Wednesday, February 1, 2012

Mortgage and Loan


A Mortgage represents a loan or lien on a property/house that has to be paid over a specified period of time.
A Mortgage is defined in Section 58 of the Transfer of Property Act as the transfer of an interest in specific immovable property for the purpose of securing payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of any contract or engagement which may give rise to a pecuniary liability.
The transferor in case of the mortgage is called the Mortgagor, and the transferee as the mortgagee, the principal money and interest o which payment is secured for the time being are called the Mortgage Money, and the instrument of transfer, a Mortgage Deed.
Any person, company, association or body of individuals not otherwise disqualified can be the Mortgage.
Provisions of Mortgage in India
• In the case of a company or association, such a mortgage must be authorized by the Memorandum and approved by the Resolution of the Board of Directors or the governing body as the case may be.
• Under the Indian Contract Act a minor or a lunatic cannot create any mortgage in respect of their properties. A mortgage by a lunatic is void under Section 11 read with Section 12 of the Indian Contract Act.
• A partner has no implied authority to mortgage any immovable property belonging to a form (Section 19(2)(g) of the Indian Partnership Act)
• Under the Code of Civil Procedure, a person whose property I being managed by the collector cannot create nor submit his property to any mortgage.
• A Karta of a Mitakshara joint family cannot create a mortgage except for legal necessities and for the benefit of the estate. An executor in the absence of ant restriction can mortgage any property belonging to the estate of the deceased for the purpose of administration.
• A trustee cannot be the mortgagee of a trust property. A guardian of a minor is in the same position as the trustee.
Mortgage how effected?
Section 59 of the Transfer of Property Act lays down that hen the principal money secured is one hundred rupees or upwards, a mortgage, other than a mortgage but deposit of title deeds, can be effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses.
Where the principal money secured is less than one hundred rupees, a mortgage can be effected either by a registered instrument signed and attested as aforesaid, or by the delivery of the property.


A Loan is an arrangement in which the lender gives money or property to a borrower and the borrower agrees o return the property or repay the money. It is done usually along with interest, at some future points of time.
Usually there is a predefined time for the repayment of loan, and generally the lender has to bear the risk that the borrower may not repay the loan, even though modern capital markets have developed many ways of managing this risk.
The most common type of loan is the bank loan, which exists to lend money; it is for this reason that the banks offer a wide variety of ways to fund a business growth.
Types of Business Loans in India
• Line- of- credit loans. The most useful type of loan for a small business is the line-of-credit loans. This is a short term loan that extends the cash available in our business checking account to the upper limit of the loan contract. Line-of-credit loans are intended for purchases of inventory and payment of operating costs for working capital and business cycle needs. They are not intended for purchases of equipment or real estate.
• Secured and Unsecured loans. Loans can be secured or unsecured. A secured loan is the loan with collateral. That is, if a borrower pledges a property or other assets to the creditor and states that the creditor may take ownership if the borrower defaults on a loan and sell it to recover the loan amount. In most cases, lenders charged a lower interest rate on a secured loan than on an unsecured loan of comparable size. Most important example of secured loan is Mortgage.
Unsecured loans are the loans which are not attached to any collateral. They are unsecured loans because the banks have nothing to do if the borrower defaults to repay the loan amount.
• Term loan. Tern Loan can be defined as the loan from a bank for a specific amount that has a specified repayment schedule and floating interest rates. The term loans almost always mature between one to ten years. Term Loan is secured by a collateral security. Term Loan facilitates the borrower to raise a stipulated amount one time and plan the business expenditure or investment or purchases on his or her own.

Proceedings before the Company Law Board

The Company Law Board is an independent quasi-judicial body in India which has powers to overlook the behavior of companies within the Company Law. It was constituted in its present form on May 31, 1991, under Section 10E of the Companies Act, 1956 replacing the erstwhile Company Law Board which was primarily as a delegate of the Central government since 1.2.1964. The Company Law Board has framed Company Law Board Regulations 1991 wherein all the procedure for filing the applications/petitions before the Company Law Board has been prescribed. The Central Government has also prescribed the fees for making applications/petitions before the Company Law Board under the Company Law Board (Fees on applications and Petitions) Rules,1991.
There was a specific objective behind section 397/398 of the Companies Act, 1956 and a great responsibility is cast upon the Company Law Board to protect the interests of the minority shareholders, to put an end to the matters complained of and to regulate the affairs of the Company. The absence of an effective remedy to address the serious grievances of the shareholders in the Company will directly impact the growth of corporate world. To the extent possible, differences between the shareholding groups in any Company is to be addressed and every effort is to be taken to ensure that the Company functions smoothly rather resorting to winding-up. The same is the object behind constitution of BIFR and section 391 to 394 of Companies Act, 1956. It is more important to protect the interests of the shareholders in a Company and it is very important to deal with the issues of oppression and mis-management. A proceeding under section 397/398 of the Companies Act, 1956 is really complicated and as usual there exist difficulties when it comes to execution of an order.
The important aspect of a proceeding before the Company Law Board is about the procedure and the applicability of the provisions of Civil Procedure Code. The intention behind constitution of Special Tribunals is to simplify the procedure and to avoid the enormous delay in Courts due to strict applications of provisions of Civil Procedure Code. Despite all this, technicalities were pleaded in a proceeding under Section 397/398 of the Companies Act, 1956 very often.

