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Monday,
December 30, 2002, Chandigarh, India  
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Most employees to benefit
Tisco, Reliance good picks PREPARING FOR
RETIREMENT |
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Mixed fortunes for consumers
PPF Account
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Most employees to benefit Chandigarh, December 29 If the government accepts the committee's report in toto, that is unlikely to happen, the era of tax exemptions, rebates under Section 88 and tax deductions on interest income under Section 80 L, and no tax on agricultural income will come to an end. Some economists say it will check a large portion of the flourishing black economy and result in more revenue to the government. They claim it will also result in less tax burden on the salaried class, besides improving the competitiveness of the economy. Salaried class to pay less
The Kelkar Committee has recommended two basic rates — 20 and 30 per cent— with the first slab starting only at Rs 1 lakh against Rs 50,000 now, and the second slab starting from Rs 4 lakh, against Rs 1.5 lakh now. It means that a large section of tax payers in the Rs 50,000 to Rs 1 lakh slab, will not pay income tax . Persons in the income tax bracket of Rs 1.5 lakh to Rs 2 lakh will get a relief of Rs 7,151, if the recommendations are accepted by the government. Senior citizens will also benefit from the recommendation. The exemption limit of their income is Rs 1.50 lakh. However, the committee has decided to do away with various tax exemptions, currently available to tax payers. Dr Manoj Sharma, senior economist, with the University Business School, Panjab University, says:‘‘The report is fully in tune with the economic reforms, initiated in the country a decade ago. It may affect the domestic savings, but the government's thinking is to push the growth by attracting foreign savings, and not domestic one. From this point, the policy is suicidal for the income groups, dependent on interest income. The government has not offered any social security net for this vulnerable section.’’ By proposing a 30 per cent corporate tax from 36.5 per cent, the Kelkar Committee has offered a new year gift to the corporate sector. Dr Sharma feels the service and industrial sector will benefit from the increase in demand as the middle class will not find savings anymore an attractive proposition. He claims the proposed package will also provide incentive to companies to bring out black money. The Kelkar Committee has, however, recommended that the tax incentives to software exports under Sections 10A/10B of the Income Tax Act should be withdrawn after the government thrashes out totalisation agreements with its trading partners. The financial experts say implementation of the recommendations are likely to set the capital markets on fire. For, it recommends a long standing demand of corporate sector to abolish tax on dividend distribution and long-term gains on listed stocks. Further, with decreasing incentive under Tax Saving Scheme, a section of the middle class will turn towards stocks and mutual funds, despite their inherent risks. Earn, spend and enjoy
The trading community, suffering from the recession, appreciates the proposals despite strong opposition from political circles. The Kelkar Committee has challenged the logic of offering tax exemptions for savings when banks are flooded with deposits, and the country's foreign exchange reserves have crossed $ 69 billion. According to the recommendations, tax payers can no longer obtain an exemption on interest income received from bonds, securities and debentures under Section10. However, the ceilings to the pension funds have been raised from Rs 10,000 to Rs 20,000. Market experts say the proposals basically hint at a "paradigm shift in economic thinking" at the top level. Some of the political parties may raise their voice, against one or two recommendations— which hurt their vote bank— otherwise there is a broad consensus over the report. Says an owner of a departmental store,‘‘the government has realised that most of the tax payers are now adequately saving for their own future needs. There is no need to offer them any rebate on these savings. They should be rather encouraged to spend more to boost the economy. In case of slowdown of economy, the government can bank upon external investments.’’ Bankers and construction companies, however, apprehend that Kelkar's proposal to reduce the exemption limit on housing loan interest from Rs 1.5 lakh to Rs 50,000 will severely affect the housing sector. It had gained momentum in recent past. It was one of the sectors which had shown above average results. Mr Manoj Kohli, a chartered accountant, says,‘‘the government should review this proposal as it will not only affect
the sector, but also the strong vote bank of the party. ’’ The banks have also decided to oppose this recommendation in particular. Implications for farm sector
Neither economists nor farmer organisations are surprised with the recommendations to tax the agricultural income. However, the moot point is, say economists, who will bell the cat. In the given circumstances, no government has the courage to tax its growing sector. Dr Manoj Sharma, agrees,‘‘ There is a strong need to tax the agriculture income as companies and individuals are using it as an excuse to save the tax. Further, a section in the rural area is enjoying much higher standard of living without paying a penny to the state exchequer.’’ The financial experts point out that by suggesting to do away with the excise exemption currently given to butter, cheese, edible oils, including vanaspati, processed foods and vegetables and meat, the panel has touched the "holy" sector.
