credit monetary analysis

1. 1
Summer Internship Program
Report On
Study of “CREDIT MONETARY ANALYSIS & TAXATION”
Submitted to Datta Meghe Institute of Management Studies for Partial Fulfilment of
the Degree of Master in Business Administration (MBA)
Guide:
Ms. HETAL GAGLANI
Submitted by:
Mr: ASHISH V. DHANDRE
DATTA MEGHE INSTITUTE OF MANAGEMENT STUDIES,
Autonomous Institute Affiliated to Rashtrasant Tukadoji Maharaj Nagpur University
with NBA Accredited MBA Program
Nagpur
For the session 2016-17

2. 2
Datta Meghe Institute of Management Studies, Nagpur
CERTIFICATE
This is to certify that “Mr. Ashish Vaishakhrao Dhandre” has submitted the project
report titled “Credit Monetary Analysis & Taxation’’, towards partial fulfilment of
Master Of Business Administration degree examination. This has not been submitted
for any other examination and does not form part of any other course undergone by the
candidate. It is further certified that he has ingeniously completed his project as
prescribed by An Autonomous institute Affiliated to Rashtrasant Tukadogi Maharaj
Nagpur University with NBA Accredited MBA Program, Nagpur.
The student was under the guidance of Ms. Hetal Gaglani,Assistant Professor at Datta
Meghe Institute of Management studies, Nagpur and completed the project on Credit
Monetary Analysis & Taxation.
Dr. Shiney Chib Ms. Hetal Gaglani
`
(Director, DMIMS) (Assistant Professor, DMIMS)

3. 3
DATTA MEGHE INSTITUTE OF MANAGEMENT STUDIES, NAGPUR
DECLARATION
I here-by declare that the project with “A Study Of CREDIT MONITORY
ANALYSIS & TAXATION’’ has been completed by me in partial fulfilment of
MASTER OF BUSINESS ADMINISTRATION degree examination as prescribed by
An Autonomous institute Affiliated to Rashtrasant Tukadogi Maharaj Nagpur
University and is a result of my own work and efforts and this has not been submitted
for any other examination and does not form the part of any other course undertaken by
me.
Date: Mr. Ashish V. Dhandre

4. 4
DATTA MEGHE INSTITUTE OF MANAGEMENT STUDIES, NAGPUR
ACKNOWLEDGEMENT
With immense pride and sense of gratitude, I take this golden opportunity to express my
sincere regards to Dr. Shiney Chib, Director of Datta Meghe Institute of Management
Studies Atrey layout Nagpur.
I am extremely thankful to Prof. Hetal Gaglani for their direction throughout the project.
I tender my sincere regards to them for giving me outstanding guidance, enthusiastic
suggestions and invaluable encouragement which helped me in the completion of the
project.
I am extremely thankful to Mr. Pramod Hedaoo, Proprietor of Pramod Hedaoo &
Associates for giving me a chance to do my internship in such a Prestigious
Organization. I like to thanks all the staff of Pramod Hedaoo & Associates for
supporting and giving there valuable time. I would like to thank all those who helped
me in making this project complete and successful.
Date: Mr. Ashish V. Dhandre

5. 5
INDEX
Chapters Contents Page no.
01 Introduction of the SIP and Topic 6
02 Organizational Profile 7
03 Objective of SIP (Organization and self) 8
04 Details about Topic 9
05 Lessons learnt during the SIP 19
06 Conclusion 20
07 Recommendations
Bibliography
20

6. 6
Introduction:
About Organization:-
Firm M/S Pramod Hedaoo & Associates Is Enstablished On 3rd January, 2009 By Its
Proprietor Mr. Pramod U Hedaoo, Is A Registered Sales Tax And Income Tax
Practitioner, Having Good Experience Of Sales Tax, Income Tax, Service Tax,
Industrial Policies And Finance. He Is Providing These Services To Their Clients.
About Topic:-
CREDIT MONETARY ANALYSIS & TAXATION
CMA (Credit Monetary Analysis) is a report of an organization, which is analyse by
the bank before giving any kind of loan, and financial assessment. This report helps to
know the current status of an organization. In CMA report bank analyse the balance
sheet, profit and loss account to know the margin of the business to pay of the amount
of loan and also helps to determine what amount should be sanctioned to the
organization out of proposed Amount.
Taxation:-
Taxes are of two distinct types, direct and indirect taxes. The difference comes in the
way these taxes are implemented. Some are paid directly by you, such as the dreaded
income tax, wealth tax, corporate tax etc. while others are indirect taxes, such as the
value added tax, service tax, sales tax, etc :

