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CHANDIGARH

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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS

B U S I N E S S

Economists for mid-term corrections in Budget
Seek more investment in infrastructure, R & D

New Delhi, December 30
Leading economists of the country today asked Finance Minister P Chidambaram to ensure higher investments in the critical infrastructure, farm sector and research and development.

Banks offer sops to its employees to beef up deposits
Chandigarh, December 30
High asset liability mismatch (difference in bank credit and deposits) in banks, leading to rising interest rates on fixed deposits, has brought windfall not just for the consumers, but also for bank employees. The latter are now being lured with incentives to increase deposits in their banks.

Infosys to spend Rs 800 cr on training
Bangalore, December 30 In order to meet the huge demand for skilled manpower, software major Infosys has said it will be spending Rs 800 crore on training programmes this year. "The IT industry is committed to creating one lakh jobs.

SBI hikes interest rates on FCNR, NRE deposits
Mumbai, December 30
The State Bank of India (SBI) today hiked interest rates on its Foreign Currency Non-Resident (FCNR) and Non-Resident External (NRE) term deposits, with effect from January 1, 2007.

With the Malaysian landmark Petronas twin tower and the world’s largest mobile ferris wheel, the "Eye on Malaysia" in the background
With the Malaysian landmark Petronas twin tower and the world’s largest mobile ferris wheel, the "Eye on Malaysia" in the background, a Malaysian tourism campaign flag flutters at a lake garden in Kuala Lumpur on Saturday. Malaysia is targeting 20.1 million tourists and over $12.6 billion in revenue in 2007. — AFP

BSNL aims at wider broadband connectivity
Thiruvananthapuram, December 30
Aiming to widen its broadband map, the BSNL will be adding five million port capacity to its existing network of one million with plans to extend the service from 600 cities to more than 1,000.


Japan's toy giant Tomy employee displays a cubic moneybox with LCD display "Bank of Life", only for Japan's 500 yen ($5) coin and to save up to 1,00,000 yen ($1,000) in the box in Tokyo on Friday
Japan's toy giant Tomy employee displays a cubic moneybox with LCD display "Bank of Life", only for Japan's 500 yen ($5) coin and to save up to 1,00,000 yen ($1,000) in the box in Tokyo on Friday. An annimated "man" lives in the room on the LCD display and will have various stories of life depending on the amount of saving money. The piggy bank started to sell here from Thursday with a price of 4,750 yen ($40). — AFP

EARLIER STORIES
 

Aviation Notes
Halwara airport issue not handled professionally

There is unlimited land available around Sahar airport in Mumbai. But it is illegally occupied by underworld goons and weakling government cannot play tough with them. In view of it, it is not possible to expand.

Investor Guidance
Rent paid to father eligible for HRA rebate

Q: I stay with my parents in their house. Recently, one of my friends advised me to pay rent to my father to claim HRA exemption. Is this allowed under the rules? Is there any restriction on giving money to your parents and living under the same roof?

 

 

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Economists for mid-term corrections in Budget
Seek more investment in infrastructure, R & D
Tribune News Service & PTI

New Delhi, December 30
Leading economists of the country today asked Finance Minister P Chidambaram to ensure higher investments in the critical infrastructure, farm sector and research and development.

Though they, more or less, supported the measures taken by the UPA government so far to put the economy on high-growth path, they told the Finance Minister to make some bold mid-term corrections in the next year’s Budget to ensure 9 per cent GDP growth.

They warned that inadequate investment in critical sectors of infrastructure, irrigation, research and development, will ruin the good economic initiatives embarked upon resulting in hampering GDP growth rate in medium term.

In a customary pre-Budget interaction with the Finance Minister here today, they sought enhanced budgetary support for irrigation and research and development, besides rationalisation of farm subsidies and a goods and service tax (GST) by 2009-10.

Most of them expressed confidence that India can achieve a 9 per cent GDP growth this fiscal despite inflation hovering around 5 per cent.

There is a need to give incentives to foreign institutional investment in infrastructure, besides special incentives to labour-intensive exports and R & D in major sectors, Mr Nagesh Kumar, Director-General of Research and Information Systems for developing countries (RIS), said.

He said Mr Chidambaram would have to announce measures in the Budget for 2007-08 to enhance country's competitiveness in the global economy.

India cannot aspire to become a superpower on the strength of a few sectors like IT, pharma and auto, he said, adding bold steps would have to be taken.

