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Indians abroad remit home more money than Chinese
Guidelines on forex transactions
Gurgaon to become Detroit of India, Suzuki assures Hooda
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Ruia keen to revive Dunlop tyre units
Investor guidance
Aviation
Notes
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Indians abroad remit home more money than Chinese
New Delhi, December 3 According to the World Bank’s Global Economic Prospects (GEP) report for 2006, the flow of remittances to India increased from $13 billion in 2001, presently contributing about 3.1 per cent of the GDP, as against just 1.3 per cent contributed by Chinese migrants. In comparison, 15-year long economic reforms could help the country garner total $14 billion foreign investment in 2004-05, including $5.5 billion FDI and $8.9 billion investment by FIIs. According to World Bank report, immigrants from poor countries are expected to send more than $167 billion back home. India is among the top three countries worldwide to receive the maximum amount of remittances, along with China and Mexico. While estimating the overall growth in South Asia at 6.9 per cent in 2005, up from 6.8 per cent in 2004, the report said, this year’s performance reflects stable growth of about 7 per cent in India. Official sources said keeping in view the increasing importance of remittances, Prime Minister Manmohan Singh, would launch the Universal Integrated Electronic Remittances Gateway at Hyderabad during the coming Pravasi Bhartiya Divas next month. Significantly, a large part of these flows is being sent by people gone from Punjab, Gujarat, Andhra Pradesh and Kerala. The government has called upon the state governments to offer attractive investment options to facilitate the flow of funds by NRIs. As per Nasscom estimates about 7.7 lakh workers were employed in the software export industry by last year, generating revenues of $12.8 billion; revenues are estimated at $17.3 billion this year. It is estimated that 10 to 15 per cent of all those trained as doctors in India have emigrated, and are now sending large amounts to home. Of the other South Asian countries, the report said Pakistan received remittances worth $3.9 billion and Bangladesh $3.4 billion. Sri Lanka’s remittance receipts were larger than its tea exports, and in Nepal, remittances accounted for nearly 12 per cent of its GDP. It forecasts that South Asia will receive some $32 billion in remittances this year, a 67 per cent increase from 2001. Remittances recorded worldwide in 2005 are estimated to exceed $232 billion. Of this, developing countries are expected to receive $167 billion, more than twice the level of development aid from all sources, the report added. Officials added that at the coming WTO ministerial conference to be held at Hong Kong from December 13 to 18, India would also press for the relaxation of rules for the migration of professionals in developed countries, besides lowering of agricultural
subsidies.
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Guidelines on forex transactions
Mumbai: The Reserve Bank of India (RBI) today said that each authorised moneychanger (AMC) should appoint a Money Laundering Reporting Officer for monitoring transactions and ensuring compliance with the anti-money laundering (AML) guidelines issued by it from time to time.
The officer will also be responsible for reporting of suspicious transactions to the Financial Intelligence Unit (FIU) and other appropriate authorities, besides putting in place necessary controls for detection of suspicious transactions. All AMCs are advised to ensure that a proper policy framework on “Know Your Customer” and AML measures is formulated with the approval of the Board of Directors and put in place before March 31 next year. For encashment of foreign currency notes and travellers’ cheques up to $500 or its equivalent, production of passport need not be insisted upon and any other suitable document of identification, like ration card and driving licence can also be accepted. For verification of the identity of customer for encashment in excess of $500 or its equivalent, a photo identity document such as passport, driving licence, PAN card, voter identity card issued by the Election Commission should be obtained. Requests for payment of sale proceeds in cash may be acceded to the extent of $1,000 or equivalent per transaction. Payment in excess of Rs 50,000 towards sale of foreign exchange should be received only by account payee cheque or demand draft.
— UNI
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Gurgaon to become Detroit of India,
Nagoya (Japan), December 3 Mr Suzuki was interacting with the high-powered delegation led by Mr Hooda, which visited Suzuki headquarters at Hamamatsu. The delegation had a business meeting with Suzuki, its vendors and other companies engaged in the business of manufacturing automotive components. Mr Suzuki said during his visit to India in September 2005, he found the Chief Minister “very considerate and responsive to the concerns of the investors, particularly the Japanese companies. He said Suzuki had been in Haryana for the past 23 years and had faced no problems. The success of the company was the testimony of the government to Maruti Udyog Ltd (MUL) at Gurgaon. He pointed out the company was in the process of completing its three projects on 600 acres of land allotted to MUL by the Haryana State Industrial Development Corporation at IMT, Manesar, where they planned to promote their key vendors within the campus as had been done in the MUL campus. He said Bellsonick, one of their key vendors, had shown its interest to locate its unit within the campus of MUL at Manesar. Thanking the Suzuki Chairman for arranging the interaction with the prospective investors, Mr Hooda said the MUL has been one of the key contributors in the progress of the state. His government would extend its support to the new ventures for which he had laid the foundation stone in June 2005. He further assured that his government would consider the MUL request at IMT Manesar for allowing vendors an independent entity within the campus.