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by J.C. Anand Tisco, Reliance good picks IN anticipation of the Kelkar Committee’s recommendations, the stock market had welcomed them by a steady rise in market indices. Sensex closed at 3398 points on last week’s Friday when the market closed. This was not only higher by 55 points during the last fortnight but it was 8-month high recording of the
Sensex. The important question, however, is how good are Kelkar Committee’s recommendations? For the stock market these are
favourable. According to these recommendations dividend-income from listed companies will be tax-free. Long term capital gain will be non-taxable. However, the 20 per cent tax on short-term capital gains derived by the mutual funds has been imposed. These recommendations relating to no-tax on dividend income and long-term capital gains will hit direct tax collections. But the corporate sector will have to pay more. Though the corporate tax has been reduced from 36 per cent to 30 per cent and there will be no surcharge imposition but certain changes made in the depreciation rates will impose a larger burden on the sector. According to an analysis of 1334 companies made by the Revenue Department, the total tax collection from the corporate sector will jump by Rs 10,762 crore. The only possible hurdles could be the US attack on Iraq and the unfavourable monsoon season next year. However, investors are clear gainers. Individual investors who derive their income from bank interest will be loser. Almost all tax exemptions at present available under Sections 80 and 88 will no longer be available under these recommendations. Standard deduction available for those in service and tax exemptions of Rs 5,000 to women tax payers will also go. It is possible, however, that some of these exemptions which Kelkar seeks to abolish may be restored in a diluted form. During the last fortnight some pharma companies have been hit because of revision in the prices of vitamin and some other medicines. Glaxo share was quoted at Rs 306 on last Friday. Larsen and Toubro was up at Rs 207 on the report that the four financial institutions are likely to respond favourably to Birla’s proposal of demerging the cement sector of Larsen and Toubro as proposed by
Birla. The stock market is bound to gain in case these proposals are accepted and incorporated in the budget. Investments in the shares of listed companies will be the best form of investments. In other words the investment in bank deposits and post offices will have diluted returns. With all exemptions under Section 80 and 88 gone investable funds are bound to flow to the stock market. It is the time that investments should be made in good companies which have sound managements and good prospects. Tisco (which is likely to raise steel price soon), Reliance and some top software companies are good for investment. |
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PREPARING FOR
RETIREMENT Ludhiana, December 29 Plan your child's future Unfortunately, due to an unsound planning many people retire while their children are still unsettled in life. The financial requirements of children arise at a time when the parents are not sound financially due to the post-retirement fall in income. For such people a well- timed investment-cum-protection plan covering their children can be a life saver. Equally important, if not more, is planning the financial security of one's children in case something unfortunate happens to parents. Treasure Plus launched Aviva Life Insurance, one of the oldest insurance companies in the world, but a new entrant in the Indian market, recently launched an investment-cum- protection plan on the Christmas eve in alliance with the ABN Amro Bank. Part of its Bancassurance plans "Treasure Plus" focuses on children of the bank's customers and offers an inbuilt life insurance cover, with accidental, non-accidental and permanent disability cover. Customer care with perks With the competition, most service sector organisations are devising methods to add on more and more perks for their customers. Most credit cards today come with an insurance cover for the principal account holder and sometimes other family members too as a small additional cost. And now the ABN Amro Bank has tied up with Aviva Life Insurance to cover the bank existing clients and new customers between ages 18 and 50 years. Flexible terms and no medical tests, the "Treasure Plus" comes with a tenure of 10, 15, and 20 years and at present the product does not require customer to undergo any medical tests and the payment of premium can be made directly through customers' savings bank account on a monthly, quarterly, semi-annually, or annual basis ranging between Rs 1,000 and Rs 4,000 depending on the various chosen options. Tax-free wealth The Treasure Plus, first of its kind, aims at creating tax-free wealth by parents for their children that can be used for the child's higher education, marriage or towards financing the child's future needs. All in a manner that is simple and hassle-free. Not first Bancassurance scheme Aviva Life Insurance has taken the first step of launching its schemes through banks. Earlier in December, the Aviva Insurance announced that its products would be available through the Lakshmi Vilas Bank. The Aviva Insurance has also introduced CorporateLife, a group term insurance product that is made available on option to the bank's customers availing of a housing loan from the LakshmiVilas Bank. In addition, EasyLife Plus, a simple regular savings plan with the benefit of life protection has also been made available to the bank's customers. Canara
Bank too a partner Aviva has also tied up with the Canara Bank to distribute its various products through various branches of the bank all over the country. By January, Aviva products will be available in almost 50 branches of the Canara Bank, apart from the Lakshmi Vilas Bank and the ABN Amro Bank. The Aviva products include the whole life and endowment products, group products, creditor products, as well as single premium savings and protection plans to the bank's customers. The product portfolio being made available to customers of Canara Bank will be based on the profile and requirements of the bank's customers. |
