax rate changed from 30% to 25%. New due dates for Tax Returns: Sl No 1 2 Type Non-Business / Non-Corporate Others Date 30th June 31st August First filing (under DTC) 30/06/2012 31/08/2012

Tax incentives: 1. Earlier terms Deductions under Chapter VI A will be treated as Tax incentives. 2. 80C gets a major hit by introduction of EET methodology (Exempt - Exempt - Tax). The investment is Exempted when invested. The investment is Exempted till it is remained invested. The investment is Taxed when it is withdrawn. 1. Also, investments are considered only of those invested through savings intermediaries approved by PFRDA (Pension Fund Regulatory and Development Authority)!! 1. Such savings intermediaries may in turn invest in ELSS mutual funds, government securities, Public sector securities, etc. 2. Such investments are also exempted to the maximum of Rs. 3 Lakhs. 2. All such savings will be governed directly by government by an appointed depository (an independent agency). 3. Other than this, Tuition fees for children will be allowed as deductions. 4. No maximum limit for this, as savings are charged once they are withdrawn. 3. Medical treatment, higher education loan interest, donation and rent paid by selfemployed individual are deductible. 4. New provision comes for Handicapped individuals to get deductions upto 75,000. Major Deductions applicable under Tax Incentives for an individual: 1. Investments through PFRDA approved agencies (Max of 3 Lakhs) 2. Payment of tuition fees 3. Medical treatment

4. Health insurance 5. Donations 6. Interest on loan taken for higher education 7. Maintenance of a disabled dependant 8. Interest income on Govt bonds *Some more for specific cases, like political contributions, royalty, etc Deductions from Salaries: 1. Allowed are only, PT, Transport Allowance (limit prescribed) and special allowances given exclusively to meet duties (to the extent actually incurred). 2. Also deduction is allowed for PF as tax incentives. 3. And last, deductions are allowed for Voluntary retirement, Gratuity on retirement and pension received. 4. No deductions on HRA, Medical reimbursements, etc, etc. 5. Employer part of PF paid will be exempt from tax as Tax Incentives under EET methodology (to employees). House Property: 1. No deduction for Housing loan repayment of Self-Occupying property. This includes interest as well as part of principal. 2. Only Let out properties are considered and the Gross rent and specified deductions are taken with simple calculations. Residuary Sources (Other Sources) 1. Earlier things follow almost. 2. Any amount exceeding 20,000 taken / accepted / repaid as loan or deposit, otherwise by an account payee cheque/draft shall be added to the income. Computation of total Income

1. Incomes are broadly divided into 2 sources, namely Special Sources and Ordinary Sources. 2. Special sources are given no deduction and what is earned is taxed directly (generally at a lower rate). 3. Ordinary sources are divided into further categories, namely: 1. Income from employment. 2. Income from House Property 3. Income from Business 4. Capital gains 5. Income from Residuary Sources (Similar to other sources, with some minuses) Ordinary Sources: 1. The 5 categories of Ordinary sources can have multiple sources under each head (Eg: Multiple employer, Multiple Business, Multiple Properties, etc). 2. The income will be computed in 2 step procedure for each head: 1. Calculate for each source under each head of Income. 2. Aggregate the total under each head and arrive a total profit or loss under such head. 3. Then aggregate all the 5 heads and arrive the figure of Current Income from Ordinary Sources. 4. Then this value has to be aggregated with unabsorbed losses as of immediate preceding financial year. Such aggregated income will be treated as Gross Total income from Ordinary Sources . 1. If such result is negative, then Gross Total Income will be NIL and value will be treated as Unabsorbed current loss from ordinary sources. 5. Such Gross Total Income will be further reduced by incentives similar to earlier Chapter VI A deductions. The resultant amount will be 'Total income from ordinary sources'.

Some cases for Ordinary Sources GTI deriving: Description Current income from ordinary sources Unabsorbed preceding year ordinary sources Case - I Case - II Case III 1000 1000 (-)500 500 Nil 1000 (-)1500 Nil (-)500 loss from Nil - Case - IV Case - V (-)1000 Nil Nil (-)1000 (-)1000 (-)1500 Nil (-)2500

Gross total income from ordinary sources, of 1000 the financial year Unabsorbed current loss from ordinary Nil sources of the financial year Special Sources: 1. This includes incomes like: 1. Any assessee

1. On income by way of winnings from 1. any lottery or crossword puzzle

2. race, including horse race (not being the income from the activity of owning and maintaining race horses) 3. Card game or any other game or gambling or betting. 2. Non-resident 1. On investment income by way of Interest, dividends on which distribution tax has not been paid, capital gains, any other investment income 2. On income by way of royalty or fees for technical services 3. Non-resident sportsman who is not a citizen of India 1. On income by way of participation in India in any games, advertisement or contribution of articles relating to any game or sport in newspapers, magazines or journals in India 4. Non-resident sports association or institution 1. On income by way of guarantee money in relation to any games or sports played in India.

2. The income on such way will be aggregated Current Income from Ordinary Sources. 3. Then this value has to be aggregated with unabsorbed losses as of immediate preceding financial year. Such aggregated income will be treated as Gross Total income from Special Sources . 1. If such result is negative, then Gross Total Income will be NIL and value will be treated as Unabsorbed current loss from Special sources. 4. Such Gross Total Income will be calculated separately and adjusted will losses. Then the resulting values will be aggregated and the resultant amount will be 'Total income from Special sources'. Total Income: 1. 'Total income from ordinary sources' PLUS 'Total income from Special sources' = Total Income. 2. The losses can be carried forward for any number of financial years, with year on year adjustment system. 3. Loss under Capital Gains and Loss under Speculative business are ring-fenced and can be adjusted only against respective heads.

FEATURES OF DIRECT TAX CODE

DTC removes most of the categories of exempted income. Equity Mutual Funds (ELSS), Term deposits, NSC (National Savings certificates), Unit Linked Insurance Plans (ULIPs), Long term infrastructures bonds, house loan principal repayment, stamp duty and registration fees on purchase of house property will lose tax benefits.

Only half of Short-term capital gains will be taxed Surcharge and education cess are abolished. For incomes arising of House Property: Deductions for Rent and Maintenance would be reduced from 30% to 20% of the Gross Rent. Also all interest paid on house loan for a rented house is deductible from rent.

Tax exemption on Education loan to continue. Tax exemption on LTA (leave travel allowance) is abolished. Taxation of Capital gains on listed securities held for more than a year will not be taxed. If held for less than a year, it will be taxed at 5%, 10% or 15%

Tax on dividends: Dividends will attract 5% tax. Under Sec 80C deduction of up to 1.5 lakh allowed 1) INR Rs.1 lakh on Pension, PF and Gratuity funds. 2) Up to 50,000 for expenditure on tuition fees, pure life insurance premium and health

MANAGEMENT OF INVENTORY IN LIBERTY

PERCENTAGE OF INVENTORY TO WORKING CAPITAL

(In 000) Inventory W.C. Ratio of inventory/ W.C.

2006-07 2149406 583395

2005-06 1847956 325758

2004-05 1341899 (451387)

368.43

567.27

297.28

Above table shows the inventory and working capital relationship in BIL .It appears from the analysis that the percentage of inventory to WC is reasonable considering the nature and the size of the business, for the given period i.e. 04-05 to 05-06 .How ever in 05-06 it has increased marginally. Generally inventory in any business enterprise should be kept at minimum. Inventory in excess of this limit is a sign of excessive buying and slow use of material reason being the large production cycle. How ever this ratio can differ from Industry to industry. Heavy manufacturing industries characterized by a long production cycle invariably have higher inventory to working capital ratio as indicated by the figure inventory to working capital ratio as indicated by the figure.

2500000 567.27 2000000 2149406

600

1847956

500

1500000

1341899 400 368.43

1000000 297.28 500000 325758 200 0 2004-05 2005-06 2006-07 100 -451387 583395 300

-500000

-1000000
Inventory Working capital Ratio of in ventory to WORKING CAPITAL

MANAGEMENT OF DEBTORS
PERCENTAGE WORKING
(In crores)

OF DEBTORS TO CAPITAL 2006-07 286070 2005-06 208516 2004-05 443147 Debtors Working capital % of debtors to working capital

583395

325758

(451387)

49.03

64.009%

(98.17)%

The study of debtors and working capital relationship is shown in above table. The analysis of the table reveals that the amount of debtors in BIL is on an average 81% of working capital during the above stated period, which means not very large amount of working capital, is blocked in debtors, but still it should be minimum ass much as possible. Looking at the trend during the period, BIL debtors to working capital ratio has been fluctuated. It has increased from 04-05 to 05-06.

800000 64.009 600000 443147 400000 286070 208516 200000 49.03

80

60

40

20

Debtors Working capital Ratio to WORKING CAPITAL

-20 0 2004-05 2005-06 2006-07 -40

-200000

-60

-80 -400000 -98.17 -100

-600000

-120

MANAGEMENT OF CASH
PERCENTAGE OF CASH TO WORKING CAPITAL

(In crores)

2006-07 486460

2005-06 353395

2004-05 163062

CASH Working capital

583395

325758

(451387)

% of Cash to working capital

83.38%

108.48%

(36.12)%

Above table shows the relationship of cash to working capital for the companies during the period 04-05 to 06-07 On analyzing the table we find that cash was on an average 51.91% of working capital in BIL, which is not, a good sign as excess of liquidity is also harmful. It is clear from above table that during 04-05 the ratio was negative where as in 05-06 it was too high as to 06-07 which has decreased to 83.38% along with increasing cash. This suggests that BIL need to take some good steps for maintaining the adequate liquidity along with sufficient cash generating power. At the year end cash collection is high in comparison to whole year that is the reason company has high percentage of cash to working capital.

