Entries from September 2009 ↓

FDI into SSI /MSE

The Department of Industrial Policy & Promotion has issued Press note 6 (2009) dealing with FDI into SSI/MSE and Industrial undertaking manufacturing items reserved for SSI/MSI and is briefly discuss below:

FDI into SSI /MSE

  1. Prior to 2006, A SSI was defined in terms of Investment in fixed asset in plant & machinery and equity participation.

  1. Vide press note 18 (1997), In case of FDI of more than 24% in SSI was subject to following:

the company would get itself de-registered as small-scale unit

obtain Industrial licence or file Industrial entrepreneur Memorandum wit SIA

Now with the enactment of Micro, Small and Medium Enterprises Development Act, 2006, theceiling for equity participation in Micro and small enterprise (MSE) is removed and defined solely based on the investment in plant & machinery.

Accordingly, FDI in MSE is subject only to the sectoral equity caps, entry routes and other relevant regulations.

FDI in undertaking manufacturing items reserved for SSI/MSE

  1. An Industrial licence would be required for undertaking, whether with or without FDI, who

is not a MSE; and

manufacture item reserved item for SSI

  1. Further, such industrial undertaking would also require prior government approvalwhere FDI is more than 24% in equity capital and would be subject to other conditions.

Courtesy: Sudha Gupta (sudha@mukeshraj.com)

Clarification regarding deduction of tax at source from payments of second installment of arrears to Government employees on account of implementation of Sixth Central Pay Commission's recommendations

CIRCULAR NO. 6/2009

Dated: August 31, 2009

Subject :- Clarification regarding deduction of tax at source from payments of second installment of arrears to Government employees on account of implementation of Sixth Central Pay Commission’s recommendations matter regarding.

Under the provisions of Section 192 of the Income-tax Act, an employer is required to deduct tax at source from any payments in the nature of salary, which inter alia also includes any arrear payments. The Implementation Cell of the Department of Expenditure, Govt of India, vide its Office Order dated 30th Aug’ 08 had stated that 40% of the aggregate arrear (first installment of arrears) would be payable during FY 2008-09. In Circular No. 09/2008 dated 29th Sept.2008 issued from this office it was stated that during 2008-09 the tax has to be deducted at source on this 40% of aggregate arrear during FY 2008-09.The OM,F.No-1//1/2008-IC, of the Implementation Cell of the Department of Expenditure, Govt of India, vide its order dated 25th August,2009 has stated that the remaining 60% of the aggregate arrear ( second installment of arrears) would be paid to the concerned Government servants during FY 2009-10. Such arrangements could be followed by State Governments also.

In this regard, all the DDOs and PAOs as the case may be, in the Central/State Government and various organizations under them are advised to compute the correct tax liability of every employee on second installment of arrears drawn by him and immediately recover the full tax liability along with education cess thereon at the rates in force. The deduction of tax at source on such arrear payment should not be deferred in any circumstance. They should further ensure that the tax so recovered is paid to the account of Central Government account immediately as per the Income Tax Rules, 1962. The DDOs/PAOs are further advised that they should ensure that the PAN details of the deductees (recipient of arrears) are correctly quoted in the relevant quarterly e-TDS returns filed by them so that the Government Servants get proper credit of their tax deducted in their respective income tax returns.

DDOs/PAOs who fail to comply with the provisions of Section 192 of the Income-tax Act, 1961 would be liable to pay interest under section 201(1)/(1A) of Income Tax Act along with other penal consequences.

Hindi version will follow.

F.No.275/192/2008-IT(B)

Ansuman Pattnaik

Director (Budget)