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India, Pak, Iran to go ahead with pipeline proposal
SEBI may rate public issues
Orascom may not get FIPB nod for stake in Hutch
IRDA cautions against tendering for insurance cover
Paswan keeps steel regulator proposal in abeyance
Rolls-Royce, Kawasaki to develop Airbus engine
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Market Update
Tax Advice
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India, Pak, Iran to go ahead with pipeline proposal
Dubai, April 23 Oil ministers of India, Pakistan and Iran, currently in Doha to attend a global energy forum, held talks yesterday on the issue. "All three of us have agreed to go ahead with the pipeline proposal," Petroleum and Natural Gas Minister Murli Deora was quoted as saying by The Peninsula newspaper after he held talks with his counterparts Amanullah Khan Jadoon of Pakistan and Kazem Vaziri of Iran. Mr Deora said a meeting at the level of Secretaries among the three countries would be held shortly in Karachi. Earlier, the Pakistani minister had said the meeting was likely to be held in the first week of May. The three countries had conducted their own studies and the cost of the project was initially estimated at $7 billion. Mr Jadoon said Pakistan was determined to work with India to make the proposed Iran-India gas pipeline passing through its territories a reality. "We have had enough of misgivings in the past 60 years. We must leave all this behind and work together for the future of our two countries." On the US opposition, Mr Jaddon said: "We (Pakistan and India) have to look for our interest. We will do whatever is best for us." About 800 km of the proposed 2,100-km pipeline linking Iran and India would pass through Pakistan. The three countries involved have separately conducted feasibility studies on the proposed venture, Mr Jadoon said. "We have appointed legal and financial consultants as there are a lot of technical studies to be carried out."
— PTI
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SEBI may rate public issues
New Delhi, April 23 The project would be taken up on a pilot basis for a year and it would be financed through the investment protection fund in stock exchanges, a Finance Ministry official said. The ratings would be optional for the companies but once they agreed, the companies will have to disclose them in the offer documents. The financing is now to be done from the investment protection fund after the Ministry of Company Affairs rejected the proposal to fund the pilot project from its Investor Education and Protection Fund as its purpose was something else. An alternative source of funding was also required in the face of apprehensions that such grading would raise the costs of IPOs, the official said. There was, however, no proposal for compulsory rating of IPOs since nowhere in the world public issues of equities were rated this way. It was the debt, which was rated worldwide this way and not equities, he said. The official also dismissed speculation that the Finance Ministry had shot down the proposal. In fact, it was a SEBI decision which did not require the ministry’s approval. The proposal was mooted by SEBI to ensure that investors don’t get confused by an array of public issues hitting the market. A record Rs 45,000 crore of public issues are expected to hit the market this calendar year, according to market think tank Prime Database. Real estate major DLF will come out with a mega IPO of more than Rs 10,500 crore some time in June. Besides, Ansals, Air Deccan, Kingfisher, Sun TV, Parsvanath, Power Finance Corporation are expected to hit the capital market with their issues. Analysts doubt utility of the SEBI move, saying that the equity investment by nature is a risky business. No rating agency could for sure say how the issues are going to fare in future, they added. As such, the disclosure norms set by SEBI provide sufficient guidance to investors to know about the company. The ratings would only confuse the investors instead of enlightening them, the analysts
added. — PTI
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Orascom may not get FIPB nod for stake in Hutch
New Delhi, April 23 Orascom also holds 19.3 per cent equity in Hutch Telecom International Ltd (HTIL). FIPB sources said under the given circumstances, even if Orascom's acquisition of 19.3 per cent equity in HTIL is not treated as a threat to national security per se, the FDI guidelines in telecom (issued by Ministry of Commerce and Industry) very clearly states that "FIPB approval shall be required for FDI in the licensee company/ Indian promoters/ investment companies, including their holding companies, if it has a bearing on the overall ceiling of 74 per cent. While approving the investment proposals, FIPB shall take note that investment is not coming from unfriendly countries." Orascom is a dominant mobile operator in Pakistan and Bangladesh. No decision has yet been taken on this issue by FIPB, but a decision either way would trigger enough heat. In case the board decides to reject Orascom's indirect stake of 10 per cent in Hutch Essar, it will have to come with a clear instruction that whether any prior regulatory approval is required if an investment is made in the international promoter company who is not actually the licensee in India. Earlier, National Security Adviser M.K. Narayanan had expressed similar concerns and had written to Department of Telecom to look into the matter and it is after that DoT sought clarifications from FIPB whether HTIL, an investor in Hutch Essar, required an FIPB approval prior to selling a minority stake to Orascom, an Egyptian company.
