CURRENT AFFAIRS 21 SEPTEMBER 2019

DAILY CURRENT AFFAIRS 

21 SEPTEMBER 2019

BY SUMIT BHARDWAJ

IMPORTANT NEWS ARTICLES

ANALYSIS

1.UNDERSTANDING -CORPORATE TAX, Minimum Alternate Tax (MAT), Income Tax Act of 1961 , Finance Act of 2019(GS-3)

Context: In a big boost, govt. cuts corporate tax

amid growing concerns over the economic slowdown, Union Finance Minister Nirmala Sitharaman announced a slew of tax exemptions at the GST Council Meet on Friday.

Nirmala Sitharaman proposed to slash corporate tax for domestic companies and new local manufacturing companies through an ordinance.

In a major fiscal booster, the government on Friday slashed effective corporate tax to 25.17 per cent inclusive of all cess and surcharges for domestic companies.

Making the announcement, Finance Minister Nirmala Sitharaman said the new tax rate will be applicable from the current fiscal which began on April 1.

CORPORATE TAX

A corporate tax, also called corporation tax or company tax, is a direct tax imposed by a jurisdiction on the income or capital of corporations or analogous legal entities. Many countries impose such taxes at the national level, and a similar tax may be imposed at state or local levels. The taxes may also be referred to as income tax or capital tax. Partnerships are generally not taxed at the entity level. A country's corporate tax may apply to:

corporations incorporated in the country,

corporations doing business in the country on income from that country,

foreign corporations who have a permanent establishment in the country, or

corporations deemed to be resident for tax purposes in the country.

Company income subject to tax is often determined much like taxable income for individual taxpayers. Generally, the tax is imposed on net profits. In some jurisdictions, rules for taxing companies may differ significantly from rules for taxing individuals. Certain corporate acts, like reorganizations, may not be taxed. Some types of entities may be exempt from tax.

Countries may tax corporations on its net profit and may also tax shareholders when the corporation pays a dividend. Where dividends are taxed, a corporation may be required to withhold tax before the dividend is distributed.

Minimum Alternate Tax (MAT)

Minimum Alternate Tax (MAT) is a tax effectively introduced in India by the Finance Act of 1987, vide Section 115J of the Income Tax Act, 1961 (IT Act), to facilitate the taxation of ‘zero tax companies’ i.e., those companies which show zero or negligible income to avoid tax. Under MAT, such companies are made liable to pay to the government, by deeming a certain percentage of their book profit as taxable income.

MAT is an attempt to reduce tax avoidance; it was introduced to contain the practices followed by certain companies to avoid the payment of income tax, even though they had the “ability to pay”.

MAT is applied when the taxable income calculated as per the normal provisions in the IT Act is found to be less than 18.5% of the book profits.

MAT was first introduced in India vide Section 80VVA of the IT Act through the Finance Act of 1983. Section 80VVA placed a restriction on certain deductions in the case of companies, or in other words, placed a ceiling on allowances and required companies to pay a minimum tax on at least 30% of their profits. The allowances that were unabsorbed in a particular year, due to the restriction, could be carried forward and absorbed in a later year, if there were sufficient profits.

Income Tax Act of 1961:

The Income-tax Act, 1961 is the charging Statute of Income Tax in India.

It provides for levy, administration, collection and recovery of Income Tax.

The Government of India brought a draft statute called the "Direct Taxes Code" intended to replace the Income Tax Act,1961 and the Wealth Tax Act, 1957.

However, the bill was later scrapped because of wealth tax act being repealed.

Finance Act of 2019:

The Finance Act is an important Act in India. The Central Government, through this Act, gives effect to financial proposals at the beginning of every Financial Year.

The Act applies to all the States and Union Territories of India unless specified otherwise.

Finance Act thus making this Act one that renews itself each year. All the Governmental financial policies are included in this Act. The existing policies, new policies, as well as changes made to existing policies are all included here. Every Finance Act is assented by the President of India.

Important Elements of Finance Act

All the elements included in the Finance Act associated with a particular Financial Year are of course important. Even so, there are particular elements that take precedence over the others.

The most important element is the rules laid down in the Act with respect to Income Tax Rates. Every year, the Act lays down in detail all the associated provisions related to Income Tax in the country. Since this applies to a large number of taxpayers, it is considered one of the most important elements.

The Finance Act is responsible for laying down the tax slabs that applies to taxpayers. The Act includes various details related to

• Income through Salary
• Agricultural Income
• Tax slabs for Senior Citizens
• Tax slabs for Very Senior Citizens
• Income Tax Surcharges
• Taxes chargeable to companies
• Advance tax

These are a few important elements included and elaborated upon in detail in the Finance Act for a particular year.

