Compliance News @ Mynd: Amendment in Section-192 A of the IT Act

Please find below the summary of the circular detailing the amendments issued by office of the Central Provident Fund Commissioner on applicability of changes in Finance Act 2015 ( insertion of section 192A regarding the taxation on withdrawal of PF Accumulations). Provisions of the said circular shall take effect from 1^st June 2015. The gist of the circular is being given here under-:

1.   Hither to fore no income tax was deducted on the PF accumulations refunded by the PF authorities on the members leaving employment of their employers.

2.   

      Consequent upon amendments carried out through the Finance Act 2015, effective from 1^st June 2015, Income tax will be deducted by the PF Authorities at the time of payment of PF accumulations to the members in the following cases-;

    Where the payment of accumulated PF balance is more than or equal to Rs. 30,000/-, with service less than five years TDS will be deducted  @ 10% provided PAN is submitted but where the members fails to submit the PAN the TDS will be deducted @ maximum marginal rate i.e. 34.608%.

3.    TDS shall not be deducted in the following cases-:

·    Transfer of PF from one account to another PF account.

·    Termination of service due to ill health of member, discontinuation/contraction of business by employer, completion of project or other cause beyond the control of the member.

·   If employee withdraws PF after a period of 5 years of continuous service , including service with former employer.

·     If PF payment is less than Rs 30,000/- but the member has rendered service of less than 5 years.

·    If employee withdraws amount more than or equal to Rs. 30, 000/-, with service less than 5 years but submits Form 15G/15H along with their PAN.

·     Form 15G and 15H may not be accepted if amount of withdrawal individual and senior citizen (60 years and above) is Rs. 2, 50,000/- and Rs. 3,00,000/- respectively. For format for Form 15G/15 H please refer attached document.

 Form 15H is for senior citizens ( 60 and above) while Form 15 G is for individuals having no taxable income.

Note: The provisions of the circular will not apply to PF Trust of relaxed/exempted establishments to whom provisions as contended Rule 8 ,fourth schedule, Part A- Recognised Provident Funds shall continue to apply.(Extracts already enclosed with the attached circular ).

Offering our services on a Shared Service Centre model...Mynd SSC

Mynd believes in creating Real Business Impact by integrating it’s Analytics & Technology Competencies with Comprehensive Business Management Solutions

Continuous improvement is an essential element in any effective business strategy. Whether these improvements are large or small in scale, achieved on the factory floor or in the back office, the goal is the same—to better leverage the resources of the organization to create optimal value for customers and other key stakeholders. Enabled by rapid advances in technology, the drive to achieve world-class performance standards is resulting in innovative structures, strategies, and solutions to complex business problems. Shared services centres (SSCs) are being created in organization after organization as the optimal solution to the need to both reduce the cost and improve the performance of Mynd Solution' s Shared Service Centre(SSC) can standardize and automate process work activities, while at the same time delivering greater value through process innovation, reducing risk and revealing new sources of revenue for stakeholders.

As a Shared service centre, we can handle specific operational tasks that include various services in the Finance and Accounting and Human Resources. We work as multi-functional unit that is dedicated to a centralized point of service. It involves multiple business units to consolidate one or more than one operation into a shared one.

Our Shared Service Centre also customizes our processes with a focus to improve efficiency taking cost-effective measures. Its accuracy is focused with the help of technology on the platform of Business Process Management (BPM). We aspire to deliver our services with unique industry demands with a set of expert team working under us. Our platform stands as SaaS (Software as a Service) which complements the service delivered to suit diverse needs of customers globally also.

Benefits of Shared Services Model:

• Agreed upon service levels
• Standardization of Processes-Best Practices
• Common Technology Platform
• Economies of Scale
• Flexibility
• Scalability

Mynd's Customized service delivery for Small to Mid-Sized Business Owners...

As an SME business owner, we understand that you have a strong penchant for growth and a rock solid perseverance to stay ahead in the game. As your company grows, do you find yourself spending too much time inyour non-core business and not enough time on your core business? That is why you need business partners who can anticipate your requirements, rather than just try keeping pace with your thinking.

Our Small to Mid-size Business Solutions can assist you with tasks such as bookkeeping, small business accounting, Controller etc., as well as accounting systems automation and integration. We help you free up your time to focus on running your company by offering a full range of business solutions. We have created a solution for small to mid-sized businesses that can be tailored to your specifications. Our customized small to mid-sized business solutions can also include functions such as data entry and offering specialized manpower.

