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India’s take: Coordinated fiscal stimulus
ATF prices cut by 12 pc
Meltdown: Cycle industry hits roadblock
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Investor Guidance
Aviation Notes
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India’s take: Coordinated fiscal stimulus
India has expressed the hope that leaders of the world’s 20 biggest economies would agree on a coordinated fiscal stimulus plan to arrest global recession and ask countries to resist rising protectionist pressures. “In our view, the most important thing right now is to counter the recessionary tendencies that people are talking about,” said Montek Singh Ahuwalia, deputy chairman, Planning Commission, at the Summit on Friday. After a dinner hosted by US President George W.Bush for the world leaders here that was attended by Prime Minister Manmohan Singh and Montek Singh Ahluwalia among others said the idea of a stimulus package was before the leaders and if a coordinated fiscal stimulus package arrived at the summit then that would be a substantial gain. US President-elect Barack Obama, who is not not attending the summit, may not not be averse to it and it would not not be a problem for the new administration, Ahluwalia said. Ahluwalia said the focus of the summit about a month ago was on the need for a new financial architecture but since then there has been a “deterioration” of the situation. The historic summit brings together a group of seven industrial nations, a dozen emerging markets like India, China, Brazil and South Africa and the European Union, which together account for 90 per cent of global economy. “What we are calling for is a coordinated fiscal stimulus. We have to see what response that elicits tomorrow (Saturday), but it’s certainly our view that if we are facing the most serious crisis in the world economy since the Great Depression, then we need to take a lot of possibly unorthodox and special steps,” he said. Ahluwalia, who has been involved in parleys with his counterparts on the Summit outcome, said he hoped the Summit on global economy and financial markets would end with a communique that makes a strong statement of support for fiscal stimulus actions that would boost confidence in the global economic situation. He said recessionary conditions in the US, Europe and other industrial countries were slowing economic growth in India, but its growth for this year would still be impressive compared to many other countries. Second half-growth for India will remain positive, he asserted. “History teaches us that when you face recession, protectionism increases. But relapsing into protectionism particularly in industrial countries would be damaging to economy,” he said, seeking agreement on the successful conclusion of Doha round of trade talks. On the Prime Minister’s stress on the need to ensure that developing country growth prospects do not suffer, he said: “We have consistently taken the view that the current crisis is unique in one respect that it did not originate in developing countries. It started in the US and then spread to Europe, but the worst affected would be the developing countries. They would not only be hit by recession directly, but because of recessionary trends in advanced countries, the capital flow too would get restricted.” Regarding Manmohan Singh’s stress on the need for greater inclusivity in the international financial system, his key aide said there was general recognition that the current situation just didn’t reflect the contemporary reality. WB to give $100 b loan to developing countries The World Bank has said it will give a loan of $100 billion this year to developing nations and India can draw an additional $3 billion annually for three years. Disclosing this, Planning Commission deputy chairman Montek Singh Ahluwalia told reporters here that “some concrete response has come and we told them they need to go further”. The World Bank has already committed $3 billion to India this year. Ahluwalia cited this as being the World Bank's response in the context of increasing the flow of resources to help developing countries by the Brettonwoods institutions. The IMF, he said, has also offered extension of low-condition facility called the liquidity facility which can go up to five times. Should India decide to use the facility, it would be able to draw $300 million. On the impact of global downturn on the Indian economy's growth rate, he said it was quite clear that the economic crisis was having some impact. In fact, this year the growth rate is expected to be between 7 and 7.9 per cent against the rate of 9 per cent recorded in the last four years. — PTI
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ATF prices cut by 12 pc
