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India, Pakistan to hold talks on February 22
Iran gas pricing by year-end
Mumbai, February 17
The government today said the price of gas to be imported from Iran through a proposed tri-nation pipeline could be finalised by the year-end and Indian and Pakistani officials would soon start deliberations on the matter.




External Affairs Minister Pranab Mukherjee releases the report of First SAARC Business Leaders Conclave in Mumbai on Saturday. — PTI photo
External Affairs Minister Pranab Mukherjee releases the report of First SAARC Business Leaders Conclave in Mumbai on Saturday.

SEBI to regulate derivatives market
New Delhi, February 17
Market regulator SEBI today deferred decision on mandatory grading for IPOs, while deciding to set up a committee on derivatives market and frame regulations for investment advisors.

Model Toccara Jones arrives at a launch party for the Air Jordan XX2 shoe line at the MGM Grand Resort in Las Vegas, Nevada, on Friday.
Model Toccara Jones arrives at a launch party for the Air Jordan XX2 shoe line at the MGM Grand Resort in Las Vegas, Nevada, on Friday. — Reuters

 

Red-tape stifling RTI
New Delhi, February 17
The Right to Information (RTI) Act hardly ushered in a sense of accountability in the absence of voluntary disclosures and have led states and empowered bureaucracy to develop tendencies to suppress information disclosures, instead enabling Indian Inc to utilise its provisions to access industry-specific information in last 16 months.

Aviation Notes
Cargo sector laden with profits
by K.R. Wadhwaney

The merger bid of Air-India and Indian has encountered fresh series of roadblocks. Two popular unions have expressed apprehensions while Group of Ministers (GoM) is said to be divided. A majority of Indian staff has made it clear to the powers-that be that they will not accept any change in “passes rules”.

Investor Guidance
Opting from one mutual fund scheme to another is transfer
by A.N. Shanbhag

Q: I have invested in a equity Mutual Fund - dividend plan and want to switch to growth plan. Is this a taxable event? Also, if it is taxable, then will I incur TDS?

— Sanjay

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India, Pakistan to hold talks on February 22
Iran gas pricing by year-end

Mumbai, February 17
The government today said the price of gas to be imported from Iran through a proposed tri-nation pipeline could be finalised by the year-end and Indian and Pakistani officials would soon start deliberations on the matter.

“We hope the pricing issue would be settled by the end of the year,” External Affairs Minister Pranab Mukherjee told reporters on the sidelines of the second SAARC Business Leaders Conclave hosted by FICCI here.

The pricing of gas between Iran and Pakistan has been finalised. “We have to now finalise the pricing of transporting gas from the Iran-Pakistan border to that of Indo-Pak,” he added.

Petroleum officials of India and Pakistan would hold two- day talks beginning from February 22 in New Delhi to discuss several issues related to the multi-billion project.

A 10-member Indian delegation headed by Petroleum Secretary M.S. Srinavasan is due to hold parleys with its Pakistan counterparts on laying of the pipes, transit fee and issues relating to security of the pipeline from Iranian border to that of India.

Iran, which is believed to have the world’s second largest gas reserves, would attend the meeting as an observer, they said.

The talks follow Pakistan accepting the $4.93 million British thermal unit (mBtu) price offered by Iran during the trilateral meeting in Tehran last month.

New Delhi, too, favourably considered the price and the Indian officials were expected to discuss the Pakistan terms.

He also said South Asia Free Trade Agreement (SAFTA) should include services and investments, in order to enlarge its scope.

In a separate interview Pakistani Minister of State for Commerce Hamid Yar Hiraj today said Pakistan and India should sign a bilateral trade agreement to boost economic ties.

“A bilateral trade agreement should be signed between the two countries which will take care of everything styming the trade relations between them,” Hiraj told PTI here.

Hiraj was here to attend the second SAARC business leaders’ conclave in India’s financial capital.

On conferring the most favoured nation (MFN) status to India, Hiraj maintained the issue was more political than trade-related in nature.

“Even though India has conferred MFN status on us, it has a long negative list (of import items) and higher non-tariff barriers. So together, we need to address all these issues to improve bilateral relations,” he remarked.

Hiraj, however, expressed hope that “something positive” would come out on the MFN issue during Pakistan Prime Minsiter Shaukat Aziz’s ensuing visit to India. — PTI 

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SEBI to regulate derivatives market

New Delhi, February 17
Market regulator SEBI today deferred decision on mandatory grading for IPOs, while deciding to set up a committee on derivatives market and frame regulations for investment advisors.

However, the issue of allowing institutional investors to short sell securities, that is to trade in securities without owning them, was not taken up at the SEBI’s board meeting held here.

“The board decided to take a final call (mandatory) on grading of IPOs, after a credit rating agency makes its presentation to the SEBI’s board meeting,” SEBI Chairman M. Damodaran told reporters after over an eight-hour meeting today.

