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US to host 1st global summit
Pusa 1121: Basmati status ok, but export tax ‘deterrent’
Market Update |
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Tax Advice
Batala foundry cluster project hangs fire
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US to host 1st global summit
Washington, October 19 ''It is essential that we work together because we are in this crisis together,'' Bush said before a meeting at the Camp David presidential retreat with French President Nicolas Sarkozy and European Commission President Jose Manuel Barroso. A joint statement after the meeting said the first summit would take place in the US soon after the November 4 US presidential election and focus on the ''principles of reform'' needed to fix the world's financial system. ''Later summits would be designed to implement agreement on specific steps to be taken to meet those principles,'' the statement said, adding that other world leaders would be contacted beginning next week. The US and European leaders decided it would be too ambitious to handle all issues in one summit, White House spokesman Tony Fratto said. French President Sarkozy has called for a revamp of the international financial architecture established after World War Two at the 1944 Bretton Woods conference — a massive overhaul that may not win unqualified support in the Bush administration. The summit plan emerged as fears of a full-blown global recession gathered. Both US consumer confidence and new-home construction showed sharp drops, and stock markets around the world remain volatile as investors count their losses and ponder when the financial gloom may ease. Another glimmer of light appeared as interbank lending rates fell this week for the first time since July, providing some hope that the worldwide credit drought may be easing. But the overall picture continued to look grim. The IMF, meanwhile, said it was investigating whether its chief, Dominique Strauss-Kahn, abused his power in an affair with a subordinate who has since left the institution — an embarrassing distraction as global leaders review the role of the IMF and other international financial institutions. Sarkozy, whose country now holds the rotating presidency of the European Union, said the summit would provide an opportunity to reassess the entire global financial system. British Prime Minister Gordon Brown has also advocated reforms, including a regulatory forum to monitor risks in the financial system, tough new disclosure and due diligence rules and guidelines on executive pay. Bush stressed on Saturday that the basic principles of democratic capitalism — free markets, free trade and free enterprise — must be respected. Bush said both developed and developing nations would be represented at the summit. ''For this meeting to be a success we must have ideas from around the world,'' he said.— Reuters |
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Pusa 1121: Basmati status ok, but export tax ‘deterrent’
Karnal, October 19 The exporters can now export Pusa 1121 as registered basmati rice but the export tax of Rs 8,000 per tonne imposed by the Union government to discourage exports in view of spurt in prices of foodgrain is acting a deterrent for exporters. The rice exporters had been exporting Pusa 1121 as basmati for the past three years but were legally not authorised to label their produce as "basmati" as it was not registered at "basmati" in India. The ban on export of non-basmati rice had also hit the export of Pusa 1121 but the export tax of Rs 8,000 per tonne is giving an edge to Pakistani exporters over India as the price gap as per the Pakistan media reports was $400 per tonne. The Indian Millers adjust the export tax of Rs 8,000 per tonne from the price they pay to farmers for the paddy and rice traders accuse government of subsidising basmati for the rich upper class at the cost of farmers and trade by depressing its prices. President of All India Rice Exporters Association, Vijay Sethia says that the matter has been taken up by the association as well as Chief Ministers of Punjab and Haryana, but the union government is indulging in delaying tactics. There is no justification of export tax as there is bumper crop of paddy this year and it is only harming the producers of other varieties also, he adds. Industry fears the export tax may also impact farmers when they begin harvesting paddy in September. Millers plan to adjust the Rs 8,000 a tonne export tax from the price they pay to farmers for the paddy. The basmati status to Pusa 1121 would open a market for export of 1.5 lakh tonne in Europe as the exporters would be entitled to label it as basmati and fetch higher returns. The 1121 variety was selling at Rs 2,000 to Rs 2,100 per tonne at present as compared to Rs 2,400 to Rs 2,600 last year and in case the decision to declare it as basmati had not come, the prices would have crashed within next 15-20 days, claims Sethia. However, the bonus of Rs 50 per quintal on paddy has been dubbed as "betrayal" of the farmers who were expecting that the MSP for common variety would be increased to Rs 1,000 per quintal. |
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Market Update
Despite a spate of positive steps taken by the RBI and SEBI to shore up liquidity, encourage dollar inflows and check relentless slide in the stock market, the benchmark indices continued to tumble. Concerns about a slowing economy, muted corporate profit growth coupled with the weak global markets pulled the Sensex below the 10,000 mark for first time since July 2006. The Sensex lost over 5 per cent for the week to close at 9,975. Nifty lost over 6 per cent to close the last week at 3,074.
