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Shift in power needed at IMF: FM
‘FII inflow to breach Rs 1 lakh crore this year’
Ludhiana races after premium cars
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‘RIL’s seeking of gas price hike wrong’
RBI to intervene if inflows volatile
Market Update
Tax Advice
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Shift in power needed at IMF: FM
Washington, October 10 “While the worst may be behind us, the period of tribulation is not over yet," finance minister Pranab Mukherjee said in his address to IMF at the Fund-Bank annual meetings with governance reforms high on the agenda. "We have to remain vigilant about threats to the fragile recovery materialising in this fragile phase of repair and rebuilding," he said. Mukherjee described the Fund as an anchor in global collective endeavour. Making a strong case for minimum 5 per cent rise in voting power in IMF for emerging economies, he added that legitimacy of the multilateral agency will be questioned if the governance structure does not reflect changing global economic reality. ”The IMF cannot be effective or credible without a shift in governance structure and voting power in line with the changing importance of countries in the global economy, he said during his intervention on ‘Global Economy and IMF Reforms,’. Unless relative power in the board of directors and the board of governors reflects the changing global economic reality, the legitimacy of the IMF will again be questioned, the finance minister added. "We are all agreed that there has to be a shift in quotas of at least 5 per cent to dynamic emerging markets and developing countries. The ad hoc increase should be used in a manner to focus the quota increases to dynamic emerging markets and developing countries. This is best done through a PPP-GDP based mechanism," he said.
— Agencies |
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‘FII inflow to breach Rs 1 lakh crore this year’
New Delhi, October 10 An analysis of the data available with the capital market regulator Securities and Exchange Board of India shows FIIs have made a net purchasing of stocks worth Rs 97,955.50 crore ($21.42 billion) so far in this year. Last year, FIIs were the net purchaser of shares worth Rs 83,423 core, the highest-ever in rupee terms. During the same year, the stock market benchmark Sensex had recorded a gain of over 80 per cent. "With the economic activity gaining pace, it is believed that Indian market would continue to see overseas buying," SMC Global Securities Research Head (Retail) Saurabh Jain said. The government's plans to mop up money by selling its stake in public sector companies, including the mega IPO of Coal India Ltd, will give more investment opportunities to investors, he said. The sharp rise in FII flows to Indian stocks has pushed up the market. The BSE benchmark Sensex climbed over 10 per cent in September, a month when the index re-gained the magical 20,000 level after a gap of 32-months. This whopping capital inflows have also raised an alarm. However, the finance ministry had said that it did not see a need to curb FII flows. Many analysts fear that this whooping inflow is creating a bubble in domestic market, which may crash once FIIs start pulling out their money. However, market experts do not see any sharp correction in near term, as they say India has better economic conditions.
— PTI |
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Ludhiana races after premium cars
Ludhiana, October 10 Industrialists and business men do not mind shelling out for luxury. This penchant for the good life has meant that bankers and financiers in the state are laughing all the way to their own branches, literally. More than 90 per cent of the vehicles, particularly in the luxury and premium segment, are financed by the banks and the finance companies. Defaulting rate of the financed vehicles has come down to almost nil - say from 1 percent to below 1 per cent according to banks and finance companies. This is in part due to the presence of CIBIL (Credit Information Bureau of India Ltd) an Government of India organization, which ensures the prompt payment of instalments to banks and the finance companies. Before the introduction of CIBIL, the defaulting rate or NPA (non-performing assets) was 5 to 7 percent. HDFC bank, ICICI and Kotak Mahindra banks are the main finance providers for vehicles. ICICI Bank entered into the segment only recently. Nischal Puri, Area Sales Manager, HDFC bank told The Tribune that extended Rs 50 crore as finance every month. The bank has been in the business of finance for the vehicles for ten years and has advanced around Rs 1,000 crore in Punjab. ICICI bank disburses Rs 8 crore to 10 crore per month in Ludhiana. Kotal Mahindra also advances Rs 8 crore to 10 crore a month. Defaulting rate of Kotak Mahindra is below 1 percent, says Deepak Anand from the bank. Banks and the finance companies have categorised cars into five categories A Segment: Maruti 800 and other similar cars upto Rs 2 lakh and above; B Segment: Rs 4 lakh, Santro and Zen; C Segment: Rs 8 lakh to 9 lakh - Honda, Verna, Ford Fiesta; C Plus: Civic, Corola and Skoda - Rs 10 lakh to Rs 12 lakh; D Segment: Rs 20 lakh - Super Skoda and Laura and Accord and D plus: Mercedes Benz, BMW, Audi, Land Cruiser and Prado - Rs 40 lakh to Rs 1 crore. Land Cruiser costs Rs 86 lakh and Prado - Rs 52 lakh. Buyers of the premium cars like Mercedes, BMW and Audi are mostly businessmen, industrialists the colonizers and builders. NRIs are also among them. Mercedes and Audi are constructing state-of-the-art show rooms in Ludhiana, likely to be ready by year end. |