Our custom solutions help SMEs to overcome their unique set of challenges as compared to the larger players including:

• How do we get relevant, practical, and implementable advice?
• How can I make the most of the limited resources we have?
  
  
  
  
• Can someone help me to plan big but implement small?

We at Mynd would like to change that scenario by making easily implementable advice available to SMEs in a cost effective manner on an ongoing basis. We bring with us experience gained during our careers with large consulting firms and will leverage the same to benefit your business. This will include support in various business domains with the aim to enable you to be more competitive in the market place. We have a tailor made version for SMEs which can scale once you grow into larger organizations.

Specialized services on offer by Mynd to SMB owners:

HR Outsourcing

Specialized Manpower

Accounting services on varied platforms

Taxation

Reduction in rate of Admin Charges on PF/EDLI contributions

We are forwarding herewith copies of two Notifications bearing  No. S.O.323(E) dated 2nd February, 2015 and 324 (E) dated  2nd February, 2015 issued by Government of India, Ministry of Labour and Employment New Delhi.

Note:  The above mentioned two notifications relate to un- exempted establishments i.e. establishment to which EPF Scheme , 1952 applies. These notifications do not apply to exempted/relaxed establishments which are required to pay inspection charges in place of administrative charges. Similarly notification relating to payment of administrative charges on EDLI contribution apply to only such establishment which report compliance of EDLI , Scheme, 1956 to RPFC concerned. In other words the said notification does not apply to those who subscribe to group insurance policy obtained from an approved insurer.

The following table shows the changes brought about through these notifications:

A. Notifications bearing  No. S.O.323 (E) dated 2nd February, 2015, effective from 1st January 2015
Sr. No	Existing Provisions	Revised Provision	Impact
(i)	The rate of administrative charges payable under para 38 of the EPF Scheme,1952 at present is @1.10% of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon	This rate has now been reduced to 0.85% of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon)	Thus , as a result of the issue of present notification, the liability of an employer towards payment of such administrative charges shall stand reduced  except in cases of smaller establishments who were required to pay the administrative charges @ 1.10% of pay of the members employed by them amounting to rupees less than Rs. 75/-  per month in case of non-functioning establishment  having no contributing member and Rs. 500/- per month per establishment for other establishments.
(ii)	No minimum amount was prescribed for payment of such charges	A minimum sum of Rs. 75/-  per month for every non-functional establishment having no contributory member and Rs. 500/- per month per establishment  for other establishments.
B. Notifications bearing  No. S.O. 324 (E) dated  2nd February, 2015 ,effective from 1st January 2015
Sr. No	Existing Provisions	Revised Provision	Impact
(I)	The rate of payment of administrative charges  on EDLI contribution was prescribed @ 0.01%  of aggregate of the basic wages , dearness allowance(including cash value of food concession ) and retaining allowance  if any payable by the employer in relation to his employees	This rate remains the same	The liability of the employer towards payment of such charges has now gone up in cases of establishments who were paying such charges amounting to less than Rs. 25 per month in case of non-functional establishments having no contributory members and less than Rs. 200 per month per establishment in case of other establishments.
(ii)	The minimum amount payable towards such charges was fixed earlier as Rs.2/- per month vide  notification No . S.O 237 dated 11th Jan 1989	This minimum amount has now  been enhanced to Rs 25 per month for every non-functional establishment having no contributory member and Rs. 200 per month per establishment for other establishments

HR Process Outsourcing and Your Organization..

Business Process Outsourcing

HR Outsourcing

HR is a strategic business function in most organizations and hence outsourcing the processes related to it is a task that requires ample thought and decision. There are several concerns that most HR decision-makers normally have with regards to confidentiality of employee information, loss of control over their internal resources and knowledge also the quality of work delivered remains a major concern.

Several organizations in the employee range of 1,000-5000 are outsourcing their Human Resource processes as a cost-control strategy. HR is primarily a non-profitable cost centre in the organization, and hence qualifies itself as the best area to be outsourced to a third party. More and more companies are now subcontracting the backend HR functions including compensation and benefits administration, recruitments, expense management, payroll and statutory compliances.

As per market statistics, HR is one of the most aggressively growing segments in the Business Process Outsourcing (BPO) market. The primary driving factors behind the increasing adoption of HRO (for not just the redundant backend tasks but even for performance management, talent management, training etc.)-

Efficiency Enhancement: Efficiency is undoubtedly a primary driver in the outsourcing business. Mostly, efficiency depends upon the outsourcing service provider’s capability to enable technology additions to the usual HR platforms and processes.