There is robust economic growth and economy is likely to achieve 9 per cent GDP growth. Revenue collections are buoyant and inflation is within control. This is the right time for mid-term corrections, Mr D.K. Srivatava, Director of Madras School of Economics, said.

He said in the medium term the country could achieve 9-9.5 per cent growth rate considering the fact that domestic savings rate was projected to rise from 34 per cent to 39 per cent.

However, the government would have to increase public sector investment in infrastructure sector from around 4 per cent of GDP to 6-6.5 per cent in the Budget, besides encouraging private investment in this sector.

The additional expenditure incurred in a deficit situation should be limited to capital-intensive sectors such as infrastructure, education and health, the economists said.

The common recommendations by the economists for the Budget included rationalisation of direct and indirect taxes so that combined central and state taxes could be brought down to around 20 per cent from the present level of 28.5 per cent in a phased manner, Mr Srivastava said.

Some participants also sought to speed up reforms in labour, insurance and pension sectors to raise investment in the manufacturing and service sector. The issue of projected revenue loss through tax concessions in special economic zones was also raised in the meeting.

The meeting was also attended by Saumitra Choudhuri, Economic Adviser to ICRA; Subir Gokaran, chief economist of Crisil Ltd and Partho Mukhopadhyay of Centre for Policy Research among others.

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Banks offer sops to its employees to beef up deposits
Ruchika M. Khanna
Tribune News Service

Chandigarh, December 30
High asset liability mismatch (difference in bank credit and deposits) in banks, leading to rising interest rates on fixed deposits, has brought windfall not just for the consumers, but also for bank employees. The latter are now being lured with incentives to increase deposits in their banks.

The high growth in bank credit (30 per cent year-on-year growth) and slower pace of growth in deposits has ensured that public sector banks are offering incentives to their staff members in terms of cash incentives.

The State Bank of India and its associate banks are offering 0.25 per cent of the interest charged (of 8-8.5 per cent) to the employees for getting more deposits while many other public sector banks are offering cash incentives to their employees in case they meet the set targets for getting deposits.

Promotions are also being offered in case the officials get huge deposits.

Official sources informed TNS that these incentives have been offered because the deposit growth in the country’s largest bank — SBI — has slowed down as compared to other public sector banks and private sector banks. The growth has come down to 12 per cent now as compared to 15.5 per cent in March 2006.

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Infosys to spend Rs 800 cr on training

Bangalore, December 30
In order to meet the huge demand for skilled manpower, software major Infosys has said it will be spending Rs 800 crore on training programmes this year.
"The IT industry is committed to creating one lakh jobs.

There are more than five lakh jobs available in Karnataka in various sectors, but finding skilled labour is a problem," Infosys Director (HRD) T V Mohan Das Pai said today.

Mr Pai was speaking at the launch of an 'on job' training programme for youth initiated jointly by Infosys and Karnataka Government.

As part of the programme, Infosys today held a written test and interview for 500 graduates who hail from Kolar and Bangalore city to select them for placements in the company.

Asserting that Infosys has an obligation to the state, he said: "We want more and more locals to be there. It is a challenge. Of the 30,000 persons Infosys would recruit this year, about 9,000 will be from Karnataka," he said.

In this context, he suggested that there be a national skill development programme to train young people and asked Karnataka to invest at least Rs 150 crore on the programme next year.

Infosys is working with the state's social welfare department to pick 500 engineers and depute them for training at IIT Bangalore.

"Karnataka has the potential to create 10 lakh jobs in the coming five years," Mr Pai observed. — PTI

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SBI hikes interest rates on FCNR, NRE deposits

Mumbai, December 30
The State Bank of India (SBI) today hiked interest rates on its Foreign Currency Non-Resident (FCNR) and Non-Resident External (NRE) term deposits, with effect from January 1, 2007.

Interest rates on NRE deposits for one year to less than two years have been raised to 6.33 per cent from 6.24 per cent, for two years to less than three years to 6.16 per cent from 6 per cent and for three years to less than five years to 6.08 per cent from 5.91 per cent, SBI said.

Similarly, interest rates of FCNR deposits in dollars for duration of one year to less than two years have been increased to 5.33 per cent from 5.24 per cent, for two years to less than three years to 5.16 per cent from 5 per cent and for three years to less than four years to 5.08 per cent from 4.91 per cent.