800000 108.48 600000 583395 486460 83.38 400000 353395 325758

120

100

80

60

200000

163062

40

0 2004-05 2005-06 2006-07

20

0 -200000 -20 -400000 -36.12 -451387 -600000 -60

-40

CASH

Working capital

% ofcash to working capital

LOANS AND ADVANCES

LOANS AND ADVANCES AS A % OF WORKING CAPITAL

(In crores)

2006-07

2005-06

2004-05

Working Capital loans and advances % of loan and advances to W.C.

583395

325758

(451387)

890016

940316

631468

152.55

288.65

(139.89)

Table shows the relationship of loans and advances as a percentage of working capital in BIL during the period 04-05 to 06-07. During this period loans and advances accounted an average increase of 100.44 %. According to common norms loans and advances should be made as low as possible unless they earn reasonable returns.

During the above period percentage has been consistently increased along with loans and advances in last year it, which is a negative sign.

1200000

350 300 890016 250

1000000

288.65 940316

800000 631468 600000 583395 152.55 400000 325758 150 100 50 0 0 2004-05 -200000 -100 -400000 -451387 -600000 -200 -139.89 -150 2005-06 2006-07 -50 200

200000

working capital

Loans & Advances

% of loan & advances to working capital

ANALYSIS OF SOME IMPORTANT SIGNIFICANT RATIOS

RATIOS

Formula to be used 2006 -07 2005 -06 2004-05

MEASURES OF INVESTMENT
RETURN ON EQUITY
PROFIT AFTER TAX EQUITY SHAREHOLDERS FUND

17.4%

26.7%

33.5%

BOOK VALUE PER SHARE DIVIDEND COVER

SHAREHOLDERS FUND NUMBER OF EQUITY SHARES EARNING PER SHARE DIVIDENDS (plus tax) PER SHARE

Rs. 257.4 2.5 times 1.2 times 0.78% 9.1%

Rs. 229.8 3.5 times 1.1 times 1.7% 27%

Rs. 185.7 3.8 times 0.9 times 1.4% 32.5%

MEASURES OF FINANCIAL STATUS

CURRENT RATIO DEBT RATIO TAX RATIO
CURRENT ASSETS CURRENT LIABILITIES BORROWED CAPITAL EQUITY SHARE HOLDERS FUND TAX PROVISION PROFIT BEFORE TAX

MEASURES OF PERFORMANCE
PROFIT MARGIN DEBTORS TURNOVER STOCK TURNOVER
PROFIT BEFORE TAX AND EXCEPTIONAL ITEM SALES+OTHER INCOME SALES DEBTORS+BILLS RECEIVABLES SALES STOCK

5.6% 81.0 times 10.8 times

11.3% 87.2 times 9.8 times

15.2% 36.5 times 12.0 times

TAX We offer expert consultancy to individuals, businessmen, organizations, partnership firms and all other Indian citizen who are liable to pay Tax according to the Indian legislation authority. We can develop tax strategies that can help our clients in managing new tax laws according to our legislation. Our expert services include - Tax Planning, Reducing Tax Liabilities & Risks, Finalization of Accounts, Filing of Returns, Preparation of Tax planning and preparation. Below mentioned our Income Tax related service that we offer to our clients:

Preparation of return Getting Assessment done Consultancy in tax matters & tax planning Foreign taxation consultancy Transfer Pricing matters Withholding tax compliance Fringe benefit tax compliance Income tax Appeals before CIT (Appeals) and ITAT

FRINGE BENEFIT TAX Finance Act, 2005 has introduced a new tax in the form of Fringe Benefit Tax (FBT). FBT is a tax payable by the employer on benefits other than salary or wages (provided/ deemed) that employees (past or present) receive as a consideration of their employment. FBT is applicable on all type of assesses as mentioned above in Income Tax except the following:

Individuals Hindu Undivided Family and certain charitable institutions

Every assessee who is liable to pay the Fringe Benefit Tax is required to follow the certain below mentioned formalities:

Advance payment of FBT at regular period prescribed the Act.

Filing of FBT returns annually. FBT audit which is along with the Income Tax Audit

TRANSFER PRICING Businesses need to maintain extensive documentation to support their inter-company pricing, especially with reference to third party comparables to meet the transfer pricing provisions. Transfer pricing policy balances opportunity and risk management, weighing effective tax-rate optimizations against fiscal-authority challenges and the costs of compliance. This responsibility, together with the measure of taxes involved and the considered nature of inter-company pricing makes it essential for businesses to maintain robust and safe transfer pricing documents. We have expert economists, legal, finance and tax professionals with extensive experience in transfer pricing and international tax issues to take care of your Transfer Pricing. We provide the following transfer pricing services Multinational Transfer Pricing, Transfer Pricing Guidelines, Transfer Pricing Documentation, Transfer Pricing Guidelines In India, Transfer Pricing Regulation Services:

Transfer pricing related advisory services Transfer pricing studies and analysis Litigation support and representation before tax authorities

Transfer Pricing Regulation for Indian Companies All Indian companies are required to analyze their international transaction with respect to the Transfer Pricing Regulation and adhere to it by maintaining proper transaction records and documents. INCOME TAX SERVICES Resident Companies According to the Income Tax Law, the Indian resident companies have been made legally responsible to be taxed at 33.66 per cent on net basis. Moreover, companies have also been regulated to pay dividend distribution tax (DDT) at 14.025 per cent on the amount of profits distributed to shareholders. Non-resident Companies On the other hand, the Non-resident companies have been made accountable legally to tax at 41.82 per cent on net basis. Such companies may perhaps be taxed on a gross basis or on a presumptive basis in certain cases. Though, income from long-term capital gains might well have

to pay at the rate of 20.91 per cent.

KINDS OF TAXES Annual Tax An annual tax is charged on income earned, for a financial year, as per the rates mentioned by the annual budget. The rates tend to be different with each budget. The annual tax is generally paid in advance through quarterly instalments at some point in the financial year. The quarters may also show a variation according to the taxpayer involved.

Minimum Alternate Tax (MAT) The domestic tax law has been made in the way to entail companies to pay MAT in lieu of the usual corporate tax, where the usual corporate tax is lower than the MAT. MAT gets calculated on the book profits; at the rate of 8.415 per cent for domestic companies and 7.841 per cent for non-resident companies.

Dividend Distribution Tax (DDT) The tax payable on the dividend declared, distributed or paid is called as DDT. Dividends at present get exemption from being taxed in India. However, the company paying the dividends has been made liable to pay DDT at the rate of 14.025 per cent on the sum of dividends declared. Direct Tax Code The New Direct Tax Code (DTC) is said to replace the existing Income Tax Act of 1961 in India. DTC bill was tabled in parliament on 3oth August, 2010. There are big changes now in monsoon session and There are now much less benefits as compared to what were in the original proposal. During the budget 2010 presentation, the finance minister Mr. Pranab Mukherjee reiterated his commitment to bringing into fore the new direct tax code (DTC) into force from 1st of April, 2011, but same could not be fulfilled.

Highlights of Direct Tax code 1. Removal of most of the tax saving schemes: DTC removes most of the categories of exempted income. Unit Linked Insurance Plans (ULIPs), Equity Mutual Funds (ELSS), Term

deposits, NSC (National Savings certificates), Long term infrastructures bonds, house loan principal repayment, stamp duty and registration fees on purchase of house property will loose tax benefits. 2. New tax saving schemes: Tax saving based investment limit remains 100,000 but another 50,000 has been added just for pure life insurance (Sum insured is atleast 20 times the premium paid) , health insurance, mediclaims policies and tuition fees of children. But the one lakh investment can now only be done in provident fund, superannuation fund, gratuity fund and new pension scheme (NPS).

3. Tax slabs: The income tax rates and slabs have been modified. The proposed rates and slabs are as follows: Annual Income Up-to INR 200,000 (for senior citizens 250,000) Between INR 200,000 to 500,000 Between INR 500,000 to 1,000,000 Above INR 1,000,000 Men and women are treated same now 4. Home loan interest: Exemption will remain same as 1.5 lakhs per year for interest on housing loan for self-occupied property. 5. Short and long term gains: Only half of Short-term capital gains will be taxed. e.g. if you gains 50,000, add 25,000 to your taxable income. Tax Slab Nil 10% 20% 30%

6. EEE and EET: As per changes on 15th June, 2010, Tax exemption at all three stages (EEE) savings, accretions and withdrawalsto be allowed for provident funds (GPF, EPF and PPF), NPS (new pension scheme administered by PFRDA), Retirement benefits (gratuity, leave encashment, etc), pure life insurance products & annuity schemes. Earlier DTC wanted to tax withdrawals. 7. Education Cess: Surcharge and education cess are abolished. 8. Income arising from House Property: Deductions for Rent and Maintenance would be reduced from 30% to 20% of the Gross Rent. Also all interest paid on house loan for a rented house is deductible from rent.

Before DTC, if you own more than one property, there was provision for taxing notional rent even if the second house was not put to rent. But, under the Direct Tax Code 2010 , such a concept has been abolished. 9. LTA (Leave travel allowance): Tax exemption on LTA is abolished. 10. Education loan: Tax exemption on Education loan to continue. 11. Corporate tax: Corporate tax reduced from 34% to 30% including education cess and surcharge. 12. Taxation of Capital gains from property sale : For sale within one year, gain is to be added to taxable salary. For long term gain (after one year of purchase), instead of flat rate of 20% of gain after indexation benefit, new concept has been introduced. Now gain after indexation will be added to taxable income and taxed at per the tax slab. Base date for cost of acquisition has been changed to 1st April, 2000 instead of earlier 1st April, 1981. 14. Medical reimbursement : Max limit for medical reimbursements has been increased to 50,000 per year from current 15,000 limit. 15. Tax on dividends: Equity mutual fund will attract 5% dividend distribution tax (DDT). DDT has been removed from debt and non-equity based mutual funds but now dividends on nonequity funds will be taxable in investors hand as per his slab rates. There will also be a TDS 0f 10% (20% in case of NRI and companies) if dividend is more than 10,000 Rs for non-equity funds. 15. News for NRIs : As per the current laws, a NRI is liable to pay tax on global income if he is in India for a period more than 182 days in a financial year. But in new bill, this duration has been changed to just 60 days. An NRI will be deemed as resident only if he has also resided in India for 365 days or more in the preceding four financial years, together with 60 days in any of these fiscal years. Even if an NRI becomes a resident in any financial year, his global income does not immediately become liable to tax in India. Global income would become taxable only if the person also stayed in India for nine out of 10 precedent years, or 730 days in the preceding seven years. This is very unfair to Seafarers. To avoid any income tax, an Indian sailor employed with a foreign ship will have to stay maximum for 60 days in India Like very year on the budget day, we are again here with all new income tax calculator for financial year 2012-13, or for assessment year 2013-14, along-with budget updates for common man.

