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Chidambaram defends 8.5 pc EPF rate
Low bank penetration hits common man
Haryana units hit as power plays truant
Indirect tax
India strategic segment for Switzerland |
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Use Form 12B if ex-employer refuses to give Form 16
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Chidambaram defends 8.5 pc EPF rate Kolkata, December 10 Speaking to reporters on the sidelines of Consular Corps Business Seminar here today, Mr Chidambaram said that the Board would have to fund the deficit. He opposed to the hiking of the interest rate of the Employment Provident Fund from 8.5 per cent, since it will affect the government’s entire fiscal system, thereby jeopardising the country’s economy. He said at this juncture there was no scope for rolling back of the interest rate. The Prime Minister, Dr Manmohan Singh, had however, agreed to reconsider the
Opposition's demand to increase the PF’s rate in the wake of large scale protests and agitations by not only the Left parties but also a section in the Congress and workers, that has threatened to
launch a massive movement all over the country, protesting against the government’s decision to reduce the EPF rate to 8.5 per cent from 9.5 per cent. Referring to Manmohan Singh’s statement that he would discuss the issue with the Labour Ministry on whether the EPF rate could be raised to 9.5 per cent as demanded by Left trade unions, Mr Chidambaram said: “I do not know what the Prime Minister has in his mind”. “No one has spoken to me in this regard,” he said. Mr Chidambaram, said he did not think it would be a wise decision to either maintain the previous interest rate of 9.5 per or even to enhance it to 9 per cent. He said even if the interest rate was 8.5 per cent, the government would have to meet an extra burden every month. He suggested that the state governments should contribute additional funds to the central exchequer through coal cess and
electricity duties so that the Centre could bear the extra financial burden. But the CPM leadership and other political parties, including the CPI, the Forward Bloc and the RSP today warned that they would reconsider their support to the UPA if the EPF rate was not restored to 9.5 per cent. The Trinamool Congress leader, Ms Mamata Banerjee and the INTUC leader, Mr Subrata Mukherjee also strongly opposed the reduction of the EPF rate. The CPM Politburo member, Mr Anil Biswas, who is also the party’s state unit secretary, demanded that the proposal for reduction of the EPF rate be discussed at the UPA’s committee of which the CPM and other left parties were members and accordingly, the new EPF rate be fixed. He said they would not allow in any case the reduction of the EPF rate to 8.5 per cent. Earlier during the session, Mr Chidambaram said that sluggish growth in the coal and electricity sectors have pulled down the overall growth of the economy. He said that although the GDP growth had been 8.1 per cent in the first half of the current financial year, the year-on-year figure would be just over 7 per cent during 2005-06. Mr Chidambaram said the problems in the two sectors would have to be resolved immediately so that the growth rate could be raised by another 0.5 per cent in the coming financial year. He said that although the country has huge coal reserves, there is no legal and economic framework to exploit the resources efficiently. On modernisation of airports, he said that the bids for Kolkata and Chennai would be opened in January 2006, while for Mumbai and Delhi, the name of the developers would be announced before December 31, 2005. Regarding the small and medium enterprise sector, he said a SME Bill was pending in the Parliament and it proposed to hike the amount of capital subsidy and enhance credit flow to the sector. Mr Chidambaram said that India, which had already signed a Free Trade Agreement (FTA) with Thailand and a comprehensive economic cooperation agreement with Singapore, is also in the process of signing similar pacts with the ASEAN and Japan. This, he said, was a part of the Look East policy of the Centre.
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Low bank penetration hits common man New Delhi, December 10
According to a recent World Bank report: “More than 87 per cent of the India’s poor cannot access credit from a formal source and have to depend on moneylenders who charge them interest rates varying from 48 per cent to 120 per cent. It has lamented that India has just six bank branches per 1,000 square km as against 15 in Brazil, eight in Indonesia, 10 in Malaysia and 31 in the US. The Planning Commission has also admitted in the Mid-Term Appraisal of The 10th Five Year Plan that only four crore farm households out of over 10 crore, have access to the institutional credit. Notably, as per RBI estimates, only 31 per cent of the population in India have access to the banking services. The banks have lowest penetration in Bihar, Jharkhand, Orissa, Chhattisgarh, Madhya Pradesh and North-Eastern states. In comparison, 92 to 94 per cent of the British population has either current or savings bank account. However, about 43 per cent of population in Northern India has access to the banking service. For instance, there are about 86 lakh bank accounts in Haryana out of 2.10 crore population, 1.49 crore accounts in Punjab with a population of 2.42 crore. But Chandigarh has the highest banking penetration — 12 lakh bank accounts for a population of nine lakh. To encourage the banks to provide micro-finance to the rural poor, the World Bank has recommended “removing of ceiling on interest rates as this has the unintended consequence of squeezing the micro-credit market.” The bank has claimed that 70 per cent of poor households in Indian villages have no access to formal banking. Commenting on the institutional banking, it said, “rural borrowers have to pay up to 42 per cent of their loan amount in bribes to officials. It takes an average of 33 weeks to get a loan approved in rural areas.” RBI guidelines to the banks to offer “ no-frills accounts” have not made much-headway, as banks are reluctant to go the rural markets with poor infrastructure. It has now asked them to come out of “inhibited feeling that an aggressive competition policy and social inclusion are mutually exclusive, and has called upon the banks “to think outside the box” to redesign their business strategies. Mr Praful Patel, Vice-President for South Asia for the World Bank recommended that multilaterals, donors, NGOs, private sector-led institutions and government should collectively promote micro-finance as a serious part of the financial sector and an instrument of poverty alleviation.