2.Understanding:Juvenile Justice (Care and Protection of Children) Act, 2015(gs-2)

Context:J&K court panel to probe charges of illegal detention 
of children 
The Supreme Court on Friday assigned the Jammu and Kashmir High Court’s Juvenile Justice Committee the task of inquiring into the allegations of illegal detention of children — some as young as 10 — by security forces

Juvenile Justice (Care and Protection of Children) Act, 2015

• Juvenile Justice (Care and Protection of Children) Act, 2015 has been passed by Parliament of India amidst intense controversy, debate and protest on many of its provisions by Child Rights fraternity.It replaced the Indian juvenile delinquency law, Juvenile Justice (Care and Protection of Children) Act, 2000, and allows for juveniles in conflict with Law in the age group of 16–18, involved in Heinous Offences, to be tried as adults. The Act came into force from 15 January 2016.It was passed on 7 May 2015 by the Lok Sabha amid intense protest by several Members of Parliament. It was passed on 22 December 2015 by the Rajya Sabha.
• To streamline adoption procedures for orphan, abandoned and surrendered children, the existing Central Adoption Resource Authority (CARA) has been given the status of a statutory body to enable it to perform its function more effectively. A separate chapter on Adoption provides detailed provisions relating to adoption and punishments for non compliance. Processes have been streamlined with timelines for both in-country and inter-country adoption including declaring a child legally free for adoption.
• As of 2019, Ministry of Women & Child Development of Government of India is working towards bringing an amendment, primarily to remove courts from adoption process, to handover it to Executive Magistrates/ District Magistrates and to make Child Welfare Committees administratively and judicially subordinate to District Magistrate, despite nationwide protest against such a move.

3.Understanding Zonal Councils,States Reorganisation Act, 1956.(gs-2)

Context: Amit Shah chairs Northern Zonal Council meet
Union home minister Amit Shah on Friday chaired the Northern Zonal Council meeting in Chandigarh. The Northern Zonal Council comprises Jammu and Kashmir, Ladakh, Haryana, Himachal Pradesh, Punjab, Rajasthan, and New Delhi.
Host Manohar Lal Khattar, chief minister Haryana, served as the vice-chairman of the Council.
The zonal council discussed issues pertaining to boundary disputes, security, infrastructure issues such as roads, transport, industries, water and power, forests and environment, housing, education, food security, tourism and transport.
Punjab Chief Minister Amarinder Singh, who attended the meeting, said the Council would discuss and deliberate on issues involving the Centre and the northern states.
The meeting of the zonal council was last held in Chandigarh on May 12, 2017. Five zonal councils were set up in 1957 under the States Reorganisation Act, 1956.

Zonal Councils:

What are Zonal Councils?

Zonal councils have been established by the Parliament to promote interstate cooperation and coordination.
They are statutory bodies established under the States Reorganisation Act 1956 and not constitutional bodies.
They are only deliberative and advisory bodies

How many Zonal Councils are there?

There are 5 five Zonal councils namely:
The Northern Zonal Council, comprising the States of Haryana, Himachal Pradesh, Jammu & Kashmir, Punjab, Rajasthan, National Capital Territory of Delhi and Union Territory of Chandigarh.
The Central Zonal Council, comprising the States of Chhattisgarh, Uttarakhand, Uttar Pradesh and Madhya Pradesh.
The Eastern Zonal Council, comprising the States of Bihar, Jharkhand, Orissa, and West Bengal.
The Western Zonal Council, comprising the States of Goa, Gujarat, Maharashtra and the Union Territories of Daman & Diu and Dadra & Nagar Haveli.
The Southern Zonal Council, comprising the States of Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and the Union Territory of Puducherry.

The North Eastern States i.e. (i) Assam (ii) Arunachal Pradesh (iii) Manipur (iv) Tripura (v) Mizoram (vi) Meghalaya (vii) Sikkim and (viii) Nagaland are not included in the Zonal Councils and their special problems are looked after by the North Eastern Council, set up under the North Eastern Council Act, 1972.
What is the composition of Zonal Councils?
Chairman – The Union Home Minister is the Chairman of each of these Councils.
Vice Chairman – The Chief Ministers of the States included in each zone act as Vice-Chairman of the Zonal Council for that zone by rotation, each holding office for a period of one year at a time.
Members- Chief Minister and two other Ministers as nominated by the Governor from each of the States and two members from Union Territories included in the zone.
Advisers- One person nominated by the Planning Commission (which has been replaced by NITI Ayog now) for each of the Zonal Councils, Chief Secretaries and another officer/Development Commissioner nominated by each of the States included in the Zone.
Union Ministers are also invited to participate in the meetings of Zonal Councils depending upon necessity.

What is the objective of zonal councils?
The main objectives of setting up of Zonal Councils are:
Bringing out national integration.
Arresting the growth of acute State consciousness, regionalism, linguism and particularistic tendencies.
Enabling the Centre and the States to co-operate and exchange ideas and experiences.

Establishing a climate of co-operation amongst the States for successful and speedy execution of development projects.

The States Reorganisation Act, 1956 was a major reform of the boundaries of India's states and territories, organising them along linguistic lines.

Although additional changes to India's state boundaries have been made since 1956, the States Reorganisation Act of 1956 remains the single most extensive change in state boundaries since the independence of India in 1947.

