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B U S I N E S S

Finance Minister hints at amendment of SEBI Act 
Government to teach investor protection
Mumbai, February 10
Finance Minister P. Chidambaram today indicated at comprehensive amendments to the SEBI Act to launch Investor Protection Fund (IPF) and that the government will launch a package to enhance financial literacy skills soon.

German Finance Minister Peer Steinbrueck gives an interview at the opening of the G7 finance ministers meeting, in Essen, western Germany
German Finance Minister Peer Steinbrueck gives an interview at the opening of the G7 finance ministers meeting, in Essen, western Germany. China joined the Group of Seven nations for talks on the global economy on Saturday even as Steinbrueck favoured inclusion of other emerging economies like India, South Africa and Australia. — AFP photo

Hindujas tie up with QTel, Altimo
London/Mumbai, February 10
Hindujas have joined hands with Qatar Telecom and Russian telecom giant Altimo in the race to acquire Hutch-Essar, which has reached a decisive stage with bids pouring in from various suitors.

Investor Guidance
Shares sold abroad taxable
by A.N. Shanbhag

Q: 1. Whether one has to pay income tax if he sells/ redeems the shares given to him under stock option plan of his parent company (USA) during his employment 4/5 years back, in its Indian company, free of cost?

Aviation Notes
Air rage on rise
by K.R. Wadhwaney
The Indian civil aviation scenario continues to be as unpredictable and murky as the Indian cricket team’s doings occasionally high and generally low.


A child model displays an outfit at the Child Magazine Fall 2007 fashion show in New York.
A child model displays an outfit at the Child Magazine Fall 2007 fashion show in New York. — AFP

EARLIER STORIES

 

Realty advice for Rlys
New Delhi, February 10
The Railways should commercialise about 45,000 hectares of wasteland in its possession for real estate development and undertake the modernisation drive through enhanced safety measure.

 

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Finance Minister hints at amendment of SEBI Act 
Government to teach investor protection

Mumbai, February 10
Finance Minister P. Chidambaram today indicated at comprehensive amendments to the SEBI Act to launch Investor Protection Fund (IPF) and that the government will launch a package to enhance financial literacy skills soon.

“We need to advance the level of investor protection and impart financial literary skills at an early stage. We will come up with a financial literacy package, free of cost for schools and colleges,” Mr Chidambaram said.

He was addressing the annual convention of National Stock Exchange members here today.

A comprehensive amendment to the SEBI Act was under examination, he said, adding that an IPF will be set up soon as announced by Prime Minister Manmohan Singh earlier.

Investor protection was the surest way to attract small investors to the capital market, he said.

“Only 4 per cent of household savings get into the capital market. With IPF, a sizeable portion of household income will enter stock markets,” he noted.

Stressing on the need to consolidate brokers, Mr Chidamabaram said a large number of them raised the cost of regulation and it was in the mutual interest, SEBI, NSE and Association of NSE Members of India (ANMI) should work towards this end.

“I urge ANMI, NSE and SEBI to consider whether it is possible to incentivise consolidation of market participants,” he said.

Reasons for inflation

The rise in India’s inflation rate is due to strong growth and robust consumer demand but the government would use all possible measures to control the price rise, he said.

The benchmark wholesale price inflation rate rose to a two year-high of 6.58 per cent in late January, adding to expectations that last week’s interest rate rise would be followed by further measures to calm prices.

The spike in inflation could not have come at a worst time for the ruling Congress Party as it faces polls in three states later this month and the government is keen get the rate back to its own comfort level of around 5 per cent.

“GDP is rising at more than 9 per cent. Year-on-year credit growth is little over 30 per cent and money supply is close to 21 per cent,” the Finance Minister told reporters

“This is an unusual combination of factors. The government is determined to take all steps to moderate inflation. We have done it before and are confident of doing it again.” — PTI, Reuters

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Hindujas tie up with QTel, Altimo

London/Mumbai, February 10
Hindujas have joined hands with Qatar Telecom and Russian telecom giant Altimo in the race to acquire Hutch-Essar, which has reached a decisive stage with bids pouring in from various suitors.

Hindujas have already submitted a binding bid for acquisition of controlling stake in India’s fourth largest mobile player and contrary to speculations have not sought any extension for making its offer, sources close to the development said.

They discarded suggestion that Hindujas-led consortium had put up a non-binding bid while seeking some more time for a firm offer.

The bid from Hindujas, as also from Reliance Communications, Essar and Vodafone, are expected to be considered tomorrow by the board of Hong Kong-based Hutchison Telecom International (HTIL), which has put its 67 per cent stake on the block.

Spokesperson from Hindujas, Qatar Telecom or Altimo could not be contacted for comments.

Various reports had suggested that Hindujas sought a day’s extension from HTIL for submitting its bid as it was still in the process of completing due diligence for a possible deal.

Besides Hindujas, Reliance Communications, UK-based Vodafone and Indian conglomerate Essar Group, the 33 per cent partner in Hutch-Essar, have also submitted their initial bids for acquisition of controlling stake in the target company.

While an HTIL spokesperson was not available for comments, the sources close to the development said it could still be a long-drawn battle.

The bids have been made in the range between $16 and 20 billion. — PTI

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Investor Guidance
Shares sold abroad taxable
by A.N. Shanbhag

Q: 1. Whether one has to pay income tax if he sells/ redeems the shares given to him under stock option plan of his parent company (USA) during his employment 4/5 years back, in its Indian company, free of cost?