New Delhi, November 15 Aviation turbine fuel (ATF) prices were slashed by over Rs 5,580 per kilolitre in line with fall in international oil prices, an official of IndianOil Corp, the nation’s largest fuel retailer, said. It is for the third time in a month that oil companies are cutting jet fuel prices. IndianOil, Bharat Petroleum and Hindustan Petroleum at the time of monthly revision on November 1 reduced jet fuel prices by 17 per cent and then in the next three days they slashed them again by a further Rs 2,100 per kl, reflecting abolition of import duty on the fuel. This is the fifth cut in ATF prices since August when rates rose to an all-time high of Rs 71,028.26 per kl. With today’s reduction, jet fuel prices are at the Rs 38,163.23 per kl levels that were prevalent in September 2007. The cash-strapped airline industry is not yet ready to reduce airfares despite the cut in jet fuel prices today saying the heavy losses that accumulated during the past several months, when the prices peaked, were still to be recovered. Welcoming the move as “good news”, Air India executive director Jitendra Bhargava said it should also be borne in mind that when the prices were shooting up month after month, the airlines were passing on “only part of the additional financial liabilities”. A Kingfisher Airlines spokesperson said: “We will evaluate the impact and then take a view” on lowering the fares or the fuel surcharge. — PTI
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Meltdown: Cycle industry hits roadblock
Chandigarh, November 15 As the global financial meltdown hits home, the bicycle industry has been forced to cut down its production by almost 30 per cent. It is not just that export orders have dried up, the domestic market for cycles, too, has shrunk considerably and sales have shown a sharp drop. S.K Rai, MD, Hero Cycles, says while exports are down, volatility in the prices of inputs is affecting the domestic market. “When steel prices were at Rs 44,000 per metric tonnes, we had increased the cost of bicycles. With steel prices coming down, we have already announced a reduction in prices. But dealers are wary of lifting stocks and are adopting a wait and watch policy,” he says. Volatility in steel prices has also affected the lifting of bicycles by the foreign buyers as well as government agencies. “The orders were placed when the steel prices were high, now the steel prices have dipped and cost of bicycles, too, have gone down. But these buyers will have to lift stocks at the price at which orders were placed. So they are delaying the lifting, and most companies now have a huge inventory,” said another cycle manufacturer, requesting anonymity. According to D.S Chawla, proprietor, Chawla International, and former president of Cycle and Cycle Parts Manufacturers’ Association: “Over the past eight years, the stiff competition from China has adversely impacted the cycle industry here. But with the global economic crisis, a number of small units are being completely wiped out. They are laying-off daily wage labour, while the big industrial units have cut down production by eight to 10 per cent”. The export turnover of industry is already down from Rs 800 crore in year 2006-07 to Rs 746 crore in 2007-08.
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Investor Guidance
Q: I live in the US with my husband and both of us are NRIs. We recently bought two plots in India. My husband's name is the “first name” in sale deeds of both plots and mine is the “second name’. I have the following questions:
a) Are the plots subject to income tax in India? b) Are they subject to wealth tax in India? c) If so, how do we file the tax returns from the US? d) Do we need PAN numbers in order to file the returns or are NRIs exempt from having PAN? e) Does it matter whose name is first name in the sale deeds of the plots. My husband funded the plots, I am a housewife. However, the plots were funded from our joint account. — Nalini A:
The initial exemption limit for wealth tax is Rs 15 lakh. Beyond this value, wealth tax is payable at the rate of 1 per cent on the value of the assets. The plots will not be subject to income tax. PAN is mandatory in order to file a tax return and NRIs are not exempted from the same. Since it is your husband who funded the plots, his name being that of the first holder is appropriate and in order. Your name being second is for convenience and has no implication either for income tax or for wealth tax. Indexation on foreign investments
Q: After having worked in the UAE for over 20 years, I have returned to India. Though I do not have a regular job, I undertake some freelance assignments, the income from which is taxable. When I was in the UAE, I had made some investments in mutual funds that I will be liquidating to aid in my day-to-day expenses. I am aware that this income would be taxable in India as capital gains. My question is whether I can avail of indexation to compute long-term capital gains and secondly, what is the exchange rate that I should use to arrive at the rupee value of capital gains? Also, since my Indian investments are currently at a loss, can I book such loss and set-off the long-term gain from abroad against the domestic short-term loss? — M.N Pavri A:
