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Industry gets tongue-lashing from Chidambaram
Bush visit to trigger foreign investments, says NRI entrepreneur
Shipping Corp’s joint venture plan gets nod
Samsung plant inauguration on March 7
MFs can invest up to $2 b overseas
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A-I’s safety certificate held in abeyance
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Industry gets tongue-lashing from Chidambaram
New Delhi, March 4 “If a company is profitable, why should it not pay some tax,” visibly agitated Finance Minister asked, while interacting with the industry captains in his post-Budget meet organised by Ficci here today. The philosophy of this Budget have been “no new taxes, and no change in tax rates while removing the clutter here and there.” But we must remember, he said, “there are people without portable drinking water, mothers which cannot deliver their babies in hospitals, children out of school… they all need our help.” Urging them not to complain of minor tax details, Mr Chidambaram said: “We are creating environment for you so that you are able to make profit quarter after quarter. The service tax revenue collections is projected to create Rs 34,000- 35,000 crore in 2006-07, though services contribute about 54 per cent share in GDP.” On taxing agriculture, he said: “I ask our critics to read the Constitution at least once in their life to know that the Centre cannot impose income tax on agriculture income.” We are proud of you that you are creating national wealth, and pay the maximum amount of tax. You are most treasured Indian citizens, and we are just instrumental. I will help you to achieve growth, he said, adding that they must consult their chartered accountants before asking for additional tax concessions. On long-term capital gain tax, he said: “You should not forget that I am under pressure from some political parties (Left) which have submitted their 11-point charter including to tax long-term capital gain.” Earlier, talking to reporters at the RBI office after the customary post-Budget meeting with the Reserve Bank Board, he said: “The RBI will provide liquidity to all productive sectors of the economy so that the growth story is not hampered.” Mr Chidambaram said he has asked RBI to ensure there is adequate liquidity so that growth story that is unfolding is not hampered. He said the RBI was also appreciative of the efforts in the Budget to bring about fiscal prudence and increase the tax-GDP ratio beyond 11 per cent. “Our adherence and commitment to FRBM target in the Budget was appreciated, so also the efforts to raise tax-GDP ratio to over 11 per cent,” he said.
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Bush visit to trigger foreign investments, says NRI entrepreneur
Chandigarh, March 4 Stating this while speaking to The Tribune, Mr Raj Loomba, NRI entrepreneur and Chairman of London-based India First Plc, said that this recognition would help India develop faster. “The business community in the United Kingdom (UK) sees the visit as a seal of approval, which will have a positive impact on prospective investors,” he said. Mr Loomba is here as the head of a 14-member delegation from the UK, including five British joint venture developers to attend an international summit on infrastructure, housing and real-estate development in Punjab. The summit is being organised by the Punjab Government in collaboration with the International Punjabi Chamber for Service Industry. Stating that the quantum of investments in Punjab from the United Kingdom could be anywhere between Rs 100 crore and Rs 1,000 crore, Mr Loomba said the British government recognises that India is a place to do business and is encouraging British companies in this direction. He said the first-ever trade and investment exposition focused on Punjab in London is scheduled to be held in May. “Punjab, with its 2 lakh plus small and medium industrial units, along with 600 large-scale industries,
accounts more than 75 per cent of the country’s requirements for bicycles, sewing machines, hosiery and sports goods, ” Mr Loomba said. “We want to give a further impetus to this growth and develop an integrated trade and investment relations between Punjab and the United Kingdom,” he added. Stating that India is emerging as a favourite destination for foreign investors “by default”, he said that the government must ensure the implementation of announced policies and develop infrastructure and hospitality industry to cater to the needs of foreign visitors.