7. 7
ORGANIZATION PROFILE
Organization Name : Pramod Hedaoo & Associates
Division : Nagpur
Department : Tax Department
Address : 1st Floor, Tarekar Bhawan, Near Karur Vysya Bank,
Sewasadan Chowk, C.A Road, Nagpur.
City : Nagpur
State : Maharashtra
Pin code : 440018
Industry Guide’s Name : Mr. Pramod U. Hedaoo
Designation : Sales Tax and Income Tax Practitioner
Student’s Name : Ashish V. dhandre
SIP Title : Credit Monetary Analysis

8. 8
OBJECTIVE
1) To Know about Credit Monetary Analysis, and its importance.
2) To Review The Taxation System.
(Indirect and Direct taxes)
3) To Find Out how professionals manage Accounting Process With Tally 9.0
4) To Analysis How Income Tax calculated, and in which condition surcharge
were charge.
5) To Know Deductions In Income Tax For An Individual.

9. 9
CREDIT MONETARY ANALYSIS
CMA is a report of an organization, which is analyse by the bank before giving any kind
of loan, and financial assessment. This report helps to know the current status of an
organization. In CMA report bank analyse the balance sheet, profit and loss account to
know the margin of the business to pay of the amount of loan and also helps to determine
what amount should be sanctioned to the organization out of proposed Amount.
• It is required by Banks and other financial institutions, to introspect or study the
minutes of balance sheet and other financial statements of a body corporate for financing
their projects.
In other words it is the detailed explanation of the balance sheet and other financial
ratios of the Firm or any other Body corporate.
It is data used to monitor and analyse the credit rating of any customer.
It is generally for the purpose of granting the Cash Credit or can be also called for
Working capital grant.
It is a detail study of the financial position of the customer and is based on the tendon
committee report for the purpose of grant of working capital.
It is a systematic format which reveals the actual position of the customer in relation to
his credit rating.
It is based upon an actual year, an estimated running year and two projected year
balance sheet and activity records
.

10. 10
• Figure no. 1
(Figure showing Increase in Net sales)
.
This specific format is referred to as CMA Report / CMA Data. Audited P & L A/c &
Balance Sheet of at least last 1 year for existing companies, estimates of current year &
projections of next at least 2 years are provided to bank by the applicant along with
Funds Flow Statement, Ratio Analysis, Comparative Statement of Current Assets &
Current Liabilities & Statement of Maximum Permissible Bank Finance. Number of
years for which data is required may vary from bank to bank. Even after getting the
finance such data is required to be submitted to the bank periodically.

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 Maximum Permissible Banking Finance
Definition: Maximum Permissible Banking Finance (MPBF)
MPBF stands for Maximum Permissible Banking Finance in Indian Banking Sector. As
per the recommendations of Tendon Committee, the corporate are discouraged from
accumulating too much of stocks of current assets and are recommended to move
towards very lean inventories and receivable levels.
Depending on the size of credit required, two methods are in practice to fund the
working capital needs of the corporate.
Method I: For corporate whose credit requirement is less than Rs.10 lakhs, banks can
find the working capital required. Working capital is calculated as difference of total
current assets and current liabilities other than bank borrowings (called Maximum
Permissible Bank Finance or MPBF). Banks can finance a maximum of 75 per cent of
the required amount and the rest of the balance has to come out of long-term funds.
Method II: For corporate with credit requirement of more than Rs.10 lakhs this method
is used. In this method, the borrower finances minimum of 25% of its total current assets
out of long term funds. The rest will be provided by the bank through MPBF. Thus, total
current liabilities inclusive of bank borrowings could not exceed 75% of current assets.
 Figure no. 2
(Figure showing Maximum permissible bank financing)

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 'Debt-Service Coverage Ratio (DSCR)'
In corporate finance, the Debt-Service Coverage Ratio (DSCR) is a measure of the cash
flow available to pay current debt obligations.
The ratio states net operating income as a multiple of debt obligations due within one
year
A DSCR greater than 1 means the entity – whether a person, company or government –
has sufficient income to pay its current debt obligations. A DSCR less than 1 means it
does not.
DSCR = Net Operating Income / Total Debt Service
Total debt service refers to current debt obligations, meaning any interest, principal,
sinking-fund and lease payments that are due in the coming year.
On a balance sheet, this will include short-term debt and the current portion of long-
term debt.
 Figure no. 3
(Figure showing Debt- Service Coverage Ratio)

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 Working Capital Requirement
The required value of funds that a company is required to keep on hand in order to be
able to pay its debt obligations and other business related expenses. Several factors go
into the determination of this requirement.
 Non-Performing Asset - NPA
Banks usually categorize loans as nonperforming after 90 days of non-payment of
interest or principal, which can occur during the term of the loan or for failure to pay
principal due at maturity. For example, if a company with Rs.10 million loan with
interest-only payments of Rs.50000 per month fails to make a payment for three
consecutive months, the lender may be required to categorize the loan as nonperforming
to meet regulatory requirements. A loan can also be categorized as nonperforming if a
company makes all interest payments but cannot repay the principal at maturity.
The Effects of NPAs
Carrying nonperforming assets, also referred to as nonperforming loans, on the balance
sheet places three distinct burdens on lenders. The non-payment of interest or principal
reduces cash flow for the lender, which can disrupt budgets and decrease earnings. Loan
loss provisions, which are set aside to cover potential losses, reduce the capital available
to provide subsequent loans. Once the actual losses from defaulted loans are determined,
they are written off against earnings.

