The Tribune, Chandigarh, India

	Budget prudent, say foreign media New Delhi, February 28 From being termed as an attempt to please the middle class to inflationary in nature, the foreign media has hailed India's Budget for 2010-11 as a “prudent Budget” and aimed at cutting the country's debts. "India's Finance Minister is seeking to please the middle classes with his latest Budget," the BBC said about the annual Budget proposals unveiled last week, but also added that the proposals might not address the needs of the underprivileged. At the same time, the business magazine Forbes termed it a "Prudent Budget" and said the country was aiming for growth with fiscal discipline. Wall Street Journal took note of India's plan to borrow heavily in the coming fiscal year and also of its decision to "roll back some costly spending that helped support the economy through the global crisis as the government begins trying to repair its tattered finances." New York Times also focused its coverage on the Indian government's pledge to curb debt. "Acknowledging that its growing debt could threaten India’s economic growth, the government said on Friday that it would cut its fiscal deficit by slowing the growth of spending, increasing revenue from taxes and selling pieces of state-owned firms," NYT reported on the Budget. The daily also took note of the Budget deficit targeted to cut to 5.5 per cent of the GDP in the next fiscal from 6.7 per cent and the plans to reduce debt from more than 80 per cent of the GDP currently to 68 per cent in five years. The NYT said these commitments were cheered by the stock market, as its large debt had become a concern because of having contributed to higher inflation. The BBC also rightly pointed out that "Budgets in India are much more than the statement of accounts for the world's largest democracy. But instead of dampening expectations of lower prices, the Budget may well stoke inflationary fires further," the BBC said. WSJ said Rs 11,08,000 crore "Budget represents a balancing act for the minister, who is trying to please voters with continued support for agriculture, education, health and job creation while also reining in the deficit and containing inflation, now over 8.5 per cent." — PTI
	12 firms eye banking licence New Delhi, February 28 Over 12 non-banking finance companies, including those from industrial houses like the Tatas, the Birlas, the Anil Ambani-led Reliance group and the Bajaj group, have plans to seek banking licences once the Reserve Bank of India comes up with relevant guidelines. The host of private sector entities which have been eyeing a banking licence include Aditya Birla Group, Tata Capital, Anil Ambani-led Reliance Capital, the Malvinder Singh-led Religare group, the Muthoot group, the Bajaj group and Shriram Finance. The buzz among the industrial houses and the NBFCs for seeking banking licences has been growing ever since Finance Minister Pranab Mukherjee announced last week in his Budget speech that the RBI was considering grant of additional bank licences for growth of the banking sector. While officials at companies like Tata Capital, the Bajaj group and Shriram Finance were tightlipped on the issue, saying they would be able to comment only after RBI guidelines would be in place, industry sources said these entities had been vying for a banking licences for quite some time. Entities like the Aditya Birla group, Reliance Cap, Muthoot and Religare welcomed the announcement and said their further line of action would be decided at the right time. At the same time, ICICI Bank's CEO and MD Chanda Kochhar said banking was "a very complex business" and it needed to be seen how the RBI formulates the procedure for giving additional licences. On the other hand, Aditya Birla group chairman Kumar Mangalam Birla said: "This has come as a pleasant surprise....” “We would very much want to become a bank. This is a very positive step that will accelerate the mobilisation of resources for transformational growth in infrastructure and other productive sectors of the Indian economy," Reliance Capital CEO Sam Ghosh said. "This move will potentially open exciting new avenues of growth for Reliance Capital in the future. We await further details and guidelines," he added. Muthoot Capital also welcomed the announcement and said it would decide on its action plans after the RBI guidelines. Religare Enterprises chief economist Jay Shankar said,"It has been a long time since the NBFCs have been demanding banking licence. This is a positive move and it will augur positively for the banking sector as well." — PTI
	Dearness rate hike hits SMEs Tribune News Service Chandigarh, February 28 The sharp rise in the dearness rate is adversely affecting small and medium enterprises. This hike is leading to shrinkage of liquidity and the expenditure on labour, too, is going up. P D Sharma, president, Apex Chamber of Commerce and Industry, today said the MSMEs in Punjab were being adversely hit because of a sharp rise in dearness rate. “Due to rising inflation, the RBI has to ensure to parameters. It has to shrink the liquidity in the country by way of increasing CRR and SLR. With this shrinkage, the credit to the industry also reduces. So this affects the growth of industry,” he said. He further said when liquidity was reduced, the cost of funds to banks increased. The RBI simultaneously increased the trend rate of lending. The industry, therefore, has to absorb higher interest rate which in turn affected the competitiveness. “The bank lending rate in most of the countries is very low compared to our own rates. Therefore, investors in many countries send money to our country. This strengthens our rupee vis-à-vis dollar or other currency. This in turn is also affecting exports,” he rued.