2. If he has bought shares and there is good 100 per cent appreciation?

— Raffi

A: Shares sold abroad (not on an Indian stock exchange) are also taxable as capital gain. However, to qualify as long-term capital asset, the conditions are different. To qualify as a long-term capital asset, the holding period would be 3 years instead of 1 year. Also, the exemption from long-term gains is not available as the shares are not sold on an Indian stock exchange. The tax would be payable @20 per cent after taking into account indexed cost.

PPF accounts

Q: I have one query regarding the PPF account. My PPF account is maturing in April 2007. Can I keep this account as a ‘dead’ one and withdraw the interest every year later on and open another PPF account with another bank to take the necessary advantage of Sec 80C in the following years by putting in subscription in the new account? If yes, it gives excellent return of 8 per cent tax-free on the accrued amount in the old account.

— Deepak Patil

A: Even after the PPF account matures, if you do not contribute any amount, the corpus continues to earn interest and hence is not considered dead. The only way to open another account is to withdraw the entire amount since the PPF rules do not allow an individual to have more than one account. There is no advantage in opening another account since you have also the option to continue the account with contributions.

You may open accounts in the name of each and every major member of your family.

Mutual Funds

Q: I have bought Reliance Banking Fund units (Dividend Re-investment option) in 2005. Thereafter, the fund has declared dividend twice and the same has been converted to new units in the last 12 months. ((let original units purchased were 1000 units @ Rs 15 per unit. Within 1 month of purchase the Fund declared dividend (tax-free to investors) which was converted to 100 units. The Fund again declared dividend after 3 months and the same was converted to 150 units. Currently total units are thus 1,250 and the NAV Rs 18 per unit).

If I want to sell the entire units what will be the tax treatment?

— S. Vasu

A: Yes, the dividend from equity-based MF schemes like the Reliance Banking Fund is tax-free in the hands of the investor but short-term capital gains are charged to tax @10.2 per cent.

If you sell all the units now, only the original units will be eligible for the exemption on the long-term capital gains but the units from dividends reinvested will be taxed as short-term capital gains.

You would have done well by choosing a growth option in which case you would have obtained the same amount on withdrawal as the dividend-reinvest option and the entire amount would have been tax exempt.

Second home loan

Q: I am working in a public utility. I have already availed housing loan from my employer and built a house. I am 50 years of age. I have availed income tax relief for housing loan repayments and repaid the loan in full.

Now can I go for a second home loan (not extension or improvement) and also can I avail income tax relief?

— Himesh

A: If you avail of a second home loan for another house, you can claim benefits for repayment of loan and interest payable for the same.

The authors may be contacted at wonderlandconsultants@yahoo.com

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Aviation Notes
Air rage on rise
by K.R. Wadhwaney

The Indian civil aviation scenario continues to be as unpredictable and murky as the Indian cricket team’s doings occasionally high and generally low.

The laying of foundation stone for world-class airport in the vicinity of the Indira Gandhi International Airport (IGIA) is expected this week. An enlarged runway will be good enough for super jumbo jets to operate flights from this airport.

The merger plans of national carriers, Air-India and Indian, despite reservations from two popular unions, will be spelt out by the Group of Ministers (GoM) within a few days.

New aircraft have started rolling in and the world-class manufacturers are widening their bases in this country. At a ripe age, Ratan Tata has worn JRD’s mantle to reiterate his love for aviation. It is learnt he is seriously contemplating stepping into the civil aviation sector. That will be a wonderful happening if he joins the industry. All these are indeed happy developments.

But several other news emanating from air and on ground paint a very dismal picture of the civil aviation sector. The other day, a youth loitered about on a main 28 runway. He was noticed by an airlines official who reported the matter to the authorities. The Central Industrial Security Force (CISF), so far in slumber, apprehended him. The moot point is how could he reach thus far?

The private airline’s plane had to be grounded as it was hit by two trolleys. Then there were about half-a-dozen air misses during the week. Poor maintenance led to aircraft developing snags and they had to be grounded. There were inordinate delays and some flights had to be diverted as Air Traffic Controllers (ATCs) were playing their own ‘game’.

The new disease of passengers quarreling with the cabin crews has hit the flying industry. The soaring of tempers in the sky is called ‘air rage’. The trouble usually begins as flights are delayed without informing the passengers. In the recent days, there have been several ugly incidents.

According to analysts, these incidents have been taking place as there is a lax control by the authorities. The Delhi International Airport Pvt Limited has not been able to instill a sense of discipline among the staff members most of whom have been taken from the Airports Authority of India (AAI). Actually, the AAI staff has not blended well with the Dial authorities.

Amidst this, depressing scenario, some air hostesses have complained about sexual harassment. “I joined a private airlines only about a fortnight ago but I chose to resign because I found working conditions far from congenial”, said a young employee. adding: “I am prepared to work at odd hours but cannot tolerate harassment”.

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Realty advice for Rlys
Tribune News Service

New Delhi, February 10
The Railways should commercialise about 45,000 hectares of wasteland in its possession for real estate development and undertake the modernisation drive through enhanced safety measure.

In a pre-budget representation, submitted to Railways Minister Lalu Prasad, Assocham President Venugopal N. Dhoot said with these measure Railways could enhance its revenues and profitability.

He contended that the Railways Minister should incorporate provisions with sufficient fiscal concessions to lure real estate promoters to come forward to develop wasteland that Railways have in its possessions to put up motels, smaller huts and apartments, logging houses and pizza huts to enhance its revenues.

The chamber is of the view that Indian Railway Finance Corporation Ltd should be empowered with fattening its corpus size from higher allocation from the Finance Ministry and issue Letter of Intent (LoIs), seeking public private partnership.

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