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RBI may hike bank rate, feel bankers
CII for greater Indo-Japan ties
Exporters upbeat, says survey
Market update
Tax advice |
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Form H continuity underscored
Intel bounty for old magazine
IPCL letters on Anil have dichotomy: BSE
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RBI may hike bank rate, feel bankers
Mumbai, April 24 While the central bank would not like to disturb the credit pick-up by corporates for the development of the core economic sector, top officials from commercial banks feel that the RBI might go for 0.25 per cent upward revision in the bank rate in the face of the rising interest rates in the USA and to counter the higher inflationary expectation in the economy. The central bank may leave signal rates like the reverse repo and cash reserve ratio (CRR) unchanged while hiking the bank rate by 25 basis points to signal the hardening of interest rates. While the current reverse repo rate is at 4.75 per cent, the bank rate is at 6 per cent and CRR at 5 per cent. A section of bank analysts felt that a change in the bank rate was a remote possibility since such changes would have a cascading effect in the interest rate structure in the medium term and on bonds and money market in the immediate term. UTI Bank’s P Mukherjee said that there was no need for upwardly revising the bank rate in the current situation where the inflation rate was under control at 5.5-6.0 per cent. The liquidity in the market was adequate to take care of the growing demand for bank credit. The average amount going into the liquidity adjustment
facility (LAF) was around Rs 35,000 crore, he noted. As the global oil prices hike through the US dollar 52 per barrel mark, some bankers said that the RBI might go for a minor revision, both in the bank rate and a cut in the CRR, in order to counter the inflationary pressure in the economy following increases in prices of oil. This decision might emerge as about 70 per cent of India’s energy requirements are met through imports, they said. Real growth, external viability, high investment rate, large capital inflows, low money growth, credit buoyancy and stable exchange rate are all favourable for the RBI Governor to take a leap into new horizons. It would be essential for the RBI to give special focus in the credit flow to the agriculture and small scale sector for sustained growth for creation of more jobs in the rural sector. Similarly, the policy announcement is likely to address the banks’ preparation for high risk-management to meet the Basel-II norms.
— UNI
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CII for greater Indo-Japan ties New Delhi, April 24 According to a paper titled ‘India-Japan: The Road Ahead’, prepared by the CII, 45 per cent of Japan’s international trade is with Asia. However, India’s share is a meagre 1 per cent of that pie, with China retaining the largest share at 34 per cent of the Asian market. The CII paper has observed that as a destination of exports, Japan’s share has been continuously declining. “It was the second largest destination of India’s exports in the early nineties, next only to the USA. It has almost halved to 2.68 per cent of India’s total exports in FY 2003-04 from 6 per cent in FY 1996-97”, the paper says. The share of Indo-Japan trade in India’s total trade has also come down from 5.7 per cent in FY 97 to 3.08 per cent in FY04. The paper has, however, stated that assuming India’s total trade maintains a CAGR of 14.29 per cent, Indo-Japan trade will have to grow at a CAGR of 27.3 per cent to achieve 6 per cent share in India’s total trade by 2010. The paper points out that India’s export basket to Japan is heavily “skewed”. The top four categories constituted more than 50 per cent of the exports in FY 2004 and the next six categories accounted for 21 per cent of the total exports to Japan. India’s top ten export commodities to Japan are natural cultured pearls, gems and jewellery, fish and crustaceans, molluscs and other aquatic invertebrates, ores, slag and ash, mineral fuels, minerals oils etc, organic chemicals, cotton, clothing accessories, nuclear reactors, opticals, photographic accessories etc. According to the CII study, some commodities like organic chemical, mineral fuels and mineral oils, nuclear reactors and boilers, optical, photographic and cinematographic equipment, electrical machinery and equipment and parts thereof have shown impressive growth in the past few years. On Japanese FDI to India, the paper has said that the sectors attracting maximum Japanese investment are transportation, telecommunications, fuel, chemicals, trading and electrical equipment.
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Exporters upbeat, says survey New Delhi, April 24 These are the findings of a survey conducted by the Industrial chamber PHDCCI among the large, medium and small exporters. It was found that though rupee appreciation had impacted their businesses and infrastructure had remained a major impediment, a new path had been paved for increased and smoother flow of exports from India due to procedural simplification and new policy initiatives enunciated in the NFTP. The PHDCCI survey registered that 70 per cent of the respondents expressed hope of good export prospects, 20 per cent felt that the prospects were excellent. Only 6 per cent felt that the export prospects were not as good as last year’s. As regards export growth, 48 per cent of the respondents felt that the expected growth rate during the current fiscal would be between 20 and 30 per cent. About 24 per cent expected the growth to be above 30 per cent, while 15 per cent expected it to be below 10 per cent. Around 65 per cent of the respondents felt that the global slowdown had moderately affected exports from India. However, 12 per cent felt that it had significantly affected exports and 10 per cent said that Indian exports remained unaffected. The survey also highlighted the urgent need for improvements in infrastructure. As many as 60 per cent felt that the prospects for project exports from India to the Middle East remained very good.