Budget 2012 updates: Some of the important changes done this year are given below: 5. Rajiv Gandhi Equity Savings scheme: It will provide income tax deduction of 50% for those who first time invest up to Rs.50,000 directly into equities and whose annual income is less than Rs.10 lakh, subject to a three -year lock in. Exchange-traded funds (ETFs) and mutual funds listed on stock exchange and invested only in BSE 100, CNX 100 and blue chip public sector stocks would also be allowed tax rebate under the scheme. 6. Implementation of Direct tax code has again been deferred and wont be applicable from 1st April, 2012.

7. Exemption limit raised to Rs 2 lakhs from Rs 1.8 lakh. 30% slab now starts from 10 lakh rather than 8 lakh earlier. Men and women now have same tax slab. No gender bias! 8. Within the existing limit for deduction allowed for health insurance, Rs 5000 deduction for preventive health checkup is allowed.

16. Deduction of upto 10,000 for interest from savings bank accounts under a new section 80TTA. 17. Senior citizens not having income from business proposed to be exempted from payment of advance tax. 18. Securities Transaction tax (STT) reduced to 0.1% from 0.125% 19. Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SME for purchase of new plant and machinery. 20. Service tax rate increased to 12% from current 10%. This would mean more taxes in your mobile, telephone, internet, restaurant bills and life insurance premium etc. 21. Import duty free amount limit raised to Rs 35000 from 25000. So guys coming from abroad can bring more stuff. 22. Gold to be more expensive. Customs duty on standard gold raised from 2 per cent to 4 per cent. 23. Duty on large cars raised to 27%, so cars would be more expensive now. 24. Tax saving mutual funds (ELSS) deduction to continue. 25. 80C deduction on insurance policies purchased after 1st April, 2012 only if premium is less than 10% of sum assured. Benefit for existing purchased policies to continue. 26. 1% TDS on any immovable property sale above 50 lakh (20 lakh in case of non-urban areas). 27. 1% tax at source on cash purchases of jewellery over Rs 2 lakh. 28. 80CCF deduction for infrastructure bonds not valid anymore. 29. Income tax return filing would be now mandatory for every resident having any asset located outside India irrespective of the fact whether the resident taxpayer has taxable income or not.

30. 80G deduction not applicable in case donation is done in form of cash for amount over Rs 10,000. Income tax calculator: The below provided, excel based computation tool is based on slabs and recommendations proposed by Finance Minister Pranab Mukherjee in budget presented on 16th March, 2012.

Any person who has basic knowledge of Microsoft excel can use this tool easily. Income Tax Rates for financial year 2012-2013 (Assessment year: 2013-14) For Men Upto Rs. 2,00,000 Nil Rs. 2,00,001 to Rs. 5,00,000 10 per cent Rs. 5,00,001 to Rs. 10,00,000 20 per cent Above Rs. 10,00,000 30 per cent For Women Upto Rs. 2,00,000 Nil Rs. 2,00,001 to Rs. 5,00,000 10 per cent Rs. 5,00,001 to Rs. 10,00,000 20 per cent Above Rs. 10,00,000 30 per cent For resident individual of 60 years or above (Senior Citizens) Upto Rs. 2,50,000 Nil Rs. 2,50,001 to Rs. 5,00,000 10 per cent Rs. 5,00,001 to Rs. 10,00,000 20 per cent Above Rs. 10,00,000 30 per cent For resident individual of 80 years or above (Very Senior Citizens) Upto Rs. 5,00,000 Nil Rs. 5,00,001 to Rs. 10,00,000 20 per cent Above Rs. 10,00,000 30 per cent

House Rent Allowance (HRA): Rent receipts can be shown for taking tax benefit for living in a rented house. Income tax exemption for HRA will be least of following: 4. The actual amount of HRA received as a part of salary. 5. 40% (if living in non-metro area) or 50% (if living in metro area) of (basic salary+Dearness allowance (DA)). 6. Rent paid minus 10% of (basic salary+DA).

In some cases, deduction for both HRA and home loan interest (u/s 24) can be taken together in case owned house is not in same city or not at a commutable distance to office. Transport/Conveyance allowance: Rs 800 per month is non taxable if salary has this component. This would not be exempted in case employee also avail car reimbursement. No proofs/bills required to submit for this exemption. Children education allowance: Per school going child 1200 per annum is non-taxable. Maximum for 2 children, so max 2400 per annum becomes non-taxable. Grade/Special/Management/Supplemementary Allowance: Thats general component in industry to complete CTC amount after putting 35-40% into basic and 20% in HRA. This is not an expense, but this head is kept just to put the rest of CTC amount into some component. Arrears: Generally arrears are fully taxable, but employee may claim exemption u/s 89(1). One would need to compute income tax on the arrears if it would have been received in actual year. Now difference of income tax between payment year and actual year would be allowed for deduction. Gratuity: If amount is received before completion of five years of service with employer, it should be taxable. Else it would be non-taxable up to Rs 10 lakh in case of non-government servants. In case of Government service employees, it would be fully non taxable. Leave travel allowance (LTA): Two trips on a block of four years can be claimed for exemption for travel done inside India. Following amount would be non-taxable:

4. Where journey is performed by rail; railway-fare in first AC class by shortest route to destination. 5. Where places of origin and destination are connected by rail but the journey is performed by any other mode then first AC class fare by shortest route to the place of destination. 6. Where place of origin of journey and destination, or part thereof, are not connected by rail and journey is performed by any other transport; then (i) If a recognised public transport system exists between such places the first class or deluxe class fare of such transport by shortest route, or, (ii) If in other case, first AC class fare for the distance of the journey by the shortest route, as if the journey has been performed by rail.

Leave encashment: Payment by way of leave encashment received by Central & State Govt. employees at the time of retirement in respect of the period of earned leave at credit is fully exempt. In case of other employees, the exemption is to be limited to minimum of all below: 5. The actual amount received 6. The cash equivalent of leave balance (max 30 days per year of service) 7. Maximum of 10 months of leave encashment, based on last 10 months average salary 8. Rs. 3 Lakh Performance Incentive/Bonus: This component would be fully taxable. Medical allowance/Reimbursement: This component is on-taxable up to 15000 per year (or Rs 1250 per month) on producing medical bills. Food Coupons Non-taxable upto 50 Rs per meal. So a 22 working month and one meal per day would make Rs 1100 as non taxable. Sodexo or Accor ticket coupons may also be provided by employer for same. Periodical Journals: Some employers may provide component for buying magazines, journals and books as a part of knowledge enhancement for business growth. This part would become non taxable on providing original bills. Professional Development Allowance : If original bills are submitted to employer, this allowance may become non-taxable. Generally payment done towards any technical course fee, certification etc done to enhance professional knowledge can be reimbursed. Uniform/Dress Allowance: Some sections of employees mat get allowance for purchase of office dress/uniform. In such case, the component would become non-taxable. Telephone reimbursements In some of the cases, companies may provide a component for telephone bills. Employees may provide actual phone usage bills to reimburse this component and make it non-taxable. Internet Expenses - Employer may also provide reimbursement of internet expenses and thus this would become non taxable. Car expense reimbursements In case company provides component for this and employee use self owned car for official and personal purposes, Rs 1800 per month would be non-taxable

on showing bills for fuel or can maintenance. This amount would be Rs 2400 in case car is more capacity than 1600cc. Driver salary If employee pays driver salary for self owned or company owned car, Rs 900 per month may become non-taxable if employer provides component for it. Gift from relatives vs non relatives: Gifts from relatives would be non-taxable with no limits attached. Following relations are covered under non-taxable rule: 7. Spouse of the individual 8. Brother or sister of the individual 9. Brother or sister of the spouse of the individual 10. Brother or sister of either of the parents of the individual 11. Any lineal ascendant or descendant of the individual 12. Any lineal ascendant or descendant of the spouse of the individual, Spouse of the person referred to in clauses (2) to (6). If gifts received from non-relative persons is worth more than Rs.50000, one is liable to pay the tax on whole value. Gift can be in form of a sum of money (in cash/cheque/bank draft/electronic transfer) or any articles. Agricultural Income: If one has only only agricultural income, then it is fully exempt from income tax. If other income also there, rebate on agricultural income would be provided at 1030% rate depending on actual amount of agricultural income. House rent Income: 30% of the rental income can be reduced as a standard deduction for repairs, maintenance etc. irrespective of the actual amount spent. Bank/Fixed deposit/Post Office/NSC/SCSS interest: Interest earned on bank account, fixed deposits, post office, debt mutual funds/fixed maturity plans(kept less than one year) would be added to taxable income and taxed as per slab rates. Short Term Gains from Share Trading/Equity Mutual funds: if stocks/equity mutual funds are sold before one year, 15% tax would be payable on such gains. STT should have been on transaction. Long term gains from Share Trading/Equity Mutual funds: If stocks/equity mutual funds are kept for more than a year before sale, it would be long term gains and such gains would be fully

