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Yet another US bank falls
US govt to buy stake in insurance Cos: Report
Gold up at Rs 12,210
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Corporate Results
Investor Guidance
Aviation Notes
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New York, October 25 Yesterday, the US authorities seized the operations of Alpha Bank. “Alpha Bank and Trust, Alpharetta, Georgia, was closed today by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Stearns Bank, National Association, St Cloud, Minnesota, to assume the insured deposits of Alpha Bank & Trust,” the FDIC said yesterday. The statement noted that Alpha Bank is the 16th FDIC-insured institution to be closed this year and added that the cost to its Deposit Insurance Fund would be $158.1 million. In a separate statement yesterday, Stearns Bank’s chief executive Norman C. Skalicky said the current capital position of the bank was about $250 million. “We have over 23 per cent capital in our banking system today. This is three times the average capital of all commercial banks in the US, four times what is considered being well capitalised, and almost 10 times what some of the investment banks have or had. We have a very sound and diversified asset portfolio spread between six different financial products. We are pleased to bring the safety and soundness of Stearns Bank to the former depositors of Alpha Bank & Trust,” Skalicky said. Minnesota-based Stearns Bank has more than $1 billion in assets. In addition to assuming the failed bank’s insured deposits, Stearns Bank would purchase approximately $38.9 million of Alpha’s assets. The FDIC would retain the remaining assets for later disposition. As of September 30, 2008, Alpha Bank had total assets worth $354.1 million and total deposits of $346.2 million. — PTI
Iceland’s SOS to IMF
Reykjavik: Crisis-struck Iceland called on the International Monetary Fund (IMF) for $2 billion in aid to help fix a broken banking system, restart currency trading and soften the blow from a withering economic downturn.
The Washington-based lender said its staff in
Reykjavik and Icelandic authorities had reached agreement on an economic programme that would be supported by the financial assistance. The deal still needs to be approved by the IMF board. Iceland’s financial system has all but collapsed and its economy is suffering badly after the country was forced to take
over three of its biggest, debt-laden banks this month. The north Atlantic island of just 300,000 people has become the first national victim of a global crisis that has felled some of the biggest names on Wall Street and sparked panic in financial markets.
— Reuters |
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US govt to buy stake in insurance Cos: Report
Washington, October 25 The newspaper said the insurance firms are offering their shares themselves, feeling they could benefit from the government’s money pool amid financial turmoil. Citing people familiar with the matter, The Journal said MetLife Inc, Prudential Financial Inc, and New York Life Insurance Co were interested in exploring a sale of equity stakes to the government. Yesterday, PNC Financial Services Group Inc said The Treasury Department would buy $7.7 billion worth of preferred stock and warrants. Last month, the US government saved from bankruptcy American International Group (AIG), a giant insurance company. — AFP
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Gold up at Rs 12,210
New Delhi, October 25 Standard gold and ornaments which had lost Rs 1,410 each in last four trading sessions, bounced back to close with a gain of Rs 660 each at Rs 12,210 and Rs 12,060 per 10 grams respectively. Sovereign rose by Rs 100 at Rs 10,500 per piece of eight gram. Marketmen said recovery trend in global markets where the the metal touched $735 an ounce mainly attributed to rise in both gold and silver prices. A similar trend was extended to white metal as silver ready notched a handsome gain of Rs 400 to Rs 16,900 per kg while weekly-based delivery by Rs 550 to Rs 16,750 per kg.
— PTI |
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Corporate
Results
Mumbai, October 25 Shipping Corporation
Shipping Corporation of India (SCI) has said its net profit for the second quarter ended September 30, increased by 50.77 per cent to Rs 274.88 crore over the corresponding period a year ago. The company had a net profit of Rs 182.31 crore for the September quarter last fiscal, it said. Total income rose to Rs 1,284.60 crore for the quarter under review, from Rs 945.80 crore for the corresponding period previous year. Bata India net up
Bata India has said the company has registered a net profit for the second quarter ended September 30 grew by 29.84 per cent at Rs 12.40 crore, from the net profit in the corresponding period year ago. The company had a net profit of Rs 9.55 crore in the second quarter FY’08, Bata India said. Tata Communications
Tata Communications has said its net profit for the second quarter ended September 30 fell by 62.77 per cent at Rs 32.64 crore over the corresponding period a year ago.
