Book profit in mid-cap stocks
The three-week-old non-stop rally in the indices came to a sudden halt last week. Though this sudden halt in the rally was not due to the any global event or happening the trigger was more of a ‘diktat’ from our own regulator SEBI.

• Suzlon Energy

Tax Advice

• Interest on PPF account not taxable

• Gift & investment

• Interest income

• Tax liability

• Education loan

New Delhi, September 25
Uncertainty over the future of fertiliser subsidy beyond the current financial year, coupled with a rise in input prices, has hit the growth of domestic fertiliser industry.

The industry is worried that with good rain this year, it will not be easy to meet the increased fertiliser demand during the next crop season since the stocks are already down and no additional capacity has been added. The domestic sale of urea, DAP and MOP fertiliser has already increased by 12.5 per, 0.4 per cent and 15.2 per cent, respectively, till July,2005, over the previous year.

“The existing pricing policies are valid up to March 31, 2006. The future policies are yet to be formulated. The lack of clear direction and inherent uncertainties regarding government policies in respect of fertiliser and feedstock beyond 2006 continue to inhibit the medium- term and long- term business decisions,” said Mr P.S. Grewal, Vice-President, Fertiliser Association of India (FAI).

After the announcement of Finance Minister P. Chidambaram to restructure the fertiliser subsidy this year in his Budget speech, a working group headed by Dr Y.K. Alagh was set up to review the subsidy scheme and formulate a new policy.

The Ministry of Chemical and Fertilisers also constituted an expert group in March under the chairmanship of Prof Abhijeet Sen to examine the pricing of phosphatic fertilisers and related issues. The committee has yet to submit its report.

The industry is waiting for the proposed roadmap for its restructuring. With the involvement of Union Minister of Chemical and Fertilisers Ram Vilas Paswan in the Bihar elections, it is finding it hard to push its case forward.

In its annual industrial review, the FAI has claimed that despite good demand, the import of urea and DAP remained restricted to 0.64 million tonnes each due to high international prices. Further, three units-DIL-Kanpur, FACT-Cochin and RCF Trombay remained shutdown, and the commissioning of the revamped Namrup-II unit has been delayed.

Significantly, the total consumption of fertilisers in the country went up to 18.47 million tonne (MT) in 2004-05, crossing the earlier peak level of 18.07 MT achieved in 1999-00. Industry is making all efforts to meet the demand with wafer-thin stocks.

The FAI says that with the increase in agricultural credit and rising demand in states like UP and Bihar, it would not be easy to meet the demand for fertilisers. Even in Punjab, fertiliser consumption increased from 14.41 lakh tonnes in 2002-03 to 15.61 lakh tonnes in 2004-05.In Haryana it increased from 9.21 lakh tonnes to 10.50 lakh tonnes during the same period.

Shimla, September 25
The PHDCCI today asked the industry and government to make concerted efforts to sustain the recent industrial growth, which had taken place in Himachal Pradesh following the package offered by the Centre and new industrial policy of state government.

Himachal stood on resurgent path of industrialisation today and it should be maintained, PHDCCI president K N Memani told mediapersons here on the eve of the centenary celebrations of the PHDCCI.

He unfolded a six-point vision for developing the state as a hub of economic activity.

The development of quality infrastructure, modernisation of road network through public-private participation, hydropower development to provide low-cost energy, value addition to horticultural produce, enhancing human resource development and year-round tourism were need of the hour for rapid and sustainable industrial growth.

He also pleaded for setting up a special industrial area development authority on the pattern of Noida. — PTI

The three-week-old non-stop rally in the indices came to a sudden halt last week. Though this sudden halt in the rally was not due to the any global event or happening the trigger was more of a ‘diktat’ from our own regulator SEBI. Though the regulator warning was only meant for the mid and small cap stocks which were running ahead of its valuations, the large-cap stocks also bore the brunt. Large-cap indices Sensex and Nifty were down by 2 and 3 per cent, respectively. Compared to this, BSE mid-cap lost 7 per cent and small-cap lost 11 per cent for the week.

The reasons for corrections were that the market had reached an over-bought zone after a almost non-stop rally on Sensex from 7,700 to 8,500 in a little over two weeks of trading sessions. Reports of income tax raids on brokers accentuated the fall.