exempt from income tax. Securities transaction tax (STT) must have been paid on transactions for availing this exemption. Section 80C, 80CCD and 80CCC deductions- One can claim his investments/payments under section 80C, 80CCC and 80CCD, up to 1 lakh combined limit. Amount can be invested in: 13. Tax saving mutual funds (ELSS) with three years lock-in 14. Five year tax-saver bank Fixed deposits 15. Public provident fund (PPF) 16. National Savings Certificate (NSC) or National Service Scheme (NSS) 17. Employer contribution into New Pension Scheme (NPS) (Section 80CCD) 18. Life insurance/Unit Linked Insurance Plan (ULIP) premium 19. Employees contribution towards Employee provident fund (EPF) 20. Home loan principal amount payment (only if you have got possession of house) 21. Senior citizen savings scheme (SCSS), if your age is more than 60 years 22. Post office tax saving deposit or tax saving bonds 23. Pension scheme/Retirement plans (Secion 80CCC) 24. Tuition fees paid for children education Section 80D : Maximum deduction of up to 15,000 under mediclaim or health insurance offered by life insurers taken for self and family. An additional deduction of up to 15,000 for buying cover for dependent parents. If parents/assessee are senior citizens, they can claim deduction up to Rs 20,000. Section 80DD : Deduction of 50,000 for maintenance of a disabled dependent. If the disability is severe, the deduction amount will be 100,000. Section 80E : Tax relief on interest payments on education loan taken for higher studies for self, spouse or child. There is no maximum limit on this deduction. Section 80G : The eligibility is 50% or 100% of the donation amount subject to overall ceiling of 10% of your gross total income to certain funds and charitable institutions. Section 24/Home loan interest payment : The maximum limit is of 1.5 lakh on interest payments of a home loan for a self-occupied house. There is no ceiling on the amount of

deduction if the house is let out or deemed to be let out. House rent would needs to shown in income in case house is not self-occupied. Section 80U (Disabled/Handicapped person): Deduction can be claimed if person has a disability. The allowed dedudtion if for Rs 50,000. This deduction goes up to Rs. 75,000 in case disability is severe. Section 80DDB deduction (Medical treatment expenses): Expenses done for medical treatment for self, spouse, dependent children, parents, brothers and sisters. Maximum deduction can be Rs 40,000 (goes up to 60,000 in case patient is senior citizen). Deduction is only allowed in case of following diseases: 6. Neurological Diseases where the disability level has been certified to be of 40% and above, (a) Dementia (b) Dystonia Musculorum Deformans (c) Motor Neuron Disease (d) Ataxia (e) Chorea (f) Hemiballismus (g) Aphasia (h) Parkinsons Disease 7. Malignant Cancers 8. Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) 9. Chronic Renal failure 10. Hematological disorders : (a) Hemophilia ; (b) Thalassaemia. Professional tax: Professional tax deducted from salary by employer should be removed from taxable salary before computation of income tax. Employer contribution of EPF/New pension scheme(NPS): Employer contribution does not become part of employees income and hence income tax is not payable on this part. Tax deducted at Source (TDS) deduction: As per income tax rules, all payment which are taxable in nature should be done after deduction of taxes at the source itself. Hence employer

compute income tax on salary payment and deduct it every month. This TDS is based on employees saving/investment declaration at the start of year. If investments for tax saving is not done, large amount may be deducted in last few months. In Hand monthly salary: After deduction of all components like TDS, EPF etc in hand monthly salary is computed. In Hand monthly salary without reimbursements: Some of the employees get reimbursements components separately in a different payment other than salary, So this figure shows in hand salary w/o reimbursement components like medical, telephone, internet bills, driver salary etc. Total income this year: This figure shows whole years income from all sources combined. Advance tax schedule: As per income tax rules, 30% of income tax should be paid by 15th Sept, 60% by 15th Dec and rest by 31st March. If its not followed one may be charged interest penalty u/s 234C.

New Direct taxes code

The new Direct taxes code has been published by Finance ministry, which would replace current Income Tax structure from 2011-12. This draft is put for public opinion and will be presented to parliament by Winter session. If passed, this will be applicable from Financial Year 2011-12. (Starting from 1st Day of April 2011). But transitional changes will be expected from 2010-11. This means the coming budget will bring in more measures to streamline the transition procedure.

A brief of the same is provided below: In General: 7. Earlier Income Tax Act and Wealth tax Act (Covering Income Tax, TDS, DDT, FBT and Wealth taxes) are abolished and single code of Tax, DTC in place. 8. Concept of Assessment year and previous year is abolished. Only the Financial Year terminology exists. 9. Only status of Non Resident and Resident of India exits. The other status of resident but not ordinarily resident goes away. 10. Earlier the terminology of assessee was meant for the person who is paying tax and/or, who is liable for proceeding under the Act. Now it has been added with 2 more definitions namely a person, whom the amount is refundable, and/or, who voluntarily files tax return irrespective of tax liability. 1. This helps any person to file his returns and maintain the record of tax return filing. 11. No changes in the system of Advance Tax, Self Assessment Tax and also TDS. Amendment of TDS goes in line with earlier Notification 31/2009 which speaks of Form 17/UTN/etc. 1. In TDS, a new return, if found required, will be introduced for Non TDS payments. 12. Government assessee is covered in Direct Tax Code. Even though they are not liable for Income Tax / Wealth Tax, Government Assessees are required to Comply with provision of TDS and TCS. (Current act was not covered with Government Assessees)

New Tax rates: (For Ordinary source of income) Slab 1 2 3 4 Income Between 0 - 1.60 Lakhs 1.60 Lakhs to 10 Lakhs 10 Lakhs to 25 Lakhs Above 25 Lakhs Tax rate 0% 10% 20% 30%

3. For Female, second slab begins from 1.90 Lakhs and for Senior citizen it begins from 2.40 Lakhs 4. Companies tax rate changed from 30% to 25%. New due dates for Tax Returns: Sl No 1 2 Type Non-Business / Non-Corporate Others Date 30th June 31st August First filing (under DTC) 30/06/2012 31/08/2012

Tax incentives: 5. Earlier terms Deductions under Chapter VI A will be treated as Tax incentives. 6. 80C gets a major hit by introduction of EET methodology (Exempt - Exempt - Tax). The investment is Exempted when invested. The investment is Exempted till it is remained invested. The investment is Taxed when it is withdrawn. 1. Also, investments are considered only of those invested through savings intermediaries approved by PFRDA (Pension Fund Regulatory and Development Authority)!! 1. Such savings intermediaries may in turn invest in ELSS mutual funds, government securities, Public sector securities, etc. 2. Such investments are also exempted to the maximum of Rs. 3 Lakhs. 2. All such savings will be governed directly by government by an appointed depository (an independent agency). 3. Other than this, Tuition fees for children will be allowed as deductions. 4. No maximum limit for this, as savings are charged once they are withdrawn. 7. Medical treatment, higher education loan interest, donation and rent paid by selfemployed individual are deductible. 8. New provision comes for Handicapped individuals to get deductions upto 75,000. Major Deductions applicable under Tax Incentives for an individual: 9. Investments through PFRDA approved agencies (Max of 3 Lakhs) 10. Payment of tuition fees 11. Medical treatment

12. Health insurance 13. Donations 14. Interest on loan taken for higher education 15. Maintenance of a disabled dependant 16. Interest income on Govt bonds *Some more for specific cases, like political contributions, royalty, etc Deductions from Salaries: 6. Allowed are only, PT, Transport Allowance (limit prescribed) and special allowances given exclusively to meet duties (to the extent actually incurred). 7. Also deduction is allowed for PF as tax incentives. 8. And last, deductions are allowed for Voluntary retirement, Gratuity on retirement and pension received. 9. No deductions on HRA, Medical reimbursements, etc, etc. 10. Employer part of PF paid will be exempt from tax as Tax Incentives under EET methodology (to employees). House Property: 3. No deduction for Housing loan repayment of Self-Occupying property. This includes interest as well as part of principal. 4. Only Let out properties are considered and the Gross rent and specified deductions are taken with simple calculations. Residuary Sources (Other Sources) 3. Earlier things follow almost. 4. Any amount exceeding 20,000 taken / accepted / repaid as loan or deposit, otherwise by an account payee cheque/draft shall be added to the income. Computation of total Income

4. Incomes are broadly divided into 2 sources, namely Special Sources and Ordinary Sources. 5. Special sources are given no deduction and what is earned is taxed directly (generally at a lower rate). 6. Ordinary sources are divided into further categories, namely: 1. Income from employment. 2. Income from House Property 3. Income from Business 4. Capital gains 5. Income from Residuary Sources (Similar to other sources, with some minuses) Ordinary Sources: 6. The 5 categories of Ordinary sources can have multiple sources under each head (Eg: Multiple employer, Multiple Business, Multiple Properties, etc). 7. The income will be computed in 2 step procedure for each head: 1. Calculate for each source under each head of Income. 2. Aggregate the total under each head and arrive a total profit or loss under such head. 8. Then aggregate all the 5 heads and arrive the figure of Current Income from Ordinary Sources. 9. Then this value has to be aggregated with unabsorbed losses as of immediate preceding financial year. Such aggregated income will be treated as Gross Total income from Ordinary Sources . 1. If such result is negative, then Gross Total Income will be NIL and value will be treated as Unabsorbed current loss from ordinary sources. 10. Such Gross Total Income will be further reduced by incentives similar to earlier Chapter VI A deductions. The resultant amount will be 'Total income from ordinary sources'.

