The Tribune, Chandigarh, India

	Britain okays £10m loan to Tata Motors London, September 19 Tata Motors has been sanctioned a £10-million loan for its new electric car project in the UK by the British government. With this, Tata has become the first company to secure a loan under the British government's £2.3-billion automotive assistance programme, eight months after its launch. The loan from the government will support £25 million of the company's own investment in plans to develop and manufacture electric cars in the UK. The company is now “considering locations” in Britain to set up a factory. An announcement is expected soon. Britain's Business Secretary Lord Peter Mandelson said last night: “The government is determined to help the car industry to exploit fully the opportunities offered by green manufacturing. Today we are backing Tata as Tata backs Britain. This loan will strengthen our electric vehicle manufacturing expertise, securing and creating high-value engineering jobs in the West Midlands.” A spokeswoman for the Business Secretary said the government was in talks with 17 other companies about projects worth £2 billion. Tata said: “It appreciates the state support”. The car maker, led by Ratan Tata, has developed a four-seater electric vehicle in partnership with Norwegian group 20Miljo Grenland/Innovation. Production of the vehicle should begin in Norway later this year, The Daily Telegraph reported today. The automotive assistance programme is part of the government's support for the beleaguered car industry alongside the scrappage scheme, which offers consumers £2,000 incentive to scrap an old car for a new model and has reinvigorated sales in the UK. — PTI
	Problem on food price front, admits FM Bangalore, September 19 Finance Minister Pranab Mukherjee today admitted that the government had a problem on the food price front due to a dichotomy in the wholesale price index (WPI) and the consumer price index (CPI). “On the food price front, we have a problem. Before the last week, the WPI was negative. That is no satisfaction to the ordinary consumer because the CPI was moving up,” Mukherjee told. After participating in a seminar-cum-interactive session on the proposed direct tax code, organised by the Confederation of Indian Industry here, Mukherjee said the government had resorted to tight money policy last year to make credit availability difficult and control price rise. In the WPI, the weightage of the food articles is 16 but in the CPI, there are four indexes for rural, rural agriculture labour, urban, non-manual and employees and for rural poor. “In the four price indexes of the CPI, food articles have seen weightage increasing to 56 per cent from 48 per cent. Therefore, there is a dichotomy on the price front due to the negative WPI and the CPI moving up,” Mukherjee pointed out. The minister said the government had encouraged import of sugar, edible oils and pulses under the open general licence without any duty as they were in short supply right now. “Secondly, we are requesting the state governments to revamp the public distribution system,” Mukherjee added. — IANS
	Stimulus to continue till recovery Bangalore, September 19 The government would “wait and watch” the situation before deciding on rolling back the stimulus packages announced after India's economic growth slackened impacted by the global financial crisis. “We will have to wait and watch the situation,” Finance Minister Pranab Mukherjee told reporters on timing of reversal of the stimulus package. The government had slashed excise duty by six per cent and service tax by two per cent in various phases and increased Plan expenditure. This has pushed the fiscal deficit higher. The fiscal deficit is projected to rise to 6.8 per cent of GDP in 2009-10. The Finance Minister has already said this level of fiscal deficit could not be sustained and aims to bring it down to 5.5 per cent next fiscal and 4.4 per cent in 2011-12. He hoped to have an overall view of all aspects by the time of formulating the next Budget. Mukherjee said the international view was that stimulus package should not be reversed till full recovery in Europe and North America was “distinctly visible”. This viewpoint was expressed at a recent G-20 Finance Ministers preparatory meeting, he said, speaking after an interactive session organised by the CII on the proposed Direct Tax Code. — PTI
	IMF to sell gold Washington, September 19 The International Monetary Fund (IMF) has approved the sale of a limited amount of its gold to shore up its finances and China, India and Russia have indicated interest in such purchases as a way of reducing their position in dollar-denominated securities. The purchase of the gold will also help these countries to increase their role in IMF operations as they have complained that the IMF is dominated by the US and European nations. The fund's executive board said it decided to sell “a volume strictly limited to 403.3 metric tons”, 1/8th of its holdings, in a way that does not disrupt the sale of gold in commodity markets, that already were expecting and discounted the IMF decision. The IMF is the third largest official holder of gold in the world with 3,217 metric tons after the US and Germany. The board said the IMF could sell its gold directly to its members' central banks if any were interested. — AP
