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SME, agriculture sectors pin low hopes on Budget
Ericsson opens R&D facility in India
CM moots special cell to develop Baddi belt
Investor
guidance
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SME, agriculture sectors pin low hopes on Budget
New Delhi, February 25 Finance Minister P. Chidambaram has indicated to simplify the fringe benefit taxes, cut in customs and excise duties, besides enhancing the budgetary support for UPA’s flagship programmes like National Rural Employment Guarantee Scheme, Sarva Siksha Abhiyan and Urban Renewable Mission and rural programmes. The SME sector, which is struggling to compete with the dumping of cheap goods from foreign markets, especially after signing of the FTAs with Sri Lanka, Thailand and other countries has demanded a “ long-term policy for its growth and employment generation.” Mr Joginder Kumar, President, Federation of Tiny and Small Industries of India said: “The levy of service tax on SME products, like accessories of cycle and cycle-rickshaws and sewing machines, should be withdrawn as the manufacturers pay 16 per cent excise duty and service providers pay excise duty on raw materials. But they cannot claim Cenvat, as the end products are exempted. It is tantamount to double taxation.” While on one hand, the government is setting up corpus of Rs 1,44,000 crore towards the employment guarantee scheme, on the other it is not giving due attention to the SME sector, employing over two crore persons across the country. This sector is facing severe credit crunch, high interest cost up to 12 to 15 per cent as against 7 to 8 per cent interest rate on car and housing loans. Thousands of such units have also suffered from rise in steel and diesel prices, besides cost of other inputs. The customs duty on prime steel is 5 per cent and the main producers are pressurising the government to raise it to 20 per cent. The small units have urged to keep this custom duty on prime material at the same level. This sector is apprehending that about 250 items would be de-reserved which would prove, counter productive. In the agriculture sector, despite increase in agriculture credit by 30 per cent last year, the sector is unable to show signs of revival. Unable to repay the loans taken from the financial institutions and moneylenders, over 11,000 farmers have already committed suicide. Farmer leaders said over five crore farm families are still out institutional farm credit, and the decision of the government to import wheat would have adverse impact. However, Mr Chidambaram has also indicated to reconsider the demand of agriculture sector to lower interest rates currently varying between 9 and 12 per cent. Linked to the credit, the sector is also expecting expansion of crop insurance scheme, besides more funds for irrigation projects and continuity of fertiliser credit in one form or other.
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Ericsson opens R&D facility in India
Chennai, February 25 Inaugurating the R&D facility and the global service delivery centre, Union Telecom and Communication Minister Dayanidhi Maran said Ericsson had opened its facility here just after seven months of discussion. The cold war between Finland and Sweden was a known fact, he said, urging Ericsson to consider setting up a manufacturing facility also, especially since Dr Manmohan Singh and the Prime Minister of Finland were slated to inaugurate Nokia’s new plant at Sriperumbudur near here on March 11. Pointing to the presence of many multi-nationals in Sriperumbudur area, Mr Maran attributed the creation of a proper eco-system as the reason for leading companies to consider investments there. ‘’Every one is coming to Chennai,’’ he said adding, Foxconn, a leading Taiwan based manufacturer of connectors for use in personal computers and printed circuit boards (PCB) for mobile phones, will set up $110 million plant in Chennai to manufacture mobile handset and other components. The company has also committed to manufacture mobile handset and other components at Nokia Special Economic Zone (SEZ) and develop an electronic hardware and related services in special economic zone, jointly with Sipcot and Motorola at Hi-Tech Innovation Park SEZ at Sriprumbadur near Chennai. The project is expected to generate 10,000 jobs in the state. Foxconn Chairman and CEO Terry Gou would be reaching the city on March 3 to formalise an agreement, he said. Mr Maran also announced that state-owned BSNL would invite bids for adding 60 million GSM lines envisaging an investment of over $4.5 billion.
