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RBI credit policy
tomorrow Investors
jittery, say brokers Maruti to replace
L&T at BSE US seeks more
trade with India Datamatics net up
Political
uncertainty causes steep fall in Sensex
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Pension received
from LIC scheme taxable
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RBI credit policy tomorrow New Delhi, May 16 Analysts, however, were of the opinion that the RBI is unlikely to make any change in the interest rate regime even though the trends in global monetary markets are gradually moving towards higher rates. The differences between the Left and the Congress have come to the fore on critical economic issues and public statements by some leaders in recent days have only increased the anticipation in the trade and industry circles about the announcements that the RBI Governor, Dr Y V Reddy, might make. In India, the benchmark bank rate — the rate at which RBI disburses its own funds to commercial banks — presently stands at 6 per cent and is the lowest in three decades. Generally, the RBI executes changes in the key interest rates through its bi-annual monetary policy. Usually, the first policy announcement takes place in April. However, the announcement was postponed this time round in view of the elections. The bank rate has been left unchanged since April 2003, when the then RBI Governor, Dr Bimal Jalan, reduced it from 6.25 per cent to 6 per cent. Analysts said even though the RBI could be tempted to move towards a “neutral” bias from the “soft” bias towards interest rates in the last three years, it is most likely to leave the rates, including the Cash Reserve Ratio (CRR), untouched at 4.5 per cent. Banking sector analysts were of the opinion, that an increase in either the bank rate or the CRR, would somewhat carry the risk of decelerating the growth momentum, which the economy had achieved in recent months — primarily riding on the wake of a strong agricultural performance in the backdrop of plentiful rains. A rise in lending rates by commercial banks could also slow down the impetus in the retail and housing sectors. Economists aver the retail sector is poised for take off in India and therefore, was critical from the objective of generating additional employment opportunities. The housing sector was already going through cycle of boom and tightening interest rates would only deflate it as institutional funds become costlier. The RBI Governor will also come out with the growth estimates for the current fiscal year (April 2004 to March 2005) and experts were of the view that the projections could be higher than six per cent. RBI growth projections are based on a host of factors and the forecast of a normal monsoon this year. Better performance of the manufacturing sector in the recent quarters suggests that growth estimate is likely to be above six per cent, economists said. This could also be the first authoritative growth projection for 2004-05 even though various political parties have rubbished each other’s estimates on grounds of being unrealistic and mere “jugglery of figures.” RBI’s estimates on inflation would also be keenly awaited and analysts expect it to be in the range of five per cent. Presently, the inflation rate, based on the wholesale price index, is hovering around the 4.2 per cent mark. However, the rising international prices of crude oil is bound to have its impact sooner rather than later and the new government cannot delay the announcement of an increase in prices of transport fuel beyond a certain point.
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Investors jittery, say brokers Ludhiana, May 16 As a consequence of the across-the-board fall in share prices throughout the country, the turnover of the LSE
Securities Ltd — a subsidiary of Ludhiana stock exchange — has fallen drastically besides inflicting heavy losses upon the brokers and their clients. Market analysts strongly feel that the new Congress-led government may take sometime to assume office and the presence of the Left has left the impression that the fiscal reforms initiated by the NDA Government would take a back seat and the disinvestment process would be halted. Even if the Congress intends to carry these reforms forward, ignoring the protest by the Left, the stability of the government would itself be in jeopardy, they point out. Mr Jaspal Singh, president, LSE Securities Ltd and Mr R.C.
Singal, a former president, Ludhiana Stock Exchange, maintain Indian economy is enjoying strong fundamentals but the only condition is they have a pragmatic and stable Government at the Centre. Mr Singal said one of
the factors affecting the markets adversely were the continuous rise in the oil prices at the international market, fall in the American and Asian markets for the last one week, indication of slowing down of Chinese economy and pressing sales by foreign investors, not only in Indian stock exchanges but also in other Asian markets.
