The Tribune, Chandigarh, India

Swiss banks offer to tax clients

New Delhi, September 27
Pressed hard for giving access to details of money stashed away by Indians and other overseas clients with them, Swiss banks have offered to tax this wealth on behalf of the respective foreign governments.

India, where there have been long-running demand for concrete actions to bring back the black money lying in highly secretive Swiss banks, will begin talks in December for a new tax treaty with Switzerland so that it could get details about the defaulters.

Besides India, a number of other countries are also said to be looking at similar treaties, while the US recently reached an agreement for giving access to close to 4,450 bank accounts of Americans with Swiss banking major UBS.

As an alternative to the information exchange, Swiss banks have mooted the idea of a 'universal withholding tax' — wherein they would tax the earnings generated from the wealth of foreigners deposited with them and transfer the proceeds to the government of the concerned country — and is currently discussing the same with the relevant authorities.

When asked about the proposal and its applicability to the wealth deposited by Indians in Switzerland, Swiss Bankers Association's Head of International Communications James Nason told PTI from Basel: "We are in contact with the Swiss authorities about the proposal so it would be premature to publicise more details for the moment."

While there are no details available about the amount of money deposited from India there, assets held on behalf of foreign clients at the end of June stood at 2,237 billion Swiss francs (over Rs 1,00,00,000 crore), which represented 56 per cent of total assets held in Swiss bank accounts.

Out of this, about 694 billion Swiss francs (over Rs 30,00,000 crore) were held by foreign private clients.

Speaking at the annual Swiss Bankers Day recently in Geneva, Swiss Bankers Association' CEO Urs P Roth said that the withholding tax would generate revenue to the individual countries from the wealth deposited by their people, without disclosing the identity of the account holder.

Roth said SBA was discussing the model with the Swiss Federal Tax Administration and it had been received with great interest among the Swiss authorities.

"The model would generate tax revenues while respecting the privacy of bank clients and it would represent an efficient alternative to a system of automatic information exchange," he noted.

If implemented, this proposal would allow banks to tax the earnings generated by the wealth deposited there.

The Swiss banks have offered to charge tax directly at source on behalf of the foreign country with which a taxation agreement is in place. The revenue would be forwarded to the Swiss Federal Tax Administration for passing on to the client's country of domicile. However, the concerned client's identity would not be revealed. — PTI

Market Update
Cautious trend prevails
by Lalit Batra

Markets remained cautious during the last week as Indian bourses turned into a consolidation mode during the Futures and Options expiry. The Nifty managed to cross the crucial 5,000 mark (for the first time in 2009. Markets continued to trade sideways on account of weak global cues and concerns of inflation. Anxiety about upcoming earnings also prompted investors to remain on sidelines.

The market sentiment remains firm on more signs of a recovery in the economy (excise collection is up by 22.7 per cent in August over July 2009) and on sustained buying by foreign funds.

There is optimism about second quarter results after advance tax collection registered a positive growth in the second quarter after witnessing a negative growth in the first quarter. Corporate advance tax and advance personal income-tax were up by 14.7 per cent and 1.7 per cent, respectively, in September quarter.

A section of the market is concerned that a glut in share sales may suck liquidity from the secondary market. The corporate sector has raised large sums of money through equity and equity-related instruments in the past six months or so to either to retire high cost debt or to fund expansion. The supply of paper by Indian firms appears limitless, raising concerns that additional share sales will suck liquidity from the secondary market.

Bartronics Limited

Bartronics India is a pioneer in Automatic Identification and Data Capture (AIDC) technologies. Its domain consists of barcodes, Radio Frequency Identification (RFID), samartcard technologies, data communication technologies and support services. The company currently derives its revenues from two verticals namely the solutions segment and the smart cards segment.

The ‘Aap Ke Dwaar’ project, which has been bagged by Bartronics to be implemented in Delhi is expected to be a huge revenue booster for the company over the next nine years. The size of this project has been pegged at Rs 5,000 crore and involves setting up 2,000 kiosks in Delhi by October 2010 for which the government will allot the land. These kiosks will after 17 services such as electricity bill payment and the like and Bartronics’ expertise in data capture technologies will be used to enhance the services offered by these kiosks.