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Haryana units hit as power plays truant Chandigarh, December 10 Industrialists in the state rue that their production has declined sharply because of the unavailability of power. With the per unit captive power generation cost almost double the cost of normal power supply (per unit), the small and medium scale industry in the state claims that industrial production has stopped for the past three days. Power supply to industry in Haryana remained off for 24 to 36 hours, beginning yesterday, after a decision to switch off power to industry for 24 hours was taken by Haryana Power Utilities. It was also decided that industry would have to face power cuts for 10 hours a day — till the time power supply in the Northern Grid improves. The grid is facing a shortage of 5,000 MW, after several thermal power units stopped generation because of a technical snag. Talking to TNS, Mr S P Gupta, President of Haryana Chamber of Commerce and Industry (HCCI), said this is the second time this year that the dismal power situation has forced the industry to come to a grinding halt. Officials in Haryana Power Utilities defend the power restrictions imposed by them on the ground that because of technical snag (forced outrage) in thermal power generating units in Uttar Pradesh, Punjab and Haryana, they were left with no options, but to impose cuts on all consumers. “However, we have made arrangements to purchase 185 MW of power from Meghalaya, Tripura and Andhra Pradesh; and 12 Lakh Units from Delhi Transmission Limited,” said a senior official.
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Indirect tax collections up New Delhi, December 10 As per information, the indirect tax collections seem to be well on their way to achieve the Budget target of Rs 1,92,215 crore for 2005-06, even though there is likely to be a shortfall in the excise collection’s target of 1,21,533 crore. Customs collection during April-November touched Rs 42,262 crore, an increase of over 18 per cent compared with Rs 35,722 crore in the same period in 2004-05. Service tax collections continued to be buoyant at Rs 11,988 crore, against Rs 7,065 crore collected during April-November 2004, an increase of 70 per cent. However, excise collection continued to be sluggish at Rs 65,392 crore, compared with Rs 60,229 crore, an increase of only 8.5 per cent. Officials pointed out that data compiled by the Finance Ministry showed that excise collection was picking up, averaging around Rs 8,500 crore per month.
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Gold hits new high
Mumbai, December 10 Silver followed suit and after touching an all-time high of Rs 13,160, closed at a new high of Rs 13,155.
— PTI
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by K.R. Wadhwaney India strategic segment for Switzerland
Notwithstanding airports’ physical health countrywide, three-way competition among foreign players, private operators and national carriers, Indian Airlines and Air-India, has intensified. The competition will be sharper early next year as a few more foreign carriers and private airlines will further crowd the Indian skies. Despite congestion on ground at Delhi, Mumbai and other airports, the tourist traffic from west and east is on the increase. Despite slow functioning of immigration officials and delay in collection of baggage, the passengers stay in an upbeat mood and hardly any one says ‘never to India again’. Several European countries, particularly Switzerland, consider India a strategic segment for both airlines and tourism boards. Recently Switzerland Tourism held a road show in Delhi and at some other centres. Seeing enthusiasm and response, visiting officials were convinced that the two-way traffic could be successfully launched since ‘reasonable’ fares and packages were available. In view of the rising demand, Swiss has doubled its services to India by teaming up with Air Canada on the Delhi-Zurich route. According to passengers, the timings of arrivals and departures are convenient, rendering the trip enjoyable. While Air Sahara will initiate Delhi-London flight from January 6, 2006, Kingfisher Airline is making its presence felt with effective service both on ground and in air. Recently, it became the first Indian carrier to be declared the ‘best new airline of the year 2005 by the Centre for Asia Pacific Aviation (CAPA). Dr Vijay Mallya received this prestigious award in Kuala Lumpur. This is indeed a boom period for aviation sector but sadly hardly anything is being done to improve ground facilities. Recently, Henry C. Joyner, Senior Vice-President (Planning) of American Airlines, said: “..... to many flights crowding the airspace and too little happening on the airport infrastructure front”. The Indian aviation scene will improve manifold if infighting between ministries seizes. As it is, there is hardly any progress because the evil of ‘pulling down’ is in operation. |
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by A.N. Shanbhag Use Form 12B if ex-employer refuses to give Form 16