Indian stock market regulator’s decision to raise margins in the derivatives segment also weighed on investor sentiment. A sharp fall in Reliance Industries, an index heavyweight, on concerns of fall in refinery margins weighed on the market. Aggressive cut in cash reserve ratio (CRR) by the RBI and pledges by policymakers around the world to pour cash into troubled banks had boosted markets at the beginning of the week. The market regulator SEBI tightened margins in the derivatives segment to ward defaults and curb volatility. The exposure margin for gross open positions in single stock futures and gross open positions in stock options will now be higher of 10 per cent or 1.5 times, the standard deviation in the notional value of the positions. Foreign institutional investors (FII’s) have continued to press sales in the equities and now have sold close to $ 12 billion of equity this calendar year. The results declared so far of the financials (HDFC Bank, HDFC and Axis Bank) do not point any structural problems in the Indian banking system nor do they point to any significant slowdown yet, but investors will have to wait and watch for results of other banking biggies over the next couple of weeks for a firm opinion in these contexts. Going forward, markets may find some support in the range of 9,200-9,400. Investors with a couple of year’s perspective may start buying into fundamental strong stories. Banking
Globally, September 2008 will go down in the history as the worst period for financial companies. We saw several big names (Lehman Brothers, Washington Mutual, Merril Lynch...) in the business filing for bankruptcy while many others were taken over. The Federal Reserve (Fed) was forced to infuse capital in American International Group (AIG) and has finalised a $ 700-billion bailout package to salvage the situation. With the credit crisis spreading to Europe, many countries (the UK, Germany, Iceland etc) too have adopted stringent measures such as capital infusion, ban on short-selling etc. The fears of the contagion spreading to the Indian banking space, which is already reeling under tight liquidity conditions, led the central bank, last week, to lower the CRR by 250 basis points to 6.5 per cent. In addition, the RBI has taken steps to help mutual funds meet their redemption obligations. Against the backdrop of tight liquidity conditions, moderating credit growth and likely strain on the quality of banking assets, the outlook for the banking sector remains bleak in the near term. Besides domestic factors, global news flow will continue to influence investor sentiments. On a positive note, the widely expected banking reform announcements may act as triggers in the near term, however, the concerns will keep the upside capped. However, from the perspective of a medium to longer term, the banking stocks look attractive at the current valuations. |
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Tax Advice
Q. I request you to please advise me on the following:
1. What is the maximum amount I can deposit in the PPF A/c of my two grand daughters (daughter's daughters) and 'Gift' every year in the capacity of “Nana”? The deposits are intended to be made through cheques out of my taxable income. 2. I am a senior citizen and filing my income-tax return and paying the tax after availing rebate under Section 80C and also as a senior citizen. Whether deposits made as above will qualify for rebate under section 80C in my hands. — S.K. Verma, Panchkula A. (i) The gift to your grand daughters can be made to the extent of any amount and the same would not be treated as income in the hands of your grand daughters. This is because a receipt from a grand father is covered within the exception provided by Section 56(2)(v) of the Act. However, for the purpose of depositing the amount in the PPF account of your grand daughter, the limit of Rs 70,000 up to which the deposit is permissible under the PPF scheme will have to be kept in view. (ii) Section 80C of the Act allows deduction of contribution to any public provident fund account which is maintained in the name of the individual himself, his spouse, and any child of such individual. In view thereof, the amount gifted to your grand daughters for being deposited in her Public Provident Fund account would not enable you to claim the deduction under Section 80C of the Act.