— UNI
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Ruia keen to revive Dunlop tyre units
Kolkata, December 3 Speaking to reporters here, he said DIL’s Ambattur plant in Chennai would open first since negotiations with the unions were at an advanced stage. Reopening DIL’s Sahagunj plant in West Bengal would take about a year since dialogue with the trade unions would have to be initiated, he said. Mr Ruia said the Dunlop Board would be reconstituted and Ashok Jajodia is likely to be the new MD of the company. Mr Ruia said that as per initial estimates, Rs 130 crore was required for restarting operations at Dunlop. Regarding the technology aspect, he said this has to be upgraded and a number of international players, including Sumitomo, had approached for becoming technological partners. — PTI
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Brokers can treat interest paid for purchase
of shares as business expense
by A.N. Shanbhag Q: What is the effect of the income tax on the following transactions: 1) After bonus shares allotted and kept unsold, shall original shares sold on reduced market value, attract, short-term capital loss on the purchase value? 2) What is the effect of shares being split from the face value of Rs 10 to face value Re 1 or Rs 2? 3) Is service tax, education cess, STT, brokerage, interest paid for buying the shares and DP charges deductible from the sale/purchase price, according to the transaction? — Gora Lal Gargi A: 1) The long term capital gains as well as loss (LTCG/LTCL) from shares sold on recognised stock exchanges in India is exempt. The short-term loss can be set off against LTCG or STCG. 2) The cost of acquisition per share is accordingly reduced. 3) If you are in the business of trading of shares, interest paid for buying the shares can be treated as your business expense. Moreover, Sec. 88E offers rebate on STT only against income chargeable under the head “Profits and gains of business or profession”. The deduction shall be equal to the amount calculated by applying the average rate of income tax on such income and is limited to the amount of income tax on such income. The assessee has to furnish Form numbers 10DB & 10DC, along with the return of income and evidence of payment of securities transaction tax, in the prescribed form. The evidence can be in any form, including the broker’s note. The service tax is applicable only if you are an agent or the broker. You can recover this from your clients. If you are not in business or an agent or a broker, the service tax, STT and interest paid are not deductible. However, the brokerage can be treated as cost of acquisition or reduction in the sale value, as the case may be. Education cess is a part and parcel of the income tax and not deductible in any case. Jindal Photo shares
Q: 1. I have purchased units of MF on February 11, 2005. The record date for dividend was February 17, 2005. If I dispose the same today, that is after the expiry of nine months from the record date, what shall be the impact of STCL (dividend stripping) against my STCG of shares of various companies. Shall it qualify for set off against STCG or not? 2. Suppose I buy shares of a company, immediately before its record date of bonus shares and sell the original and keep the bonus shares, immediately after the record date at the reduced market value, shall I be eligible for STCL for original shares or not. If yes, up to which extent and if not, the reason. For example, 100 original shares purchased @Rs200 and 1:1 bonus 100 shares turns to be 200 shares and market rate falls to the extent of Rs 105 per share after the record date of bonus shares, shall 100 original share sold @ Rs 105 attract the STCL of Rs 20,000 - Rs 10,500 = Rs 9,500 or not? 3. I purchased 600 shares @ Rs 62 per share of Jindal Photo and after split of the company, I was allotted 456 shares of consolidated Finvest and 144 shares of Jindal Photo, both on 04/02/2005.What shall be the purchase price determined now of Cons Finvest and Jindal Photo and what the holding period of both these companies shall be considered for the purpose of STCL/STCG? — Vinod Kumar A: 1. The modified Sec. 94(7) has been made effective from April 1, 2004. The following four conditions are simultaneously satisfied: 1. The purchase has been within three months before the record date, 2. The sale has been within three months in the case of shares and nine months in the case of units, after the record date 3. The dividend is tax-free and 4. The sale results in a loss (naturally, short-term). In that case, the loss arising on the sale to the extent it does not exceed the exempt income has to be ignored. Since you are selling the units after nine months and before 12 months you will be entitled to claim the STCL and setoff the same against any STCG or taxable LTCG. 2. The newly-inserted Sec. 94(8) deals with bonus stripping, only of MFs and not equities. You shall be eligible to claim the short-term loss incurred on sale of original shares. 3. It is better if you approach the company, Jindal Photo for the ratio of value split. Normally the cost of your original shares (Rs 37,200) should be split proportionately on the basis of the distribution of the assets between the two companies. Only the company, as happened in the case of L&T, can supply this ratio.