— PTI
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IRDA cautions against tendering for insurance cover
New Delhi, April 23 “Insurance cannot be transacted like the sale of a commodity,” IRDA Chairman C. S. Rao has said in a circular to all CEOs of general insurance companies .Proper underwriting calls for the insurer to fully understand the needs of the client so that it could ask for and receive all information for supporting a technically sound rating of the covers required, it said. The regulator has found that a practice of calling for tenders for insurance cover by some clients has been developed in which the insurer is required to pay some amount for buying the tender documents and also to pay an earnest money deposit. It has also been reported that in some cases clients invite bidding through the Internet where the portal is kept open for a short time wherein insurers are expected to compete on price. “Insurers should not canvass business through a non- participative process of tendering or e-bidding,” IRDA warned. IRDA could ask erring insurers to explain the process of quoting terms for a particular client and to technically justify the premium quoted for covers. Limiting competition to price alone is against interests of the client and since the policyholders’ fund ultimately is affected by the results of the business, it is generally against their interests, the circular said. IRDA has advised insurers to inform clients seeking to use the tender process about the impropriety of that system for insurance business and offer to provide competitive quotations for the covers best suited to the needs of the client after obtaining all required underwriting
information.— PTI
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Paswan keeps steel regulator proposal in abeyance
Kolkata, April 23 “We were thinking to bring a steel regulator in the lines of the Telecom Regulatory Authority of India, but the matter has been put in abeyance for the time being due to lack of consensus,” Union Steel Minister Ramvilas Paswan said. The idea of a regulator was mooted by the government to check the pricing of steel after an unprecedented hike in the price of steel in the recent past. Earlier, it was found that when the Steel Ministry instructed the Steel Authority of India to reduce prices, private steel players had declined to follow suit and the difference was enjoyed by the middlemen. The benefit could not reach the consumer. The SAIL market share is below 30 per cent of the total steel production of the country. Asked about the current rise in steel prices, Mr Paswan said that the ministry was keeping close tab on the situation and would intervene if the rise was found to be
abnormal. — PTI
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Rolls-Royce, Kawasaki to develop Airbus engine
Tokyo, April 23 The two companies will decide on a basic design of the new engine, Trent1700, by the end of 2007, the Nihon Keizai Shimbun said. The new engine, based on Trent1000, also developed by Kawasaki and Rolls-Royce, will cost around $128 million, the business daily said. Kawasaki is expected to supply parts, including an air-pressure system, the newspaper said, adding that the two also planned to jointly procure raw materials needed for the engine. The A350 is scheduled to begin service in 2010, two years later than the launch of Boeing’s 787 Dreamliner. Airbus is owned 80 per cent by the European Aeronautic Defence and Space Company and 20 per cent by BAE Systems of
Britain. — AFP
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Market Update
The stock markets have continued to move northwards. Sensex crossed another landmark last week when it touched 12,000. The Indian markets gained 7 per cent last week, the largest since the current bull run began in April, 2003. The upsurge was fuelled by some strong fourth quarter results and a healthy guidance by software major Infosys. The market sentiment was also aided by the RBI keeping short-term interest rates unchanged in contrast to the market expectation of a 25 basis points hike in rates.
Currently, Sensex trades at almost 22 times its trailing 12-month earnings, which is rather unattractive from the investment point of view, more so for global investors, considering the fact that many other emerging markets are available at better valuations despite their lower growth forecasts. Volatility may remain high this week ahead of the expiry of April, 2006, derivative contracts. April contracts expire this Thursday (April 27). The outstanding positions in the derivatives segment are large. The near-term trend will be dictated by how the remaining fourth quarter results shape up.
Pfizer
Pfizer India has unveiled plans for stepping up the pace of its new product launches, which will be the key growth-driver. The company has already launched three of its parent’s products in the Indian market in the past three months. The launched drugs include caduet, lyrica and viagra. The introduction of the product patent law in India is a positive sign, especially for the MNC pharma companies. Pfizer India plans to launch its first patented product in the country 2008 onwards. Pfizer India is aiming to align its portfolio with that of its global parent. The company has identified seven strategic business units (SBUs) on the basis of the core therapeutic areas. Another important step taken by the company is to reduce the time gap between the global product launch and the Indian launches to six months and one year. I had recommended a buy on Pfizer in February, 2005, at Rs 650. The stock has since then appreciated by over 62 per cent and is currently trading at Rs 1,056. I believe that the new product launches will take time to capture a significant market share. The investor may continue to hold the Pfizer stock for a little longer term.
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Tax Advice
Q. (i) I have taken loan from bank for renovation & repair amounting to Rs 4 lakh. Can I avail tax rebate or not?
(ii) My son is studying abroad, can I take rebate on his fee. — Baldev Singh Gill A. The answers to your queries are as under: (i) The tax benefit is available only in respect of interest on loan taken for renovation and repair of the house. The amount of interest payable on such loan would be deductible from the income from house property even if the renovation and the repair work has been carried out in respect of a self-occupied property. However in such a case the deductible amount is limited to a sum of Rs 30,000. (ii) Section 80C of the Act provides for the deduction of tuition fee etc. paid for any two of the children of assessee. However, such deduction is allowable for tuition fee paid to any university, college, school or other educational institution situated within India. Accordingly, you will not be entitled to any deduction in respect of tuition fee paid or payable to an institution which is not situated in India.
