The Tribune, Chandigarh, India

Doha deal could bolster world GDP by $700 bn

Washington, August 16
The world could grow richer by as much as $300-700 billion annually from a successful completion of the Doha round of trade talks and India could see more than $32 billion in trade gains.

The Peterson Institute for International Economics has said the benefits could be well balanced between developed and developing countries.

"The potential GDP gains are significant, between $300 billion and $700 billion annually, and well balanced between developed and developing countries," the Institute, which is a private, non-profit entity dedicated to studying international economic policy, said.

The Doha round is one of the longest-running trade liberalisation negotiations in the postwar era and countries disagree on the extent of liberalisation necessary in agriculture and non-agricultural market access (NAMA).

According to the study titled 'What's on the Table? The Doha Round as of August 2009', a successful Doha round could see India having trading gains worth $32.5 billion.

"India's trade gains from both the formula cuts and Doha top-ups are much more muted, with the notable exception of import gains on services ($10.5 billion).

"Liberalisation of services would generate an increase of more than $22 billion (or two per cent) to Indian GDP and account for about two-thirds of India's GDP gains from an expanded Doha accord," the report noted.

"... the boost to global exports from concluding the Doha round could range between $180 billion and $520 billion annually, depending on the level of ambition," the report said.

As per the study, over $65 billion of additional world exports annually and roughly $100 billion in annual world GDP gains can come just from agriculture and NAMA negotiations.

"The reason GDP gains are so large is that both imports and exports contribute to economic efficiency and income growth, and world two-way trade gains are more than double export gains alone," it noted.

Trade ministers from many countries would be meeting in New Delhi next month in a bid to restart the talks, which failed at the World Trade Organisation last year. The trade talks was first started in Doha, the capital of Qatar, in 2001. — PTI

Now, file IT returns at Corp Bank ATM

Mumbai, August 16
Aimed at retail assesses, state-run Corporation Bank will offer income tax returns filing facility through its 1,000-plus ATM network spread across the country.

"We are offering a service for filing of Income Tax (I-T) returns for Corporation Bank debit card holders through our network of 1,000 plus ATMs in the country. The facility will commence from August 18," Corporation Bank CMD J M Garg told PTI.

The Bank has received an approval from the Central Board of Direct Taxes (CBDT) for this 'first-of-its-kind facility' in the country.

"The idea behind this is to make income tax payment easier for the individual tax payer. It will also reduce dependence of our customers on CAs and income tax consultants," Garg said.

"It (payment of income tax through ATMs) will improve tax compliance," he added.

The Bank's debit card holders would also be able to pay education cess, surcharges and advance tax through ATMs.

"Unlike corporates, who have to mandatory pay I-T returns online, retail assesses prefer paying physically. We want to cater these retail assesses, who account for around 65 per cent of all income tax payers," Corporation Bank General Manager (New Initiatives) B R Bhat said. — PTI

Market Update
Monsoon plays spoilsport, may dent markets further
by Lalit Batra

Last week, the market gained ground on the back of encouraging industrial production data, a new Direct Taxes Code providing a simple tax structure for better compliance, and optimistic comments from the US Federal Reserve on the US economy. The rise was despite the key indices sliding in three out of five trading sessions in the last week. The sensex gained 251 points to close the week at 15,411 and the Nifty gained 98 points at 4,580.

India’s industrial production expanded 7.8 per cent in June 2009, adding to signs that the economy has been spared from the worst of the global recession and is well on its way to a turnaround. Industrial output expanded at its fastest pace in 16 months in June 2009, beating forecasts by a wide margin, as higher salaries of government employees and stimulus spending boosted consumer demand.

Meanwhile, the US central bank has said US economic activity was levelling out and the financial sector had continued to improve in the past few weeks. The Fed kept its benchmark federal funds rate at a 0-0.25 per cent range and pledged to keep rates low ‘for an extended period’.

Back home, the monsoon has continued to play truant and the situation remains grim with the country heading into the worst drought year over the last two decades. The monsoon rains were 29 per cent below normal during the period from June 1 to August 12. The progress of monsoon is closely watched as more than two-thirds of the people live in villages and 60 per cent of the farm land depends on the annual rains.

Going forward, the direction of the market is uncertain given the fact that the monsoon, on which 60 per cent of the farm land depends, has been so deficient that it will affect the buying power of rural India, which in turn will affect corporate profits. Given the above fact, markets may continue their downtrend and may correct 10 to 15 per cent from the current levels in the next 45 to 60 days.

Novartis

Investors with a couple of years’ perspective may buy Novartis India at the current market price of Rs 449.

Novartis India is a 76 per cent subsidiary of Novartis AG-Switzerland, a global leader in the life sciences business. Novartis has a countrywide presence in the healthcare business with pharmaceuticals, generics, consumer healthcare, i.e. OTC and animal health.

The biggest positive for Novartis India is that it has an advantage of launching the products of its parent company thereby boosting its revenue growth. Novartis India has been pretty consistent in launching new products in the domestic market. In the last five years, the company has launched about 38 new products. All of these new launches will contribute to the overall growth of the company going forward.

