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Proposal to bring corporates under anti-corruption law
Hike in import duty
RBI likely to maintain status quo in its policy review
E&Y lowers growth forecast for India
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3G Roaming
Airtel’s 27% revenue to come from Africa, says Morgan Stanley
Tax Advice
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Proposal to bring corporates under anti-corruption law
New Delhi, January 22 The Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice, headed by Congress leader Abhishek Manu Singhvi, is examining the Prevention of Bribery of Foreign Public Officials and Officials of Public International Organisations Act-2011 aimed at criminalising foreign bribery and offences thereof. The Act has been passed by the Lok Sabha and awaiting nod from the upper house of Parliament. "A letter has been sent to the CVC, CBI and ED seeking their response through an in-person presentation/ submission on the matter. They have been asked to appear before the Committee on January 24," a source said. "The Committee is also considering to bring corporates or private industrial houses in the ambit of the proposed Bill," he added. The Bill prohibits accepting gratification by foreign public officials as also giving gratification to foreign public officials, while also proposing provisions for rendering assistance and cooperation among nations and making the offence punishable to a minimum of six months jail term to a maximum of seven years. It also envisages provisions for attachment, seizure and confiscation etc., of property in a contracting State or India and extradition of accused persons. Foreign bribery is not covered under any domestic anti-corruption laws at present. The sources said the committee is likely to finalise its recommendations within a month, and then the Bill will be sent to the Rajya Sabha for its nod. They said the committee has already met the representatives of industries bodies like Assocham, Ficci and PHD Chamber of Commerce and Industry, among others, to discuss various provisions under it. "Stakeholders are understood to have favoured legal net for corporates to ensure transparency and check corruption. The proposed amendments will be in conformity with the United Nations Convention against Corruption and the Anti Bribery Convention of Organisation of Economic Cooperation and Development (OECD)," a source said. The head of country’s anti-corruption watchdog CVC, Pradeep Kumar, has also favoured a legislation to bring corporates under the purview of another anti-graft law, Lokpal. Currently, no government body, including the CVC, has powers to check corruption in private firms. Capital market regulator SEBI recently rejected a proposal for donning the role of an anti-corruption watchdog for private companies - similar to the role of the CVC for government entities. — PTI Tightening Noose
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Hike in import duty
Mumbai, January 22 "Demand for gold always dips at the end of the marriage season, but this time we expect a sharper fall in demand as the import duties on gold has shot up,” says Mahendrabhai Jhaveri, a jeweller from Mumbai's Opera House. "Sentiment in the trade is poor after the government raised the import duty on gold to 2 per cent of the value and on silver to 6 per cent of the value," adds Jhaveri. Till the increase, import duties were fixed at a flat rate of Rs 300 per 10 grams for gold and Rs 1,500 per kilogram of silver. Gold prices have been falling since the announcement and fell to Rs 27,245 per 10 grams on Friday. "The sentiment is poor as bullion traders have gone slow in placing orders," says Hemant Mehta, a bullion trader in Mumbai. The trade, however, expects the market to digest the higher duties on the precious metals. "We don't see demand for either gold or silver declining because of the increase in duties," says Mehta. He expects prices to return to higher trajectory in the coming days. Meanwhile, a section of the gold trade warned that any move by the government to progressively increase import duties on gold and silver could backfire. Traders felt that even a five per cent difference in the price of gold in India would encourage smuggling of the yellow metal into the country. According to data available from the World Gold Council, demand for gold continues to be robust in India. Imports shot up 66 per cent in 2010 when imports duties on gold were pegged at Rs 300 per 10 grams. A recent report by Macquarie pegged the total amount of gold owned by Indian households at around $1 trillion.