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‘RIL’s seeking of gas price hike wrong’
New Delhi, October 10 The ministry has taken exception to RIL's September 6 letter that stated that GMR Energy and Welspun Maxsteel were willing to pay $4.75 to $5.25 per million British thermal unit for KG-D6 gas. In 2007, the government had approved a formula for pricing of natural gas from KG-D6 fields and $4.205 per mmBtu was the price derived from that formula and fixed for first five years of production (until March 2014), a senior official said. "We did not fix a price. We approved a pricing formula. Now for the company to come to us saying this customer or that customer is willing to a higher price and so that price should apply is wrong. If they want a higher price they will have to seek a formal approval for revision in the pricing formula," he added. Though RIL in its letter had not made any suggestion for a revision in rates, it referred the proposals received to the ministry for advice. The official said, adding that the company could, hypothetically speaking, get a letter from some other customer in dire need of fuel tomorrow to seek an even higher price.
— PTI |
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RBI to intervene if inflows volatile
Washington, October 10 "If the inflows are lumpy and volatile or if they disrupt the macroeconomic situation, we will do so (intervene). Our intervention will be to keep liquidity conditions consistent with activity in the real economy and to maintain financial stability," RBI Governoe Subbarao said at a panel discussion. His comments came on the heels of finance minister Pranab Mukherjee in an interview to a private television channel ruling out curbing FII inflows at present. However, RBI Deputy Governor Subir Gokarn had said the central bank could intervene in forex markets if capital surge leads to any disruptions. Market regulator SEBI last week exuded confidence that there would not be any reversal of foreign fund flows into equity markets as long as the Indian economy is on a strong wicket. — PTI |
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Market Update
Finally, the market corrected, last week. The BSE Sensex fell 194 points to settle at 20,250. The S&P CNX Nifty fell 39 points to close the week at 6,103. However, the momentum of foreign fund buying maintained its strong pace.
The correction may have been triggered by sell orders placed by investors to make room for investment in the initial public offer (IPO) of Coal India, billed as the country's largest issue ever. The IPO of Coal India opens for bidding on October 18, 2010. Foreign funds continue to aggressively mop up Indian stocks. Net equity inflow in 2010 now stands at a record $21.42 billion, above last year's $17.45 billion, as per SEBI data, which includes Fll inflow through primary and secondary market route. The second quarter results season, which kick-starts this week, is a major near-term trigger for the market, which has risen sharply over the past few weeks on heavy buying by foreign funds. Markets, however, may exhibit weakness in the near term due to a strong equity issuance pipeline over the next six months that will soak liquidity from the secondary equity markets. Indian companies are estimated to raise about Rs 36,000 crore from share sales over the next three to six months. This includes a large IPO from Coal India. The government plans to raise about Rs 15,000 crore to Rs 16,000 crore from divestment of 10 per cent stake in Coal India. Moreover, Nifty is currently trading at a 30' per cent premium to its own historical average valuation of P/E of 19 times. These numbers indicate that the broader markets are fairly valued and that the current rally is liqudity driven. The long term India story is promising and investors sitting on the sidelines may look to enter the markets at dips and buy into select stock specific opportunities. IDFC
Infrastructure Bonds