SEBI is slated to hold its next board meeting some time next month, he said.

The decision was taken after, a rating agency requested SEBI to make a presentation on the experience gained in grading of IPOs.

Currently, it is optional for companies to go for grading of their IPOs. ICRA, CRISIL and CARE are currently in the business of grading these IPOs.

Primary Market Advisory Committee of SEBI had recommended mandatory grading of IPOs on a trial basis for six months.

Mr Damodaran said the meeting also decided to set up a committee to study various aspects of derivatives market and suggest changes, if any and identify new products to be introduced in this segment.

The committee, to comprise experts and academicians among others, would not be very big, he said when asked about the Constitution of the panel.

When asked whether a decision on delivery-based settlement in options market would be taken after the committee submits its report, he said nothing stops SEBI to take decisions at any time.

An over six-year old derivatives market in India has come a long way and overtaken cash segment on BSE and NSE.

The market regulator also decided to frame regulations on investment advisors giving advises to investors through various channels of communication, he said.

When asked whether the regulations would specifically be for the media, he said there are many means of communications besides the media.

The purpose of proposed regulations would not be to help in determining price mechanism, but help investors take informed decisions, he said.

The meeting also discussed the progress made in respect of demutualisation and corporatisation of stock exchanges and progress made in respect of implementing recommendations of R H Patil Committee report on corporate debt markets, he said.

On separate exchanges for small and medium enterprises, he said SEBI’s intention is not to start such bourses but create enabling environment to help those interesting in doing so. — PTI

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Red-tape stifling RTI
Tribune News Service

New Delhi, February 17
The Right to Information (RTI) Act hardly ushered in a sense of accountability in the absence of voluntary disclosures and have led states and empowered bureaucracy to develop tendencies to suppress information disclosures, instead enabling Indian Inc to utilise its provisions to access industry-specific information in last 16 months.

This has been disclosed in a survey conducted by the Assocham in which 250 CEOs & MDs views were taken.

Releasing findings of survey, Assocham President Venugopal N. Dhoot said that the Act has yet to prove beneficiary to end-users, particularly Indian Inc, as 90 per cent CEOs and MDs have felt that in majority of states and UT’s, bureaucracy did not ensure free flow of information on industry specific issues. 

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Aviation Notes
Cargo sector laden with profits
by K.R. Wadhwaney

The merger bid of Air-India and Indian has encountered fresh series of roadblocks. Two popular unions have expressed apprehensions while Group of Ministers (GoM) is said to be divided. A majority of Indian staff has made it clear to the powers-that be that they will not accept any change in “passes rules”.

According to analysts, the “passes rule” will hurt the economy of the merged airlines, if it comes about. The rules lay down that every employee is entitled to 5 passes — two 100 per cent free, two 90 per cent and one 85 per cent.

This being the scene, just imagine how much revenue will be lost in providing 35,000 employees complimentary passes.

The Indian staff maintains that, the merger should be comprehensive as was the merger of BOAC (British Overseas Airways Corporation) and BA (British Airways-domestic) “We will not accept piece meal merger” maintain employees.

Independently, both airlines are reaping the harvest of revenue through cargo upliftment. As directional imbalances have reduced, flights to and from India are loaded with cargo.

As products in retail textile and pharmaceutical goods have increased, air cargo traffic is expected to grow 8 to 10 per cent annually for the period of 5 to 10 years.

Some foreign airlines have already expanded their activities pan-India. Air India and Indian are also trying to rub shoulders with these foreign carriers. private airlines have realised the importance of cargo.

Judging from the cargo boom, many carriers are trying to buy freighter and “combo” planes. Private airlines efforts in this regard are laudable.

The civil aviation has spread its wings from the fact that 15 non-metro cities have been operating flights to foreign countries. Such is the passion for flying by some individuals that the Air Deccan’s chief, Captain Gopi Nath, has said “Driving a Bentley is not my dream. I dream of flying people away from slums someday.”

The Delhi airport privatisation plan has lost the takeoff plot as needless congestions continue to occur. Flights are delayed for hours without any prior notice. Both, national and international concourses look filthy during peak hours.

As passengers are crying ‘wolf, wolf’ in this sordid affair of privatisation, the ministry of Civil Aviation has expressed its concern for delay and shabby upgradation.

In the already murky situation, the public interest litigation (PIL) has been filed seeking improvement in infrastructure. The PIL says” “Flying into or out of Delhi has become a living nightmare for passengers, as is an exasperating wait for them on the ground and in the air before get clearance from the air traffic control (ATC) to land or takeoff. Delays have become the norm during morning and evening peak hours”.

The Delhi High Court has already sent notices to the government, Airports Authority of India and the Delhi International Airport Private Limited (DIAL).