Besides setting up the infrastructure, Bartronics will also be running the kiosks and has the potential to generate strong revenues from advertisements as 3 sides of the kiosks will be lent for advertising. The fact that hoardings have been banned in Delhi will also act as a catalyst in spurring revenues from advertising. Thus, the company expects to generate revenues of Rs 500 crores every year for the next nine years and these revenues would start accruing 2011 onwards.

Moreover, keeping in mind that companies are increasingly veering towards the usage of RFID and smartcards (for example the government is expected to emerge as a big player in terms of using smartcards for its various projects such as the driving license project, the financial inclusion project and the Unique Identification Project. Further, the banking industry is also expected to use smartcards in a big way) the scope for growth in revenues is strong in the coming years. Given the above positives, investor may buy this stock around the current price of Rs 172 for long term.

Tax Advice
No rebate on car loan repayment
by S.C. Vasudeva

Q. I am a senior citizen and have purchased a car by taking finance from Canara Bank. The EMI for the loan taken from the said bank is Rs 6,000 per month. Is it possible for me to claim a deduction in respect of the principal and the interest paid towards the repayment of the said loan?

— Anil Kumar

A. You have not indicated the source of your income. As you are a senior citizen I presume that your income comprises of pension and interest. In such a case, no deduction is allowable from total income in respect of instalment paid towards the repayment of loan borrowed for purchasing a car and payment of interest in respect of such loan.

Rebate on home loan

Q. I am an NRI, and planning to purchase a house in Gurgaon. I am aware that there are tax breaks available for Indian residents, but I want to know is there any similar scheme available for NRIs (I hold Indian passport)? I will finance part of my purchase through home loan from an Indian bank, what do I need to do in order to qualify for tax breaks, if available?

— Dinesh Kumar

A. The following major tax incentives are available in respect of a house property purchased/constructed in India:

1. In computing the total income of an individual, for an assessment year a deduction of a sum not exceeding Rs 1 lakh is allowable in respect of the repayment of amount borrowed by the assessee from a bank or other specified entity for the purposes of construction/acquisition of a house.

2. The interest paid on amount borrowed for the construction or acquisition of a house property is allowed as a deduction against income from house property. However, such deduction is limited to Rs 30,000 in case of a self-occupied house. A higher deduction of Rs 1,50,000 in case of a self-occupied house is allowed if the amount is borrowed after 1st April 1999 and such acquisition or construction is completed within three years from the end of the financial year in which the amount was borrowed.

3. The house tax paid in respect of the property is allowed as a deduction from the annual letting value.

4. A statutory deduction of 30% of the annual letting value arrived at after deduction of house tax paid is allowed to cover expenses in respect of the maintenance of the house and collection charges etc.

No rebate on father’s policy

Q. I have taxable salaried income. My father had taken some LIC policies and was paying premiums from his income. Now, he is a senior citizen. For the past three years he has no income at all and hence I am paying his policies’ premium. Am I eligible for any deductions in my income tax return? If yes, under which section?

— AK Mishra

A. The deduction allowable under Section 80C of the Income Tax Act 1961 is for the amount paid to effect or to keep in force insurance on the life of the assessee himself, his wife or husband and any child of such an assessee. It may thus not be possible for you to claim the deduction from your taxable income for the amount paid towards the insurance policy of your father.

Transfer of shares

Q. I have transferred some shares to my wife without any consideration. I have executed a gift deed in respect of gift of the shares. (i) Is there any tax leviable on such transfer of shares? (ii) As and when the above shares are sold, who will be liable to pay the capital gains tax if the shares are sold at a profit.

— Raj Kumar

A. The gift of shares to your wife is not taxable under the provisions of the Act. However, in accordance with the provisions of the Act, the transfer of a capital asset without any consideration to a wife will be ignored and the capital gain arising on the sale of shares computed according to the provisions of the Act shall be chargeable to tax in your hands.

Gift from son not taxable

Q. I am a retired government employee and am more than 70 years of age. My son, who is employed in Mumbai, regularly sends me about Rs 1 lakh per year, which is sufficient for me to meet my expenses as I am staying in my own house at Panipat. I also have some income from interest and pension. Is the yearly amount of Rs 1 lakh received from my son subject to tax? — Sumit

A. The amount of Rs 1 lakh received by you from your son towards meeting your household expenses will be treated as a gift to you. The amount of gift received from your son is not taxable under the provisions of the Income Tax Act 1961. Further there are no gift tax implications as presently no gift tax is leviable in India.