Some cases for Ordinary Sources GTI deriving: Description Current income from ordinary sources Unabsorbed preceding year ordinary sources Case - I Case - II Case III 1000 1000 (-)500 500 Nil 1000 (-)1500 Nil (-)500 loss from Nil - Case - IV Case - V (-)1000 Nil Nil (-)1000 (-)1000 (-)1500 Nil (-)2500

Gross total income from ordinary sources, of 1000 the financial year Unabsorbed current loss from ordinary Nil sources of the financial year Special Sources: 5. This includes incomes like: 1. Any assessee

1. On income by way of winnings from 1. any lottery or crossword puzzle

2. race, including horse race (not being the income from the activity of owning and maintaining race horses) 3. Card game or any other game or gambling or betting. 2. Non-resident 1. On investment income by way of Interest, dividends on which distribution tax has not been paid, capital gains, any other investment income 2. On income by way of royalty or fees for technical services 3. Non-resident sportsman who is not a citizen of India 1. On income by way of participation in India in any games, advertisement or contribution of articles relating to any game or sport in newspapers, magazines or journals in India 4. Non-resident sports association or institution 1. On income by way of guarantee money in relation to any games or sports played in India.

6. The income on such way will be aggregated Current Income from Ordinary Sources. 7. Then this value has to be aggregated with unabsorbed losses as of immediate preceding financial year. Such aggregated income will be treated as Gross Total income from Special Sources . 1. If such result is negative, then Gross Total Income will be NIL and value will be treated as Unabsorbed current loss from Special sources. 8. Such Gross Total Income will be calculated separately and adjusted will losses. Then the resulting values will be aggregated and the resultant amount will be 'Total income from Special sources'. Total Income: 4. 'Total income from ordinary sources' PLUS 'Total income from Special sources' = Total Income. 5. The losses can be carried forward for any number of financial years, with year on year adjustment system. 6. Loss under Capital Gains and Loss under Speculative business are ring-fenced and can be adjusted only against respective heads.

FEATURES OF DIRECT TAX CODE

DTC removes most of the categories of exempted income. Equity Mutual Funds (ELSS), Term deposits, NSC (National Savings certificates), Unit Linked Insurance Plans (ULIPs), Long term infrastructures bonds, house loan principal repayment, stamp duty and registration fees on purchase of house property will lose tax benefits.

Only half of Short-term capital gains will be taxed Surcharge and education cess are abolished. For incomes arising of House Property: Deductions for Rent and Maintenance would be reduced from 30% to 20% of the Gross Rent. Also all interest paid on house loan for a rented house is deductible from rent.

Tax exemption on Education loan to continue. Tax exemption on LTA (leave travel allowance) is abolished. Taxation of Capital gains on listed securities held for more than a year will not be taxed. If held for less than a year, it will be taxed at 5%, 10% or 15%

Tax on dividends: Dividends will attract 5% tax. Under Sec 80C deduction of up to 1.5 lakh allowed 1) INR Rs.1 lakh on Pension, PF and Gratuity funds. 2) Up to 50,000 for expenditure on tuition fees, pure life insurance premium and health

COMPETITORS START FROM SCRATCH

As for the threat from the phase-out of the QRs, in respect of biscuits, Liberty has faced this threat reasonably well over the past one year, without a visible impact on its financial performance. The proposed foray by Nestle India and Hindustan Lever into confectionery and dairy products, could pose the only remaining threat to Liberty. On this, Liberty's already established brand name in the foods business could erect an entry barrier, however temporary, when it comes to mass market products. Though both HLL and Nestle have the option of drawing products from their parents' portfolio, these brands would scarcely be familiar names in India; therefore, investments in brand-building would be necessarily high, at least in the initial stages. In the bakery business, HLL's acquisition of Modern Foods, the largest bread manufacturer in India, could pose a threat. However, Liberty's dependence on the bread segment is now negligible, and any extension of the Modern brand to biscuits and cakes could take some time, affording some breathing space to Liberty.

TAX We offer expert consultancy to individuals, businessmen, organizations, partnership firms and all other Indian citizen who are liable to pay Tax according to the Indian legislation authority. We can develop tax strategies that can help our clients in managing new tax laws according to our legislation. Our expert services include - Tax Planning, Reducing Tax Liabilities & Risks, Finalization of Accounts, Filing of Returns, Preparation of Tax planning and preparation. Below mentioned our Income Tax related service that we offer to our clients:

Preparation of return Getting Assessment done Consultancy in tax matters & tax planning Foreign taxation consultancy Transfer Pricing matters Withholding tax compliance Fringe benefit tax compliance Income tax Appeals before CIT (Appeals) and ITAT

FRINGE BENEFIT TAX Finance Act, 2005 has introduced a new tax in the form of Fringe Benefit Tax (FBT). FBT is a tax payable by the employer on benefits other than salary or wages (provided/ deemed) that employees (past or present) receive as a consideration of their employment. FBT is applicable on all type of assesses as mentioned above in Income Tax except the following:

Individuals Hindu Undivided Family and certain charitable institutions

Every assessee who is liable to pay the Fringe Benefit Tax is required to follow the certain below mentioned formalities:

Advance payment of FBT at regular period prescribed the Act. Filing of FBT returns annually. FBT audit which is along with the Income Tax Audit

TRANSFER PRICING Businesses need to maintain extensive documentation to support their inter-company pricing, especially with reference to third party comparables to meet the transfer pricing provisions. Transfer pricing policy balances opportunity and risk management, weighing effective tax-rate optimizations against fiscal-authority challenges and the costs of compliance. This responsibility, together with the measure of taxes involved and the considered nature of inter-company pricing makes it essential for businesses to maintain robust and safe transfer pricing documents. We have expert economists, legal, finance and tax professionals with extensive experience in transfer pricing and international tax issues to take care of your Transfer Pricing. We provide the following transfer pricing services Multinational Transfer Pricing, Transfer Pricing Guidelines, Transfer Pricing Documentation, Transfer Pricing Guidelines In India, Transfer Pricing Regulation Services:

Transfer pricing related advisory services Transfer pricing studies and analysis Litigation support and representation before tax authorities

Transfer Pricing Regulation for Indian Companies All Indian companies are required to analyze their international transaction with respect to the Transfer Pricing Regulation and adhere to it by maintaining proper transaction records and documents. INCOME TAX SERVICES Resident Companies According to the Income Tax Law, the Indian resident companies have been made legally responsible to be taxed at 33.66 per cent on net basis. Moreover, companies have also been

regulated to pay dividend distribution tax (DDT) at 14.025 per cent on the amount of profits distributed to shareholders. Non-resident Companies On the other hand, the Non-resident companies have been made accountable legally to tax at 41.82 per cent on net basis. Such companies may perhaps be taxed on a gross basis or on a presumptive basis in certain cases. Though, income from long-term capital gains might well have to pay at the rate of 20.91 per cent.

KINDS OF TAXES Annual Tax An annual tax is charged on income earned, for a financial year, as per the rates mentioned by the annual budget. The rates tend to be different with each budget. The annual tax is generally paid in advance through quarterly instalments at some point in the financial year. The quarters may also show a variation according to the taxpayer involved.

Minimum Alternate Tax (MAT) The domestic tax law has been made in the way to entail companies to pay MAT in lieu of the usual corporate tax, where the usual corporate tax is lower than the MAT. MAT gets calculated on the book profits; at the rate of 8.415 per cent for domestic companies and 7.841 per cent for non-resident companies.

Dividend Distribution Tax (DDT) The tax payable on the dividend declared, distributed or paid is called as DDT. Dividends at present get exemption from being taxed in India. However, the company paying the dividends has been made liable to pay DDT at the rate of 14.025 per cent on the sum of dividends declared. Direct Tax Code The New Direct Tax Code (DTC) is said to replace the existing Income Tax Act of 1961 in India. DTC bill was tabled in parliament on 3oth August, 2010. There are big changes now in monsoon session and There are now much less benefits as compared to what were in the original proposal.

During the budget 2010 presentation, the finance minister Mr. Pranab Mukherjee reiterated his commitment to bringing into fore the new direct tax code (DTC) into force from 1st of April, 2011, but same could not be fulfilled.

Highlights of Direct Tax code 1. Removal of most of the tax saving schemes: DTC removes most of the categories of exempted income. Unit Linked Insurance Plans (ULIPs), Equity Mutual Funds (ELSS), Term deposits, NSC (National Savings certificates), Long term infrastructures bonds, house loan principal repayment, stamp duty and registration fees on purchase of house property will loose tax benefits. 2. New tax saving schemes: Tax saving based investment limit remains 100,000 but another 50,000 has been added just for pure life insurance (Sum insured is atleast 20 times the premium paid) , health insurance, mediclaims policies and tuition fees of children. But the one lakh investment can now only be done in provident fund, superannuation fund, gratuity fund and new pension scheme (NPS).