Cost Benefits: Majority of the outsourcing decisions are intended at direct cost benefits to the company. However, one needs to know that solely basing an outsourcing decision on price benefits does not guarantee success.

SMBs and Outsourcing...

There is a general perception among small & medium business owners that third-party outsourcing of business functions such as HR is essential for only large corporate. However, time and again it has been proven that streamlining business operations and cost-control strategies in the form of outsourcing is restricted not just to the large companies but also the SME’s.

Comprehensive Solutions for Every Client 

HR Process Management

 The evolution of outsourcing in destinations such as India, Vietnam and Philippines etc. and the development of high-quality service providers like Mynd Solutions have however driven a change. This change in the thought processes of Small/Medium business owners are driving more outsourcing operations and is primarily attributable to the below reasons:

    Local Payroll-related ccompliance and taxation: Small businesses normally find challenges in this area of business, owing to its strong financial and legal implications. Employee benefits compliance and taxation related laws are the specific areas that require immediate attention and any laxness on the part of the company can lead to major financial losses as well as harm the public reputation of the company. HR outsourcing can be very beneficial in this regard and help to avoid this tricky situation.

    High-end technology access at a relatively affordable price: Small and medium enterprises and/or newly formed companies normally have limited resources for spending on technology and infrastructure etc. In case the backend services are outsourced, the need for companies to own sophisticated and latest technology tools/ skilled manpower are actually eliminated. Hence, the Capex and Opex are decreased for the company.

    A comprehensive solution: SMBs can avail the benefits of a comprehensive HR solution by sub-contracting their entire HR function to a trusted third party vendor. Payroll, Statutory Compliance, Employee Lifecycle management can all be handled under the same service umbrella by the service provider.

Understanding the varied Benefits of Outsourcing..

The Essential Benefits of Outsourcing Your Non-Core Processes and Functions

Organizational Growth: Optimize Your HR

Improve Business Turn around

1. Real-time access. The nature of business is highly dynamic; there are continuous changes and fluctuations without any guaranteed stability. It is almost impossible to assess the circumstances of the business nature. Outsourcing offers a certain level of scalability to help solve the enviable situation of significant growth. If there is a strong team for handling the projects outsourced, then the organization’s growth can be achieved in a better manner.

2. Better Gains: We are all under constant pressure to deliver more productivity and establish new benchmarks. Through the usage of outsourcing services, the existing staff of the company can be aligned in order to handle the outsourced projects. The company’s staffs take care of the outsourced team, and thereby enhancing the productivity and output of each and every member of the team.

3. Attention to the core issues: The growth of a business is quite dependant on the success of your products/services. Companies need to keep ramping up their support infrastructure, in order to witness their desired growth levels. Organizations need to maintain their focus on growing their customer base and conducting relevant market study on the same for driving even more growth and profitability. An efficient strategy to go about this is to outsource part/whole of the non-core business functions to a responsible third-party such as Mynd Solutions.

4. Generating greater value per person due to higher flexibility: Generating optimal profitability through a limited number of employees is a vital tactic. The reason being that with very little staff you stand the chance of delivery failure and on the other side, with higher number of employees there is a possibility of overcrowding and wastage of resources.

On the other end of the spectrum, Outsourcing offers the flexibility to determine and forecast approximate staff levels needed. This flexibility allows you to keep the FT’s at a stable rate of utilization across the year. As a result, the non-productive team of each team member gets decreased.

Considerations and Guidelines While Outsourcing Services..

Of an on, we have been highlighting the varied advantages and service specifications of different domains of HR and Finance & Accounting Outsourcing. However, today we would like to take an opportunity to present some Considerations that must be assumed before arriving at the decision to Outsource:

·         Examining the corporate culture- Assessing the level of readiness in the organization with respect to transferring some control/confidential information to a third party vendor in order to enhance business motives.

·         Evaluate current processes in different business verticals that are under planning to be outsourced. Companies must determine the efficiency of their processes and also whether they could be managed in a better manner by an external service provider.

·         Performance measurements- ensure adequate determining metrics are in place to assess the vendor's performance and check whether there are any workflow and process improvements or not.

Sometimes, the staff of a company such as the HR or Finance & Accounting team might be reluctant to adopt outsourcing due to fear that their role within the company will get side-lined. However, the very opposite of the same is most likely to be true. There is indeed a change in responsibilities due to the outsource partnership, but it is definitely for the positive.