— PTI
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CM moots special cell to develop Baddi belt
Shimla, February 25 Mr Singh disclosed this while interacting with the delegation of the PHD Chamber of Commerce and Industry here today. The delegation headed by Mr Yoginder Diwan, Chairman, HP Committee, presented the pre-Budget memorandum of the PHDCCI to him. The Chief Minister assured the delegation that basic infrastructure had been created for the development of industrial activities in the state. "The proposal to set up SADA had been mooted, keeping in view the developmental requirements of the area," he stated. He said the government would take up the matter of extension of the special industrial package up to 2013 on par with the rest of the special category states. "We will also request the Centre to connect the Baddi industrial area with a broad gauge railway line ," he said. The industrial package for Himachal Pradesh was only up to 2007, while for other states it was till 2013. Mr Virbhadra Singh said his government would take up the issue of construction and expansion of roads in the Baddi area with the Punjab and Haryana governments so that the best possible communication network could be provided in the area.
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Infrastructure, power bonds no
more lucrative
by A.N. Shanbhag Q: I am a salaried person. I am looking for long-term investment in shares as well as tax rebate in current year. Earlier in AY 2004-05 Section 88 provided for a rebate on a basic investment of Rs 70,000 and a further rebate on investment of Rs 30,000 in debentures or equity of a public company engaged in infrastructure development or power. My question is that with the removal of sectoral cap by introducing Section 80C and giving overall deduction of Rs 1 lakh from salaried income, can I invest this amount in such companies engaged in infrastructure development or power? If so, which are the companies where I can invest for a period of three years and claim tax rebate for current year? — Sanket A: Yes, the infrastructure avenue is still open but there are no schemes, which get launched, in recent times. The interest rate on such bonds was low at around 5 per cent to 5.5 per cent, fully taxable. Plus since the sectoral caps have been done away with, the avenue is no longer attractive. You may take advantage of other tax saving avenues within Section 80C such as ELSS, NSC, and life insurance etc. which now don’t have sectoral limits. Taxable Saving Bond
Q: All my queries are regarding the 8 per cent Government of India Taxable Saving Bond, 2003, scheme: 1. If there are two or three names of applicants (with anyone or survivor option), obviously no nominees then: what if the first applicant expires during the tenure of six year of the scheme. What will be the different legal clarification / procedures to be followed? Whether the second applicant will have to continue for six years compulsorily and will keep getting the interest. Will the applicant right be in order of survivor? Kindly clarify for the non-cumulative and cumulative schemes separately. 2. Applicant name is single, mode of holding is also single, Interest option is non cumulative, nomination for two persons @ 50 per cent each. My query is, if the applicant expires during the tenure of six years of the scheme: Will two nominees get separate cheques of 50 per cent each of the principle amount deposited, on producing the death certificate of the applicant or is there some other legal procedure to be followed, or will the nominees have to continue compulsorily till six years. Under the same above point two: Suppose the option selected is: Cumulative: Will the two nominees get separate cheques of 50 per cent each of the principle amount with accrued interest there on, on producing the death certificate of applicant or is there some other legal procedure. Also, I request you to furnish year wise chart of accrued cumulative interest per Rs 1,000. — V. Patwa A: The nomination facility is available only to an adult individual who is a sole or has become a sole surviving holder. Normally, in the case of joint holders, when the first holder expires, the interest and the redemption amount is paid to the second holder. However, RBI used to issue one cheque favouring all joint holders together. This used to cause problems. As per RBI/2004-05/347 dated January 15, 2005, maturity proceeds can be also in favour of one of the joint holders in whose favour all other remaining holders have executed a Power of Attorney as per the prescribed format. Interest warrants are already allowed to be issued in the name of first holder subject to obtaining of the joint holders power of attorney. In the case of nomination, the same rule would apply. As regards interest on accrual basis, the RBI has not declared the amounts. The bond holder will have to compute it and include the same in his returns. You may use the following figures: Year 1: Rs 81.60; Year 2: Rs 88.26; Year 3: Rs 95.46; Year 4: Rs 103.25; Year 5: Rs 111.68
Insurance policy
Q: I am a working professional and have got three dependents — my parents and my sister. Can I pay premium of their life insurance policies and avail tax rebate on the same? Please let me know. — Rohit A: You are not entitled to claim the deduction u/s 80C for premiums paid against the life cover of parents and sisters.