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Shipping Corp’s joint venture plan gets nod
New Delhi, March 4 The joint venture will be for Dahej expansion project of Petronet LNG, Information and Broadcasting Minister Priyaranjan Dasmunsi said after a meeting of the Cabinet. Other partners in the joint venture are Mitsui OSK Lines of Japan with a stake of 33.77 per cent, Nippon Yusem Kabushiki Kaisha with a share of 21.64 per cent and Kawasaki Kisen Kaisha with 10.82 per cent. The share of SCI in the joint venture may go down to 26 per cent if Petronet LNG or its nominee exercises the option to take up 23 per cent share in above joint venture, the minister said. Petronet LNG Limited (PLL) was formed by the government in 1998 to set up LNG receiving, storage and re-gasification terminals in the country. It is a jv company promoted by GAIL, ONGC, IOC and BPCL with an authorised capital of Rs 1,200 crore. These four premier public sector companies have an equity participation in equal parts to the extent of 50 per cent. The Cabinet also approved a proposal for signing the MoU with China on cooperation in agriculture. The MoU will promote bilateral cooperation through joint activities and exchange in the areas of agricultural activities and also through exchange of scientific delegations and experts as well as training between the two countries. The MoU will be valid for a period of five years from the date of signing and is renewable for another period of five years. The MoU will be signed during the forthcoming visit of Chinese Agriculture Minister Du Qinglin from March 26 to 30. The Cabinet also approved signing of agreement between India and Botswana for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income. Mr Dasmunsi said the Cabinet also approved for concluding a bilateral investment promotion and protection agreement with Bosnia and Herzegovina. The CCEA, he said, approved extension of deadline to pay one- third of interest on special coffee term loan.
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Samsung plant inauguration on March 7
Chandigarh, March 4 Disclosing this today, the Managing Director of Haryana State Industrial Development Corporation (HSIDC), Mr Rajeev Arora, said the project is covered under 100 per cent foreign direct investments with the Korean company investing about Rs 43 crore in the first phase. Samsung plans to invest around Rs 850 crore for the manufacture of mobile phones in India by 2010. Samsung’s mobile handsets manufacturing unit is the first major project set up by a Korean multinational in Haryana. The project has been set up on leased premises at IMT, Manesar, within a record period of less than four months.
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by A.N. Shanbhag MFs can invest up to $2 b overseas
Q: I hear that in Budget 2006 there is an amendment due to which MFs (mutual funds) can invest abroad. What are the details of the same? When will the new MFs be available?
—S. P. Sharma A: Even before the new Budget, MFs could always invest in overseas instruments. However, only those foreign companies qualified that had a reciprocal investment of at least 10 per cent in domestic Indian companies. This led to the significant shrinkage in investible scrips. Only companies such as Unilever, Honda etc. qualified since they held more than 10 per cent in their domestic counterparts in India. Now, in the new Budget, two changes have been carried out. Ceiling on aggregate investments by MFs in overseas instruments has been increased from $1 billion to $2 billion. Simultaneously, the 10 per cent reciprocal ceiling required by overseas companies in Indian companies has been removed. This basically widens the investment universe of overseas stocks for the fund manager, which was earlier limited to only those companies that had investments in domestic subsidiaries. We should see new products from MFs offering overseas stocks very soon. Also, a limited number of qualified Indian mutual funds to be allowed to invest a cumulative of $1 billion in overseas exchange traded funds. At the time of writing this, it is not clear exactly what the parameters for qualification are.
One-by-six scheme Q: In the Union Budget presented by our Finance Minister it was announced that the one-by-six scheme has been abolished. From when is the same applicable? In other words, suppose I am as senior citizen with an income of Rs 2,85,000. After investing an amount of Rs 1 lakh in Sec 80C, my income falls to Rs 1,85,000. Do I have to file tax return? — Kawaljit Singh A: The one-by-six scheme has been abolished with effect from FY 2005-06. In other words, for current financial year, if your income is below the tax threshold, you don’t have to file tax return. However, such income should be before taking into account any deductions offered by the Act. In your example, the income level to be considered is Rs 2,85,000. It comes down to Rs. 1,85,000 after Sec. 80C deduction. Hence you will have to file tax return.
Fixed deposits Q: In Budget 2006, bank FDs over five years have been accorded Sec. 80C status. Does this mean that the FD is locked in for five years? If that is so, this move is not so beneficial as NSC, PPF etc. have a similar lock-in with a higher rate of interest. Am I correct or making some mistake in my perception? — Shriram A: You are absolutely correct in what you are saying. NSC has a six-year lock-in but the effective interest rate is 8.16 per cent. Even PPF has an effective six-year lock-in and the interest rate is much higher since it is 8 per cent tax-free. This move is more for the benefit of banks in general rather than for investors. Reason being that it was the constant complaint of banks that they have to compete with small saving instruments where the rates were much higher and some sort of a tax benefit would bring things more on an even keel.
