New Delhi, May 20
Undeterred by the pressure of the Left parties, Finance Minister P. Chidambaram today ruled out to reintroduce long term capital gains tax on equity transactions or unilaterally reviewing the double tax avoidance treaty with Mauritius.

“There is no intention to reintroduce long-term capital gains tax on securities traded on the stock market... The issue of Double Taxation Avoidance Agreement has been debated threadbare. Due to host of economic, political and diplomatic reasons, the treaty cannot be reviewed unilaterally,” he said addressing a press conference today.

After the fall in BSE Sensex by about 1,300 points this week, the CPM had demanded that the government reintroduce long-term capital gains and dividend tax, apart from reviewing the DTAA with Mauritius, which was being increasingly used by FIIs for avoiding tax.

The bear run in the market was partially due to heavy selling by Foreign Institutional Investors (FIIs) on fears that the Central Board of Direct Taxes may levy higher tax from them.

He said on Thursday that no foreign institutional investor (FII) has been assessed as a trader, scotching market talk that tax rates could be raised for them.

The FII withdrawal seems to have prompted the Finance Minister to clarify that no FIIs would be taxed and the fears were based on “uninformed reporting.”

He also allayed apprehensions about the economy, saying economic fundamentals were strong and they did not undergo any change recently.

“The foreign exchange reserves were at $163 billion, inflation reined in below 4 per cent for several weeks, manufacturing sector is growing at over 9 per cent and monsoon has set in, which is expected to be good,” he said.

The markets had tanked nearly 1,300 points on Thursday and Friday, as panicky investors joined FIIs in selling activity.

The Finance Minister said the stock markets go beyond Sensex stocks. “In the last four trading sessions, 420 stocks have risen adding more than Rs 5,200 crore to their market capitalisation.”

He said FIIs influence 10 per cent of volumes in derivatives market and 10 per cent of volumes in cash market.

“FIIs play a significant role in India like in any other market. I believe mutual funds also play an equally important role,” Mr Chidambaram said.

The minister also said: “India growth story continues to be a growth story. It goes beyond stock markets and includes agriculture, services and manufacturing”.

Infrastructure sector

Earlier addressing the state chief secretaries, he said, India’s deficient infrastructure, including roads, power plants and ports, cuts economic growth by as much as 2 percentage points each year.

“India’s infrastructure needs cannot be funded by government’s budgetary resources alone,” Mr Chidambaram said urging them to emphasise on public-privatisation model to finance infrastructure projects.

“One has to reach out to private sector, private savings to fund such ambitious projects.”

Mr Chidambaram said India needs $48 billion by 2012 to build new highways and widen existing ones. Airport modernization would require Rs 400 billion by 2010 while another Rs 500 billion need to be invested to improve the country’s seaports by 2012.

New Delhi, May 20
The Planning Commission today favoured a hike in fuel prices to keep pace with the rising international oil prices.

"Its simply not sustainable to enter into an era of high oil prices without charging economic price," Planning Commission Deputy Chairman Montek Singh Ahluwalia said on the sidelines of the conference of secretaries.

"When we do that (price hike), we will have to identify the customers who need to be protected. The Commission is sure of a few oil products' sensitive nature and price hike there has to be reasonable.

"Subsidies, too, have to be reasonable related to other forms of subsidies... it is a complex balance," he said, while seeking tax cuts for the oil companies to reduce the revenue losses, which they are suffering. — PTI 

Chandigarh, May 20
The Haryana State Industrial Development Corporation (HSIDC) has decided to expand its industrial growth centre at Bawal in a phased manner to meet the demand for industrial plots from multinational companies and domestic corporates.

Stating this here today, a spokesman of the corporation said an additional 1,000 acres land in Rewari district on NH 8 has been acquired by invoking the urgency clause of the Land Acquisition Act. This was necessitated not only to meet the growing demand for industrial plots at Bawal, but also to counter the competition from neighbouring Rajasthan. Two industrial complexes of Rajasthan — Bhiwadi and Neemrana — were in close proximity to Bawal.

He said the first phase of Bawal growth centre was set up 15 years ago under the growth centre scheme of the Central Government. 

New Delhi, May 20
The patriarch of the Rs 15-billion Dabur India group Ratan Chand Burman died here late Friday after a prolonged illness, family sources said on Saturday.

The 81-year-old Burman was the grandson of the group’s founder S.K. Burman and was its chairman in the ‘80s. Under his leadership, the Dabur group, which was synonymous with traditional ayurvedic medicines, modernised and diversified its business.