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RBI likely to maintain status quo in its policy review
New Delhi, January 22 "I think there would be strong measures to indicate that RBI wants inflation to be stamped out totally," he said. Headline inflation fell to a two-year low of 7.47 per cent in December, 2011. Food inflation entered the negative zone in mid-December and stood at (-)0.42 per cent as of January 7. RBI will unveil its third quarterly review of monetary policy on January 24. Industry has been demanding cut in interest rate to prop up economy. In the second quarter (July-September) of the current fiscal, the economy recorded a growth of 6.9 per cent, the lowest level in over two years.— PTI |
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E&Y lowers growth forecast for India
Mumbai, January 22 "While growth in the current year has moderated, India's medium-to-long-term growth prospects remain intact," E&Y India Partner & India Markets Leader Farokh Balsara said. According to the latest RGMF, growth in India is expected to accelerate by 9.5 per cent next year as the global economy recovers, impact of previous interest rate tightening wanes, investments increase and exports pick up. An improvement in both domestic and external demand will feed the recovery in growth, it said. E&Y said slackening demand, turbulent and volatile markets and credit liquidity problems in Europe are beginning to squeeze rapid-growth markets (RGMs) but not to the extent of derailing robust economic performance. The RGMs are expected to grow collectively by 5.3 per cent this year, in stark contrast to the mild recession expected in the euro-zone in H1 2012 and modest growth in the US, according to the latest E&Y report. While growth in RGMs will continue to be the envy of advanced economies, in the near term, they are showing the strains from the fall in demand from the euro-zone, as well as the buffeting to financial markets and business confidence over the past few months, the consulting firm said. "As a result, growth in 2012 is expected to be lower than forecast by RGMF in October. However, these markets will continue to contribute nearly half of the world's growth over the next three years."— PTI
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3G Roaming
New Delhi, January 22 By filing the caveat, the operators have ensured that the courts would pass no orders on the DoT plea without hearing their counsel, or get an ex-parte relief. The government had questioned role of TDSAT which had given a lifeline to operators, by entertaining their plea during the scheduled winter vacations and asking DoT not to take any coercive step against them. — PTI |
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Airtel’s 27% revenue to come from Africa, says Morgan Stanley
New Delhi, January 22 According to a research note by Morgan Stanley, the key negative for Bharti has been its Africa operations, which has been a drag on the financial performance and it has suggested that Bharti overpaid for the Zain Telecom acquisition. The African mobile market is as big as India with one half the number of subscribers and double the average revenue per user (ARPU) vs India. MTN is Bharti’s strongest competitor in Africa but is present in only 60% of Bharti’s addressable market in terms of subscribers, which leaves the remaining 40% as easy areas for Bharti to expand into. The report estimates Bharti to have 86 million subscribers, $5.9 billion revenues and 35 per cent operating profit margin by FY 2015. Bharti’s results for Africa far outstripped MTN’s in the last 12 months and this trend is likely to continue in the coming quarters. Morgan Stanley has forecast that Africa will contribute 27% of revenues and 22% of operating profit in FY 2012, increasing to 29% and 26%, respectively, in FY 2016. On Bharti’s strategy in Africa, the note says that Bharti grew India revenues by 44% during FY 2005-10 through increasing penetration and lowering tariffs. Analysts say that a sensible strategy in Africa would be to increase capex and improve network coverage, lower tariffs and increase traffic. For Bharti to increase market share and EBITDA margins, it needs spend on improving footprint and network, the report says. Bharti has almost doubled its capex guidance for Africa to $1.5 billion for FY 2012, from $780 million in FY 2011. It is expected to retain its capex largely at these levels in the coming two years, and thereafter settle at $1.2 bn.
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Tax Advice
Q. I want to give a sum of Rs 60,000 as a gift to my daughter on the occasion of her daughter's marriage as a social obligation. Can I get exemption of tax on this amount by excluding it from my total income? If so, under which section. Kindly advise. I am a senior citizen and Punjab government pensioner.