PPF account of minor
Q: I have a query regarding PPF. I have my own PPF account and one account in the name of my minor daughter. According to what I understood from a similar question in your column in The Tribune, one can make a total contribution of Rs 70,000 per year, and this sum can be distributed between the two accounts, but the aggregate in both accounts must not exceed Rs 70,000 since my daughter’s income is clubbed with mine. This is in accordance with rules laid down by both income tax and PPF authorities. In another column in another newspaper, the consultant, in response to a query stated that an individual cannot make a contribution to more than one PPF account. The minor must contribute to the account from her own sources of income. This means that I cannot contribute to my daughter’s PPF account. If so, can I give a gift to my minor child of Rs 70,000 per year and she deposits this subsequently in her PPF account. Of course, no income tax rebate would be claimed but the interest and security are the attractive features. If this is not correct, can a gift from grandparents be deposited in the PPF? — Ravi Matani A: The declaration in the account opening form of PPF is — “I shall adhere to the ceiling on deposits as provided for by Central Government from time to time, which is Rs 70,000 in a financial year at present together in an individual self account and account(s) on behalf of minor(s) of whom I am the guardian. In case, at any time, the said declaration is found untrue/false, no interest shall be payable to me/the subscriber on the amount of deposits found in excess of the prescribed limit.” This implies that the ceiling on the aggregate contributions is Rs 70,000 to accounts of self and all minor children… Even if an individual who is not a guardian, say the grandfather, contributes to the account of the child, but the rule of clubbing in the hands of the parent is applicable. As per ITA, contribution made for the purposes of clauses ‘i’ (LIC), ‘v’ (PPF), ‘x’ (ULIP of UTI) and ‘xi’ (Dhanaraksha of LICMF) (i) in the case of an individual, the individual, the wife or husband and any child of such individual, and (ii) in the case of a Hindu undivided family, any member thereof. is eligible for deduction u/s 80C. I am not aware of any circular issued by the authorities prohibiting contribution by an individual to the account of self and also the account of the spouse and/or minor children of the individual.
The author may be contacted at wonderlandconsultants@yahoo.com
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Aviation Notes by K.R. Wadhwaney
The
Minister of State for Civil Aviation Praful Patel has recommended Vishwapati Trivedi, a 1977 batch IAS officer, for an appointment as a full-time Chairman and Managing Director of the Indian Airlines (IA).
After clearance from the Appointment Committee of the Cabinet (ACC), the file will be sent to the Prime Minister’s Office (PMO) for final approval. The airline industry is undergoing enormous changes at the rapid speed. New foreign airlines are plying on Indian skies, which are getting crowded. Domestic skies have become exceedingly competitive as no-frills carriers are multiplying. On international routes, several carriers are offering heavy discount and facilities, including hotel accommodation, to woo passengers. The role of travel agents is being reduced. All in all, only the fittest can survive in the industry in which goings-on have become complex. The national carriers, IA and Air India have their own peculiar problems. The synergy continues to be at the lowest ebb. There is little rapport between them. Instead of being complimentary to each other, they are rivals. The talk of the merger is not feasible in this rough weather. Keeping all these and several other factors in view, the aviation analysts are of the firm belief that the IA’s welfare will continue to be safe only if it is headed by an ‘insider’ who is acquainted with the working of the industry and personnel. IA is plagued with a multitude of problems. Among them are (1) excessive expenses on over-time, (2) unwieldy staff strength, (3) heavy expenses on cockpit and cabin crews and (4) acute shortage of pilots because of indulgence of poaching by private operators. In view of the induction of new 43 aircraft in phases and increasing competition on domestic and international skies, it will be a safe bet to allow an ‘insider’ to head the airline. The recommended incumbent is a graduate from the London School of Economics and a PhD from the University of British Colombia (Canada). But going for him in the initial tenure of 10-12 months will be problematic because industry is controlled by shrewd commercial icons. In this climate, it is difficult to handle a mega-IPO exercise. Time is money. An explicable delay in construction world-class airports at Delhi and Mumbai has played havoc with twin — industries of aviation and tourism. After years of procrastination and meetings, the high-level Government Review Committee has ‘cleared’ airports project. But there are many ‘hurdles’ on road to finalising the project. Judging from the existing scenario, it appears that it will take several months before the work begins. It looks that new airports would not be functional for at least 3-4 years and, by the time, they fully function, they will be obsolete, as it happened with the Indira Gandhi International Airport (IGIA). The more the delay, the more would be the damage to these vital industries, which are money-spinning areas. These are the gateways of the country. The government has to give it top priority because success of the 2010 Commonwealth Games depends upon world class airports.
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SBI loan for Tibetans
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