Britain’s Eastern Eye, a weekly newspaper for South Asians, had ranked Burman among India’s 10 top billionaires, with an estimated wealth of around Rs.18 billion ($400 million). — IANS

Q : I have one housing loan on my name. I wanted to buy a separate flat/house for my parents as our present flat area is very small. But as I will pay the EMI’s, will I be the owner of the flat. I will not receive any income from both my flats.

Will I be eligible for tax benefits from both the housing loans?

— Samir

Q : I have inherited property in India from my parents. I am a US citizen. (1) Can I sell the property? (2) What is tax rate (3) Can I deposit in NRE account. (4) Any other legal implication. Please advise.

— Parthiv

A : 1. You can sell the property without requiring permission to do so from any authority in India. You will have to pay tax on capital gains. The tax rate will mostly be 20.4 pc.

2. Circular 67/2003-RB dt 13.1.03 supplemented by the RBI Master Circular dt 1.7.05 makes it possible for an NRI or a PIO to remit as much as $1 million per calendar year for bona fide purposes out of the sale proceeds of assets held in NRO accounts. He should have acquired the assets in question, out of rupee resources when he was in India or by way of legacy/inheritance from a person who was a resident in India.

The following funds/assets are eligible for remittance :

a) Sale proceeds of immovable property.

b) Assets acquired by way of Inheritance/legacy.

c) Deposit with a bank or a firm or a company.

d) Provident fund balance or superannuation benefits.

e) Amount of claim or maturity proceeds of insurance policy.

f) Sale proceeds of shares and securities.

g) Any other asset held in India, in accordance with the FEMA.

In the case of immovable property acquired out of rupee funds, the remittance of sale proceeds is available subject to the condition that the property should have been held for a minimum period of 10 years. If such a property acquired out of Rupee funds is sold after being held for less than 10 years, remittance can be made, if the sale proceeds have been held by the NRI for the balance period in NRO Account (savings or term deposits) or in any other eligible security, provided such investment is traced to the sale proceeds of the immovable property.

For remittance of sale proceeds of assets, both financial and immovable property acquired by way of inheritance/legacy or settlement from a person who was Resident, there is no lock-in. The remittance can be effected only when it is sought for all bonafide purposes to the satisfaction of the AD. An undertaking by the remitter and certificate by a chartered accountant in the format prescribed by CBDT vide their Circular 10/2002 dt 9.10.02 has to be produced.

It is necessary to file Form-A2, FEMA declaration, and certificate from an accountant, and undertaking for payment of income tax, in the specified format. A no-objection certificate from the income tax department will be useful, but not necessary.

Q : Can the short-term capital gains (STCG) generated out of land, building or any other capital asset be set off against short-term losses booked under equity-related/debt-based mutual funds/shares.

2. Can long-term capital gains (LTCG) by the sale of land, building/capital asset be set off against short-term losses booked under equity related/debt-based mutual funds/shares.

— Narendra

A : 1. STCG can be setoff against STCL, whatever be the source.

2. LTCG which is not exempt can be setoff against STCL from whatever source.

3. Equity-based MF schemes are governed differently from the debt-based schemes. In both cases, dividend is tax-free in the hands of the investor. However, there is a dividend distribution tax @14.025 pc payable by the MF directly to the exchequer in the case of debt-based whereas the equity-based are exempt from this tax.

Equity-based schemes are also exempt from long-term capital gains tax. The short-term capital gains are taxed @10 pc only.

Q : In one your answers, you have mentioned that only IPI form is required now for having invested in immoveable property.

You have also said that a resident outside India who has been permitted by the RBI to establish a branch or office or place of business in India (excluding a liaison office), can acquire property.

Now, will you please let me know how to get permission for starting a business activity and doing business in India while remaining NRI.

— Rajesh Vashishat,

A : If an NRI desires to purchase a real estate property in normal course, he does not need to file form-IPI.

A person resident outside India, who has a branch, office or other place of business (excluding a liaison office) for carrying out his business activity with requisite approvals in India may acquire an immovable property in India which is necessary for or incidental to carrying out such activity provided that all applicable laws, rules, regulations or directions for the time being in force are duly complied with. The entity/concerned person would have to file a declaration in form IPI with the Reserve Bank, within 90 days from the date of such acquisition. The non-resident is eligible to transfer by way of mortgage the said immovable property to an authorised dealer as a security for any borrowing.

You may apply to the Chief General Manager, Reserve Bank of India, Exchange Control Department, Central Office (External Payments Division), Amar Building, Fort, Mumbai 400 001.

The author may be contacted at wonderlandconsultants@yahoo.com