Unlike other MNC pharma companies, Novartis was earlier focused on the urban centres with major presence in the metros and class ‘A’ cities. But now, the company has been moving to the interiors of the country by expanding its distribution presence in Tier-II and Tier-III cities. These new markets will bring in the much-needed growth for the company, especially when they have become the new growth drivers in the domestic market in recent times.

Besides the above positives, the company also has a healthy balance sheet, with virtually no debt on it.

The only risk to our recommendation is that the company has set up a 100 per cent unlisted subsidiary, Novartis Healthcare and there is a possibility that new products would be introduced through this subsidiary. If this does happen, it would be detrimental to the interests of the shareholders of Novartis India.

Tax Advice
DA can’t be termed as honorarium
by S.C. Vasudeva

Q. Thank you for replying to my query in The Tribune dated August 3. However, you have mentioned as detention amount, and have written that it is not taxable.

But I am getting amount as DA (Daily Allowance) or it can be termed as honorarium. It is not fixed and varies from month to month. Secondly, should return be filed in ITR-I or ITR-4.

— Balbir

A. The term ‘Daily Allowance’ (DA) is also used for denoting a payment made to a person for compensating him for expenditure incurred for being detained at a place on account of his official duties. Such an allowance is not an honorarium. Normally DA is a fixed sum. It may, however, vary on the basis of a place, which is visited by an employee. For example, DA for a visit to Mumbai may be different as compared to that fixed for cities like Ludhiana, Jalandhar. etc. If it varies for a visit to the same city it will be essential to determine the basis of payment so that it could be ascertained whether the amount being paid to a person is to cover his actual expenditure required to be incurred for visit to that place. If the amount paid as variable DA includes any incidence of income, that part of the income would be subjected to tax.

HRA rebate
Q. Being a Central Govt. employee, whether “DA” has to be included for the definition of salary for allowing HRA rebate as per rule? In fact, some of my colleagues are insisting that there is a rule, which exempts “DA” from the definition of salary for calculating HRA rebate as DA is not included in the pensionary benefit for superannuation calculation. But, however, we are getting “DA” on retirement as pensionary benefit. Please advise.
— Jitender
A. Rule 2A of the Income-tax Rules 1962 prescribes the limits for the exemption of house rent allowance. The said rule provides that for this purpose the salary shall have the meaning as specified in clause (h) of Rule 2 of part A of the Fourth Schedule to the Income-tax 1961 (the Act). According to Rule 2(h) salary includes dearness allowance if the terms of employment so provide, but excludes all other allowances and perquisites. You will have to therefore ascertain whether your terms of employment provide for the inclusion of dearness allowance as part of the salary. If so, you will be able to seek the exemption of house rent allowance on the salary inclusive of dearness allowance.

IT return

Q. I have been allotted Permanent Account Number from Panchkula (Haryana) and presently I am working in District Solan, Himachal pradesh. My query is where should I file my income-tax return as per the Income Tax Act.

— Davinder Rawat

A. The return of income will have to be filed on the basis of your permanent address which had been indicated in the application for the allotment of Permanent Account Number. It seems your permanent address is that of Panchkula and if it is so the return should be filed at Panchkula.

ITR 4

Q. In ITR 4 & 5 in Balance Sheet under heading loans & advances there are two sub headings: 1. Advances recoverable in cash or in kind or value to be received 2. Deposits, loans & advances to corporate & others. I request you to please clarify this in detail for most taxpayers (especially commission agents) who face difficulty in filing these columns. Also I want to know the difference between the two. Suppose I have given Rs 1,20,000/- to B. Now in this case should I show this amount while filing my return under sub heading 1 or 2. I urge the Finance Ministry to amend return form & provide only one heading so as not to confuse taxpayers.

— Sam

A. The heading in the ITR 5 relating to Advances recoverable in cash or in kind and deposits etc have been adopted from Schedule VI to the Companies Act 1956 which prescribes the format of Balance Sheet for companies. The distinction between the two can be explained as under:

Advances recoverable in cash or in kind should include the amount which are in the nature of advance adjustable against the bills to be received, prepaid expenses and the like.

Deposits, loan and advances to corporate and other should include those amounts which have been given to various entities on interest or otherwise and are in the nature of deposits or loans recoverable in cash such as Fixed Deposits with companies, Inter corporate loans, loans to partnership firms etc.

The amount of Rs 1,20,000 advanced to B should thus be categorised on the basis of above distinction. As a taxpayer you may approach the Ministry directly for making the amendments proposed by you.

Q. I want to show my plot, residential house or some investment in my return form ITR 4. Now in which column should I show this, under fixed assets or other current assets? Also, is it necessary to show only that items in fixed assets on which we claim depreciation?

— Desilva

A. The information about the purchase of immovable property valued at Rs 30,00,000 or more should be shown in schedule relating to AIR against Code 006. The payment for acquisition of units, bonds/debentures and shares is required to be shown in AIR schedule provided the purchase of units is of Rs 2 lakh or more, bonds/debentures is of Rs 5 lakh or more and of shares is of Rs 1 lakh or more. The respective Code numbers are 003, 004 and 005.

Under fixed assets normally only those assets are reflected in the Balance Sheet on which depreciation is charged in the books of account.