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Correction may continue by Lalit Batra
Bargain
hunting by retail investors, robust fourth quarter results and good news on the monsoon front helped the markets stem its weekly losing streak. Sensex gained 1.5 per cent for the week to settle at 6346, whereas Nifty gained half a per cent to close at 1967 for the week. The lesser gains for Nifty were due to the fact TCS (Tata Consultancy Services), which witnessed a massive round of selling, has a significant weightage on the index. TCS was pounded last week due to the lower-than-expected results for the fourth quarter. In the first official forecast of this year’s monsoon on Wednesday, the Indian weather office predicted normal seasonal rains. The importance of the monsoon need to be understood as 65 per cent of the Indian population, dependent on agriculture for livelihood and rural spending, is the key to demand for various sectors of the economy. Though this may keep the market firm in the near term, volatility is likely to continue this week as the April derivatives contracts expire this Thursday. Though the last week pullback is heartening, it still cannot be construed to be the end of the correction which started for the indices from their all-time high. Markets may shed some more flab as good results pour in but which may fall shorter than expectations. The latest spike in the crude oil prices may hit the sentiment further. The credit policy announcement by the RBI is also being keenly awaited. TCS:
TCS is the largest software company in Asia and has become the first Indian software company to have crossed the coveted $ 2 billion revenue mark. TCS has a wide range of offerings and caters to industries like manufacturing, telecom and retail. TCS was at the receiving end last week with the stock losing close to 12 per cent — this was due to the company reporting lower-than-expected March quarter numbers. It reported a flat quarter on quarter top-line growth and a 34 per cent decline in profits for the March quarter. The sudden pounding of the stock may be a over-reaction from the market and the IT spending which is expected to grow 3 to 4 per cent in the current fiscal will translate into stable pricing and healthy deals for the company. TCS, with its scale and brand name and execution capabilities, would be one of the major beneficiaries along with other top-tier companies. Long-term investors can start taking exposure into the stock on declines. IPO:
The investor would have realised that public offerings are no longer free lunches. Therefore, he should be selective while putting his money in these issues. The current issues which offer some value are Shopper Stop and Mangalam Drugs. Shopper Stop’s offering is priced stiffly at the upper end of Rs 250 and listing gains may not be exorbitant. But given the fact that retail sector is growing at a healthy rate and FDI may be allowed in the sector, this may keep the stock in demand and the patient investor may be rewarded with handsome gains. Mangalam Drugs is modestly priced at Rs 22. This anti-malarial bulk drug producer may give a decent premium on listing.
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Tax advice Q.1 My gross salary for this year was Rs 2.37 lakh and I deducted 15,725 as house rent calculated by using formula from gross salary. So, my taxable income became Rs 2,21,275. I paid Rs 36,000 as house rent and got around Rs 15,000-16,000 as house rent. If my income, received house rent and paid house rent remains the same for next year, how will I calculate taxable income'. In other words, I want to know whether house rent is still deductible from gross income for next year'. — Dr R. S. Jaurr A. From your question, it is evident that you want to know whether the house rent allowable is deductible from the salary income. For financial year 2005-06, you can claim deduction of HRA from your salary income based on the provisions contained in Rules 2A of the Income Tax Rules, 1962. The said rule provides for the deduction of the least of the following amounts:- (a) an amount equal to 50 pc of salary where residential house is situated at Mumbai, Kolkata, Delhi or Chennai and where the residential house is situated at any other place, an amount to equal 40 pc of the salary; (b) the house rent allowance received by an employee in respect of the period during which the residential house is occupied by the employee during the previous year; or (c) the excess of rent paid over 10 pc of salary. Salary for above purpose includes basic salary and dearness allowance if terms of employment so provide. It may be added that exemption of house rent allowance is not available where an employee lives in his own house or in a house for which he does not pay any rent. Tax on leave
encashment
Q. 2 Sir, we would like to know more about the tax benefits on leave encashment at the time of superannuation of an individual. In our company, a person can get the leave encashment of maximum 240 days on his/her superannuation/retirement from company. These 240 days include earned leave and medical leave available in balance account. This point can be more clarified as under: The total days for encashment are maximum 240 days, with a break up of 120 days as earned leave and 120 days of commuted medical leaves. Kindly advise. A. As per the provisions of Section 10(10AA) of the Income Tax Act, 1961, any payment received by an employee other than an employee of the Central or a state Government, in respect of so much of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise, as does not exceed 10 months is exempt from tax. In my opinion, the aforesaid Section does not cover the payment given to the employee in respect of commuted medical leave. Accordingly, your finance department has taken the right step in deducting tax on the payment made to you in respect of the commuted portion of the medical leave.