For dollar deposits of tenure four years to less than five years, the interest rate would be 5.07 per cent and for five years it would be 5.09 per cent, the release added. — PTI

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BSNL aims at wider broadband connectivity

Thiruvananthapuram, December 30
Aiming to widen its broadband map, the BSNL will be adding five million port capacity to its existing network of one million with plans to extend the service from 600 cities to more than 1,000.

Apart from the broadband connectivity, the BSNL would also provide two crore mobile connections each in the next three years, BSNL Chairman and Managing Director A.K. Sinha said here today.

Mr Sinha said of the five million broadband connections, 1.84 million would be provided in rural areas.

Pointing out the BSNL wanted to make broadband services more affordable, he said the downloading limits under Home 250 and Business 700 plans would be enhanced to one GB and four GB from 400 MB and two GB, respectively, from next year.

The broadband speed would be increased from 256 kbps (kilobits per second) to up to 2 mbps (megabits per second) at the existing tariff of Rs 250 per month, from next year, thus upgrading all its 8.2 lakh broadband users. — UNI

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Aviation Notes
Halwara airport issue not handled professionally
by K.R. Wadhwaney

There is unlimited land available around Sahar airport in Mumbai. But it is illegally occupied by underworld goons and weakling government cannot play tough with them. In view of it, it is not possible to expand.

Another international airport of worldclass in Navi Mumbai is, therefore, the only alternative. It will be built on a public-private partnership. According to plans, it will take at least six years before it can become partially operational. The estimated cost will be Rs 4,500 crore.

The site selected is much farther than Sahar and passengers living in far flung areas will be subjected to enormous problems in commuting to and from the new airport.

The Minister of State for Civil Aviation Praful Patel has gone on record saying: “ We hope to start the bidding process in 2007 after having detailed discussion with the Mumbai Chief Minister Vilasrao Deshmukh”.

The airport, much larger than Sahar, will absorb 10 million passengers per year in its first year of operation in 2013. The aviation analysts, however, feel that there are many hurdles before work can begin next year. The delay in starting the construction will lead to delay in completing the first phase. This is not all. But delay beyond certain time will mean escalation of cost of construction.

In building another airport around Indira Gandhi International Airport (Delhi), many important office buildings will have to be demolished. One of them is the recently constructed Research Analysis Wing (RAW) guest house. Similarly, Centaur hotel has to be demolished. There are several other buildings that will be adversely affected. Had the construction been undertaken in 1988, as it was planned after inauguration of the IGIA in early 1980s, lot of tax payers’ money could have been saved.

The need for Punjab to have another international airport in Halwara (Ludhiana) is urgent. But the project has not been handled as professionally as it ought to have been. Civil aviation and defence aviation (air force) are on different wavelengths. Had civil aviation ministry been prudent in not involving a private player at this premature date before getting clearance from the defence ministry, the project might have taken off the ground. Since it has run into rough weather at the behest of some politicians and bureaucrats, the project may be delayed inordinately.

Following this needless tug-of-war between civil and defence ministries, Prime Minister Manmohan Singh did not lay the foundation stone for the meaningful project during his two-day visit to Punjab.

While government proposals for expansion of airports and flights by national carriers get grounded at flimsy problems, the private players continue to capture space in international skies although some of them are facing cases for non-payment of customs duty. The cases have been filed by the Directorate of Revenue Intelligence (DRI).

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Investor Guidance
Rent paid to father eligible for HRA rebate
by A.N. Shanbhag

Q: I stay with my parents in their house. Recently, one of my friends advised me to pay rent to my father to claim HRA exemption. Is this allowed under the rules? Is there any restriction on giving money to your parents and living under the same roof?

— Ratan Shah

A: There is a deduction available from the house rent allowance amount (HRA) if the taxpayer pays rent for the premises he or she resides in. The reason your friend asked you to pay rent to your father was because then you would be able to claim HRA deduction. If no rent is paid, then there is no deduction available. However, this transaction should not be entered into to evade tax. In other words, it should be a genuine arms length agreement between you and your father. Also, note that your father would have to include the rent you pay in his taxable income.

Capital gain bonds issue

Q: I had sold immoveable property in March 2006 and decided to buy capital gain bonds, the last date for which is 31.12.2006. As per my information, there is no capital gain bonds issue going on. Please advise that in case the issue do not come by 31.12. 2006, what are the options left with me, except to pay tax. Will the date for purchase of bonds be extended? Please guide at the earliest.