Income Tax Update

Income Tax

Income tax is the tax payable, at the rate enacted by the Union Budget (Finance Act) for every assessment year, on the total income earned in the previous year by every individual. The government of India imposes Income Tax on every taxable income of individual. The Levy of tax is different on each of the person. The Levy is governed by the Indian Income Tax Act, 1961, which came into force on 1st day of April, 1962. The Act has been recently amended by the Finance Act of 2011.

The Indian Income Tax department is governed by the Central Board of Direct Tax and is part of the Department of Revenue under the Ministry of Finance, Government of India. The chargeability of Income Tax is based on the nature of income, i.e., whether it is Revenue or Capital.

The recent rates of Income Tax with effect from 1st April, 2011, are:

Income Tax Rates/Slab Rates (%)

For Men

· Up to 1,80,000 = Nil
· 1,80,001 – 5,00,000 = 10%
· 5,00,000 – 8,00,000 = 20%
· 8,00,000 upwards = 30%

For Women

· Up to 1, 90,000 = 0%
· 1,90,001 - 5,00000 = 10%
· 5,00,001 - 8,00,000 = 20%
· Above 8,00,000 = 30%

For Senior Citizen (for resident individual of 60 years or above)

· Up to 2, 50,000 = 0%
· 2, 50,001 - 5,00,000 = 10%
· 5, 00,001 - 8,00,000 = 20%
· Above 8,00,000 = 30%

For Very Senior Citizen of 80 years or above

· Up to 5, 00,000 = 0%
· 5,00,001 - 8,00,000 = 20%
· Above 8,00,000 = 30%

Educational cess is applicable @ 3% on income tax. No Surcharge will be levied.

Income Tax (Corporate)

The Corporate Tax Rate in India entirely depends on the origin of the company. Indian Companies are taxable in India on their worldwide income. The slab for the corporate income tax is different from the general Income Tax slabs. There are special rates prescribed for corporate, firms, cooperatives and local authorities. Features of Corporate Income Tax are:

· Income is taxed at a flat rate of 30% for Indian Companies.
· A surcharge of 7.5% of the Income Tax is levied, if the taxable income exceeds Rs. 1 million.
· Foreign companies pay 40%
· An educational cess of 3% (on both the tax and the surcharge) is payable, yielding effective tax rates of 32.5% for domestic companies and 41.2% for foreign companies.
· All companies incorporated in India are deemed as domestic Indian Companies for tax purposes, even if owned by foreign companies.
· Electronic filing of Income Tax Returns is a legal obligation of every company whose total Income Tax for the previous year has exceeded the maximum amount that is not chargeable for Income Tax under the provisions of the Income Tax Act, 1961.

Income Tax (Individual)

In India, Individual Income Tax is a progressive tax. It is important for every income individual to pay tax on time. For resident individual, Income Tax rate is levied by the Indian Government on the taxable income which may be lower than total income depending on Deduction/Exemptions. The slab for tax payment is different for women, senior citizen, and very senior citizen which has been recently included in the category and is also different as per individual income level. The slab for individuals has been mentioned above.

The Individual Income tax is divided into 5 heads:

· Income from salary: All income received as salary under Employer/Employee relationship is taxed under this head. Income from salary is the least from all deductions.
· Income from House property: Income from House property is computed by taking into account Annual value of the property.
· Income from Business or Profession
· Income from capital gain: Transfer of capital assets results in capital gain.
· Income from other heads.

For Personal Income Tax, surcharge has been abolished in the financial year of 2009-10.

With effect from assessment year 2009-10, Secondary and Higher Secondary Education Cess of 1% is applicable on the subtotal of Income Tax. The education cess is mainly applicable on excise duty and service tax.