by Pushpa Girimaji Mixed fortunes for consumers AS 2002 draws to a close, it's time for a total recall and review of the year gone by from a consumer's perspective. As the events — both good and bad— of 2002 unfold, what stands out are the two tragic railway accidents—the derailment of the Hyderabad-Bangalore Express on
December 21 and that of the prestigious Kolkata-New Delhi Rajdhani Express a few months earlier. Given the dismal safety record of the Railways, accidents caused by the negligence of the railway staff or poor infrastructure maintenance, are not rare. But going by the preliminary investigations, both these accidents were caused by sabotage. In other words, the year 2002 brought an additional focus on rail safety— the need for the Railways to put in place substantial measures to prevent such acts of sabotage. December also brought to the fore the problem of corruption in the delivery of essential services. An all-India survey, conducted by the Tranparency International(India) and ORG-Marg and released on December 17, showed that consumers in India paid an estimated Rs 26,728 crore in bribe for various services, including power, health and education. The exploitation of consumers by those who provide essential services is nothing new, but the study put a figure on the extent of the problem. But what shocked the entire nation was the huge haul of fake medicines unearthed by the police. Fakes are not new to consumers, but the raids conducted by the police in May, 2002, on three medicine manufacturing units in Delhi, Haryana and Uttar Pradesh unearthed 662 kg of finished medicines and 1000 kg of raw materials kept ready for use. The raids exposed, perhaps for the first time, the magnitude of the problem and showed up the failure of drug control agencies in preventing the manufacture and sale of such sub-standard medicines. There were analgesics, antibiotics, antacids and steroids and they all carried the brand names of reputed pharmaceutical companies. While in respect of food and drugs, the problem lay with poor enforcement, in case of essential household electrical goods and cement, it was the delay on the part of the government in notifying two new orders that put consumer interest in jeopardy. To protect consumers from sub-standard and hazardous electrical goods, the government had brought certain electrical appliances and accessories under the mandatory ISI quality certification through quality control orders issued under the Essential Commodities Act. A similar order also protected consumers from sub-standard cement. However, in February the Ministry of Consumer Affairs removed certain items, including household electrical goods and cement, from the list of essential commodities. Consequent to this, fresh orders were required to be notified to replace the earlier ones, but the government continued to dilly dally, putting a big question mark on the safety of these products sold in the market. It was not at all bad news however. After a long wait of nearly 10 years, the amendments to the Consumer Protection Act finally came through. The comprehensive amendment Bill, passed by both Houses, received the President's assent on December 17. These amendments, aimed at overcoming the innumerable lacunae felt in the Act of 1986, are expected to strengthen the consumer justice system envisaged under the Act. The year 2002 also had its share of some good consumer court orders that brought cheer to consumers. Perhaps the most significant among them was the order giving consumer the right to haul up airlines before a consumer court for any loss or injury caused on account of the negligence of its agents. One of the most significant gains of 2002, however, was the reduction in telecommunication tariffs. It took a long time coming but finally consumers could savour the benefits of the entry of private players and the ensuing competition in the telecommunication sector. The STD and ISD rates fell by over 60 per cent and 40 per cent. Things could only get better in the coming year with more choices and better quality of service at more reasonable rates. In the air transport sector too, there were considerable consumer gains with the airlines offering highly reduced fairs to those who booked their tickets in advance. Of course, this came about not so much on account of competition but on account of the empty seats caused by economic downturn and the negative travel advisories issued by several countries in June, fearing a war between India and Pakistan. However, the "book in advance and pay less" schemes continued during the year, offering those who could plan their travel in advance, an opportunity to travel at a much lower fare. All in all, when one looks back, 2002 has been a year of mixed fortunes. Let's hope that 2003 will be a better and a safer year for the consumer. |
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by R.N. Lakhotia PPF Account Q: I opened my PPF A/c in the SBI, on June 28, 1982 and got it extended for five years, thus 20 years has been completed on June 28, 02. I want to know when the payment falls due either after June 28, 02 or after March 31, 03, so that I apply for refund and close the account? Since I have not deposited any amount in this financial year so should I deposit minimum amount to keep account as continuous? Can I deposit up to Rs 60,000 now, for getting tax benefits? I want the payment by closing the account as early as possible.
Madhu Mittal, Ludhiana Ans: You may contact the SBI for further details. However, you can now withdraw the amount as the period of 15 years and extension is complete. So long as the PPF account continues you can make deposit in the account and avail yourself of the tax rebate. Leave encashment Q: “The amount received as “Leave Encashment” after retirement is tax exempted up to Rs 2.40 lakh or 3 lakh for the financial year 2002-03.” Kanwar R.S., Patiala Ans: The exempt amount of leave encashment for A.Y. 2003-04 is Rs 3
lakh. |
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Inflation static FII net buyers Rupee firm Escorts eyes pact HPL meeting |
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