3. Tax slabs: The income tax rates and slabs have been modified. The proposed rates and slabs are as follows: Annual Income Up-to INR 200,000 (for senior citizens 250,000) Between INR 200,000 to 500,000 Between INR 500,000 to 1,000,000 Above INR 1,000,000 Men and women are treated same now 4. Home loan interest: Exemption will remain same as 1.5 lakhs per year for interest on housing loan for self-occupied property. 5. Short and long term gains: Only half of Short-term capital gains will be taxed. e.g. if you gains 50,000, add 25,000 to your taxable income. Tax Slab Nil 10% 20% 30%

6. EEE and EET: As per changes on 15th June, 2010, Tax exemption at all three stages (EEE) savings, accretions and withdrawalsto be allowed for provident funds (GPF, EPF and PPF), NPS (new pension scheme administered by PFRDA), Retirement benefits (gratuity, leave

encashment, etc), pure life insurance products & annuity schemes. Earlier DTC wanted to tax withdrawals. 7. Education Cess: Surcharge and education cess are abolished. 8. Income arising from House Property: Deductions for Rent and Maintenance would be reduced from 30% to 20% of the Gross Rent. Also all interest paid on house loan for a rented house is deductible from rent. Before DTC, if you own more than one property, there was provision for taxing notional rent even if the second house was not put to rent. But, under the Direct Tax Code 2010 , such a concept has been abolished. 9. LTA (Leave travel allowance): Tax exemption on LTA is abolished. 10. Education loan: Tax exemption on Education loan to continue. 11. Corporate tax: Corporate tax reduced from 34% to 30% including education cess and surcharge. 12. Taxation of Capital gains from property sale : For sale within one year, gain is to be added to taxable salary. For long term gain (after one year of purchase), instead of flat rate of 20% of gain after indexation benefit, new concept has been introduced. Now gain after indexation will be added to taxable income and taxed at per the tax slab. Base date for cost of acquisition has been changed to 1st April, 2000 instead of earlier 1st April, 1981. 14. Medical reimbursement : Max limit for medical reimbursements has been increased to 50,000 per year from current 15,000 limit. 15. Tax on dividends: Equity mutual fund will attract 5% dividend distribution tax (DDT). DDT has been removed from debt and non-equity based mutual funds but now dividends on nonequity funds will be taxable in investors hand as per his slab rates. There will also be a TDS 0f 10% (20% in case of NRI and companies) if dividend is more than 10,000 Rs for non-equity funds. 15. News for NRIs : As per the current laws, a NRI is liable to pay tax on global income if he is in India for a period more than 182 days in a financial year. But in new bill, this duration has been changed to just 60 days. An NRI will be deemed as resident only if he has also resided in India for 365 days or more in the preceding four financial years, together with 60 days in any of these fiscal years. Even if an NRI becomes a resident in any financial year, his global income does not immediately become

liable to tax in India. Global income would become taxable only if the person also stayed in India for nine out of 10 precedent years, or 730 days in the preceding seven years. This is very unfair to Seafarers. To avoid any income tax, an Indian sailor employed with a foreign ship will have to stay maximum for 60 days in India Like very year on the budget day, we are again here with all new income tax calculator for financial year 2012-13, or for assessment year 2013-14, along-with budget updates for common man. Budget 2012 updates: Some of the important changes done this year are given below: 9. Rajiv Gandhi Equity Savings scheme: It will provide income tax deduction of 50% for those who first time invest up to Rs.50,000 directly into equities and whose annual income is less than Rs.10 lakh, subject to a three -year lock in. Exchange-traded funds (ETFs) and mutual funds listed on stock exchange and invested only in BSE 100, CNX 100 and blue chip public sector stocks would also be allowed tax rebate under the scheme. 10. Implementation of Direct tax code has again been deferred and wont be applicable from 1st April, 2012.

11. Exemption limit raised to Rs 2 lakhs from Rs 1.8 lakh. 30% slab now starts from 10 lakh rather than 8 lakh earlier. Men and women now have same tax slab. No gender bias! 12. Within the existing limit for deduction allowed for health insurance, Rs 5000 deduction for preventive health checkup is allowed.

31. Deduction of upto 10,000 for interest from savings bank accounts under a new section 80TTA. 32. Senior citizens not having income from business proposed to be exempted from payment of advance tax. 33. Securities Transaction tax (STT) reduced to 0.1% from 0.125% 34. Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SME for purchase of new plant and machinery. 35. Service tax rate increased to 12% from current 10%. This would mean more taxes in your mobile, telephone, internet, restaurant bills and life insurance premium etc. 36. Import duty free amount limit raised to Rs 35000 from 25000. So guys coming from abroad can bring more stuff. 37. Gold to be more expensive. Customs duty on standard gold raised from 2 per cent to 4 per cent. 38. Duty on large cars raised to 27%, so cars would be more expensive now. 39. Tax saving mutual funds (ELSS) deduction to continue.

40. 80C deduction on insurance policies purchased after 1st April, 2012 only if premium is less than 10% of sum assured. Benefit for existing purchased policies to continue. 41. 1% TDS on any immovable property sale above 50 lakh (20 lakh in case of non-urban areas). 42. 1% tax at source on cash purchases of jewellery over Rs 2 lakh. 43. 80CCF deduction for infrastructure bonds not valid anymore. 44. Income tax return filing would be now mandatory for every resident having any asset located outside India irrespective of the fact whether the resident taxpayer has taxable income or not. 45. 80G deduction not applicable in case donation is done in form of cash for amount over Rs 10,000. Income tax calculator: The below provided, excel based computation tool is based on slabs and recommendations proposed by Finance Minister Pranab Mukherjee in budget presented on 16th March, 2012.

Any person who has basic knowledge of Microsoft excel can use this tool easily. Income Tax Rates for financial year 2012-2013 (Assessment year: 2013-14) For Men Upto Rs. 2,00,000 Nil Rs. 2,00,001 to Rs. 5,00,000 10 per cent Rs. 5,00,001 to Rs. 10,00,000 20 per cent Above Rs. 10,00,000 30 per cent For Women Upto Rs. 2,00,000 Nil Rs. 2,00,001 to Rs. 5,00,000 10 per cent Rs. 5,00,001 to Rs. 10,00,000 20 per cent Above Rs. 10,00,000 30 per cent For resident individual of 60 years or above (Senior Citizens) Upto Rs. 2,50,000 Nil Rs. 2,50,001 to Rs. 5,00,000 10 per cent Rs. 5,00,001 to Rs. 10,00,000 20 per cent Above Rs. 10,00,000 30 per cent For resident individual of 80 years or above (Very Senior Citizens) Upto Rs. 5,00,000 Nil Rs. 5,00,001 to Rs. 10,00,000 20 per cent Above Rs. 10,00,000 30 per cent

House Rent Allowance (HRA): Rent receipts can be shown for taking tax benefit for living in a rented house. Income tax exemption for HRA will be least of following: 7. The actual amount of HRA received as a part of salary. 8. 40% (if living in non-metro area) or 50% (if living in metro area) of (basic salary+Dearness allowance (DA)). 9. Rent paid minus 10% of (basic salary+DA). In some cases, deduction for both HRA and home loan interest (u/s 24) can be taken together in case owned house is not in same city or not at a commutable distance to office. Transport/Conveyance allowance: Rs 800 per month is non taxable if salary has this component. This would not be exempted in case employee also avail car reimbursement. No proofs/bills required to submit for this exemption. Children education allowance: Per school going child 1200 per annum is non-taxable. Maximum for 2 children, so max 2400 per annum becomes non-taxable. Grade/Special/Management/Supplemementary Allowance: Thats general component in industry to complete CTC amount after putting 35-40% into basic and 20% in HRA. This is not an expense, but this head is kept just to put the rest of CTC amount into some component. Arrears: Generally arrears are fully taxable, but employee may claim exemption u/s 89(1). One would need to compute income tax on the arrears if it would have been received in actual year. Now difference of income tax between payment year and actual year would be allowed for deduction. Gratuity: If amount is received before completion of five years of service with employer, it should be taxable. Else it would be non-taxable up to Rs 10 lakh in case of non-government servants. In case of Government service employees, it would be fully non taxable. Leave travel allowance (LTA): Two trips on a block of four years can be claimed for exemption for travel done inside India. Following amount would be non-taxable:

7. Where journey is performed by rail; railway-fare in first AC class by shortest route to destination. 8. Where places of origin and destination are connected by rail but the journey is performed by any other mode then first AC class fare by shortest route to the place of destination.

9. Where place of origin of journey and destination, or part thereof, are not connected by rail and journey is performed by any other transport; then (i) If a recognised public transport system exists between such places the first class or deluxe class fare of such transport by shortest route, or, (ii) If in other case, first AC class fare for the distance of the journey by the shortest route, as if the journey has been performed by rail.

Leave encashment: Payment by way of leave encashment received by Central & State Govt. employees at the time of retirement in respect of the period of earned leave at credit is fully exempt. In case of other employees, the exemption is to be limited to minimum of all below: 9. The actual amount received 10. The cash equivalent of leave balance (max 30 days per year of service) 11. Maximum of 10 months of leave encashment, based on last 10 months average salary 12. Rs. 3 Lakh Performance Incentive/Bonus: This component would be fully taxable. Medical allowance/Reimbursement: This component is on-taxable up to 15000 per year (or Rs 1250 per month) on producing medical bills. Food Coupons Non-taxable upto 50 Rs per meal. So a 22 working month and one meal per day would make Rs 1100 as non taxable. Sodexo or Accor ticket coupons may also be provided by employer for same. Periodical Journals: Some employers may provide component for buying magazines, journals and books as a part of knowledge enhancement for business growth. This part would become non taxable on providing original bills. Professional Development Allowance : If original bills are submitted to employer, this allowance may become non-taxable. Generally payment done towards any technical course fee, certification etc done to enhance professional knowledge can be reimbursed. Uniform/Dress Allowance: Some sections of employees mat get allowance for purchase of office dress/uniform. In such case, the component would become non-taxable.

Telephone reimbursements In some of the cases, companies may provide a component for telephone bills. Employees may provide actual phone usage bills to reimburse this component and make it non-taxable. Internet Expenses - Employer may also provide reimbursement of internet expenses and thus this would become non taxable. Car expense reimbursements In case company provides component for this and employee use self owned car for official and personal purposes, Rs 1800 per month would be non-taxable on showing bills for fuel or can maintenance. This amount would be Rs 2400 in case car is more capacity than 1600cc. Driver salary If employee pays driver salary for self owned or company owned car, Rs 900 per month may become non-taxable if employer provides component for it. Gift from relatives vs non relatives: Gifts from relatives would be non-taxable with no limits attached. Following relations are covered under non-taxable rule: 13. Spouse of the individual 14. Brother or sister of the individual 15. Brother or sister of the spouse of the individual 16. Brother or sister of either of the parents of the individual 17. Any lineal ascendant or descendant of the individual 18. Any lineal ascendant or descendant of the spouse of the individual, Spouse of the person referred to in clauses (2) to (6). If gifts received from non-relative persons is worth more than Rs.50000, one is liable to pay the tax on whole value. Gift can be in form of a sum of money (in cash/cheque/bank draft/electronic transfer) or any articles. Agricultural Income: If one has only only agricultural income, then it is fully exempt from income tax. If other income also there, rebate on agricultural income would be provided at 1030% rate depending on actual amount of agricultural income. House rent Income: 30% of the rental income can be reduced as a standard deduction for repairs, maintenance etc. irrespective of the actual amount spent.