— O.P. Gupta A. No deduction is allowable from the total income in respect of the gift made by a person to any of his relatives. However, the gift so received by your daughter would not be taxable in her hands. Deduction on tuition fee
Q. I shall feel highly obliged if you kindly reply to my following queries: (a) Whether any type of relief is available to an IT payee who, after retirement, is paying market/ penal rent for his govt. accommodation? (b) What is the maximum limit of the amount of tuition fee for one/two children which is admissible for deduction from total income for AY 2012-13 (FY 2011-12) ? Whether it is independent of other admissible deductions u/s 80 C? Whether this benefit can be availed of by both the spouses, independently, or is it divisible among them? And what will be the change in this regard in the Direct Taxes Code regime? (c) What is the maximum limit of the amount deposited in Senior Citizens Saving Scheme which is admissible for deduction u/s 80 C during the current financial year ( AY 2012-13 ) ? And what will be its status during the DTC regime? (d) What are the different heads under which combined deduction of Rs. 1 lakh u/s 80 C can be availed during the current financial year and what will be their status during the DTC regime? (e) Whether any relief/deduction is admissible u/s 80C or any other section on account of expenses/fees incurred on six-monthly courses of CFA (Chartered Financial Analyst) conducted by CFA Society, USA simultaneously with the MBA by the son of the IT Payee? " — Manjit Singh A. Your queries are replied hereunder: (a) No relief is available to an assessee for paying market/penal rent for occupying the govt. accommodation after retirement. However, a deduction is allowable under Section 80GG of the Income-tax Act 1961 (The Act) in respect of the rent paid by an assessee provided he satisfies the following conditions:- (i) The rent paid is an excess of 10% of an assessee's total income before allowing deduction under Section 80GG. (ii) The rent paid is in respect of accommodation occupied for the purpose of his own residence and a declaration in form 10BA is filed with the assessing authorities. (iii) No residential accommodation is owned by the assessee or his spouse or minor child or by HUF of which he is a member. This condition would not be applicable where the residential accommodation is owned by the persons specified herein above, at a place other than that where the assessee resides and performs duties of employment or carries on his business or profession. The deduction is also not allowable in case an assessee has a residential accommodation at any other place but claims that the said accommodation is self-occupied and a concession in respect thereof is claimed. (iv) The assessee is not entitled to HRA. The amount of deduction under this section is limited to 25% of the total income or Rs 2,000 p.m. whichever is less. (b) The deduction for tuition fee for any two children is allowable within the overall limit of Rs. 1,00,000 specified under Section 80C of the Act. The deduction can be availed by both husband and wife provided the same is being paid by both of them. This deduction under Direct Taxes Code is tagged with the deduction allowable for life insurance premium, health insurance premium. The maximum deduction allowable under the code for these three payments is limited to Rs 50,000. (c) The deduction for amount deposited in senior citizen scheme is covered within the maximum amount of Rs. 1,00,000 allowable under Section 80C of the Act. No such deduction is allowable under the Direct Taxes Code. There are about 24 items covered under the provisions of 80C of the Act. It is not possible to specify each one of them on account of the space constraint. Under DTC deduction would be admissible only in respect of contribution to an approved fund, payment of life insurance premium, health insurance premium and tuition fee.
In the case cited by you the payment to CFA society, USA would not be allowable in view of the fact that the same has not been paid to an educational institution situated within India.
Delayed IT return
Q. I am a proprietor of a firm whose annual turnover is Rs 58 lakh (excluding VAT) and net profit is around Rs 2 lakh as according to my books of accounts for the financial year April 2010 to March 2011. Due to a misguidance by my accountant I could not file my income tax return for the financial year by 30th Sept, 2011 because according to him 'A firm with an annual turnover of less than Rs 60 lakh need not get its accounts audited and can file its return till 31st March, 2012'. He obviously was not aware of the 8% profit declaration clause which even I never knew about. My query is......
