GS Paper II- Statutory, regulatory and various quasi-judicial bodies.

SEBI reviews rules for removal of firms’ independent directors

What’s Happening-
The ongoing boardroom tussle in the Tata Group has compelled the Securities and Exchange Board of India (SEBI) to review the norms for removal of independent directors in listed companies.

Key Points discussed were:

  • At the SEBI board meet, the capital market watchdog took note of the fact that promoters by virtue of their majority holding in large listed companies can easily remove an independent director.
  • An internal note presented to the SEBI board stated that the regulator should evaluate the option of barring the promoters from voting on resolutions seeking removal of independent directors.
  • “It is felt that the present provisions make the removal process less stringent than the appointment process. Therefore, since a special resolution is required for the re-appointment of an independent director, the same principle should be applied for his removal also i.e. special resolution may be made necessary,”-SEBI

Current framework:

  • At present there is no restriction on promoters to vote on such kind of resolutions, it said referring to the current regulatory framework for removal of independent directors.
  • SEBI listing regulations and Companies Act, 2013 needs to provide independent directors a fair process and the opportunity to debate their dismissal before the non-promoter independent shareholders, currently it does not require legally sufficient cause for dismissal, or any similar test, Violation of laws
  • Meanwhile, the note presented to the board also stated that it would not be right on SEBI’s part to question the commercial decisions of the boards of companies unless there is any kind of violation of the securities laws.
  • The regulator has, however, directed the stock exchanges to seek information from the companies on the allegations made by Mr Mistry.
  • The companies were asked to place the allegations before their respective audit committee as per SEBI guidelines. Only, Tata Teleservices (Maharashtra) and Tata Capital Financial Services have responded.

Background-
Mr. Wadia alleged that Tata Sons levelled false charges against him in the special notice sent to the shareholders of Tata companies in which he served as an independent director.
He has also filed a ₹3,000 crore defamation suit along with a criminal defamation case against Ratan Tata, Tata Sons and its board of directors.

Sources- The Indian Express, The Hindu

GS Paper III- Indian Economy and issues relating to planning.

Tax-free withdrawal limit for PF may rise

What’s Happening-
The Labour Ministry has sought a fourfold increase in the threshold limit for tax deduction on provident fund withdrawals, from the existing ₹50,000 to ₹2 lakh, in the coming Budget.
This means that if the proposal gets a go-ahead, you may be able to withdraw provident fund savings of up to ₹2 lakhs without any tax deduction even if you have not completed five years of continuous service.

Key Points discussed were:

  • At present, provident fund withdrawals of more than ₹50,000 before completing five years in service attracts income tax of up to 34.608%.
  • “No tax is required to be deducted on provident fund withdrawal of less than ₹50,000. However, even this limit appears to be too low and may be enhanced to ₹2 lakh keeping in view the deliberations in the meetings of the Central Board of Trustees,” the Employees’ Provident Fund Organisation (EPistry has also requested the Finance Ministry to remove tax deduction of 34.608%, known as the maximum marginal rate, for workers who do not furnish PAN card details.
  • While a 10% tax is deducted for workers disclosing PAN details, 34.608% tax is deducted for workers who do not have a PAN card.
  • It would not be out of place to mention that only such persons are required to have a PAN who are above the taxable limit,” the EPFO wrote. “The total revenue impact on this count would be less than ₹10 crores,” according to the EPFO.
  • The Finance Act of 2015
  • It was first introduced the deduction of income tax on payment of accumulated provident fund balance due to an employee with less than five years of service.

PAN card:

  • The Labour Ministry has also requested the Finance Ministry to remove tax deduction of 34.608%, known as the maximum marginal rate, for workers who do not furnish PAN card details.
  • While a 10% tax is deducted for workers disclosing PAN details, 34.608% tax is deducted for workers who do not have a PAN card.
  • It would not be out of place to mention that only such persons are required to have a PAN who are above the taxable limit,” the EPFO wrote. “The total revenue impact on this count would be less than ₹10 crores,” according to the EPFO.

The Finance Act of 2015

  • It was first introduced the deduction of income tax on payment of accumulated provident fund balance due to an employee with less than five years of service.

Background-
The Centre had last year increased the threshold limit of PF withdrawal for deduction of tax (TDS) from ₹30,000 to ₹50,000.

Service tax exemption:
The Labour Ministry has also sought retrospective service tax exemption for the EPF scheme.
EPFO was exempted from the purview of service tax from April 2016.
The Labour Ministry has now said the exemption should come into effect retrospectively arguing that EPF is a social security scheme and doesn’t come in the category of ‘banking and financial services.

Sources- The Indian Express, The Hindu. Page 19

GS Paper II– Important aspects of governance.

Misleading ads for traditional medicine under Centre’s scanner

What’s Happening-
The Ministry of AYUSH has tasked the advertising industry watchdog to proactively identify potentially misleading advertisements of traditional systems of medicine in domains such as ayurveda, yoga and naturopathy.

Government Measures of:
Monitoring ads
The watchdog will comprehensively monitor these advertisements across 900 publications and 500 TV channels.
The Ministry will also redirect complaints against misleading advertisements to ASCI which will be reviewed using ASCI’s code and guidelines.
“The MoU also requires ASCI to report to the Ministry of AYUSH, advertisements in potential violation of the Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954 and Rules thereunder as well as non-compliance of ASCI’s CCC recommendations for the Ministry of AYUSH to take further action.

Key Points discussed were:

  • Usually, the Advertising Standards Council of India (ASCI) scans the advertisements based on complaints it receives.
  • “ASCI has been given a self-monitoring mandate by the Ministry of AYUSH to identify potentially misleading advertisements in the AYUSH sector and process complaints through its Consumer Complaints Council (CCC),” according to a statement from the watchdog.
  • The arrangement would ensure that any advertisement making claims for diseases and disorders, in violation of the notification issued by our ministry for indications that have been prohibited from claiming, are immediately brought to our attention,” the Ministry of AYUSH.
  • Ministry of AYUSH have entered into an MoU with ASCI to effectively weed out such advertisements so that consumers are protected from unscrupulous manufacturers selling products making false claims.
  • This is vital for the propagation of AYUSH system of medicine within India and beyond.

Background- Ayush related sector

yoganaturopathyunani,  siddha,  homoeopathy, Sowa-rigpa (Traditional Tibetan medicine), and other Indigenous Medicine systems

Sources-The Hindu, The Indian Express. Page 25