Infrastructure Development Finance Corporation (IDFC) is looking to raise Rs 3,400 crore through the issue of ten-year infrastructure bonds. The bonds have a lock-in period of five years and come in four different series which allow investors to choose the mode of payment of interest (annual, compounded) as well as opt for a buy-back option after the expiry of the lock-in period. Although the coupon rate on offer 8 per cent without the buy-back option and 7.5 per cent with buy back option is largely in line with the ten-year government bond yield, the infrastructure bonds offer certain tax benefits under Section 80C, leading to a higher effective yield. The infrastructure bonds offer certain tax benefits under Section 80CCF leading to a higher effective yield (ranging from 9.18 per cent to 17.19 per cent depending upon the tax bracket and the chosen series option for investment of up to Rs 20,000). Since these bonds offer tax rebate over and above the Rs 100, 000 tax benefit under section 80C, 80CC and 80CCD, and an attractive yield, investment is recommended. The issue closes October 18. |
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Tax Advice
Q. It is the responsibility of all nationalised banks in India to deduct income tax at source. Most homemakers have opened senior citizens a/c to earn 9% interest. Others have fixed deposit receipts (FDs), so that the interest earned is Rs 18,000 to 36,000 a year. All banks allow Rs.10, 000 exemption, after which the remaining interest is counted as taxable income. My questions are:-
1. Is the earned interest not part of total exemption i.e. Rs2.40 lakh or Rs 1.60 lakh? 2. Why banks demand a PAN Card filling up the 15H Form? 3. Are the Banks right or wrong? 4. If wrong, what course of action should be adopted? — Ram Sarup A.
The obligation for payment of tax on the income earned by an assessee rests upon him. It is his responsibility to file form 15H with the bank so that bank does not deduct tax at source on an amount of interest exceeding Rs.10, 000. A bank is not supposed to be aware of the total income of an assessee and therefore it is obligatory for the bank to deduct tax at source. If a bank does not deduct tax at source it would be liable to penal consequences. Banks would like to avoid such a liability and would deduct tax at source in case form 15H has not been filed by a depositor. Bank needs PAN because if a depositor is not having PAN, tax is deductible @ 20% of the amount. This complies with the I-T Act, 1961. Filing tax return from abroad
Q. I am going abroad for two years. Kindly advise how can I pay tax and file I-T returns during this period. My annual income is above exemption limit and I am senior citizen. — BM Gupta A. You have two options to file the tax returns. You can file this return online basis from the country where you are going. You also have an option to file the return through your tax advisor /representative in India. You can send particulars of income to him. He will prepare a return and send the same to you for signatures. The same can be thereafter returned to him by courier. He will file the same with the tax department. The tax due in respect of your income can also be paid through your tax advisor/representative. Coaching taxable with conditions
Q. In the Tribune dated July 6, 2010, you had clarified that in case of business covered under section 44AD (amended) of the I-T Act 1961, no books of account are required to be maintained if the annual turnover/gross receipt in the previous year was less than Rs 60 lakh. Clarify if ‘Coaching to the students/ tuition’ is included in the business covered under section 44AD (amended) of the I-T Act 1961? — Jagdev Singh Virk A. Section 44AD of the I-T Act 1961 (the Act) would be applicable for assessment year 2011-12 in case an eligible assessee is engaged in an eligible business. The term “eligible assessee” has been defined to include an individual. The term “eligible business” has been defined as “any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE of the Act”. In view thereof, in case you are carrying on the business of coaching to the students you can claim to be taxed under section 44AD of the Act provided your gross receipts in the previous year relevant to the assessment year 2011-12 do not exceed Rs.60 lakh. Share sale taxable?
Q. I have shares of a few companies which I am holding for the last 25-30 years and a few for the last 2-3 years. If I sell these securities through a registered stock broker (paying STT), I think no long-term capital gain tax is payable. Is my view correct? — R Khanna A. Section 10(38) of the Act provides that any income arising from the transfer of a long term capital asset being an equity share in a company or a unit of an equity oriented fund would be exempt from tax provided the transaction of sale of such equity share or unit is entered into after coming into force of the Securities Transaction Tax leviable in terms of the provisions of the Finance Act, 2004 and is chargeable to securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004. Query indicates that you are holding shares which had been held by you for more than one year and therefore such shares would be eligible to be categorised as long-term capital asset. If you comply with the aforesaid conditions, the income arising on the sale of such shares would be exempt from tax. |
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Washington, October 10
