Exclusive Interview with G Ramaswamy, President of ICAI - Part I
President of the Institute of Chartered Accountants in India (ICAI) G Ramaswamy was in Mangalore to lay the foundation stone for the Mangalore branch of Institute of Chartered Accountants of India in the city recently. In the backdrop of two major bills - Goods and Services Tax (GST) and Direct Tax Code (DTC) proposed by the government which is likely to be implemented by April 2012, there will be far-reaching changes in the system of taxation and income tax laws of the country. As such GST and DTC will have a bearing on every citizen of this country, on companies and corporates and also on the NRIs who will be anxious to know in what way it will impact them. It will just be a matter of few months before DTS and GST becomes a reality in our country.
G Ramaswamy was elected as the President of ICAI for the year 2011-12 and assumed charge as President in February this year. He is a member of ICAI with more than 25 years of standing and is known for his administrative and organizational skills apart from his professional excellence. Daijiworld.com spoke to G Ramaswamy to know more about these proposed bills, career opportunities in CA and efforts of ICAI to rope in more youngsters towards the profession in Mangalore and other parts of the country.
Excerpts of the interview:
1. Is DTC going to be a reality and if yes when?
Our Finance Minister Pranab Mukherjee is quite hopeful that the Parliamentary Standing Committee on Finance would submit its report in the coming winter session of Parliament and thus DTC would become a reality from 1st April, 2012.
2. How is DTC going to impact the ordinary people?
The New Direct Tax Code (DTC) Bill would replace the current complex Income Tax structure which is overburdened by the numerous amendments made over a period of time. The main purpose of DTS is to revise, consolidate and simplify the language and structure of the direct taxes laws by making it tax-payer friendly to enable common man to understand it. As far as substantive changes made in the Direct Taxes Code are concerned, the same may have positive or negative impact on different assesses depending on the circumstances. However, I feel implementation of DTS is a step in the right direction.
3. DTC is going to replace the existing income tax act of 1961. The new tax system is going to bring under its fold some of the exempted categories. What are these categories?
As we know (DTC) Bill is not an amendment but a complete replacement to the existing Income Tax Act, 1961. The code aims to reduce the tax burden which seems to be a progressive initiative on the part of the Government. This new system has withdrawn some exemptions e offered under the existing Income Tax Act, 1961. The proposed new tax system has covered some exempted categories such as investments in ULIPs, ELSS funds, NSC, Infrastructure bonds, FDs and Post Office Time Deposits. Other concessions like deduction in respect of principal part of housing loan, tax exemption on Leave Travel Allowance is also proposed to be abolished.
4. If these categories coming under tax bracket, is it going to alter the saving based investment?
Under the proposed DTC many of the tax saving investments will not be eligible for deductions. This would definitely alter the saving based investments as the assessee would not prefer investing in a scheme which does not provide a tax benefit. However, there are certain tax-saving investments which will have huge financial implications if these investments are discontinued like life insurance investments which are proposed to be restricted to Rs.50000 including investment in medi-claim and tuition fees. Also, the restriction that premium should not exceed 5% (presently 20%) of the sum assured in any year will be disadvantageous to the assessee. Considering the substantial amount of money blocked in past years such saving based investments are expected to be continued by the assessee even if there is no tax benefit attached to it.
5. What will be the impact of DTC on housing loan?
At present the repayment of principal amount of housing loan is eligible for tax exemption under section 80C of the Income Tax Act, 1961. Under the proposed DTC, this privilege will be taken off and the tax payers will have to look at other options of investments for claiming tax exemption. On the other hand, deduction under section 24(b) of the Income Tax Act, 1961 towards interest paid on housing loan which was available from the "Income from House property" will not be available under proposed section 74 from Gross total income.
6. It is said that DTC is detrimental to the NRIs who are going to be affected. If yes, in what way?
Under the present law, an individual who is in India for 182 days or more is treated as the resident of this country. Alternatively, if a person is in India for 365 days or more during the four years immediately preceding that year and is in India for more than 60 days in the fifth year, he will be treated as the resident in India. However, in case of a Indian citizen, who being outside India, comes to a visit to India in any previous year, this period of 60 days is extended to 182 days under the present law. The said extension is not provided for in the Direct Taxes Code which in effect is a disadvantageous for such a person as he would become resident in India if in the fifth year he is in India for more than 60 days and will have to pay tax on its income which accrues or deemed to accrue outside India, thereby increasing the tax base.
7. So, in a way can we say DTC is a bad news for the NRIs?
With the change mentioned above, a non-resident would be at higher risk of becoming liable to pay tax in India as the threshold limit in terms of number of days has been reduced. This may be viewed as rationalization of the provisions.
8. Coming to the aspect of career opportunities in the field of CA it is said globalization has opened new vistas of career for CA students. How far is it true?
With most of the global economies suffering from economic downturn, the boom in India has increased the opportunities available to Chartered Accountants manifold in the last 5-10 years. Now the Chartered Accountants have the option of either moving into professional practice or join an industry or service sector or have their own company for provision of management services to diverse sectors spread across the economy. Institutes are making all efforts to equip not only the newly qualified Chartered Accountants but also senior members of the profession with the latest technology and knowledge to enable them to exploit the available opportunities across the world.
9. There is a general feeling that passing CA exam is more challenging than civil service exams.
This general feeling is not true because the objective of the Civil Service Examination and CA Examinations are quite divergent. In fact, in our opinion the success rate in the civil examination is linked to the exact number of vacancies available in the Central Government in each cadre. However, as far as CA Examination is concerned there is no such limiting factor as far as the declaration of results is concerned. At the same time, there is absolutely no doubt that the Chartered Accountancy Examination is quite challenging since it happens to be a professional examination.
10. Where do Indian CA firms stand vis--vis International CA firms?
The importance of Indian CA Firms has grown in the recent years. The CA profession has the potential to emerge as a global powerhouse in terms of strengthening its capacity. The Institute is taking lot of initiatives in this regard to enhance their capacity in competing with International CA Firms.