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 Drawing Power
Drawing power is the limit up to which a firm or company can withdraw from the
working capital limit sanctioned.
Drawing Power is calculated after deducting margin from “Stock less Creditors +
Book Debts” for the month.
Drawing Power Calculation
As on 31.10.2014 INR
Stock 50
Creditors 12
Total Debtors 70
Debtors > 90 Days 10
Stock Covered Under Insurance 44
Margin on Stock 0.25
Margin on Debtors 0.4
Sanctioned Working Capital
Limit 70
Calculation:-
Particulars INR
Bank
Allow
Stock (Insured Stock) 44
Less Creditors 12
Paid Stock 32
Less: 25% Margin 8 24
Debtors 70
Less: Debtors > 90 Days 10
Debtors allowed for DP 60
Less: 40% Margin 24 36
Drawing Power 60

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CLASSIFICATION OF BUSINESS=
 On the basis of calculation of taxes
 IT IS MANDATORY TO PAY DUTY ON ALL GOODS
MANUFACTURED, UNLESS EXEMPTED:-
For example, duty is not payable on the goods exported out of India or if
the turnover does not reach Rs. 1.5 crores in a year or based on certain process of
production.
1] MANUFACTORING UNIT
2] TRADING UNIT
Excisable unit
• Totaloutput
per year 1.5
crores &
above
Non-Excisabe
unit
• Totaloutput
per year
below 1.5
crores(SSI)
Exempted
• Wheat, rise,
jawari, etc.
Electronic
goods and
taxable Goods
Taxable
Non Taxable
Goods like
rice, weat etc.
Exempted

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3] SERVICE SECTOR
 BUSINESS TAXES=
 INDIRECT TAXES
Types of Taxes:
Taxes are of two distinct types, direct and indirect taxes. The difference comes in the
way these taxes are implemented. Some are paid directly by you, such as the dreaded
income tax, wealth tax, corporate tax etc. while others are indirect taxes, such as the
value added tax, service tax, sales tax, etc.
1) Indirect Tax:
By definition, indirect taxes are those taxes that are levied on goods or services. They
differ from direct taxes because they are not levied on a person who pays them directly
to the government, they are instead levied on products and are collected by an
intermediary, the person selling the product. The most common examples of indirect
tax can be VAT (Value Added Tax), Taxes on Imported Goods, Sales Tax, etc.
Examples of Indirect Taxes:
These are some of the common indirect taxes that you pay.
>PROFESSIONAL TAXES
• Doctor, Charted Accountant, Advocates etc.
>NON-PROFESSIONAL TAXES
•Contractor, Tours and Travels etc.

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• Excise Duty:
This tax is levied on certain goods for their production or sale catering or on licenses on
specific services and activities. Excise duty is an inland tax unlike custom duties is an
inland tax. Also this duty charges are a form of indirect tax. Indirect taxes are generally
collected by a retail store or an intermediary body from the person who ultimately bears
the responsibility of paying the tax as a consumer. The producer of the goods then pays
this tax to the government. This amount is excise of the VAT (Value Added Tax) and
sales tax that is charged to the consumers when purchasing a good.
The excise duty falls under the Excise Duty Act, 1944. The State Government charges
them on certain goods such as narcotics, alcohol or alcoholic products, the duty charges
on other goods are collected by the Central Government, hence the term, ‘Central Excise
Duty’. The tax is however, collected by the Government when the good are being
removed from the factory and dispatch.
• Value Added Tax:
The value added tax is a tax that is levied at the discretion of the state government and
not all states implemented it when it was first announced. The tax is levied on various
goods sold in the state and the amount of the tax is decided by the state itself. For
example in Gujrat the government split all the good into various categories called
schedules. There are 3 schedules and each schedule has its own VAT percentage. For
Schedule 3 the VAT is 1%, for schedule 2 the VAT is 5% and so on. Goods that have
not been classified into any category have a VAT of 15%.
VAT = Output Tax – Input Tax
• Service Tax:
Like sales tax is added to the price of goods sold in India, so is service tax added to
services provided in India. In the reading of the budget 2015, it was announced that the
service tax will be raised from 12.36% to 14%. It is not applicable on goods but on
companies that provide services and is collected every month or once every quarter
based on how the services are provided. If the establishment is an individual service
provider then the service tax is paid only once the customer pays the bills however, for
companies the service tax is payable the moment the invoice is raised, irrespective of
the customer paying the bill. An important thing to remember is that since the service
at a restaurant is a combination of the food, the waiter and the premises themselves, it
is difficult to pin point what qualifies for service tax. To remove any ambiguity, in this
regard, it has been announced that the service tax in restaurants will be levied only on
40% of the total bill.

