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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS

B U S I N E S S

Reliance in gas pricing mode
Mumbai, April 7
Reliance Industries Ltd will finalise sales agreements in the next few months for natural gas from its deep-sea fields off the country’s east coast, a senior official said on Saturday. 

Gas cartel on cards?
New York, April 7
The world’s largest natural gas producers are expected to announce the formation of a cartel at Doha, Qatar, next week but experts in the United States expect no “significant impact” on prices or production, a media report said.

Overdrawal from grid may cost more
New Delhi, April 7
With scorching summer slowly and steadilty setting in and deteriorating frequency regime in the regional grids and its serious impact on grid security, the Central Electricity Regulatory Commission (CERC) is proposing to increase the ceiling rate for unscheduled interchange (UI) energy at the inter-state level from the present rate of Rs.5.70 per unit to Rs.7.45 per unit.

SBI hikes rates
Mumbai, April 7
The State Bank of India, country's largest commercial lender, today hiked interest rates for corporate lending by half a per cent and said it would take a call on home and other retail loans in the coming week.The bank's prime lending rate was today increased to 12.75 per cent from 12.25 per cent and will be effective from April 9.


EARLIER STORIES

 
This handout photo, received on Saturday, shows a wedding ring coffin. A New York divorcee has come up with a solution for failed marriages — a miniature coffin to lay those unwanted wedding rings to rest. The 15x5 cm solid wood coffin has a black velvet ring insert, a choice of six brass plaques and costs $30.
This handout photo, received on Saturday, shows a wedding ring coffin. A New York divorcee has come up with a solution for failed marriages — a miniature coffin to lay those unwanted wedding rings to rest. The 15x5 cm solid wood coffin has a black velvet ring insert, a choice of six brass plaques and costs $30. — AFP 

Aviation Notes
Norms thrown to winds
by K.R. Wadhwaney
Substandard maintenance, an excessive use of leased worn-out aircraft, pilots’ little regard for sleep-rest regime and non-adherence to duty and time norms by commanders are some of the major causes for repeated heavy landings and near-miss reports in the crowded Indian skies.

Investor Guidance
Equity-based schemes tax free if sold after a year
by A.N. Shanbhag

Q: I am currently employed in Dubai and earn salary in the UAE dirhams. I hold an NRE savings account. I regularly deposit funds in the bank account and then invest the funds into Indian mutual funds. The mutual funds investments have showed impressive NAV appreciation. My query is that if I redeem some of the investments and deposit the sales proceeds back in my NRE account, will there be any tax applicable on the sales proceeds or the gains? I would like to either re-invest the funds from the sales proceeds or repatriate them.

 

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Reliance in gas pricing mode

Mumbai, April 7
Reliance Industries Ltd will finalise sales agreements in the next few months for natural gas from its deep-sea fields off the country’s east coast, a senior official said on Saturday. “We are in the process of price discovery right now and hope to sign agreements within the next two or three months,” P.M.S. Prasad, head of Reliance’s oil and gas business said.

Reliance, India’s top private oil refiner and petrochemical maker, is developing two deep-sea gas fields in India’s Krishna-Godavari basin, off the southern state of Andhra Pradesh, and aims to produce 80 million cubic meters of gas a day (mmscmd) by mid-2008.

Prasad said the company would initially produce 40 to 50 mmscmd, using up to 15 mmscmd of this for its own plants, at its refinery in the western state of Gujarat.

Reliance, through an associate firm, is constructing about 10,000 km (6,200 miles) of pipeline infrastructure to transport gas from its fields to the western and southern regions. “About Rs 250-300 billion ($6-7 billion) is required from Reliance to set up these pipelines, of which we have already invested Rs 170 billion in the east-west pipeline,” Prasad said at a press conference.

He said the company was in talks with several fertiliser and power firms to sell its gas.

“I can’t tell you their profile, but the government wants us to fill the existing shortfall and supply gas to fertilizers and power and then to other heavy industries,” he said. India produces 95 mmscmd of gas, and the government expects this to rise to more than 190 mmscmd by 2009 after a series of gas finds off the east coast, including Reliance’s discoveries, come on stream.

India, Asia’s third-largest oil consumer, is encouraging use of natural gas to control its oil import bill and rein in rising inflation, but inadequate infrastructure to support gas demand is a seen as a major road block.

Reliance is also planning to supply gas through distribution projects in cities across five Indian states—Tamil Nadu and Karnataka in the south, Maharashtra and Gujarat in the west and West Bengal in the east.

Reliance has 83 per cent of its exploration acreage in deepwater areas and is planning to spend $5.2 billion on developing the two fields. The company has signed development contracts worth $4.5 billion.— Reuters

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Gas cartel on cards?