The positive changes include development of the talent pool of the company teams’ to add skills such as vendor management, vendor performance management, leadership and team management. Additionally, outsourcing would enable your current HR and/or Finance & Accounting staff emphasize on the advancement of their strategic efforts rather than focussing on fulfilment of core administrative objectives. Industry statistics suggest that the outsourcing advantages offset a few of the challenges that may arise, such as a cultural shift.

Moving ahead on the decision to outsource, there are a Few Guidelines that must be followed in order to contract out your organization’s services in a secure manner. Enclosing them below-

Shortlisting the Appropriate Outsourcing Services Provider:

Selection of the right company is among the most critical steps to be followed while outsourcing. The selected vendor must have a stringent security policy. Organizations should cross check if the prospective outsourcing provider has adequate security policies for data protection, privacy and against any vulnerabilities/ threats that may arise from the same.

Well documented and complied Security Policy:

A proper security policy detailing standards and procedures applicable must be in place. The policy should have the capability to maintain the confidentiality of vital client data and must also be regularly validated by a third-party security assessment company. The privacy policies must also be clearly defined and outlined.

Data Protection Policies

Companies should select vendors that employ VTA (Vulnerability Threat Assessment) and ensure the absolute protection and privacy of their client data. Taking the above security considerations in mind will facilitate any company in selecting a reliable, secure and efficient Outsourcing vendor to execute their processes.

Managing Your Company Payroll_Outsource

Confidentiality of Payroll Data and Process

Inter-organizational confidentiality is maintained well if a third party takes care of the processing of payroll. Using an external agency eradicates the business risks of leaking of confidential salary data through internal employees processing payroll.

 Devote Management Time to Productive Activities

Manual payroll processing is a tedious and unfruitful process. Outsourcing your businesses’ payroll operations enables business leaders and management to focus their attention to beneficial activities like revenue creation & growth along with strategic planning, instead of unproductive administrative tasks like pay calculation or accounting.

 Control Expenditure

The direct expenses incurred towards the process of payroll management are capable of being substantially decreased by taking the support of a payroll vendor.

 Avoiding errors and Tax penalties

Opting for outsourcing services enables preventing errors as well as incorrect or late payments and filings. Majority of the vendors comply by specific KPI’s and thereby are bounded by penalties, hence the entire responsibility for accurate payroll calculation and timely deposition of statutory payments rests with the service provider.

 Ease of Processing

Processing payroll manually is an arduous and wasteful task, which takes up a considerable time both for HR team and the approving management, especially in the case of small and medium enterprises wherein the primary focus should be revenue enhancement rather than backend jobs.

Stay updated with Technology and Statutory Changes

A persistent question that companies processing payroll in-house is often face is that are their systems updated in line with the latest tax changes and if they have a latest version of payroll software. Payroll outsourcing allows companies to breathe a sigh of relief and eases troubles associated with updation. This saves both time and effort for business owners.

The Dominance of India as a Globally Preferred Outsourcing Destination...

        India: “The Preferred Outsourcing Destination”

India remains the most preferred Outsourcing Country and contributes to 65% of the BPO off shoring market. NASSCOM (The National Association of Software & Service Companies) has conducted several surveys in recent past in the outsourcing industry. Many positive outcomes have been reported as part of this survey, especially for the companies engaged in the outsourcing industry. Majority of American and European companies have selected India as a preferred destination to outsource their work, while nearly 50% Fortune 500 companies choose to outsource IT related processes to Indian outsourcing firms.

Despite the recent emergence of other contending lower-cost outsourcing destinations such as the Philippines, Mexico and China etc.; the Indian subcontinent has retained its leadership position as a prime provider of “Affordable yet superior quality” outsourcing services. The Indian outsourcing industry is witnessing a rapid growth rate of nearly 30% per annum. This growth is primarily attributable to a skilled and knowledgeable young workforce, rapid infrastructure growth and some beneficial economic and government policies.  

The Cost Benefit Factor

India gains heavily on the point of labor costs as compared to the developed countries where the wages for skilled personnel are relatively much higher. The low labor cost factor helps companies achieve substantial savings on their expenses. Due to this sort of flexibility available in terms of labor wages, companies are empowered with the ability to enhance their profitability.

The Best Talent Pool of the World- Both in Quantitative and Qualitative Terms…

India is a young nation, with more than 80% of the population under the age of 30 years. This young population is progressively enhancing their education levels and hence contributes to the development of the largest Global pool of Skilled Human Resources. Another fact that contributes to the dominance of the country in the International Outsourcing Market is the fact that India is the world’s Largest English speaking country. Hence, India secures and seals its leadership position with the Human Resources playing a prime role in the same.