	Tax Advice Monthly compassionate assistance tax-free by SC Vasudeva Q. The Haryana Govt has started giving the compassionate assistance (last drawn salary except House Rent) per month to the spouse or dependent of an employee in case of his death during his service. Whether this assistance is fully taxable or not. Whether this assistance is divisible among the spouse and dependent members for income tax purposes. — Manohar Lal A. The monthly compassionate assistance will not be taxable under the provisions of the Income-tax Act 1961. The issue with regard to the divisibility will have to be decided on the basis of the terms of assistance. In case the same has been granted to the spouse for maintaining the family, the question of any divisibility may not arise. Gratuity tax Q. In reply to the problem of Rajdeep Singh, in The Tribune dated Feb 15, 2010, regarding tax on gratuity, you have stated that there is no tax on government employee’s gratuity. We are to receive differential amount of gratuity over and above the previous ceiling of Rs 3.50 lakh, due to revision of pay scales and maximum limit of gratuity. It is learnt that our employer (FCI) is going to recover TDS on Rs 3 lakh approximately, which is in addition to Rs 3.50 lakh already paid to us without TDS. What steps should we take so that we are not liable to TDS? — Prem Nath Gupta A. An employee of a public undertaking is not an employee of the Central government or state government. In view thereof, the provisions of section 10(10)(iii) of the Act with regard to the exemption of gratuity to the extent of Rs 3.50 lakh will apply. Any amount received in excess of the amount will be includible in the total income of the assessee for the purposes of computing his tax liability for the year in which such excess payment has been received. LIC premium in advance Q. I am working in an autonomous organisation of the Central govt. If I deposit monthly LIC premium in advance in January, 2010, for the full year till Dec, 2010 (100012). How much rebate can I claim under section 80C in previous year 2009-10 and in previous year 2010-11. If I deposit LIC premium and have to pay service tax along with, can I claim rebate on full amount paid or the amount of service tax paid by me will be excluded for purpose of claiming rebate under section 80C? — Shalini Goyal A. The deduction under section 80C is in respect to the amount paid or deposited during the previous year relevant to a particular assessment year. In view thereof, the amount paid in January, 2010, will be covered within the maximum deduction of Rs 1 lakh allowable under the section. The deduction under section 80C of the Act is allowable for any sum paid or deposited in the previous year by the assessee to effect or keep in force an insurance on the life of the specified persons. In my view therefore, the entire amount inclusive of service tax should be covered within the maximum deduction of Rs.1 lakh allowable under the section. Policy sans sum assured* Q. I invested Rs. 1 lakh on June 24, 2009, under LIC Market Plus-I as single premium without risk cover - with no sum assured noted on the Policy Bond (copy enclosed). Please clarify as to what amount of premium is admissible as tax rebate under section 80C? Agent of LIC is entitled to gratuity after completion of 60 years age and 15 years of qualifying agency years. Is this amount is taxable? I may add that my total income is taxable and I file return every year. — KK Chopra A. The deduction under section 80C of the Act is allowable in respect of any amount paid or deposited in the previous year by the assessee to effect or keep in force an insurance on the life of the specified persons. Accordingly, in case premium has been paid without the coverage of the risk on the life of the specified persons, the deduction under the section will not be allowable. The gratuity in the case cited by you will be exempt to the extent of Rs 3.50 lakh computed in accordance with the provisions of section 10(10)(iii) of the Act. Any amount in excess thereof will be includible in the total income of the recipient and be taxable. TDS on FD Q I am 70-year-old. I invested Rs 4,03,175 during November, 2008, and December, 2008, as fixed deposit for one