Tax Advice

Interest on PPF account not taxable

Q. My PPF account completed 25 years on 01.04.2005 (Date of opening is 07.03.1980). I have neither withdrawn the corpus nor have yet advised the SBI for its extension for another 5 years on Form H. If I allow the account remain dormant, will its interest be taxable u/s 80C under the new EET regime? If I go for extension of another 5 years, will the corpus as of 01.04.2005 and the interest thereof be grandfathered and not taxed under the new regime of EET? PPF like EPF generates taxfree interest and income u/s 10(ii) of P.F. Act 1925. Does this benefit continue after April 2005?

—V.S. Seth

A. The interest on the PPF, account is not taxable even if the account remains dormant. The EET regime is yet to be announced and the position will be clear as and when the same is announced by the Government of India.

The position of the amount lying in the EPF account has not been changed by any of the provisions of the Finance Act. 2005.

Gift & investment

Q. I seek your advice on the following:-

1. Can the amount proposed to be gifted by a son to his father and mother jointly be invested in a senior citizen savings scheme launched by the Govt. of India sometime in 2004? The rate of interest for the scheme is 9% with max. investment limited to Rs 15 lakh.

2. The gifted amount has to be offered along with a written intention of the son while gifting the amount. Would this letter be on some proforma or would it be a simple letter on a plain sheet of paper?

While father is an income tax payee with a PAN and the mother is a simple housewife with no source of income except her husband’s.

— R.C. Sharma

A. The gift can be made by the son to his father or mother without any restriction of the amount.

1. The person who has received the gift can invest the same in the joint name.

2. The gift can be made through a simple letter. However, the gift must be accepted by the donee so as to complete the gift.

Interest income

Q. I am a senior citizen and my age is 66 years. My pension during the financial year 2004-2005 is Rs 1,09,000. Total interest received through bank is Rs 39,885 and through post office against senior citizen deposit scheme @ 9% is Rs 86,000. The total amount of interest accrued due to NSC from the last six (6) years is Rs 33,250. As per the existing orders, the complete interest accrued due to various NSC’s is exempted from income tax, under the EEE scheme. My CA says that only a sum of Rs 12,000 is exempted, and rest of the interest will be counted towards my income. Please advise and calculate my interest for the year 2005-2006 as per my income of the year 2004-2005 as above.

— Krishan Gopal Sharma

A. The interest accrued for the assessment year 2005-06 is exempt upto Rs12,000. The Finance Act 2005 has deleted Section 80L of the Income-tax Act 1961 (The Act) and, therefore, no exemption would be allowed in respect of such interest for the financial year 2005-06.

It is not possible to compute your total income and tax thereon as the interest on NSC for the year 2005-06 is not given in your query.

Tax liability

Q. My wife is a working woman; and for A.Y. 2006-2007, her total income will be Rs 2,64,000; She has gained Rs 1,60,000 as profit on the sale of a shop during AY 2006-07. She is not a senior citizen. Kindly tell us her tax liability how it can be reduced. She has taken housing loan and will be paying around Rs 10,000 as interest on loan.

— Amrit Kalra

A. It is not clear from your query whether capital gain on the sale of a shop is a long-term gain or not. Presuming that it is so, you can invest the same in the capital gains tax saving bonds. The investment has to be made within the six months of the date of transfer of the property in respect of which the capital gain has been earned.

Education loan

Q. Education loan has been granted in name of my son to study in Australia. Payment of Rs 2,32,000 has been made to the Australian university in May 2005 from education loan. In the above payment, the bank has paid 85% and marginal payment of 15% is made by me. Now, I have started repayment of interest and loan to the bank. I am a private employee. Please let me know about the income tax benefits to me in the financial year 2005-2006 (Assessment year 2006-07) and later on regarding the repayment of interest, loan and 15% marginal payment made by me.

— Tarlochan Singh

A. In accordance with the provisions of Sction 80E of the Act, the deduction for the interest paid on the loan is allowed in respect of loan taken by a person from any financial institution or any approved charitable institution for the purpose of pursuing his higher education. Since the borrowing has not been made by your son who is studying in Australia and the loan is not for your education, no deduction would be allowed to you in respect of the interest paid on the loan taken by you.