Gift to spouse
Q: I have queries relating to gifts and clubbing of income. 1) My wife and I are both NRIs. If I give a gift to my wife while overseas, and she invests this in India will her income from these investments be clubbed with my income? My wife has an irregular source of income overseas from cookery classes. I file my taxes in India too while my wife does not file her taxes in India. 2) If an overseas relative gives a gift to my wife, and she invests this amount in the above mentioned instruments, will her income from these investments be clubbed with my income? And, will the gift have to be declared to Income Tax, irrespective of whether she invests it in India now? — Sandip A: Section 64 requires the income of the wife arising out of corpus gifted from the husband to be clubbed in the hands of the husband if such income is chargeable to tax in India. There is no such provision in respect of gift from your wife’s relative as long as you or she does not give a gift back to said relative or the relative’s spouse. In other words, cross gifts attract clubbing provisions will apply.
Self-leased house
Q: I am an employee of public sector undertaking and own one residential house at the place of posting. The employer has extended facility of self-lease accommodation for said house. I have received Rs 1,840 per month during 2005-06 from my employer, which is being paid by 7th of each month in advance separately from salary. For this purpose Rs 196 per month is being deducted as licence fee from my salary. No HRA is paid in the salary. Kindly let us know as to whether the amount of Rs 1,840, less Rs196, will be taken as income under the head perquisite under Section 17(2) for computation of income tax or it is taken income from house property u/s 24 of IT Act. — S. S. Pruthi A: This is your income from house property and will be taxed accordingly. You are also enjoying the benefit of a residential house furnished by the employer and therefore, you will have to pay tax on the perquisite value thereof.
The author may be contacted at wonderlandconsultants@yahoo.com
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Aviation Notes The Indian civil aviation continues to stay mired in controversies. A ‘dead’ militant running a travel agency from Jalandhar, two buses colliding while ferrying passengers around parking bay 35 of the Indira Gandhi International Airport (IGIA), fraudulent claims by frequent fliers and a Mumbai-based private airline selling no-frills tickets without actually starting operations on the Delhi-Jaipur sector are some of the many shoddy deals that portray country’s dismal aviation health. Despite government’s steadfastness, the much-delayed work on modernisation of two international airports at Mumbai and Delhi has not begun. There are hurdles within hurdles although the authorities are aware that delay is suicidal. The physical health of several other important airports continues to be miserable. There is hardly any scheme for development because the parent body, Airports Authority of India (AAI), is virtually devoid of plans. While there is a half-hearted attempt to provide new look to the Directorate of Civil Aviation (DGCA), an uneasy calm prevails in private sector which keep announcing buying of aircraft without possessing parking bays. The fact of the matter is that airline trade has always been difficult. When skies were opened in 1992, about a dozen airlines sprang up. Majority of them closed down virtually declaring bankruptcy. There is again a mushroom growth of no-frills carriers but the situation remains complex. Kingfisher awarded
Inside nine months, Kingfisher Airlines earned another global award. This award came for ‘service excellence’. The award is meaningful as Skytrax (London) is world’s foremost passenger-based research organisation. The newly-born airline had earlier received award from the Centre for Asia Pacific Aviation in December 2005.
Summit on March 4
The Punjab government and the International Punjabi Chamber for Service Industry (IPCSI) will be holding a one-day summit on March 4 at Chandigarh to explore ways and means in the development of aviation infrastructure in the region. Many well-known aviation persons from London, Australia and Thailand are expected to attend the conference to impress upon investors that ultra-modern airports are important to achieve sustainable development.
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