New York, April 7
The world’s largest natural gas producers are expected to announce the formation of a cartel at Doha, Qatar, next week but experts in the United States expect no “significant impact” on prices or production, a media report said.

Fourteen gas-rich nations are attending the meeting of the Gas Exporting Countries Forum in Doha, Forbes said.

It said the natural gas exporters appear to be seeking only cooperation amongst themselves for now. But as was the case with OPEC when it formed in the ’60s, it is unclear exactly what “cooperation” will mean a decade or so down the road, when global energy markets surely will have changed.

No one is certain what the new organisation will try to achieve, but experts in the US say it will not be able to set prices like the oil cartel, the Organisation of Petroleum Exporting Countries (OPEC).

If a cartel is formed, it will likely include Russia, Venezuela, Iran, Qatar, Indonesia and Algeria. — PTI

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Overdrawal from grid may cost more

New Delhi, April 7
With scorching summer slowly and steadilty setting in and deteriorating frequency regime in the regional grids and its serious impact on grid security, the Central Electricity Regulatory Commission (CERC) is proposing to increase the ceiling rate for unscheduled interchange (UI) energy at the inter-state level from the present rate of Rs.5.70 per unit to Rs.7.45 per unit.

The increase in UI ceiling rate has been proposed after considering the proposal of regional load despatch centres (RLDCs) to increase the UI ceiling rate to Rs.9.30 per unit. The proposal of RLDCs was sent to all stakeholders. — TNS

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SBI hikes rates

Mumbai, April 7
The State Bank of India, country's largest commercial lender, today hiked interest rates for corporate lending by half a per cent and said it would take a call on home and other retail loans in the coming week.

The bank's prime lending rate was today increased to 12.75 per cent from 12.25 per cent and will be effective from April 9.

SBI is the second public sector bank to increase its PLR after Bank of Baroda following RBI’s move last month to squeeze liquidity through the twin measures of increasing cash reserve limits and short-term lending rate (repo).

Another public sector bank, Punjab National Bank, has also said it would be increasing its PLR soon and other public sector lenders are expected to soon follow suit.

Meanwhile, the Industrial Development Bank of India (IDBI) is planning to review its current lending rate in view of the changing trend in the financial market, IDBI chairman and managing director V.P. Shetty said today. — PTI

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Aviation Notes
Norms thrown to winds
by K.R. Wadhwaney

Substandard maintenance, an excessive use of leased worn-out aircraft, pilots’ little regard for sleep-rest regime and non-adherence to duty and time norms by commanders are some of the major causes for repeated heavy landings and near-miss reports in the crowded Indian skies.

If the health of the Indian civil aviation continues to cause concern to the authorities, the state of welfare of general aviation continues to be in turmoil. The recent chopper crash in Himachal Pradesh, for example, took place because the commander had violated the duty and time norm. Had he had enough rest and relaxation, the five precious lives could have been saved.

According to reports, the pilot continued to fly when the visibility was poor and there was also heavy turbulence around. Similar lapses have brought about several other crashes, including the one in which Madhavrao Scindia died.

The directorate of civil aviation has rightly sent its findings to all helicopter and other flying concerns. Merely sending of the probe report is not enough. What DGCA should do is that it should undertake effective measures for adherence of age-old flying rules and norms. The modern flying machines are sturdy while pilots, some of them high on ‘spirits’, continue to be either casual or exuberant. Both attitudes are dangerous when in cockpit.

The worst scenario persists in private airlines which, in order to reduce losses, deploy aircraft without undertaking proper checks and counter-checks. The tyre burst of the aircraft of a private operator led to disruption at the Indira Gandhi International Airport (IGIA). The disruption caused inconvenience to arriving delegates for the SAARC meeting.

Most of the private carriers are passing through a lean phase. They have finally realised that all that glitters is not gold in this prestigious airline industry. Quite a few private operators are plagued by internal bickerings, which are a affecting growth.

Jet Airways, a known private player, stays in the news. The airline, which operates on international routes also, seems to thrive on controversies. Locked in legal battles, it has now been affected by internal feuds. Five senior officials have bid ‘farewell’ to the airline. Two expatriates have already returned to their countries. Among the remaining three, the latest to quit is Nandini Verma, vice-president of Corporate Affairs, including media relations. An all-rounder, she had hopped from hotel industry to airlines. With Jet Airways for about a decade, she had resigned about two years ago but she was persuaded into staying back. this time, she has walked out to join another private airline.