World-Class Services- Local Prices

At the advent of the outsourcing century since the year 2000 onwards, MNC’s had chosen India to outsource their requirement, keeping in mind the resultant cost benefits.  However, later on it was noticed that companies extended their outsourcing contracts and continued with their Indian providers due to continually good service delivery levels. Quality of services offered and time-to-market drove global customers to continue with Indian Outsourcing Companies

Government Stability and Favorable Policies

Government supports the outsourcing industry in India through several helpful policies on power, telecom, taxation, special zones and industrial parks are improving both communication and infrastructure systems. The IT industry is being supported continually by the Information Technology Act IT which also leading to a growth in the outsourcing industry.

Rapid time-to-market of Indian Companies

India, being in a different time zone ahead of most Western world countries gains by this time difference and offers the most rapid time-to-market. The time difference allows early completion of work, timely fulfillment of deadlines and hence quick turnaround. The above mentioned factors lead to satisfied customers.

India boasts of the best in Infrastructure and technological capabilities

Urban India has well developed infrastructure in terms of cellular networks, telecom and Internet in all major towns and cities. Customers are offered leading edge technology, tailor made solutions for all applications and business functions including Business Process Management, Finance & Accounts, and HR Outsourcing etc. 

The many benefits of Human Resource Outsourcing..!!

The Human Resources department of any organization is definitely an indispensable part of its smooth functioning, and is responsible for executing several critical functions including hiring, payroll processing, compensation & benefits administration and HR related country-specific compliance. For both small and large firms outsourcing a strategically vita

l business function like HR could be a difficult choice to make, keeping in mind the probabilities of losing complete control over their valued assets- the human resource as well as the possibility of a decline in the quality of task execution by the prospective vendor. However, actually the contrary is mostly true for majority of organizations whether SME or large. The simple reason for the same which most enterprise owners and managements do not realize, is that the HR is a non-profitable cost center and thereby it is indeed the most suitable among all business functions to be outsourced!

Trends indicate most organizations with employee headcounts ranging between 1000-10000+ are adopting HR outsourcing in order to reduce their costs.  Many MNC’s including Fortune 500 corporate are outsourcing their non-strategic/ administrative HR functions for instance, Payroll processing, Employee Self Service activities and Benefits administration etc to offshore. HRO is slowly emerging as one of the most rapidly growing segments in the outsourcing market

Some questions to be pondered on before considering the decision of outsourcing Human resource activity

1.     Does your prospective HRO Service provider hold a strong market reputation and credibility?

2.     Do the services offered by the provider seem economical keeping your company budgets in mind?

3.     How strong are the financial and technical expertise levels of our prospective vendor?

4.     Are your HR department employees over burdened leading to a lower productivity rate?

5.     Are your cumbersome/unproductive HR administrative activities taking up a major share of your HR management’s time and creating hindrances in taking strategic HR decisions/policy implementation/framework designing etc.?

If most of the answers seem to be going in favor of adopting outsourcing, then it’s high time your organization does indeed go in for HR outsourcing!

Benefits of outsourcing your HR function to a reliable service provider

1.     Cost Saving- The most common reason for outsourcing any function in an organization remains cost savings. HR outsourcing enables companies to save substantial amounts of money as hiring of new employees in the HR team is not required, as and when the company is witnessing growth and increase in size

2.     Efficiency Improvements- If your outsourcing provider is innovating itself using technology as an enabler, the efficiency of the entire outsourcing process is improved comprehensively, as compared to vendors that stick to standard and traditional platforms.

3.     Smooth Functioning of HR Processes- Outsourcing your HR department ensures that additional information overload or any sudden requirement coming up in the organization can be addressed smoothly with the third party vendor taking care of time consuming administrative tasks. Hence, the normal business operations are not adversely affected

4.     Preventing HR Processes from Adverse Turnover Effects – HR outsourcing would mean that any employee’s leaving the organization would not hamper the core HR processes in any which way. HRO allows companies to manage their turnover issues in a hassle free manner.

5.     Reduce Overheads – HRO also facilitates the reduction in high overhead costs also by decreasing sudden, unplanned additional expenses. These expenses can be managed by the HRO provider at a relatively lower cost.

6.     Training Existing Employees on new functions – When new technologies/functions/tasks are added in an organization, the HRO partner can also train and develop the existing employees till the level of the new technologies and place trained professionals in their place in the meantime. Thus, HR outsourcing can help in driving the holistic growth of your company.