Month: Jul 2020

# Scope of the convention (1) Persons covered (2) Taxes covered

# *Persons covered*-

*Resident of Contracting State (CS)- For application of treaty, a person has to be a resident of one or both of the CSs.

*Fiscally transparent entity*-Income derived by or through a fiscally transparent entity under the tax law of either CS to be considered to be income of a resident of a CS, to the extent such income is treated, for the purposes of taxation by that State, as the income of a resident of that State.

Series continue……

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1. FEMA & International taxation https://chat.whatsapp.com/J3O8lXBnYzdLnWmql7cBVG

2 *YouTube Link https://www.youtube.com/channel/UCtgyAk11-4JfHh1mHDyZ5bg 

# Three types of Model tax conventions (1) OECD Model (2) UN Model (3) US Model

# In OECD MC- MC between developed countries, it advocates Residence based taxation

# In UN MC- MC between developed and developing country, More emphasis on Source based taxation

#In US MC-Applied by US

Series continue……

For daily updates, you may join:

1. FEMA & International taxation https://chat.whatsapp.com/J3O8lXBnYzdLnWmql7cBVG

2 *YouTube Link https://www.youtube.com/channel/UCtgyAk11-4JfHh1mHDyZ5bg

*Let’s understand EEE, EET and ETE Tax Investments*

What is EEE?

EEE stands for EXEMPT EXEMPT EXEMPT and specifies three kinds of exemptions.

• Exempt 1 means that an investment qualifies for deduction. In this, a part of the annual salary/income, which is equal to the investment amount, is not taxable.

• Exempt 2 means that the interest earned on the investments is also exempted.

• Exempt 3 implies that the income generated from an investment is also not taxed during withdrawal.

EEE status is typically applicable to long-term investment instruments, with *Employer Provident Fund (EPF)* and *Public Provident Fund (PPF)*. It also includes other investment instruments such as *National Pension Scheme* and *life insurance policies*.

What is EET?

EET stands for Exempt Exempt Taxable. As the same suggests, an investor can receive two types of exemptions on his investments, while a taxable component also exists. In an EET investment:

• The first exempt denotes that you receive exemption on a stipulated investment limit, when the investment is made.

• The second exempt implies that the returns earned on the investments are also tax-exempted.

• The taxable component means that although you receive tax exemption on investment and interest accrued, you must pay taxes when you withdraw your investment.

Since the total amount i.e. the principal amount plus returns are taxed during withdrawal, you can earn lower returns from EET investments. However, this also depends on the tax slab you belong to. For example, if Mr. Sharma receives 8% returns on his investment and belongs to the 20% tax slab, he earns only 6.4% returns on his investments.

*Equity Linked Savings Schemes* or *ELSS mutual funds* fall under the EET category.

What is ETE?

ETE stands for Exempt Taxable Exempt and it is explained as follows:

• Exempt 1 denotes that the amount of income which is equal to investment amount is eligible for tax deduction basis the total limit of exemption.

• The T denotes that the interest earned on this investment qualifies as taxable

• Exempt 2 implies that the total amount withdrawn when the investment matures is tax-free.

E.g. a *tax-saving fixed deposit*

Interest accrued from his investment is taxable. ,

Invested amount and the total amount at withdrawal qualify for deduction

The Govt. has clarified that it is not considering proposal to merge the Central Board of Direct Taxes and Central Board of Indirect Taxes and Customs as published in a leading newspaper. The news was published without due verification of facts from the competent authorities of Ministry of Finance. Ministry of finance 06 JUL 2020 4:34PM by PIB Delhi

5S Method explains *how a work space should be organized* for *efficiency* and *effectiveness* by *identifying and storing* the items used, *maintaining the area and items*, and *sustaining the new order*.

*Sort (Seiri)*

• Make work easier by eliminating obstacles and evaluate necessary items with regard to cost or other factors.
• Reduce chances of being disturbed with unnecessary items.
• Prevent accumulation of unnecessary items.

• Set In Order (Seiton)

• Arrange all necessary items into their most efficient and accessible arrangements so that they can be easily selected for use and make workflow smooth and easy.
• Ensure first-in-first-out FIFO basis, so that it is easy to find and pick up necessary items.
• Place components according to their uses, with the frequently used components being neared to the work.

• Shine (Seiso)

• Clean your workplace on daily basis completely or set cleaning frequency.
• Keep workplace safe, easy to work, clean and pleasing to work in.
• In an unfamiliar environment, people must be able to detect any problems within 50 feet.

• Standardize (Seiketsu)

• Standardize the best practices in the work area.
• Maintain high standards, orderliness, everything in order and according to its standard.
•  Every process has a standard.

• Sustain (Shitsuke)

• Not harmful to anyone, training and discipline, to maintain proper order.
• Also translates as “do without being told”.
• Training is goal-oriented process. Its resulting feedback is necessary monthly.

Professionals firm (CA/CS/CMA Firms, Law Firms, Architects etc.) having huge amounts of paperwork and this not only makes processes slower but also allows errors to be introduced.  5S is a method of both cleaning out of working area and maintaining the cleanliness to improve process quality.