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Maruti to replace L&T at BSE
New Delhi, May 16 This replacement is being made due to the demerger of the cement business of Larsen and Toubro Ltd into a new company, UltraTech Cemco Ltd, and the capital restructuring being undertaken subsequent to the demerger. The free-float adjustment factor for Maruti would be 0.30, it added. The long-awaited demerger of Larsen and Toubro’s cement business to the AV Birla Group flagship Grasim Industries came into effect from Friday last. As per the proposal, L & T would spin off its 16.5mn tonnes cement division into a separate company called UltraTech CemCo. L & T would then sell a 8.5 per cent stake to Grasim. Grasim, which owns a minority stake in the demerged entity, has said it would make an open offer to the shareholders of Ultra Tech CemCo at Rs 342.6 per share. As per the deal sanctioned by the Bombay High Court, Grasim would purchase up to 37,320,539 shares of Rs 10 each aggregating 30 per cent of the total share capital of Ultra Tech CemCo.
— UNI
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US seeks more trade with India
Washington, May 16 “India is a potential partner for the United States on the issues of global scope. We are looking forward to working closely with the new government. Our goal remains to develop a new strategic relationship”, Director of US Policy planning Mitchell B Reiss said in an address at the Asia Foundation. He called for deeper economic reforms, trade liberalisation and “a more predictable investment environment” adding the economic potential of the region remains enormous. Reiss said “US shared democratic traditions and interests with an India that is developing into one of the most important nations of the 21st century and we have more at stake bilaterally than ever before”.
— PTI
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Datamatics net up
Mumbai, May 16 The non-voice Business Process Outsourcing major’s board has recommended a 20 per cent dividend, or Re 1 on face value of Rs 5 per share, a DTL release said here today.
— PTI
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by J.C. Anand Political uncertainty causes steep fall in Sensex THE stock market is in a bad shape due to very heavy losses suffered last week. Sensex was down last Friday by 329.6 points (by 6 per cent) and closed at 5069.87 — largest single-day fall since April 2000. Nifty was down by 350 points. There were very few scrips that escaped the bloodbath. As many as 16 sectors (which included steel, pharma, automobiles,
aluminum, fertilisers, PSUs and banks) suffered heavy losses. Another disturbing factors was heavy sales by FIIs. On May 13, the election-results day, FII funds sold $138 million worth Indian shares. Though SEBI has not released its data regarding FII sales on February 14, one report states that FIIs have now sold $500 million-worth shares in 8 trading session, equivalent to their total investments made in India in 2004’. What has led to this steep fall in the stock market is political uncertainty. This relates to a number of factors. How stable would be the new Congress party-led coalition government at the Centre? Will the Communist parties join the government? How would the new coalition government take up the issue of economic reforms? Would it pursue the World Bank policies which call for privatisation, patent laws, scaling down tariff walls, cutting down subsidies with a diminishing role of the state in the economy? Dr Manmohan Singh, who is likely to be the next Finance Minister, has tried to allay the fears of the investors by making a statement that the new government will pursue policies to create favourable climate for growth. But uncertainty remains as to the extent to which the Left parties will have their say in the formulation of the economic policy of the new government. A top CPI leader has stated that the Left is not against the policy of liberalisation but would want “liberalisation with a human face”. Disinvestment of PSUs is also under fire. The Left leaders have declared that profit-making PSUs must not and will not be sold. Only those units may be privatised which cannot be revived and need to be scrapped. Another policy decision favoured by the left parties is to raise a tax-GDP ratio by levying and collecting more indirect taxes. But if the World Bank Policy calls for lowering tariff walls and promoting free trade, how would this policy operate? May be, that direct taxes, like succession duty tax, gift tax are introduced and the corporate sector has to contribute towards raising the tax-GDP ratio. There is little doubt that the new government would look more towards the rural areas and the poor than was being done by the NDA coalition government. But some policy announcements made by the government in Andhra Pradesh have a disturbing content. The new Chief Minister has announced that free electricity would be provided to the farmers and any arrears against them for non-payment of electricity charges would be written off. This week, some part of the political uncertainty would be diluted when the new government is formed and it is known whether the communist parties join the government or otherwise. It would take rather a longer time to assess the economic policy of the new government. FIIs will also wait and watch before they step in actively into the Indian stock market. In fact, FIIs have been sellers in the Asian markets last week due to rumours about raise in interest rates in US. The best option for investors is to hold on to their investments in fundamentally strong scrips and cultivate the habit of being long-term investors rather than acting as day-traders or indulging in short-term speculation. Excellent results have been announced by Biocon and Novartis. |