(a) Do I now need to file my return by showing a net profit of 8% in my balance sheet according to which my tax liability comes to around Rs 35,000 which is at least 8 times of my actual tax liability? (b) How much interest and fine I am liable to pay if I now furnish a return after getting my accounts audited showing my actual profit? (c) I have read somewhere that it is not essential to file an audited return last by 30 Sept, 2011. What's essential is that I should get an audit report prepared before 30th Sept. and I can still file my return declaring actual profit. Just that I will have to pay nominal rate of interest other than my tax liability. Is this true? (d) What in your view is the best option for me so that I end up paying the minimum possible tax? — Navdeep A. In case the net profit of your business is less than 8% of turnover you could have filed your income tax return for the payment of tax on lesser profit provided your accounts has been audited in accordance with the provisions of Section 44AB of the Act. Since the audit has not been conducted before 30th Sept, 2011, a penalty equal of ½ of total sales, turnover or gross receipts subject to a maximum of Rs 1,50,000 can be levied for not getting the account audited by that date. Although you are not required to file the tax audit report along with the return of income, it may not be possible to get the tax audit done in the back date. In case you file the return by 31st March, 2012, you would be liable to pay maximum penalty of Rs 5,000 plus the penalty for not getting the accounts audited. The best option would be to get the accounts audited and file the return. The maximum penalty leviable for not getting the audit done before 30th Sept., 2011 would be Rs 29,000 in your case which should be contested in appeal. |
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The answers cannot be generic. They ideally need customisation depending on who you are. You may be a first-time earner…or a new spouse…or the parent of a child for whose future you have a million dreams….or a middle-age senior employee used to fine life and who may not have really thought how this fine life will continue to exist after 20 years when you stop earning…the categories are diverse but united by one common factor i.e. the age and environment that we live in is no longer the same as what our parents or forefathers experienced during their time. Life is on the fast lane these days…and at the blink of an eye, your hard-earned wealth could either multiply or can erode at equal speeds. Case in point is the year gone by. Except certain commodities such as gold and oil, every other asset class has moved south. Sensex was down more than 25% YTD, and Rupee down by almost 14% against the US Dollar. Strong global risk aversion led by the European Sovereign Debt crisis, high inflation in emerging markets, consequent monetary tightening and lack of proper policy action in India has made it “not a very rich” year for investors. What does 2012 have in store for you?
Trust me, you will find limited or generic answers to the above. Recommendations
1. Whatever be the market situation, investors must ensure that they have an asset allocation strategy and should stick to it. For instance, if one is supposed to invest in equities to the extent of say 60% of the portfolio, let him maintain that asset allocation at present. Under the above strategy, further downsides in equities will lower the allocation. The investor should then proceed to buy more equities to bring the overall equity allocation back to the original. This will automatically bring down the overall cost of equities in the portfolio and enable significant gains once equities bounce back. Asset allocation strategies are best offered by professional financial planners and depend on your age, time horizon to meet your goals, risk appetite, which is most often correlated to the age. A well documented financial plan is a must for every serious goal-driven investor. If it is not done yet, get it done NOW. 2.
Don’t go by the 2009 experience and end up “buying on a high” and “selling on a low”. The first half of 2012 may well represent a discount sale in the markets and hence do not lock the money provisioned for equities into Illiquid investments or investments with lock-in periods. You never know when these need to be moved to equities. 3.
If the investor has Rs 100 allocated for equities, research suggests that he puts Rs 50 into money market funds and starts a 6-month STP (Systematic Transfer Plan) from money market funds into diversified equity funds. This will entail a complete movement of the money market funds into equities over a 6-month period and the investor during this period would have been able to leverage on a lower average cost in equities (should the market correct further).
4. Young investors should learn the science of directly trading in the capital markets. There is no harm in allocating 10% of the investable surplus into direct equity trading and profiting from market momentum. This strategy should not be executed on the basis of market rumours or blind “tips’ by your brokers. The start point resolution to this is to first understand and learn the nuances of direct equity trading and stick to research- based advice. 5.
Never stay away from evergreen strategies like (a) Allocation of a small portion of your monthly earnings into Mutual Fund SIPs (b) allocating 7.5 - 10% allocation of your investible surplus into gold and (c) Taking an insurance cover. Gold was, is and will always remain an evergreen future-value product and mutual fund SIPs are not instruments that work on market timing. It simply averages the highs and the lows and enables a sure shot long-term wealth creation. Whenever in doubt, always remember the basics - Historical data has shown that disciplined monthly investments in SIP have only benefited the investor. Insurance is the only parachute that will bail you and your family out when the unexpected happens and future income earnings are threatened. Remember, to the world, you are just an individual but to your family, you are the world.