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• Sales Tax:
As the name suggests, sales tax is a tax that is levied on the sale of a product. This
product can be something that was produced in India or imported and can even cover
services rendered. This tax is levied on the seller of the product who then transfers it
onto the person who buys said product with the sales tax added to the price of the
product. The limitation of this tax is that it can be levied only ones for a particular
product, which means that if the product is sold a second time, sales tax cannot be
applied to it.
• Custom duty & Octroi:
When you purchase anything that needs to be imported from another country, a charge
is applied on it and that is the customs duty. It applies to all the products that come in
via land, sea or air. Even if you bring in products bought in another country to India, a
customs duty can be levied on it. The purpose of the customs duty is to ensure that all
the goods entering the country are taxed and paid for. Just as customs duty ensures that
goods for other countries are taxed, octroi is meant to ensure that goods crossing state
borders within India are taxed appropriately. It is levied by the state government and
functions in much the same way as customs duty does.
2) Direct Tax:
Direct tax, as stated earlier, are taxes that are paid directly by you. These taxes are levied
directly on an entity or an individual and cannot be transferred onto anyone else. One
of the bodies that overlooks these direct taxes is the Central Board of Direct Taxes
(CBDT) which is a part of the Department of Revenue. It has, to help it with its duties,
the support of various acts that govern various aspects of direct taxes. Some of these
acts are:
• Income Tax:
Income tax has to be paid by every individual person, Hindu Undivided Family (HUF),
Association of Persons (AOP), Body of Individuals (BOI), corporate firms, companies,
local authorities and all other artificial juridical persons that generate income.
Taxes are calculated on the annual income of a person, and an annual cycle (year) in the
eyes of the Income Tax law starts on the 1st of April and ends on the 31st of March of
the next calendar year. The law recognizes and classifies the year as “Previous Year”
and “Assessment Year”.
The year in which income is earned is called the previous year and the year in which it
is charged to tax is called the assessment year.

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For example: Income earned between April 1st 2014 and March 31st 2015 is called the
income of the previous year and will be charged to tax in the next year, or the assessment
year that starts on April 1st 2015.
• Gift Tax Act:
The Gift Tax Act came into existence in 1958 and stated that if an individual received
gifts, monetary or valuables, as gifts, a tax was to be to be paid on such gifts. The tax
on such gifts was maintained at 30% but it was abolished in 1998. Initially if a gift was
given, and it was something like property, jewellery, shares etc. it was taxable.
According to the new rules gifts given by family members like brothers, sister, parents,
spouse, aunts and uncles are not taxable. Even gifts given to you by the local authorities
is exempt from this tax. How the tax works now is that if someone, other than the exempt
entities, gifts you anything that exceeds a value of Rs. 50,000 then the entire gift amount
is taxable.
 Lessons learnt during SIP
 I have learn many things during Internship and take a great experience of learning
in a guidance of experienced industrial guide
 I learn what is Drawing Power and calculation of Drawing Power.
 How bank calculate Drawing power Amount on stock or Debtors.
 I learn how to create ledgers in tally and how taxes were calculated in tally.
 I have learn how entries related to sales and purchase are noted in tally9.0 and
with the help of tally how they apply taxes like VAT and EXICES duties.
 I learn how banks approve the loan application of organizations by investigating
CMA report of organization.
 I learn with the help of credit monetary analysis report, bank identify how much
should be granted out of demanded loan amount and also analyse paying
capacity of organization
 Also learn how banks analyse the projection report of an organization for
repayment of loan.
 I learn how taxes where affect an individual and how an individual can save
taxes with the help of different sections made for deductions in taxes.
 I learn the term surcharge which where apply on an individual, HUF or firms if
there income were excide 1 crore.
 I analyse Form no. 16 and also study how we should interpret form no.16 in
Income Tax

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 Conclusion
My Internship in Pramod Hedaoo & Associates was the first instance for me, working
in any professional Environment.
Because of industrial training my knowledge and skills were enhanced. I tried to relate
my experience in our institute and also try to apply my knowledge on job.
With this experience, knowledge and skills acquired during industrial training I will be
better prepared to face working environment.
 Recommendation
No Recommendation…..
 Bibliography
 From www.taxindia.com
 From Sales Tax and Income Tax Advisor
 Taxation book 2014-15 (TAXMANN’S)
 Taxation (Direct taxes)2015-16 (TAXMANN’S)