— Agencies |
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Investor Guidance Q: I have been working abroad for past three years. Currently, I plan to return to India after two years. My company has a health insurance for me. However, I think I need to buy a separate health insurance for myself/wife. My question is: Should I buy a health insurance from my current place of work (Singapore) or should I be buying a policy from an Indian company? If I buy from Singapore: a) Would they cover for rest of my life in India? b) The premium would be in Singapore dollars, so how am I going to pay it from India? c) Can I transfer rupee for this purpose? However, if I buy insurance from India, am I allowed to buy in first place? The same query is actually true for my term insurance also. Should I buy a policy here or from India? — Aashish A: Since you plan to return to India eventually, it would be advisable to buy the insurance from an Indian company. There is no restriction on NRIs buying insurance in India. Life insurance proceeds even for policies bought in India may be payable abroad. However, medical insurance is payable only for hospitalisation in India. So once again, if you eventually plan to return and settle in India, it would be advisable to buy insurance from Indian insurance companies. Tax benefits on arrears
Q: I am a central government servant and have read your article on availing of tax benefits on arrears under Section 89(1) of the IT Act. In the article, you have explained the instance where the employee receives the arrears of the past period in one instalment. However, I request you to guide me as to the calculation to be adopted where the arrears for the period from January 1, 2006, to August 31, 2008, would be disbursed in two instalments, which is the case in the disbursement of arrears in the sixth pay commission. — Ravinathan A:
In the article, though the example was for only one year of arrears, the treatment for multiple years (which is on similar lines) was discussed. You will need information for which year or years is the first instalment of arrears is being paid for. Then you will need to do the following calculations: For current year, calculate the tax payable after including the arrears and without including the arrears. The difference is the extra tax that you are paying on account of receiving the arrears. Next, calculate the tax payable with and without the arrears for each year for which you are receiving the arrears. The difference is the extra tax that you ought to have paid had you received the arrears, not as arrears but as regular pay. You need to subtract the aggregate of the extra tax that you ought to have paid from the extra tax that you are paying this year. Any positive difference is the Section 89(1) deduction, a negative difference means that you cannot avail of any deduction. Gifting shares
Q: I have sold a property after holding it for two years. The net short-term capital gain on the property is Rs 8 lakh. My father bought shares worth Rs 10 lakh about two months ago. The value has eroded in the market turmoil and they are worth Rs 4 lakh only. So, if he sells it today the loss will be Rs 6 lakh. So if now I ask my father to gift those shares to me and I sell them at Rs 4 lakh, will I be getting a short-term loss of Rs 6 lakh? I want to adjust the short-term capital gain from selling the property that was in my name against the short-term capital loss that I get from selling the shares. — Amit A:
There will be no tax incidence on either party arising from the gift of shares by your father to you. Moreover, when you sell such gifted shares, the cost and the holding period of the previous owner (your father) would be taken as your cost and the holding period respectively. And since short-term capital gains can be set-off against short-term capital loss, the strategy that you have outlined in your query is sound as per income tax law. However, the income tax officer could raise an objection that this arrangement was essentially undertaken to evade tax. While you can viably argue your case through the means of an appeal, it would be advisable to undertake such an action only if the tax saving potential is substantial. In other words, the means should justify the end. Short-term capital gains
Q: In case I sell shares within one year, I believe the gain, if any, is termed as short-term gain. Is the tax applicable just 15 per cent of the gains? If my other income is say Rs 50,000, would I have to pay tax on the full amount of short-term gain or would I get the benefit of the Rs 1,00,000 short fall in the basic exemption limit? — Brijesh Shah A:
The short-term capital gains tax rate is 15 per cent. However, note that if your other normal income chargeable to tax falls below the tax threshold applicable to you, the gains would be reduced by the amount by which the total income so reduced falls short of the threshold and the balance of the gains would be taxed at the rates applicable. In short, where the tax liability arises only because of inclusion of the capital gains in the total income, tax is levied at the corresponding flat rates on the excess over the minimum taxable limit. In your case, say your short-term capital gains amount is Rs 1.25 lakh. Then from the basic exemption limit, Rs 50,000 would be taken up by your other income. The balance Rs 1,00,000 would be set-off against the short-term capital gains. Hence, you would have to pay 15 per cent tax on the remaining Rs 25,000 only. The authors may be contacted at
wonderlandconsultants@yahoo.com
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Aviation Notes The civil aviation sector has been caught in a web of uneasiness and uncertainty. The industry is in a total turmoil. What was claimed as a boom two years ago has turned bane. The railway minister is having a vicarious pleasure at the predicament of the airline bosses. The private operators, smart and clever, manufacture “demand and supply” cries. They “manipulate” figures. If the government provides them relief, the aviation sector will never take-off in the country. Sacking staff and their reinstatement have both been calculated ploys to paint a gloomy picture and relief from generous government in the mood of elections. Jet supremo Naresh Goyal, for example, is India’s Richard Branson (Virgin airline). His rise has been meteoric. Influential and well connected with politicians. Goyal now heads the country’s largest private airline. According to reports, Jet’s total outstanding fuel bill is Rs 859 crore of which he has defaulted on payment due on September 25 and October 5. Similarly, Kingfisher owes IndianOil Rs 110 crore, of which Rs 60 crore remained unpaid after the expiry of the credit period. The aviation analysts are baffled as to why does the government and its agencies like IndianOil allow dues to accumulate? Contrary to popular belief, the government has gone soft on airlines. They have been awarded the concession to clear their oil dues in six installments until March 2009. They should not be awarded more concession. The situation in the NACL is no better. Even when it was bleeding, it promoted 14 officials to make them as directors. The majority of these directors belonged to Air India, while a few were from Indian. It is this kind of wrongdoing that is affecting the smooth growth of the national carrier.
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