Chandigarh, June 23
In spite of the short-term measures adopted by the RBI, the rupee is sliding rapidly against the dollar. It fell to an all-time low of Rs 57.12 against the dollar yesterday. Though the Finance Minister, Pranab Mukherjee, has today claimed that the fundamentals of Indian economy continue to be strong and the latest official data also shows a slight growth in foreign exchange reserves (growth of $2 billion for the week ended June 15), economists feel that though global factors are contributing to the weakening of rupee, it is the adverse domestic environment that is leading to a free fall of the rupee.

The RBI is expected to make some more short-term market interventions to stem the fall of the rupee on Monday. But, economists say in unison, “The need of the hour is to build investor confidence in the Indian economy and stop speculative forces from pulling the dollar down”. They also agree that the weakening of other currencies, especially the euro, is helping the dollar gain strength, and thus contribute to the weakening of the rupee. Over the past two months, the rupee has weakened sharply, mainly on account of increased demand from oil importers and rapid outflow of money by foreign institutional investors (FIIs) after poor GDP growth data dampened sentiment in the Indian markets.

Talking to The Tribune, NR Bhanumurthy, economist at the National Institute of Public Finance and Policy, said the speed at which the rupee is sliding is baffling policy makers. “Other than the domestic factors, global currencies like euro are weakening and euros are getting converted to dollars because of a high demand for the US dollar. Also, speculation in gold is adding to the concern for the rupee. Speculation in the yellow metal is now a little more than 2 per cent of the GDP. This is putting pressure on the rupee. Speculation on black gold (coal), too, is adding to the slide of the rupee,” he said.

Naveen Mathur, associate director, commodities and currencies, Angel Broking, however, feels that the volatility in gold prices is because of currency volatility, and not the vice-versa. “I feel the domestic environment along with the FIIs’ withdrawal from India and poor GDP growth are the major reasons for the slide of the rupee. “There is heavy buying of dollar in the international market, which is leading to the dollar gaining strength,” he said.

Q: I have four questions regarding Sec. 54EC bonds:

(1) Whether capital gain from commercial property purchased by my parents and inherited by us after their death since 2001 would qualify for capital gain exemption under Section 54EC by investing in bonds.

(2) Which are the bonds that qualify for exemption for sale of commercial property?

(3) From where can I get these bonds at 20% discount upfront?

(4) Since the property is held jointly between me and my brother, will the proceeds divided equally half between us and invested individually in the bonds also qualify for exemption.

— Rohit

A: 1. Yes, it will. The investment has to be made within 6 months of earning the capital gain.

2. There are only two type of bonds that are available which qualify for any kind of taxable long-term capital gain. These bonds are issued currently by NHAI and REC.

3. There is no 20% discount upfront. You get a tax break on capital gains by investing in these bonds and since the tax rate is 20%, 20% is what you effectively save by investing in the bonds.

4. Yes, that is correct. Since the property is jointly owned, any income from the property will also be taxed jointly. So your brother and you must individually invest in the bonds to avail of the exemption on your individual share of capital gains.

Q: Can any HUF out of funds of HUF contribute Rs 1 lakh in PPF a/c of any member of HUF (Son of Karta of HUF). If yes, will HUF get rebate u/s 80C ?

— GurbakhshRai Ram Parkash

A: Notification GSR 585(E) dt 25.7.03 prohibits NRIs from opening a PPF account. Moreover, GSR 291(E) dt 13.5.05 has discontinued opening (or opting for post-maturity continuation) of the accounts on behalf of HUF, AOP or BOI. Such accounts opened or continued by mistake after the respective dates of notifications shall be treated as void ab initio. As and when the error comes to light, the account shall be closed and the amount refunded to the depositor without any interest. The existing accounts can continue up to their maturity with full benefits. Additionally, Notification GSR 956(E), dt 7.12.10 requires those HUF accounts which are in the extended mode to be closed on or before 31.3.11. Interest would be paid on those accounts, which had attained the maturity between 13.5.05 to 7.12.10 but closed before 7.12.10, if these had not been extended thereafter and the deposits were retained therein without further subscriptions. This is the final nail in the coffin of PPF for HUF.

If you desire to continue to enjoy the benefit of PPF for your HUF, you can legally play a trick. Sec. 80C(4) allows the deduction for LIC premiums, PPF, ULIP of UTI etc. in respect of subscriptions by any member of HUF. You can open a fresh PPF account in the name of any HUF member (including females) of your HUF and make the payment through the HUF bank account.

The authors may be contacted at wonderlandconsultants@yahoo.com

Hyderabad, June 23
After emerging as one of the favourite destinations in the country for the software industry, Andhra Pradesh has now come up with an electronic hardware policy to attract investments in the sector.

The new policy envisages a slew of incentives including 100 per cent reimbursement of value-added tax (VAT) and goods and services tax (GST) for five years to those who set up units in Hyderabad and other parts of the state.

The 2012-17 policy was unveiled by Chief Minister N Kiran Kumar Reddy during the two-day “Advantage AP IT Summit-2012” which concluded here yesterday.

Under the policy, the government has also exempted the electronic hardware industry from any power cuts and statutory inspections, except in the case of a specific complaint, besides facilitating three-shift operations with women working in the night shifts as well.

Among the key initiatives to back up the policy incentives, the government has proposed to create four hardware clusters in and around the newly-built outer ring road around Hyderabad; common testing and incubation facilities; a common fund under public-private participation to promote design, manufacturing, assembling and innovation; and a single-window system for necessary clearances.

The government has brought under the policy nearly 170 non-semiconductor items, besides a whole range of semiconductor manufacturing and testing equipment and parts used in making semiconductor equipment.

The incentives such as 100 per cent reimbursement of stamp duty, transfer duty and registration fee paid on sale/lease deeds, 50 per cent reimbursement on second transaction, power subsidy ranging from 10 per cent to 50 per cent limit to Rs 30 lakh for a period of five years have also been offered to companies.