Q: I have recently changed my job and my previous employer has not given me the TDS certificates. Please guide me. — Milind A: When employees change jobs, most often they find that their ex-employer does not issue the Form 16 which indicates the salary earned from him and the TDS thereon, though it is mandatory to do so. To cater for such situations, Sec. 192(2) has provided for Form-12B as prescribed by Rule 26-A. This is required to be filled and verified by the employee and submitted to his new employer. The ex-employer does not have to come in the picture. You may use the salary slips of the ex-employer for the purpose of picking up the necessary information. Incidentally, it is mandatory for all employers to give the requisite certificate and there are stringent penalties. You may report to your ITO this fact and pray for protection u/s 205, which provide as under: ‘Where tax is deductible at the source under (Section 192 to 194..., the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income.” Once tax has been deducted u/s 192, the tax deductor is bound by Section 203 to issue the certificate of tax deducted in Form 16. The Gauhati High Court has in the case of CIT v Om Praksash Gattani 242ITR638 held that the payer i.e. the person responsible for deducting the TDS would be deemed to be an assessee in default in case he deducts the amount and fails to deposit it in the Government Treasury. The payee has no control over discharge of tax liability by the deductor. In view of all this you must file the return of income claiming TDS even if the same is not remitted to the government by employer. The department is bound to give credit for the same. Since employer has not issued Form 16, you can file the return along with proof of request for issue of Form 16 and monthly salary slips received.
Gains on house Q: I want to know about long-term capital gain. I purchased a house in my HUF name in July 2000 at Faridabad for Rs 5 lakh and sold it on November 14, 2005 for Rs 10 lakh for plot by registered sale deed and same day scrap of structure sold to same person for Rs 2 lakh by agreement of sale. Both payments were received by draft. On November 16, 2005, I purchased a house for Rs 14 lakh. What would now be my liability for transactions? — Vinod Goel A: It is presumed that the purchase of the new house is in the name of HUF. Since you have purchased a residential house within the stipulated time and have paid more than the sale prices of the plot and the superstructure, taken together, you are entitled to the exemption on long-term capital gains u/s 54. However, if you have brought down the superstructure and sold the scrap, you can claim the benefit on the plot u/s 54F but the possibility of the department taking the view that the scrap is a short-term asset looms large.
Dividend stripping Q: I have heard a lot about dividend stripping. Can you please explain the concept? For example, I had bought a mutual fund scheme. They gave me a dividend of 30 per cent. However, just after the dividend, the NAV fell. So, I did not gain anything by stripping the dividend because the NAV fell proportionately. Please answer with example if you can how can an investor strip dividend for his benefit. — Sandesh A: First let us explain dividend stripping as a concept. It works this way. Say your mutual fund scheme is currently at an NAV of Rs 35. It declares a 30 per cent dividend. Now, dividend being on face value, directly translates into Rs 3 per unit. Post dividend, the NAV falls by Rs 3 to Rs 32. Now, what you would do is to buy the scheme at Rs 35, pocket the dividend of Rs 3 and immediately sell the units post dividend at Rs 32, thereby booking a notional loss of Rs 3 per unit. Hold on. So far you haven’t really benefited financially. Now what you do is anytime during the financial year, earn short-term capital gains. It is at this time that the benefit kicks in. Marry the previously booked (notional) loss against this (very much real) gain and thereby benefit financially. So in other words, you don’t benefit when you get the dividend, you benefit when you set off the notional loss from the diluted NAV against profit. Authorities woke up to this tactic and didn’t like it one bit. Anti-stripping laws were passed with immediate effect and thus Sec. 94(7) was born. Budget 2004 gave this law sharper teeth. And now the way it stands is that whenever a person sells shares or units date and the following four conditions are simultaneously satisfied — 1 The purchase has been within three months before the record date, 2 The sale has been within three months in the case of shares and nine months in the case of units, after the record date 3 The dividend is tax-free and 4 The sale results in a loss (naturally, short-term). The loss arising on the sale to the extent it does not exceed the exempt income has to be ignored. For instance, take the following case: Shares or units purchased on 4.4.05 at Rs 500, Dividend distributed on 25.6.05 is Rs. 15 and Sale on August 2, 2005 at Rs. 490, resulting in a loss of Rs 10. This loss shall be ignored for tax purposes and hence will be unavailable for set-off.
Long-term loss Q: I have some long-term capital gain and short-term capital gain (from the sale of units of Mutual Fund and equity shares). Can I set off the same against my long-term loss of house property? What about unabsorbed loss? — Amit A: Long-term gain can be setoff only against long-term loss. That means your long-term loss cannot be set-off against short-term gain. Also if you have carried forward the loss for AY 04-05 in your tax return, only then can you claim the set-off in the next year. |
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