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Investor Guidance
Opting from one mutual fund scheme to another is transfer
by A.N. Shanbhag

Q: I have invested in a equity Mutual Fund - dividend plan and want to switch to growth plan. Is this a taxable event? Also, if it is taxable, then will I incur TDS?

— Sanjay

A: Switch from one scheme of an MF to another scheme or one option to other option within the same scheme is treated as transfer, unless it is from dividend to dividend-reinvestment option. Such a switch will attract provisions of capital gains. For Residents there is no TDS. If your period of holding before the switch is more than 12 months, it would be a long-term capital gain else it would be a short-term capital gain. Long term capital gains from equity-based schemes is tax-exempt in India while short-term capital gains are taxed at 10 per cent.

Tax on bonus units

Q: What is the difference in taxability or treatment of bonus units allotted under a “Bonus option” & units allotted upon “Dividend reinvestment option” in a Mutual Fund? Or to put it differently, is there any sense or advantage in having a bonus option in a Mutual Fund, if one has an option for reinvestment of dividend?

— Patkar

A: Though both bonus and dividend reinvestment work similarly (allocating reserves against issue of units), the tax treatment differs for both.

Under dividend reinvestment, the cost of the units issued is the amount of dividend reinvested. However, units issued under the bonus option have a zero cost. This will affect capital gain calculation. (However, after a holding period of one year, there would be no capital gain applicable to both).

Also, currently, there is no dividend distribution tax on equity funds. However, if the same were applicable (as it is in debt funds), the units under the div reinvestment option would be allotted net of the distribution tax. This will not be applicable to issue of bonus units. Similarly, bonus stripping rules applicable under Sec. 94(8) would not be applicable to sale of units which are allotted under the dividend reinvestment option.

IT returns

Q: My total taxable income for FY 2006-2207 is going to be below Rs 1.35 lakh (I am a housewife), but I have earned Rs 70,000 as long-term capital gains in this FY. Should I need to file income tax for this FY. As I understand, we do not need to file tax returns if total taxable income is not exceeding Rs 1.35 lakh, in this case how will I keep the record of long-term capital earned.

— Nilam

A: Yes, you are right. Your gross total income, inclusive of the capital gains, is below the tax threshold applicable to the assessee, there is no need to file tax returns. However, it is a good strategy to file the returns to maintain continuity and ward off any problems in future arising out of the queries of the Department, if any.

Tax on MFs

Q: I bought 15,000 units of mutual fund at Rs 17.65 per unit on 15th June,2005. Now, I would like to sell the units at 35 per unit. Kindly let me know the amount of tax involved.

If I sell the same after 2 years at higher price (assumption) will the tax increase?

— Sudarshan Agrawal

A: Equity-based MF schemes (65 per cent or more exposure to equities) are governed differently from the debt-based schemes. In both the cases, dividend is tax-free in the hands of the investor. However, there is a dividend distribution tax @14.025 per cent payable by the MF directly to the exchequer in the case of debt-based whereas the equity-based are exempt from this tax.

Equity-based schemes are also exempt from long-term capital gains tax (holding period over 12 months). The short-term capital gains are taxed @10.2 per cent only.

In the case of debt-based schemes, short-term gains are treated as normal income of the assessee and taxed at the rates applicable to the assessee. The long-term gains will attract tax @10.2 per cent without indexation or @20.4 per cent with indexation, whichever is more beneficial to the assessee.

In the case of ELSS, there is an additional benefit of deduction u/s 80C.

Gains for NRIs

Q: I am an NRI. I have the following queries —

1. Equity — Can the short-term capital gains (taxed @10 per cent) be clubbed with the other normal income?

2. Debt — Can the short-term (taxed @30 per cent for NRI) or the long term capital gains (taxed @10 per cent) be clubbed with the other normal income?

3. Does the capital gains qualify for Rs 1,00,000 income exemption?

4. Can you buy ELSS etc (for additional 1,00,000) and increase this exemption limit to 2,00,000?

5. MF houses are doing a TDS for my short-term capital gains. I don’t have any other source of income in India. Will I able to claim a refund of the TDS if these capital gains does not exceed 1,00,000 (or 2,00,000 with 100,000 investment into ELSS)

— Niranjan

A: For NRIs, long-term capital gains on equity is exempt. Short-term capital gains taxable @10 per cent or long-term capital gains on debt, again taxable @10 per cent are not to be clubbed with other income. Only short-term capital gains on debt instruments may be clubbed with other income to be taxable at slab rates applicable.

The initial Rs 1,00,000 exemption limit is not available for capital gain income, in the case of NRIs. In other words, any amount of capital gains (not from equity which is tax-free) is fully taxable.

The Rs 1,00,000 deduction under Sec. 80C is available to NRIs.

If TDS or withholding tax is more than the final tax liability, the NRI may file a return and claim refund.

The authors may be contacted at wonderlandconsultants@yahoo.com

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