	Aviation Notes Courtesy takes a back seat by K.R. Wadhwaney There was a time when air travel was a pleasure with courteous ground handling and pleasing cabin service by agents. Now it is nothing but pain for passengers, who are subjected to arduous frisking, varying fares, exorbitant airport fees, rude behaviour of officials and possibilities of being stranded for cancellations and delay of flights. Amidst this depressing scenario, some international airlines have already started charging for check-in baggage and more airlines plan to do the same. There was also a time when passengers were allowed to carry one or two suitcases within the stipulated weight limit of 20 kg. Later, some international carriers scraped the rule and allowed carrying of two suitcases of certain sizes for free. Now the rule has returned on US routes. The passenger can carry one suitcase of less than 23 kg free and will have to pay $50 for second and $150 for a third suitcase. American Airlines has already started levying fees from outgoing passengers and, according to travel agents, more airlines are contemplating of doing the same. Earlier, the agents used to get a nine-per cent commission and general sales agents pocketed 12 per cent. Now, the agents get negligible commission and, therefore, they can not offer discount to passengers. Soon, the rule pertaining to commission to the agents will be done away with. And again the passengers will be the sufferers. International Air Transportation Association has now opined that the airlines will continue to sustain losses and the market situation will be murky. Fare structure has become unstable because fuel prices keep changing. The association predicts that the passenger traffic will decline by 4 per cent and cargo by 14 per cent. Situation in India is worse where most of the international airports are getting face-lifts and developers are charging additional fees, hurting passengers’ already feeble purses. After the Jet strike, Air India unions are threatening to resort to go slow or strike strategy in view of the management's arbitrary functioning. The harassed AI staff says: “Our economy class may or may not be a cattle class, but our carrier has certainly become a cattle airline with employees facing hardships than getting rewards for their loyal working.”
	Investor Guidance Interest on NRO fixed deposits taxable by A.N. Shanbhag Q What is the tax treatment for interest on fixed deposits made from an NRO account by an NRI? Do the normal tax slabs applicable to residents also apply to NRIs? Is there a form that can be submitted to the bank so that it doesn't deduct TDS on interest on FDs by NRIs? — Ankit A Interest on NRO fixed deposits is taxable in the normal course. It will be added to the NRI’s other Indian income and taxed at slab rates applicable to him or her. The tax slabs are universally applicable, whether the taxpayer is resident or NRI. Residents have the facility of submitting Form 15G/H requesting non-deduction of TDS upon fulfilment of certain conditions. This facility is not available to NRIs. PPF account Q My husband and I want to invest in a saving scheme where we can get tax rebate as well as good returns (period 5-10 years). We were planning to invest in PPF but have come to know that after the implementation of Direct Tax Code, money withdrawn from PPF will be taxable. What should we do? Also, I want to know that if we open PPF account before the implementation of Direct Tax Code, can we evade tax at the time of withdrawal? — Sweta Ojha A As per the provisions of the Direct Tax Code, balance to your credit as on March 31, 2011, will be exempt from tax. However, interest earned thereon and the fresh contributions made after the date along with interest thereon will be eligible to tax. In case of NNS87, any withdrawal made by the investor is also taxable in his hands but it is not taxable if it is withdrawn by his nominee after his demise. That is not the case with PPF. In view of this, it may be advisable to avoid PPF unless rules are modified. NRE account Q My status changed from NRI to a resident in FY08-09, but I received income in my NRE account the same year. What is the income tax treatment in India of that portion of income? A Schedule-II (10) states: “When an account holder becomes a resident in India, deposits may be allowed to continue till maturity at the contracted rate of interest, if so desired by him. However, such deposits shall be treated as resident deposits from the date of return of the account holder to India.” Consequently, after returning to India permanently, both NRE and FCNR have to be redesignated as resident accounts. These can be run up to their maturity but the interest on NRE becomes taxable from the date of the return whereas the FCNR interest is tax-free as long as the holder remains an NRI or becomes an RNOR. Such deposits are treated as resident deposits from the date of return of account holder to India permanently. The global earnings of a resident Indian is taxable in India. However, if your status is RNOR, your forex income earned abroad during the FY when you were RNOR is tax-free in India. Capital gains Q I have a query regarding capital gains. Under Section 54, a residential property sold (with capital gains) necessitates only investment of the capital gains amount and not the whole amount in a residential property. What if the investment is in land or commercial property? I am told that Section 54F and not Section 54 will be applicable. What is the difference? Also, under Section 54F, a clear exclusion has been given in respect of a person owning more than one residential property apart from the new property to this clause. Have I understood this correctly? — Ravi A Section 54 offers exemption from capital gains tax on sale of residential property if the capital gain amount is invested in another residential property. Section 54F offers exemption from capital gains tax on sale of assets other than residential property if the net sale proceeds (and not only the capital gain amount) is invested in another residential property. It is true that for claiming Section 54F exemption, the taxpayer should not have more than one residential property other than the new property. The authors may be contacted at wonderlandconsultants@yahoo.com