PF dues
Q. My son was working as an Asstt. Manager in a company for the past about 4 years and in March 2005 he had quit his job from the old company and had joined a new company. While making the final payment of superannuation fund and provident fund, the former company has deducted income tax at source. Please advise if the action of the former company is justified and legal if tax was deductible at source from final payment of superannuation and provident fund. If yes, please also intimate the rate at which it was to be deducted. Simultaneously, it may please also be advised if the amount of final payment of the said funds is to be accounted for in income for the year 2005-06. — G.D. Gupta, Jagadhri A. The inclusion of the amount of final payment of superannuation and provident fund in your total income will be dependant on the relevant Rules of the company which have been framed with regard to the superannuation and provident fund. In view of the details in this regard not being available in the query, it is not possible to ascertain whether the action of the employer in deducting tax at source from the final payments of superannuation and provident fund was correct.
Tax calculation
Q. I am lecturer in engineering college and gets salary approx Rs 2 lakh. I have purchased a house for Rs 10 lakh with a PNB Loan of Rs 8 lakh, EMI Rs 7,300, Annual Interest approx Rs 5,000 p.m. I am staying in Government quarter in the campus in Punjab. My husband, who is in private job, owns no other property. I have given the house on rent @ 3000 p.m. Please advise regarding tax calculation: (a) income from rent Rs 36,000/- P.A. (b) rebate due to interest paid on loan approx. Rs 60,000 P.A. (c) rebate reg. principal amount paid maybe Rs 30,000 or more P.A. — A. Mittal, Kurukshetra A. The rental income of Rs 3,000 per month will be taxable in your hands as income from house property, the computation in respect thereof would be made by deducting the amount of house tax from the total rental received by you. Out of the net rental, a sum being of 30 per cent of such net rental would be allowed as a statutory deduction. Apart from the above statutory deduction, the amount of interest paid on loan raised for the acquisition of house would also be deductible from such net annual rental. Any payment towards the repayment of amount borrowed for purposes of purchase or construction of house would be deductible from your total income in accordance with the provisions of Section 80C of the Act.
Tuition fee
Q. My two children are studying in different engineering colleges. Tuition Fee of each child is Rs 64,000 per annum. How much rebate will I get in income tax for that. My total salary is Rs 2,30,000 per annum, GPF contribution is Rs 24,000 per annum. — Nirbhai Singh, Sangrur A. The deduction in respect of tuition fee allowable under Section 80C of the Act is restricted for any two children of the individual seeking the deduction. The deduction under Section 80C of the Act is capped at an aggregate amount of Rs 1 lac. Accordingly, in your case the tuition fee and GPF contribution to the extent of Rs 1 lakh would be deductible from your gross salary of Rs 2,30,000.
Standard deduction
Q. I seek your advice on the following for Financial Year 2005-06. 1. Whether the standard deduction for salaried persons/pensioners have been totally abolished? 2. Whether interest income on Bank/PO, time deposits under Section 80L up to Rs 12,000 totally withdrawn? 3. What types of deposit schemes have been included up to a maximum of Rs 1 lakh for rebate under the Income-tax. 4. Whether LTC, when paid, is also clubbed in total gross income for Income-tax purpose or not. — Rawinder Singh, Patiala A. The answers to your queries are as under: 1. The standard deduction as well as the exemption under Section 80L have been withdrawn by the Finance Act 2005 effective from assessment year 2006-07. 2. The deposit schemes which were covered earlier under Section 88 of the Act have now been covered under Section 80C of the Act. 3. According to the present scheme of things, a deduction up to Rs 1 lakh is allowable from total income under Section 80C of the Act as against the rebate from the Income-tax allowable under Section 88 of the Act. 4. There is no change with regard to the exemption of amount received by an employee towards leave travel concession. The exemption in this respect is provided in Section 10(5) of the Act and is allowable in accordance with the provisions of Rule 2B of the Rules.
Tax liability
Q. I am a government employee. My total salary from all sources is Rs 2,20,000 per annum. My total subscription towards GPF is Rs 18,000. My house loan repayment is Rs 8,000 per month. Kindly let me know my tax liability as per the new slab and sections for the assessment year 2006-07. — Devinder Pal Singh, Ludhiana A. On the basis of the figures given by you, the total taxable income would be (Rs 2,20,000-1,00,000) Rs 1,20,000 on which a total tax (including education cess) would work out at Rs 2,040. The deduction in respect of GPF and house loan repayments are limited to Rs 1,00,000 only in accordance with the provisions of Section 80C of the Act. Accordingly, as against the contribution/ repayment aggregating to Rs 1,14,000, the deduction has been taken at Rs 1,00,000
only.
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