6. Investors should try and avoid analysis paralysis. Do not overburden the mind with excess news and stories around what is going right and what is going wrong in the markets…domestic or international. Investors of course must keep themselves abreast with macro economic indicators but they must end up consulting their adviser and ask for specific investment reviews from time to time. As I sign off, let me conclude by summarising that while the initial part of 2012 may continue to see some volatility, early indicators show that the second half is likely to improve and will be much better than the first. Key risks to the above outlook might arise from adverse developments in the outside like worsening of European Sovereign Debt crisis, a recession in the USA or Europe or a drastic slowdown in Chinese growth. Each one of these events will have the potential to slow down foreign capital flows to fund India’s current account deficits…and if India needs to de-risk its dependency on foreign capital flows and increase FDI, the key remains with Indian policy makers and good governance. May 2012 be the Year of Wealth Creation! The writer is CEO, Bajaj Capital Investor
Services. The views expressed are his own. |
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Time for consolidation
The week ahead has a trading holiday on Thursday, January 26. Besides this, we have RBI’s monetary policy review on Tuesday and expiry of January futures on Wednesday. The previous expiry in December was at a level of 4,646.25 and the markets are up almost 9% or a good 400 points since then. There could be some profit taking in the coming week. FIIs were big buyers last week with net purchases of Rs 4,000 crore while domestic institutions sold shares worth Rs 790 crore.
SEBI has changed the rules of trading on listing of new IPOs and made manipulation which has been rampant in recent times. IPOs with an issue size of Rs 250 crore would trade in the trade to trade segment for the first 10 days of trading and there would be a circuit filter at 5%. Issues above Rs 250 crore would have a 20% circuit filter. The week ahead looks one of consolidation and corrections are likely to be the order of the day. Profit taking and short selling would be the order of the week. Investors should use this as an opportunity to book profits and wait for buying opportunities. The Sensex has support at 16,637 points, then at 16,460, then at 16,254 and finally at 16,037 points. It has resistance at 16,814, then at 16,991, then at 17,235 and finally at 17,391 points. The Nifty has support at 5,013, then at 4,954, then at 4,895 and finally at 4,827 points. It has resistance at 5,073, then at 5,133, then at 5,228 and finally at 5,369 points. The week ahead is likely to see consolidation after a good 8.5% rise from the lows made in December 2011. Book profits and wait for better opportunities to enter the market once again. The writer is founder, KRIS, an investment advisory firm. The views expressed are his own.
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Time is the one of the most critical factor while making an investment decision. Some of you may have made some resolutions around your financial habits, some may not have even thought about it. The question is “Have we really thought about how 2012 will be different when it comes to creating wealth”. Should we simply keep making fresh resolutions on savings and money management habits or should we really go deep down into the often talked about path of investments and seek answers to when, where, how and how much?
First of all, let’s define money management for today’s generation of investors. The New Generation should work towards making their money grow beyond the conventional means but also have a backup plan to enable preservation and protection of the capital during tough times. Most often asked questions and discussions would remain common as in previous years:
The week ended on Friday, January 20, was yet another great week for the markets with the BSE Sensex gaining 584.39 points or 3.62% to close at 16,739.01 points. The NSE Nifty gained 182.60 points or 3.75% to close at 5,048.60 points. The broader indices like the BSE 100, BSE 200 and BSE 500 gained 3.74%, 3.38% and 3.21%, respectively. The BSE Midcap and BSE Smallcap were big under-performers this week with gain of 1.75% and 1.71%. This gives an indication that with three consecutive weeks of gains in the market, there could be a time for consolidation next week. The sectoral winners saw BSE Realty up 7.97%, BSE PSU gaining 6.94%, BSE Oil & Gas up 6.43% and BSE Bankex up 5.94%. On the losing side, we saw BSE FMCG down 0.90%.
In individual stocks, we had a large list of gainers with Maruti up 12.6%, Hero Motocop up 8.99%, Reliance Industries up 8.33%, SBI up 8.72%, L&T up 8.61% and Hindalco up 7.73%. FMCG majors ITC lost 2.61% while Hind Unilever lost 0.37%.
Results season has begun in full earnest and we have seen many good results so far. The quality of results need not remain in the same vein going forward. Results from Hero Motocop, Axis Bank were good. Results from Reliance Industries were certainly below the mark and though the company has announced a buyback at a maximum price of Rs 870 for up to Rs 10,400 crore, the same may not be enough to rally the stock going forward.