year on eight different dates and gave the Form 15H on December 5, 2008, and again on May 7, 2009. Even then the bank deducted TDS on my first two amounts of Rs 50,000 at November 5, 08, and Rs 39,000 at November 7, 08, and has caused me a loss of Rs.150. I don’t file returns after my retirement from govt service, being a teacher these invested amounts is my savings of monthly pension and interest etc. from February 1, 1998, and onward. I retired on January 31, 1998, from GSSS, (Hoshiarpur). Please advise me as to how can I get the refund of this TDS amount deducted by the bank. — Baldev Raj A. The bank should not have deducted tax at source since you had filed the requisite form declaring that your estimated total income would not be eligible to tax. Since the bank has deducted tax at source and paid the same to the government there is no other alternative but to file the tax return and claim the refund from the Income-tax Department. PPF A/c extension Q. Can the spouse (who is a nominee also for PPF) of a deceased pensioner, receiving family pension of the deceased, extend the period of PPF A/c? How will the tax be calculated on family pension when the receiving person is already filing IT return and paying tax? — L. Kumar A. A nominee in case of a PPF has a right to receive the amount standing to the credit of the subscriber. There is no provision in the scheme for a nominee to extend the period of PPF account. The family pension received by the recipient shall be includible in his/her total income after allowing the deduction specified in section 56 of the Act. The tax would be payable by such recipient on his/her total income including the amount of family pension so computed.
	Market Update Sensex upbeat on Budget proposals This week will largely be driven by post-Budget reactions as analysts revise their estimates based on the announcements made in the Budget. Market players largely welcomed the Budget 2010-11, which proposed market-friendly measures, including reduction in surcharge on corporate tax, lower fiscal deficit projection, road map for roll out of goods & service tax (GST) and direct taxes code (DTC), among others. The key highlights of the Budget include increase in capitalisation of PSU banks and partial withdrawal of stimulus by rolling back of excise duty rates and increase in duty on petrol and diesel. However, stimulus will continue for small exporters. On the negative side for corporate, MAT (Minimum alternate tax) was raised from 15 per cent to 18 per cent. This will affect companies that are operating in tax-exempt zones and paying tax only at MAT rates. Once the market settles down to the Budget proposals, movement of the market will depend on how the global markets pan out. US markets have turned volatile as sentiment took a hit from recent data showing a weaker-than-expected labour market. Meanwhile, global credit agencies have warned of further downgrades to Greece, which is struggling to tackle its debt crisis. Ranbaxy Investors looking to take a bet on the generic makers, may invest in Daichi-controlled Ranbaxy. The company has set aside difficult last year and is looking to rebound in the current financial year (recovery may already be on its way if its fourth quarter results are dissected). The other big positive for the stock may be the resolution of its issues with the USFDA, which the management expects to resolve in 2010. Ranbaxy has prepared a corrective action plan and is awaiting a response from the USFDA. The company was successful in launching its FTF product Valtrex during the fourth quarter of this year and is confident of capitalising on other FTF opportunities for products like Flomax, Lipitor and Nexium, for which Ranbaxy has entered into out-of-court settlements. Moreover, the company performance in the branded and emerging markets has continued to play a significant role in offsetting the difficult conditions in the developed markets and this has offset many negatives from the US market. But once the issues with the USFDA are resolved the company will be back on the growth track, which will get captured in the stock. Investors with an appetite for risk may buy into this pharma giant around the Rs 450 levels with a medium-term perspective.