Gift to daughter-in-law
Q. (1) Can my HUF give gift to my daughter-in-law? (2) Will this gift amount be considered as “income” of my daughter-in-law for this financial year or not? — Ramesh Arora, Batala A. Under Section 56(2)(v) of the Income-tax Act 1961 (the Act), any sum or money, the aggregate value of which exceeds Rs 50,000 is received without consideration by an individual or an Hindu Undivided Family, in any previous year from any person on or after 1st day of April 2006, the whole of the aggregate value of such sum shall be treated as income of the individual or HUF provided such gift has not be received: (a) From any relative; or (b) On the occasion of the marriage of the individual; or (c) Under a Will or by way of inheritance; or (d) In contemplation of death of the payer; or (e) From any local authority as defined in the Explanation to clause (20) of section 10; or (f) From any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or (g) From any trust or institution registered under section 12AA. As it would be observed from the above exceptions, the aforesaid section does not cover the HUF of the father-in-law. In my opinion, therefore, the amount received by your daughter-in-law exceeding the above amount would be treated as income of your daughter in law.
UN pension exempted
Q. I was working with one of the wings of United Nations Organisation and have retired recently. I would be now receiving a pension from the said organisation. Is the pension so received be exempt from tax in future in view of the fact that salary received from United Nations Organisation was exempt under Section 2 of the United Nations Privileges and (Immunities) United Nations Organisation Act 1947 read with section 18 of the schedule thereto.? — Ashish A. The said section grants exemption from the charge of Income-tax on salaries and emoluments paid by United Nations to its officials. Apart from the salary, any pension is also covered under the aforesaid Act and such a receipt from United Nations Organisation would also be exempt from the chargeability of income tax. In this connection circular no. 293 dated 10th February 1981 of the CBDT may kindly be referred to.
Form 15-G
Q. I am 61 years old lady and my tentative income for the financial year ending 31.03.2009 (assessment year 2009-10) shall be as under: 1. Tentative income from (Rs) LIC commission (TDS is being deducted
regularly by LIC) 15,000 2. Tentative interest income
from bank FDR/post office MIS/Sr. citizen’s saving scheme 2,25,000 Total 2,40,000 3. Less deduction u/s 80C (deposits in PPF) 70,000 Net taxable income 1,70,000 No income tax is payable on Rs 1,70,000 being less than the exemption limit of Rs 1,80,000. My query:- I am of the opinion that since my net taxable income is less than the exemption limit of Rs 1,80,000 I should submit Form15-G to the banks so as to receive interest without application of TDS but one of my friends advised me that I should not submit Form 15-G (for claiming certain receipts without deduction of tax) to the banks and let the banks deduct the TDS for which I should claim refund later from the tax authorities. I may add here that I am regularly filing my tax returns for the last so many years to claim refund of TDS deducted by the LIC. — Usha Aggarwal, Panchkula A. The facility of filing a self-declaration form for the non-deduction of tax on interest from bank etc. is presently available to a senior citizen. In respect of other persons no self-declaration form can be filed if the income of such a person from dividends or interest etc. exceeds the maximum amount which is not chargeable to tax. On the basis of the facts given in the query, the interest income in your case exceeds Rs1,80,000 being the maximum amount which is not chargeable to tax. It may thus not be possible for you to file Form 15G requesting the bank not to deduct TDS on the interest income.
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Batala foundry cluster project hangs fire
Batala, October 19 Information gathered by TNS revealed that Batala machine tools and foundry cluster had failed to come into existence so far as entrepreneurs owning allegiance to different political parties had been trying to control its function by manipulating the things. Due to 'political games' played by different section of entrepreneurs, the special purpose vehicle (SPV), which was mandatory to run the affairs of this cluster, could not be formed by the district industry authorities for a considerable period. However, the district industry authorities succeeded in forming the SPV in the recent past and hopes among those, who had been favouring this project to bring a boost to the existing industries of the town, had regenerated. What had been causing delay in the sanctioning of this project, worth about Rs 80 crore, was the fact that centre was being ruled by Congress-led UPA government and Punjab was being ruled by SAD-BJP combine, pointed out a section of industrialists. "We have submitted the project report to DIPP about 10 months ago but so far we have not received any approval from it. Though Chief Minister Parkash Singh Badal has also written to the authorities concerned for the approval, no action has been taken on the same," pointed out V. K. Janjua, director, industries, Punjab. He claimed that implementation of this project would change the complexion of industries in the area. On the other hand, K.A.P. Sinha, private secretary to union minister of state for industries, Ashwani Kumar, when contacted, said appraisal of the project report submitted by the Punjab government would be carried out by a private agency and the approval would be given after that. |
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Washington, October 19
