Planning to invest in Sovereign Gold Bonds scheme: All you need to know

Dubai - Bonds are liquid, tradable on stock exchanges within 15 days of issue date

Q: I am returning to India for good. My financial adviser suggested that I invest in the Sovereign Gold Bonds scheme. I want to know the advantages of doing so and whether I can invest at an early date if I decide to do so after I return.
A: The objective of the Sovereign Gold Bonds Scheme is to encourage investors to invest in 'paper gold' instead of buying the physical form of gold. The bonds carry an annual interest of 2.5 per cent, which the investor will get every six months on the nominal value of investment. The bonds will be issued to eligible applicants on October 23 and November 13, 2018 and January 1 and 22, 2019. While the interest will be liable to tax, capital gains on redemption of the gold bonds are exempt from tax.
The bonds are liquid as they are tradable on stock exchanges within 15 days of the date of issue. You can purchase the bonds through banks, designated post offices and on the National Stock Exchange and the Bombay Stock Exchange. Individuals can invest in the Bonds equivalent to one gram of gold, but the maximum limit is four kilograms in every financial year. The tenor of the bond is eight years with an exit option from the fifth year, which can be exercised on any interest payment date.
Q: I am a shareholder of a private company in India that is involved in execution of software projects in the United Kingdom. This company deputed some of its Indian employees to the London office. Apart from the salary, the employees deputed were paid a personal allowance to meet the high cost of living in the UK. While tax was deducted at source from the salary amount, the Indian company did not deduct tax at source from the monthly personal allowance paid to the employees. Is such allowance liable to tax in India and has the Indian company committed any default in not deducting the tax while paying this allowance?
A: Under section 10 (14) of the Income-tax Act, exemption is available in respect of allowances which are paid to employees to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of employment. However, Courts have held that where an allowance is given to employees who are posted outside their place of work to meet personal expenses to cover the higher cost of living, the allowance would be liable to tax.
Therefore, the Indian company should have deducted tax at source from such monthly personal allowance, just as the tax has been deducted from the monthly salary. As the company has failed to do so, the provisions of Section 201 would apply. The Indian company will, therefore, have to pay the tax which should have been deducted at source while paying the monthly personal allowance to its employees who are deputed to the London office. In addition, the Indian company will have to pay interest under Section 201 (1-A) of the act on the tax which has not been deducted at source.
?Q: Chartered accountants have been giving certificates in respect of various matters, including final accounts. In some cases, it has been found that the signature of the chartered accountant has been forged. How can this menace be stopped and is any action being taken in this regard? 
A: In the past, it has come to the notice of statutory authorities that some financial statements and documents which are not genuinely signed by chartered accountants are used to lure gullible investors. In order to deal with this issue of forged certification of financial statements and documents, the Institute of Chartered Accountants of India will make it mandatory from January 1, 2019 for all practicing chartered accountants to register all certificates issued by them on the Unique Document Identification Number portal.
The unique number will be generated for every document certified by a practicing chartered accountant, which has to be registered on this portal mandatorily. Banks, regulators and others will be able to access this portal to check the authenticity of the documents. This will ensure that fraudulent certificates are immediately detected because there would be no unique identification number in respect of such certificates.
The writer is a practising lawyer specialising in tax and exchange management laws of India.

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