Bank/Fixed deposit/Post Office/NSC/SCSS interest: Interest earned on bank account, fixed deposits, post office, debt mutual funds/fixed maturity plans(kept less than one year) would be added to taxable income and taxed as per slab rates. Short Term Gains from Share Trading/Equity Mutual funds: if stocks/equity mutual funds are sold before one year, 15% tax would be payable on such gains. STT should have been on transaction. Long term gains from Share Trading/Equity Mutual funds: If stocks/equity mutual funds are kept for more than a year before sale, it would be long term gains and such gains would be fully exempt from income tax. Securities transaction tax (STT) must have been paid on transactions for availing this exemption. Section 80C, 80CCD and 80CCC deductions- One can claim his investments/payments under section 80C, 80CCC and 80CCD, up to 1 lakh combined limit. Amount can be invested in: 25. Tax saving mutual funds (ELSS) with three years lock-in 26. Five year tax-saver bank Fixed deposits 27. Public provident fund (PPF) 28. National Savings Certificate (NSC) or National Service Scheme (NSS) 29. Employer contribution into New Pension Scheme (NPS) (Section 80CCD) 30. Life insurance/Unit Linked Insurance Plan (ULIP) premium 31. Employees contribution towards Employee provident fund (EPF) 32. Home loan principal amount payment (only if you have got possession of house) 33. Senior citizen savings scheme (SCSS), if your age is more than 60 years 34. Post office tax saving deposit or tax saving bonds 35. Pension scheme/Retirement plans (Secion 80CCC) 36. Tuition fees paid for children education Section 80D : Maximum deduction of up to 15,000 under mediclaim or health insurance offered by life insurers taken for self and family. An additional deduction of up to 15,000 for buying cover for dependent parents. If parents/assessee are senior citizens, they can claim deduction up to Rs 20,000.

Section 80DD : Deduction of 50,000 for maintenance of a disabled dependent. If the disability is severe, the deduction amount will be 100,000. Section 80E : Tax relief on interest payments on education loan taken for higher studies for self, spouse or child. There is no maximum limit on this deduction. Section 80G : The eligibility is 50% or 100% of the donation amount subject to overall ceiling of 10% of your gross total income to certain funds and charitable institutions. Section 24/Home loan interest payment : The maximum limit is of 1.5 lakh on interest payments of a home loan for a self-occupied house. There is no ceiling on the amount of deduction if the house is let out or deemed to be let out. House rent would needs to shown in income in case house is not self-occupied. Section 80U (Disabled/Handicapped person): Deduction can be claimed if person has a disability. The allowed dedudtion if for Rs 50,000. This deduction goes up to Rs. 75,000 in case disability is severe. Section 80DDB deduction (Medical treatment expenses): Expenses done for medical treatment for self, spouse, dependent children, parents, brothers and sisters. Maximum deduction can be Rs 40,000 (goes up to 60,000 in case patient is senior citizen). Deduction is only allowed in case of following diseases: 11. Neurological Diseases where the disability level has been certified to be of 40% and above, (a) Dementia (b) Dystonia Musculorum Deformans (c) Motor Neuron Disease (d) Ataxia (e) Chorea (f) Hemiballismus (g) Aphasia (h) Parkinsons Disease 12. Malignant Cancers 13. Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) 14. Chronic Renal failure

15. Hematological disorders : (a) Hemophilia ; (b) Thalassaemia. Professional tax: Professional tax deducted from salary by employer should be removed from taxable salary before computation of income tax. Employer contribution of EPF/New pension scheme(NPS): Employer contribution does not become part of employees income and hence income tax is not payable on this part. Tax deducted at Source (TDS) deduction: As per income tax rules, all payment which are taxable in nature should be done after deduction of taxes at the source itself. Hence employer compute income tax on salary payment and deduct it every month. This TDS is based on employees saving/investment declaration at the start of year. If investments for tax saving is not done, large amount may be deducted in last few months. In Hand monthly salary: After deduction of all components like TDS, EPF etc in hand monthly salary is computed. In Hand monthly salary without reimbursements: Some of the employees get reimbursements components separately in a different payment other than salary, So this figure shows in hand salary w/o reimbursement components like medical, telephone, internet bills, driver salary etc. Total income this year: This figure shows whole years income from all sources combined. Advance tax schedule: As per income tax rules, 30% of income tax should be paid by 15th Sept, 60% by 15th Dec and rest by 31st March. If its not followed one may be charged interest penalty u/s 234C.

New Direct taxes code

The new Direct taxes code has been published by Finance ministry, which would replace current Income Tax structure from 2011-12. This draft is put for public opinion and will be presented to parliament by Winter session. If passed, this will be applicable from Financial Year 2011-12. (Starting from 1st Day of April

2011). But transitional changes will be expected from 2010-11. This means the coming budget will bring in more measures to streamline the transition procedure.

A brief of the same is provided below: In General: 13. Earlier Income Tax Act and Wealth tax Act (Covering Income Tax, TDS, DDT, FBT and Wealth taxes) are abolished and single code of Tax, DTC in place. 14. Concept of Assessment year and previous year is abolished. Only the Financial Year terminology exists. 15. Only status of Non Resident and Resident of India exits. The other status of resident but not ordinarily resident goes away. 16. Earlier the terminology of assessee was meant for the person who is paying tax and/or, who is liable for proceeding under the Act. Now it has been added with 2 more definitions namely a person, whom the amount is refundable, and/or, who voluntarily files tax return irrespective of tax liability. 1. This helps any person to file his returns and maintain the record of tax return filing. 17. No changes in the system of Advance Tax, Self Assessment Tax and also TDS. Amendment of TDS goes in line with earlier Notification 31/2009 which speaks of Form 17/UTN/etc. 1. In TDS, a new return, if found required, will be introduced for Non TDS payments.

18. Government assessee is covered in Direct Tax Code. Even though they are not liable for Income Tax / Wealth Tax, Government Assessees are required to Comply with provision of TDS and TCS. (Current act was not covered with Government Assessees)

New Tax rates: (For Ordinary source of income) Slab 1 2 3 4 Income Between 0 - 1.60 Lakhs 1.60 Lakhs to 10 Lakhs 10 Lakhs to 25 Lakhs Above 25 Lakhs Tax rate 0% 10% 20% 30%

5. For Female, second slab begins from 1.90 Lakhs and for Senior citizen it begins from 2.40 Lakhs 6. Companies tax rate changed from 30% to 25%. New due dates for Tax Returns: Sl No 1 2 Type Non-Business / Non-Corporate Others Date 30th June 31st August First filing (under DTC) 30/06/2012 31/08/2012

Tax incentives: 9. Earlier terms Deductions under Chapter VI A will be treated as Tax incentives. 10. 80C gets a major hit by introduction of EET methodology (Exempt - Exempt - Tax). The investment is Exempted when invested. The investment is Exempted till it is remained invested. The investment is Taxed when it is withdrawn. 1. Also, investments are considered only of those invested through savings intermediaries approved by PFRDA (Pension Fund Regulatory and Development Authority)!! 1. Such savings intermediaries may in turn invest in ELSS mutual funds, government securities, Public sector securities, etc. 2. Such investments are also exempted to the maximum of Rs. 3 Lakhs.

2. All such savings will be governed directly by government by an appointed depository (an independent agency). 3. Other than this, Tuition fees for children will be allowed as deductions. 4. No maximum limit for this, as savings are charged once they are withdrawn. 11. Medical treatment, higher education loan interest, donation and rent paid by selfemployed individual are deductible. 12. New provision comes for Handicapped individuals to get deductions upto 75,000. Major Deductions applicable under Tax Incentives for an individual: 17. Investments through PFRDA approved agencies (Max of 3 Lakhs) 18. Payment of tuition fees 19. Medical treatment 20. Health insurance 21. Donations 22. Interest on loan taken for higher education 23. Maintenance of a disabled dependant 24. Interest income on Govt bonds *Some more for specific cases, like political contributions, royalty, etc Deductions from Salaries: 11. Allowed are only, PT, Transport Allowance (limit prescribed) and special allowances given exclusively to meet duties (to the extent actually incurred). 12. Also deduction is allowed for PF as tax incentives. 13. And last, deductions are allowed for Voluntary retirement, Gratuity on retirement and pension received. 14. No deductions on HRA, Medical reimbursements, etc, etc. 15. Employer part of PF paid will be exempt from tax as Tax Incentives under EET methodology (to employees). House Property:

5. No deduction for Housing loan repayment of Self-Occupying property. This includes interest as well as part of principal. 6. Only Let out properties are considered and the Gross rent and specified deductions are taken with simple calculations. Residuary Sources (Other Sources) 5. Earlier things follow almost. 6. Any amount exceeding 20,000 taken / accepted / repaid as loan or deposit, otherwise by an account payee cheque/draft shall be added to the income. Computation of total Income 7. Incomes are broadly divided into 2 sources, namely Special Sources and Ordinary Sources. 8. Special sources are given no deduction and what is earned is taxed directly (generally at a lower rate). 9. Ordinary sources are divided into further categories, namely: 1. Income from employment. 2. Income from House Property 3. Income from Business 4. Capital gains 5. Income from Residuary Sources (Similar to other sources, with some minuses) Ordinary Sources: 11. The 5 categories of Ordinary sources can have multiple sources under each head (Eg: Multiple employer, Multiple Business, Multiple Properties, etc). 12. The income will be computed in 2 step procedure for each head: 1. Calculate for each source under each head of Income. 2. Aggregate the total under each head and arrive a total profit or loss under such head.