The Act came into effect at the same time as the Constitution (Seventh Amendment) Act, 1956, which (among other things) restructured the constitutional framework for India's existing states and the requirements to pass the States Reorganisation Act, 1956 under the provisions of Part I of the Constitution of India, Articles 3 & 4.

4.LNG deal to kick-start Modi’s U.S. visit(gs-2,3)

Context:In an effort to “re-energise” ties, Prime Minister Narendra Modi will kick off his visit to the United States with a major LNG investment deal which is expected to be announced right at the beginning of his visit. His first engagement as he lands in Houston, Texas will be a roundtable with top executives of 16 oil and gas companies, including LNG major Tellurian Inc. that is developing a $28 billion LNG terminal project called Driftwood in Louisiana. In February this year, Indian PSU Petronet LNG inked an MoU with Tellurian to buy an equity stake in the project, and industry insiders say officials are rushing through the details in time for Mr. Modi’s meeting on Saturday.

Liquefied natural gas:

Liquefied natural gas (LNG) is natural gas (predominantly methane, CH4, with some mixture of ethane, C2H6) that has been cooled down to liquid form for ease and safety of non-pressurized storage or transport. It takes up about 1/600th the volume of natural gas in the gaseous state (at standard conditions for temperature and pressure). It is odorless, colorless, non-toxic and non-corrosive. Hazards include flammability after vaporization into a gaseous state, freezing and asphyxia. The liquefaction process involves removal of certain components, such as dust, acid gases, helium, water, and heavy hydrocarbons, which could cause difficulty downstream. The natural gas is then condensed into a liquid at close to atmospheric pressure by cooling it to approximately −162 °C (−260 °F); maximum transport pressure is set at around 25 kPa (4 psi).

5.What is Bond Yield?(gs-3)

Context:Bond yields jump 15 bps

Bond yield is the return an investor realizes on a bond. The bond yield can be defined in different ways. Setting the bond yield equal to its coupon rate is the simplest definition. The current yield is a function of the bond's price and its coupon or interest payment, which will be more accurate than the coupon yield if the price of the bond is different than its face value. More complex calculations of a bond's yield will account for the time value of money and compounding interest payments. These calculations include yield to maturity (YTM), bond equivalent yield (BEY) and effective annual yield (EAY). (Discover the difference between Bond Yield Rate vs. Coupon Rate).

Overview of Bond Yield

When investors buy bonds, they essentially lend bond issuers money. In return, bond issuers agree to pay investors interest on bonds through the life of the bond and to repay the face value of bonds upon maturity. The simplest way to calculate a bond yield is to divide its coupon payment by the face value of the bond. This is called the coupon rate.

                                     Current Yield=

Bond PriceAnnual Coupon Payment

If a bond has a face value of $1,000 and made interest or coupon payments of $100 per year, then its coupon rate is 10% ($100 / $1,000 = 10%). However, sometimes a bond is purchased for more than its face value (premium) or less than its face value (discount), which will change the yield an investor earns on the bond

6.What is CSR?(gs-3)

Context:Firms can use CSR funds for R&D

Corporate Social Responsibility (CSR) is referred as a corporate initiative to assess and take responsibility for the company's effects on the environment and impact on social welfare and to promote positive social and environmental change.

It efforts that go beyond what may be required by regulators.

The income is earned only from the society and therefore it should be given back.

What is the legal mandate?

Under Companies Act, 2013 any company with a

net worth of the company to be Rs 500 crore or more or

turnover of the company to be Rs 1000 crore or more or

net profit of the company to be Rs 5 crore or more.

has to spend at least 2% of last 3 years average net profits on CSR activities as specified in Schedule VII and as amended from time to time. The rules came into effect from 1 April 2014.

Further as per the CSR Rules, the provisions of CSR are not only applicable to Indian companies, but also applicable to branch and project offices of a foreign company in India.

Further, the qualifying company will be required to constitute a CSR Committee consisting of 3 or more directors.

The CSR Committee shall formulate and recommend to the Board, a policy which indicates the activities to be undertaken, allocate resources and monitor the CSR Policy of the company.

If the company did not spend CSR, it has to disclose the reason for not spending. Non-disclosure or absence of the details will be penalised from Rs 50,000 to Rs 25 lakh or even imprisonment of up to 3 years

India is the first country in the world to enshrine corporate giving into law.

What activities can be carried on?

CSR is a commitment to support initiatives that measurably improve the lives of underprivileged by one or more of the following focus areas as

• Eradicating hunger, poverty & malnutrition
• Promoting education
• Improving maternal & child health
• Ensuring environmental sustainability
• Protection of national heritage
• Measures for the benefit of armed forces
• Promoting sports
• Contribution to the Prime Minister‘s National Relief
• Slum area development etc.

How is it beneficial to companies?

Consumers are socially conscious - Many consumers actively seek out companies that support charitable causes. Therefore CSR attracts customers.

Competitive advantage - Businesses that show how they are more socially responsible than their competitors tend to stand out.

Boosts employee morale - CSR practices have a significant impact on employee morale, as it reinforces his confidence on Company’s empathy.