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Investor Guidance
Equity-based schemes tax free if sold after a year
by A.N. Shanbhag

Q: I am currently employed in Dubai and earn salary in the UAE dirhams. I hold an NRE savings account. I regularly deposit funds in the bank account and then invest the funds into Indian mutual funds. The mutual funds investments have showed impressive NAV appreciation. My query is that if I redeem some of the investments and deposit the sales proceeds back in my NRE account, will there be any tax applicable on the sales proceeds or the gains? I would like to either re-invest the funds from the sales proceeds or repatriate them.

— Kapre

A: Equity based schemes are tax-free if sold after one year. If sold before one year, the same is subject to a 10 per cent capital gains tax. 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, which ever is more beneficial to the assessee.

The amount can be credited back to the NRE account for purposes of reinvestment or repatriation, net of taxes, if applicable.

Possession first

Q: I have invested in two houses. One, I use for my own residence, and the other is rented out. The first house is bought on mortgage where I pay interest of around Rs 2,00,000 per year and the second is self-financed. Now, I have invested in another property that is currently under construction. The same is again a mortgage and I hope to get possession sometimes in April 2008. Meanwhile, on the amount already released by the bank (for the property under construction) I have been paying interest. Given this, my question is, can I adjust my interest payment on the under construction property against my rental income from the second house? If not, what is the way out?

— Nandan

A: The deduction on mortgage interest as per Indian tax laws is available only when the construction is complete and you get the possession. So, the answer to your question is no, at this point you cannot adjust the interest payment on the under construction third house against your rental income of the second house. However, that doesn’t mean that such interest payments before construction was completed (which, by the way in India are called pre-EMI payments) cannot be utilised for tax saving purposes.

The interest for the years prior to the year in which the property was completed, shall be deducted in equal instalments for the year during which it was completed and each of the 4 immediately succeeding years. Therefore, in this situation, since you will get possession in April 2008, you can adjust the entire pre EMI interest (against the rent) in five equal instalments starting from 2008-09 onwards.

TDS on rent

Q: I will start getting rent for my commercial flat in Delhi @ Rs15,000 per month wef April 1, 2007 and tenants will deduct TDS @ 15 per cent unless I submit some suitable IT forms. Kindly advise how TDS deduction can be avoided

1. I file IT return regularly and have PAN.

2. My tax payable will be nil after allowing deductions under Section 88

3. I have no other income (earlier the rent from the same flat was @ 5,000 per month)

Please advise can I give them Form 15G, or any other condition required to be fulfilled.

— Dev Raj

A: It is not clear from your query if you are an NRI or not. In any case, Forms 15G and 15H are not available for rental income. These are just for interest income from various sources. Currently, the only alternative is to file tax return and claim refund of the excess tax deducted.

NRI investor

Q: I am an NRI and redeemed one unit of one of the mutual fund. The NAV was Rs 11.17. The purchased unit NAV was Rs. 10.61.

So, the total gain is (11.17-10.61) = 0.46 paise

Tax deducted is Re 1. How come? Meaning, the redemption resulted in net loss for me.

The tax deducted is almost 2.2 times of the gain!!!! Have they forgotten that tax is calculated on gain and not on full amount?

— Sunil

A: We find the MF has deducted only one rupee on account of the rounding off. Otherwise, any NRI investor can redeem one unit per day and escape TDS altogether. Incidentally, the cost to the mutual fund in redeeming one unit could have been over the value of check. In any case, this is a matter that should be taken up with the mutual fund directly.

Tax exemption

Q: I own an apartment in Bangalore. However, I intend to sell it and buy a bigger place. For this purpose, I have applied for a housing loan and the same has been sanctioned.

I understand that I will have to pay long-term capital gains tax on the sale of my old apartment. I also understand that if I were to invest the capital gains in the new property, I would be exempted from paying the capital gains tax. However, my problem is that the sale of the old property has not come through and the new property is being purchased by way of housing loan. Under these circumstances, the best I can do is first purchase the new apartment from the loan amount and then part pay the loan by disposing off my existing apartment.

It amounts to the same thing. However, will I still be eligible for tax exemption?

— Mandrekar

A: Yes, you will get exemption on capital gains tax. You have not mentioned dates of the transactions, therefore, please be guided by the following rules.

Yes, the law does say the capital gains from the sale of one house, if invested in another, is exempted from tax. But it doesn’t say that the particular capital gain (that gets released from the sale) has to be invested. It merely says an amount equal to the capital gains has to be invested. Plus there are time limits. You can buy the new house either within one year before or within two years after the date of sale of the old house. In your case, you have purchased the new house within one year of selling the old house. So yes, you will be entitled to the capital gains tax exemption.

The authors may be contacted at wonderlandconsultants@yahoo.com

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