Nabard bonds Q: I have read that in Budget 2006, Section 54EC bonds have been whittled down to just two. However, the disturbing thing that I read somewhere was that this provision is retrospective in nature. Does this mean investments made in Nabard or NHB bonds will not qualify for exemption? — Vishal A: The new provision in the Budget is that avenues under Section 54EC have been diluted. Nabard, Sidbi and NHB no longer are to issue capital gains tax saving bonds. Now, the bonds will only be issued by NHAI and REC. Yes, the amendment is retrospective but it is applicable to bonds issued by NHAI and REC only after April 1, 2006. In other words, if you earn long-term capital gain, you have basically six months to invest in the bonds. The amendment clarifies that even if you were to book the capital gain in the current year (2005-06), but the six months period were to fall in the next financial year, the bonds issued after April 1, 2006, can be used to save tax. In other words, capital gains booked in this year can be saved by investing in the new bonds issued next year.
Tax on ATM Q: In Budget 2006, the service tax rate has been hiked to 12 per cent. At the same time, it was mentioned that ATM transactions would be brought under the service tax net. Does this mean that we would be taxed on our withdrawals from ATMs? — Komal A: The tax on ATM services for the individual seems to be limited to the interchange fee charged by banks from their customers for using the ATM network of other banks. Therefore, that will not be much of a burden.
EET system Q: In the last Budget (2005) the government had announced that it would implement the EET system of taxation. However nothing was mentioned in this Budget. Is the same cancelled? — Mansingh A: No, EET system of taxation is not cancelled. It is merely that the FM chose not to mention it in his Budget speech. However in the post-Budget press conference, when one of the reporters asked him regarding the same, his answer was that it was announced in the last Budget and he thought there was no need to mention the same again. A committee has been appointed to look into the implementation of the new tax regime and the government will take action on the EET system of taxation when the committee is ready with its recommendations. It may be noted that it is always open to the government to introduce the new system during the year through notifications and it need not be done only in the Budget forum.
TDS for NRIs Q: What are the provisions relating to NRIs in Budget 2006? — Shridhar A: For NRIs, the TDS rate on short-term capital gains on equity and equity-oriented funds has been reduced to 10 per cent in line with the tax rate imposed by Section 111A. Earlier this was at 30 per cent as per Part II to the First Schedule to the Finance Act leading to the anomaly where the TDS rate was higher than the tax rate. The only option for NRIs was to file tax return and wait for the refund to come through. |
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by K.R. Wadhwaney A-I’s safety certificate held in abeyance
Air-India’s woes are multiplying. Already facing DGCA’s (Director-General of Civil Aviation) wrath for gross violations of duty and time limit regulations, the IATA (International Air Transport Association) has held in abeyance its operations safety certificate for its failure to meet the audit standards.
This cancellation of certificate, however, does not mean that airline’s operations are unsafe. But such strictures spread gloomy picture among flyers, some of whom choose other carriers to fly instead of continuing with Air-India (A-I). Maybe, cancellation of the certificate is on account of ‘procedural lapses’ and will be revoked soon. But why not ‘Maharaja’ take effective measurers in time to maintain its reputation instead of facing negative publicity time and again. Amidst this depressing scenario, the peace in headquarters has descended as two warring factions have decided to bury the hatchet. But the indiscipline in the organisation continues. The transfer rules are still being violated. The synergy between two national carriers, Air-India and Indian, is virtually non-existent. Similarly, trouble among private operators is brewing. If one carrier has gone out of race, another has risen to cause concern to Jet Airways. Provoked by a rising competitor, the Parliamentary Committee has sought an independent enquiry into timing of granting overseas flights rights to Jet. The committee’s subtle
observation is that international flying will improve airline’s IPO (initial public offer). Stiff competition is one thing but pulling down the rival through dubious means is another. Similar kinds of objections have been raised on the plan for modernisation of two international airports at Delhi and Mumbai. The delay in modernisation plan will lead to ‘incomplete work in haste’ causing further confusion in the already-murky aviation situation. |
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New Delhi, March 4
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Chandigarh, March 4
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