As regards the availability of indexation on your foreign investments, note that the same is available as per Section 2(42A) read with Section 48 of the IT Act. Regarding conversion of dollars to rupees, one has to go by the provisions of Rule 115(1) Clause 2(f) of the explanation to this Rule clearly states that in respect of income chargeable under the head capital gains, the telegraphic transfer buying rate (of SBI) for the last day of the month immediately preceding the month in which the capital asset is transferred has to be adopted. With respect to the availability of set-off of long-term gain against short-term loss, the same is available as per Section 74 of the IT Act. Note, that only taxable long-term gains may be set-off this way, tax-free long-term gain (on domestic shares and equity mutual funds) may not be set-off. Long-term capital gains
Q: Recently I have sold some commercial property and earned long-term capital gains. I intended to invest the sale proceeds into a residential property thereby saving on the capital gains tax. However, recently a friend informed me that one of the conditions of claiming exemption is that I should not own another property at the same time. I jointly own the house that I stay in with my wife. Will this factor prevent me from availing of tax deduction? — P.M Satta A :
In the case of ITO vs Rasiklal N. Satra (280ITR243 date September 19, 2005), the assessee sold shares (this was when long-term capital gains earned on shares were taxable) and claimed exemption under Section 54F by investing the same in purchase of residential flat at Vashi, Navi Mumbai. The assessing officer (AO) noticed that the assessee was co-owner of a flat in Mumbai. Now since the assessee already owned an old house, the AO denied him the Section 54F exemption. To this, the assessee contended that since he co-owned the old house along with his wife (they were joint owners), he was not an independent owner of the house and exemption can be denied only where he was the absolute owner of the house. It was held that since the legislature has used the word “a” before the words “residential house”, it must mean a complete residential house and would not include a shared interest in the house. Where the property is owned by more than one person, it cannot be said any one of them was the sole owner of the property. In such case, no individual person on his own can sell the entire property. Joint ownership is different from absolute ownership. Ownership of a residential house meant ownership to the exclusion of all others. Since Satra did not have full ownership of the house, it was held that the he was not the owner of “a” residential house on the date of sale of the shares. Consequently, the exemption under Section 54F could not be denied to him. The authors may be contacted at wonderlandconsultants@yahoo.com |
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Aviation Notes For years the functioning of the Airports Authority of India (AAI) has been dubious. The government has allowed private players to upgrade, modernise, renovate and even construct new airports in different parts of the country. This has affected the revenue of the AAI. The statistics show that the AAI has never been known to be a ‘service-oriented’ outfit, as it should be. It is actually a money-minting body without providing adequate facilities to users, passengers and visitors. According to norms followed around the world, the landing charges are determined on the basis of use of the airport. The busier the airport, the heavier are the landing charges. Keeping this in view, landing charges at Amritsar airport should be much lower than those at Bombay, Delhi, Hyderabad, Bangalore, Madras and other international airports. But it is not so. The AAI is charging heavier landing fee to off set expenses incurred in renovating and modernising the airport. Nothing has been done to rectify this anomaly. Aviation analysts reiterate that much needs be done for the Amritsar airport to look like an international airport. Incoming and outgoing passengers have to face many hardships in embarking and disembarking. The facilities, so far, provided are inadequate. According to reports, more than half the work needs to be completed. Heavy fees for landing, paucity of facilities for passengers and visitors, inadequate immigration and customs handling are compelling factors for some airlines to discontinue their flights. The dispassionate analysts say Amritsar is a gold mine for passenger and cargo movements. The improvement will come only when the AAI functions in all its earnestness, as private players are doing at Delhi, Mumbai, Hyderabad and Bangalore. Worldwide, two fares - peak season and lean season - fares have been in operation for decades. The year’s last peak season began in October and will end on December 31. As New Year begins, the lean season starts and, as per traditions, fares will be lower than the ones in operation. The analysts say the new fares will be five to 10 per cent lower than the existing ones. Minister of state for civil aviation Praful Patel has expressed his surprise at steep ‘transaction fee’. He says: “How can airline charge between Rs 350 and 500 on domestic flights?” According to him, it should be, if at all, between Rs 50 and Rs 100. If this is what he really feels, why has he not taken any action?
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India has expressed the hope that leaders of the world’s 20 biggest economies would agree on a coordinated fiscal stimulus plan to arrest global recession and ask countries to resist rising protectionist pressures.