— Shalu Singla

A: Last time when the Section 54EC Bonds were reissued, the authorities recognised the fact that the lack of availability of such bonds had deprived some of the investors in saving tax on long-term capital gains. Therefore, the date by which investments were to be made for long-term capital asset transferred between 29.9.05 and 31.12.05 was fixed as 30.9.06 and for those between 1.1.06 and 30.6.06 was fixed as 31.12.06.

You realise that you had the chance of investing in the bonds when these were reissued on 29.6.06. To wait for as late as 31.12.06 was shortsightedness. You have possibly one good news and one bad news. First, the good one.

The government has issued a notification on 22.12.06 authorising the issue of Rs 3,500 crore worth of additional bonds by the REC during the period 26.12.06 to 31.3.07. However there are some conditions: 1. Those who have already made investments of Rs 50 lakh or more in the earlier bonds issued on 29.6.06 cannot invest in this fresh issue. 2. Total investment in the two issues together is limited to Rs 50 lakh.

Now, the bad news. As per the first notification, this fresh issue is available to you only up to 31.12.06 since you have earned the capital gains in March 06. The limit of six months for investment in these bonds for claiming exemption from long-term capital gains continues.

All said and done, it appears that the authorities are not inclined to issue any more such bonds because the various tax concessions would be slowly and steadily withdrawn.

Senior citizen status

Q: I will complete 65 years of age in December 2006. I am told that the amount not subject to income tax is higher at Rs 1,85,000 for persons over 65 years of age. However, since I turn 65 only in December, will my income for the remaining three months of the year subject to the new limit?

— Mithila

A: The income on which you do not pay tax, also called the maximum amount not chargeable to tax is applicable for the entire year and not part of a year. You will be eligible for the higher limit of Rs 1,85,000 if you complete 65 years of age anytime during the financial year. Therefore, even if will be December by the time you complete 65, you will get the benefit for the entire year.

NRI/NRO accounts

Q: I am an Indian national and a Singapore permanent resident currently working in India. My headcount is Singapore and I am being paid training stipend by the Government of Singapore in my Singapore account.

I currently have an NRE savings account to transfer my stipend (in Singapore dollars) to India and would like to open an NRO savings account as well to reimburse my expenses from the company (Satyam Computers, India) while I am in India (in Indian currency).

It has been two months since I shifted to India and hence am still an NRI for the time being, but I will be based in India for 12 months due to which my status will change to a resident Indian. What is the implication of the same on my NRE & NRO accounts? Nationality/Passport: Indian; Permanent Resident: Singapore (till 2011)

— Amar Singh

A: 1. If you are in India for 182 days or more in the FY (Apr–Mar), you will become a resident.

2. However, there is a transitional status of RNOR between being an NRI and a resident. You are likely to be an RNOR for two years but this would depend upon the number of years you were an NRI before coming to India. In the RNOR status, your foreign income is not taxable in India.

3. When your status changes to a resident, you should get your NRE/NRO accounts re-designated as resident accounts. The interest from NRE account will be taxable during the FY for which you are resident as per the Income Tax Act. The interest from NRO account was anyway taxable and will continue to be taxable even after re-designation.

However, since Satyam is an Indian company, you may face a problem unless the company has taken a few necessary precautions.

The authors may be contacted at wonderlandconsultants@yahoo.com

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Markets closed tomorrow

Mumbai, December 30
The Bombay Stock Exchange (BSE), the National Stock Exchange (NSE), the Foreign Exchange (Forex) and the Money Market will remain closed on Monday, January 1, 2007, on account of Id-ul-Zua. — PTI

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BRIEFLY

CPI-IW static
Shimla, December 30
The all India Consumer Price Index for Industrial Workers (CPI-IW) remained static at 127 points for the month of November. The index, which tracks prices of a set of commodities and services accessed by industrial workers and serves as a measure of inflation, recorded an increase of four points in Jalpaiguri centre (West Bengal). It increased by three points each in Ludhiana, Sholapur and Lucknow centres, two points in seven centres and one point in 18 centres.— PTI

Nabard bonds
Mumbai, December 30
The Nabard will soon issue zero coupon bonds of Rs 10,000 crore to raise funds to finance priority areas of agriculture and rural development. The bonds will be issued at a discount and repaid at face value, which will be Rs 20,000 per bond, an official release said. The tenure of the bonds will be for 10 years and will be listed on the BSE with an option for investors to sell it in the secondary market.— PTI

Forex reserves
Mumbai, December 30
India's forex reserves went up by $714 million to stand at $176.233 billion during the week ended December 22 as against $175.519 billion during the week ended December 15. — PTI

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