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by S.C. Vasudeva Pension received from LIC scheme taxable Q: On retirement in the year 2000, I deposited some amount as Fixed Deposits in bank for three years and Rs 6 lakh in joint name in MIS Post Office Scheme. My queries are: (a) Since interest earned under MIS is exempted under Section 80-L, whether this interest needs to be shown in Income tax returns? (b) Under MIS, Rs 2.4 lakh have been deposited in the first name of the undersigned and Rs 3.6 lakh in the first name of my wife. In case interest has to be shown in returns, whether that interest can be shown accordingly. (c) My son is in USA for the last three/four years and holding Indian Passport
i.e. on H-1B Visa. Whether Rs 3 lakh can be invested under MIS Scheme with the first name of my son. (d) On maturity of FDs in case Rs 2.67 lakh is invested in LIC pension scheme announced by government, whether pension of Rs 2000 p.m. will be counted towards income for purposes of Income tax. (e) Any better scheme to re-invest FD amounts to have regular income as pensioner. — R.K. Gupta Ans: (a) The interest earned under Monthly Income Scheme is includable for the purposes of allowing deduction under Section 80-L of the Income tax Act, 1961. Accordingly, such interest has to be included while computing the total income and then shown as a deduction from the gross total income to the extent of 12,000 per annum. (b & c) The taxability of income is dependent upon the source of the funds. If the funds are attributable to you the amount deposited in the name of anyone would become taxable in your hands. (d) The amount of monthly pension received from LIC under the new pension scheme is taxable. (e) You may deposit your savings in government bonds, which carry a better rate of interest as compared to a Fixed Deposit. Benefits Q:
I am a retired Police Officer. At the time of retirement in 1997, I had invested my retirement benefits partly in MIS and in the DSRGE, 89 scheme. I was also maintaining the NSS, 89 Account without any withdrawals and it was giving return at the rate of 11 per cent while the MIS and DSRGE accounts were fetching me interest income at the rate of 12 per cent and 10 per cent respectively. But the financial year 2002-2003 the interest rate in r/o NSS has been reduced to 9.5 per cent while the rate of interest on DSRGE has been reduced to 7 per cent PA. Now I want to know from you if the interest income from the NSS 89 account is tax fee, if so to what extent? Secondly, can the latest interest rate on NSS, MIS and DSRGE be applied to old account like in my case the accounts, which was reopened in 1997 and were still current? — B.C. Negi Ans: (i) The amount deposited under National Saving Scheme and the interest thereon is exempt from tax till such time the same is not withdrawn from the account. The amount withdrawn would become taxable in the year in which the amount is so withdrawn. There is no exemption from taxability once the amount is withdrawn from the National Saving Scheme Account. (ii) With regard to your second query the
government has the powers to vary the interest and it would be applied from the date which is notified by the Central Government in this regard.
House loan Q:
HBA was sanctioned to me in March 2003 and its first instalment was released in April 2003 whereas recovery of Advance has not started. Kindly let me know whether I can claim rebate on HBA interest during the year, because interest is being calculated on advance from the day of its drawl sanction. — Om Parkash Ans: I presume that you are referring to the pre-EMI interest that you would be paying to the lender and that the HBA referred by you is a Housing Loan sanctioned for the purchase/construction of a residential house. Your question is being answered accordingly. The interest on house building allowance can be claimed as a deduction against the income from house property u/s 24 of the Income Tax Act, 1961.
Inflation index Q:
After my retirement, I have purchased a flat for Rs 10 lakh, at Panchkula. I propose to sell off my house at Baddi (purchased from HP Housing Board in October ‘92 for Rs 2,80,100+Rs 33660 on conveyance deed+Rs 5002 for registration) for Rs 5.6
lakh. Inflation index in 1992-93 was 223. Please let me know the inflation index for 2003-04 and my liability for capital gains tax, if any and how to save the same. Ans:
The inflation index for the year 2003-04 is 463. The capital gains tax would not be payable by you in case you sell off your Baddi house within a period of one year of the date of purchase of your flat at Panchkula. |
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