Tax on short-term capital gain
Q. 3 I am a senior citizen aged 69 having income from different sources. The details of my income for the assessment year 2005-06 i.e. income year ending 31.03.05 are as under: - Rs. 1. Salary/pension (gross) 1,07,292 2. Capital gain (a) Short term shares (after 30.09.04) 4,117 (b) Long term shares loss to be carried (-87,089) over to 7 yrs. to be carried to this -(94,641) year 3. Income from other sources (i) Interest on bank deposits 2,43,453 (ii) Winning of lottery/Quiz 500 (iii) Contest etc. 2,575 4. Dividends of domestic cost 1,183 5. Total income (Gross) 3,59,120 6. Exemptions under Chapter IV-A (i) Mediclaim Insurance u/s 80D 13,368 (ii) Donations 100% u/s 80-G 13,750 (iii) Interest on bank deposits 80-L 12,000 7. Contribution to
PPF/LIC 70,296 Kindly calculate my income tax liability for the above period. Please clarify the following points: - (A) Whether short-term capital gain (STCG) will be taxed as special rate of 10 pc or normal rate. (a) Income under the head salary Pension 1,07,292 Less: Standard Deduction 30,000 77,292 (b) Income under the head capital gain Short-term capital gain 4,117 (c) Income from other sources Bank interest 2,43,453 Winning of lottery, quiz etc. 3,075 2,46,528 Gross total income 3,27,937 Less: Deduction under chapter VI-A 80-D 13,368 80-L 12,000 80-G (100% as stated) 13,750 39,118 Total Income 2,88,819 Tax on above Other than short term capital gains- (2,84,702) 59,410 Add: tax @10 pc on STCG 412 Tax payable 59,823 Less: Rebate u/s 88 15% of Rs.70,000/- 10,500 Less: Rebate u/s 88B 20,000 30,500 (Senior citizen) 29,323 Add: Education cess @2 pc 586 Tax payable 29,909 The answers to your specific questions are as under: - 1. Short-term capital gain will be taxed @10 pc provided Securities Transaction Tax is paid by you. 2. Loss under the head long-term capital gain cannot be adjusted with short-term capital gain. 3. Dividend income is fully exempt from tax in the hands of the recipient. 4. Casual income is fully taxable as the exemption to the extent of Rs 5,000 was withdrawn w.e.f. assessment year 2003-2004.
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Form H continuity underscored Phagwara, April 24 Form H is a zero-rated form filled by an exporter making inter-state and intra-state purchases for export purposes. But since the implementation of VAT in Punjab from April 1, doubts over Form H continuity for inter-state and intra-state purchases are a major hurdle of transactions among manufacturers, traders, suppliers and export houses in the state. The state government and the Department of Excise and Taxation must clarify these doubts and issue a notification, certifying the continuance of Form H beyond March 31.
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Intel bounty for old magazine
Silicon Valley, April 24 David Clark, a 57-year-old Philips employee, had stored old copies of “Electronics Magazine” underneath the floorboards of his home for decades. “It was one of those publications that most people wouldn’t keep around after reading it. It was a trade publication,” said Mr Manny Vera, an Intel spokesman. In fact, Mr Clark’s wife gave him a hard time over the years for hoarding the magazines, but he kept telling her one day they’d be worth a lot of money. Intel posted a notice about its reward offer on e-Bay on April 11, on the eve of the 40th anniversary of Moore’s Law. Mr Clark was one of 12 persons who responded to the Intel notice, saying that he had an actual copy of the issue. Intel has already paid Mr Clark his bounty, and the chip giant’s UK operations will pick up the magazine from him, Mr Vera said, adding that it will go into the company’s museum.
— PTI
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IPCL letters on Anil have dichotomy: BSE
Mumbai, April 24 "On the face of it there appears to be a dichotomy in what was conveyed on January 20 and the communication of April 23," the official said. IPCL, headed by Mukesh Ambani, had communicated to the exchange on January 20 that the Board of Directors at their meeting on that day had considered the Anil's resignation as Vice-Chairman and Director and unanimously requested him to reconsider the same. In his January 3 letter, Anil had accused a co-Director Anand Jain of conspiring to divide the family and said it was below his dignity to serve on the same Board as Jain.
— PTI
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