13. Then aggregate all the 5 heads and arrive the figure of Current Income from Ordinary Sources. 14. Then this value has to be aggregated with unabsorbed losses as of immediate preceding financial year. Such aggregated income will be treated as Gross Total income from Ordinary Sources . 1. If such result is negative, then Gross Total Income will be NIL and value will be treated as Unabsorbed current loss from ordinary sources. 15. Such Gross Total Income will be further reduced by incentives similar to earlier Chapter VI A deductions. The resultant amount will be 'Total income from ordinary sources'.

Some cases for Ordinary Sources GTI deriving: Description Current income from ordinary sources Unabsorbed preceding year ordinary sources Case - I Case - II Case III 1000 1000 (-)500 500 Nil 1000 (-)1500 Nil (-)500 loss from Nil - Case - IV Case - V (-)1000 Nil Nil (-)1000 (-)1000 (-)1500 Nil (-)2500

Gross total income from ordinary sources, of 1000 the financial year Unabsorbed current loss from ordinary Nil sources of the financial year Special Sources: 9. This includes incomes like: 1. Any assessee

1. On income by way of winnings from 1. any lottery or crossword puzzle

2. race, including horse race (not being the income from the activity of owning and maintaining race horses) 3. Card game or any other game or gambling or betting.

2.

Non-resident 1. On investment income by way of Interest, dividends on which distribution tax has not been paid, capital gains, any other investment income 2. On income by way of royalty or fees for technical services

3. Non-resident sportsman who is not a citizen of India 1. On income by way of participation in India in any games, advertisement or contribution of articles relating to any game or sport in newspapers, magazines or journals in India 4. Non-resident sports association or institution 1. On income by way of guarantee money in relation to any games or sports played in India. 10. The income on such way will be aggregated Current Income from Ordinary Sources. 11. Then this value has to be aggregated with unabsorbed losses as of immediate preceding financial year. Such aggregated income will be treated as Gross Total income from Special Sources . 1. If such result is negative, then Gross Total Income will be NIL and value will be treated as Unabsorbed current loss from Special sources. 12. Such Gross Total Income will be calculated separately and adjusted will losses. Then the resulting values will be aggregated and the resultant amount will be 'Total income from Special sources'. Total Income: 7. 'Total income from ordinary sources' PLUS 'Total income from Special sources' = Total Income. 8. The losses can be carried forward for any number of financial years, with year on year adjustment system. 9. Loss under Capital Gains and Loss under Speculative business are ring-fenced and can be adjusted only against respective heads.

FEATURES OF DIRECT TAX CODE

DTC removes most of the categories of exempted income. Equity Mutual Funds (ELSS), Term deposits, NSC (National Savings certificates), Unit Linked Insurance Plans (ULIPs), Long term infrastructures bonds, house loan principal repayment, stamp duty and registration fees on purchase of house property will lose tax benefits.

Only half of Short-term capital gains will be taxed Surcharge and education cess are abolished. For incomes arising of House Property: Deductions for Rent and Maintenance would be reduced from 30% to 20% of the Gross Rent. Also all interest paid on house loan for a rented house is deductible from rent.

Tax exemption on Education loan to continue. Tax exemption on LTA (leave travel allowance) is abolished. Taxation of Capital gains on listed securities held for more than a year will not be taxed. If held for less than a year, it will be taxed at 5%, 10% or 15%

Tax on dividends: Dividends will attract 5% tax. Under Sec 80C deduction of up to 1.5 lakh allowed 1) INR Rs.1 lakh on Pension, PF and Gratuity funds. 2) Up to 50,000 for expenditure on tuition fees, pure life insurance premium and health

SOURCES OF WORKING CAPITAL

A firm can arrange working capital from the following two sources: 1. Long Term Sources and 2. Short Term Sources 1. Long Term Sources The sources of longterm financing can be broadly classified into the following two categories : (A) Owned Sources Owned sources include the following : i. Issue of Shares :

Arrangement of working capital through issue of shares does

not create a fixed

obligation on incomes of the business. Thus, it is preferable to arrange the permanent working capital through issue of shares. ii. Retained Earnings :

A firm can meet its working capital requirement by reinvesting the profits earned by it. Reinvestment of the earned profit is a regular and cost less source of funds. iii. Reserves :: Like retained earnings, the use of reserves for financing the working capital requirement is also a costless source of finance.

(B) Borrowed Sources : It mainly includes the issue of debentures or longterm loans. 3. Short Term Sources : For financing the working capital requirements shortterm sources can be classified into the following two broad categories ::

(A) Internal Sources : It mainly includes depreciation provision, outstanding liabilities and taxation. (B) External Sources : ShortTerm external sources of financing working capital includes the following : o Trade Credit : provision for

Usually manufacturing concerns, wholesalers and retailers avail this type of credit. Such credit is extended by supplier of goods or rawmaterials. This facility is given for a short period which may extend for a few weeks or a few months, based on prevailing market usage. No interest is charged by the supplier if payment is made by the customer before the expiry of the credit period. o Bank Credit : Normally companies obtain shortterm working capital from banks in the form of short term loans, cash credit, overdraft and through discounting the bills of exchange. Short Term loans from Financial Institutions :: The requirement of working capital can also be satisfied by arranging shortterm loans from financial institutions. ii. Public Deposits :: Business firms sometimes succeed in mobilizing enough funds by way of shortterm deposits from public. By and large attraction of a higher rate of interest prompts the public to put their savings as shortterm deposits with business firms. iii. Advance from customers :: Advance from customers is also considered as a principle source of shortterm working capital finance.

i.

RESEARCH METHODOLOGY
Problem Formulation:
As working capital management is the backbone of an organization so this study is being conducted to assess the various liquidity ratios and for the safety of organization. Since working capital management studies the current assets and current liabilities which will affect the performance of the LIBERTY in future. Hence, in order to make an accurate forecast of working capital management certain ratios are calculated which forms the part of working capital management in LIBERTY

Objectives of the study:

1. To understand the meaning of Working Capital. 2. To study the income statement of LIBERTY

Analysis Design
The analysis design used in the project is: Annual Balance Sheet(2007-2008) Annual profit and loss a/c ( 2007- 2008) Annual cash flow statement(2007- 2009

METHODOLOGY
For the purpose of the study the relevant data has been entitled from the published annual reports and manuals of the unit under reference that is LIBERTY The analysis of data has been supported by discussion with the managers of the

enterprise. The data has been intensively examined with the help of different accounting and statistical technique.

There are two main sources of data collected which are:1. Primary Data It means collection of the information for the first time. Such information is collection through the discussion with the various managers working in various section of the finance department.

2.

Secondary Data: - In order to carry out my successfully have relied on the

secondary data already available. Secondary data includes annual reports of LIBERTY and website of Libertyprulife.com. o Information regarding the profile of the organization has been collected from the annual plan and the interviews of the concerned offices of the company. o The data are secondary in nature of are collected from the published information of the finance department. o Some information has been collected from website of LIBERTY i.e, www.Libertyshoes.com.

SAMPLE DESIGN Research method Sample area Sample size Sample people : : : : Sample Survey Dehradun 100 unit Customers

RESEARCH DESIGN Research design is based on the Descriptive Method so as to describe the characterstics of the market.

NEEDS AND OBJECTIVES OF WORKING CAPITAL

The need for working capital cannot be over emphasized every business needs some amount of working capital. The need for working capital arises due to the time gap between production & realization of cash from sales. There is an operating cycle involved in the sales and realization of cash.

The working capital is needed for the following purposes.

1. For the purchase of raw materials, components & spares. 2. To pay wages and salaries. 3. To incur day-to-day expenses & overhead cast such as fuel, power and office expenses, etc. 4. To meet the selling costs are packing, advertising etc. 5. To provide credit facilities to the customers. 6. To maintain the inventories of raw material, work-in-process, stores and spares and finished stock.

FINDINGS
As most of the sale is done from its head office, so the requirement of cash is not too much. Comparing to its working capital the amount of creditors is quite low. After introduction of Ferrari project the company was able to maintain its quality and reduce wastages. Company also follows ISO 140001 certified to maintain the quality. It also performs several activities to motivate the employees such as publishing magazines, competition, sports and several others.

CONCLUSION
At last it is concluded that the company as a whole is a well branded company. The goodwill of the company is very high. As considered to my topic working capital management it is concluded that the system of working capital management of the company is very good and the inventory of the company is also maintained and controlled properly. It was observed that the requirement of working capital is not too much and what ever amount is required is being satisfied by its main branch i.e. from Bangalore. As compared to requirement of working capital the amount of creditors is also too low which shows that company is in itself sufficient enough its resources. It does not borrow much of funds from outside party. It only sales its by products and scraps. Now we see through this analysis that a Liberty industry is doing a good job in trade sector. If we analysis the Marketing strategy of Liberty industries then we conclude that its totally customer oriented firm with well managed strategies.

So, in all, it is concluded that the environment (working and cultural) is found very calm and the employees are pleased to work very hard in the corporation to achieve the desired objectives.

REFERENCE
1. 2. 3. 4. 5. 6. 7. 8. "Liberty Shoes reports 144 pc rise in Q1 net, to issue 1:1 bonus". Business Line. Jul 19, 2005. "For life n Liberty". Business Line. Jun 19, 2008. "Can Liberty do it?". Business Line. January 13, 2000. "Stepping into high fashion". Rediff.com, Money. July 21, 2004. "New footprints: How will Liberty Shoes diversification moves fare?" . Financial Express. Oct 18, 2004. "Liberty revamps product portfolio". Business Line. Apr 17, 2003. "Liberty Shoes to set up three units". The Hindu. Mar 28, 2006. http://shoesoles.co.in

Liberty Shoes Google Finance Liberty Shoes Business Standard Liberty Shoes News and BSE, NSE listing at CNBC-TV18