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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS

B U S I N E S S

Manufacturing investment regions on the anvil
Kolkata, June 30
The industry ministry has mooted a proposal to set up manufacturing investment regions (MIRs) on the lines of PCPIRs to give a boost to the manufacturing sector in the country.

Assocham seeks improvement in SEZ guidelines
Kolkata, June 30
To ensure that special economic zones (SEZs) lead to an improvement in India's competitiveness and export potential, Assocham today made some policy recommendations for consideration of the government.

Microsoft to set up IT park in Pune
Mumbai, June 30
Software giant Microsoft has announced plans to set up an information technology (IT) park in Maharashtra.

BoB hikes interest on NRE deposits
Mumbai, June 30
The Bank of Baroda (BoB) today said it has increased interest rates on its FCNR (B) and NRE term deposits with effect from July 3.

Aviation Notes
Creating infrastructure need of the hour
China is now a leader even among developed countries in complex civil aviation sector. Its planning in the last decade has been straight-forward and realistic. It creates infrastructure first before granting permission to airlines to buy long-haul and medium-haul aircraft. Those, who have had an opportunity to have a look at China's national and international airports are of the firm view that its advancement is much more visible than many countries in Europe and the USA/Canada.

Investor Guidance
No tax on inherited amount
Q. I am the only successor of my mother, who died in January 2002. She had invested in mutual funds and bank FDs. Total investment made by her was to the tune of over Rs 30 lakh. Based on her death certificate as well as survivorship certificate, the MFs redeemed the units in my favour and the amount was received in my bank account at the latest NAVs. I gifted the whole redeemed amount to my wife, who has now invested the funds in various bank FDs. The FDs are giving dream returns nowadays and my wife did not have any income of her own. Kindly let me know my tax liability arising from this amount inherited.


The newly released iPhone is displayed at the Apple store in Santa Monica, California, on Friday.
The newly released iPhone is displayed at the Apple store in Santa Monica, California, on Friday. The release of Apple's much-ballyhooed iPhone is expected to give a boost to the emerging, multi-purpose cellphone market and possibly even help rival "smartphone" devices. — AFP

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Manufacturing investment regions on the anvil

Kolkata, June 30
The industry ministry has mooted a proposal to set up manufacturing investment regions (MIRs) on the lines of PCPIRs to give a boost to the manufacturing sector in the country.

Minister of state for industry Ashwani Kumar told reporters on the sidelines of the annual general meeting (AGM) of the Indian Chamber of Commerce (ICC) here today that the proposal had been circulated to the relevant ministries, adding that the Cabinet was likely to give its approval.

"It is fairly at an advanced stage," the minister said.

Kumar said MIRs would be set up on the lines of petroleum, chemicals and petrochemicals investment regions (PCPIRs) which would run by a board of management comprising representatives of the central and state governments and anchor tenant.

The minister said these MIRs would typically require an area of 250 sq km and would be developed around the existing industries clusters.

Kumar said the government has set a target to maintain a 12 per cent growth in manufacturing sector till 2010, adding that it would generate additional jobs to the extent of 16 million.

He said the manufacturing sector alone had the potential to contribute 28 per cent of the country's overall GDP growth.

The industry ministry, which is also the nodal body behind the Delhi-Mumbai industrial corridor, was betting big on the potential of the manufacturing sector.

The minister said Japan External Trade Organisation (JETRO) was carrying out the feasibility for the corridor, which would require an estimated investment of $4 trillion.

The proposed corridor would pass through the hinterland of Madhya Pradesh, Rajasthan, parts of UP, Delhi, Mumbai and Gujarat.

On the issue of land acquisition for mega projects like PCPIRs, the minister said that it was a state matter.

He, however, said the passage of Relief and Rehabilitation (R&R) Bill in the Parliament would help the state governments in land acquisition.

The Bill is likely to be introduced either in the monsoon or winter session of the Parliament.

West Bengal was among one of the five states given approval to set up a PCPIR. — PTI

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Assocham seeks improvement in SEZ guidelines

Kolkata, June 30
To ensure that special economic zones (SEZs) lead to an improvement in India's competitiveness and export potential, Assocham today made some policy recommendations for consideration of the government.

The chamber's president Venugopal Dhoot said the Centre should announce policies on land acquisition and rehabilitation after creating consensus among various stakeholders.

According to the industry body, SEZs should be set up on areas where the soil has low biological potential for farming, and farmers should be offered a stake by way of shareholding in the proposed project.

Dhoot said land required for the projects should be purchased directly from the farmers with assistance from the government. Also, the farmers or their family members should be given jobs upfront before their land is taken.

The chamber also said that existing labour laws should not be applied to the SEZs. Special arbitration mechanism and special legal courts should be set up for resolution of disputes. — PTI

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Microsoft to set up IT park in Pune

Mumbai, June 30
Software giant Microsoft has announced plans to set up an information technology (IT) park in Maharashtra.

Microsoft boss Bill Gates told Chief Minister Vilasrao Deshmukh at the company's headquarters at Seattle in the US that the park would be set up at Hinjewadi near Pune, an official release said here yesterday.

When Deshmukh appealed to Microsoft to help the state government use IT to boost agricultural productivity, Gates assured the Chief Minister that his firm would extend all cooperation, the release said.

Deshmukh is on a 10-day visit to the US to attract foreign investment to the state. After the meeting with Gates, there are indications that several Microsoft projects will be launched in the state, it said.

Noting that Microsoft has already started various initiatives in Maharashtra, Deshmukh and Gates said after this visit, relations between Microsoft and Maharashtra would be further strengthened, the release added. — PTI

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BoB hikes interest on NRE deposits

Mumbai, June 30
The Bank of Baroda (BoB) today said it has increased interest rates on its FCNR (B) and NRE term deposits with effect from July 3.

Interest rates on NRE term deposits have been increased to 5.43 per cent from 5.39 per cent for a maturity range of one year and above but less than two years, and to 5.43 per cent from 5.32 per cent for two years and above but less than three years, a bank release said here.

For its USD-denominated FCNR (B) deposits, the interest rate has been upped from 4.64 per cent to 4.68 per cent for one year to less than two years, and from 4.57 per cent to 4.68 per cent for two years to less than three years. — PTI

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Aviation Notes
Creating infrastructure need of the hour
by K.R. Wadhwaney

China is now a leader even among developed countries in complex civil aviation sector. Its planning in the last decade has been straight-forward and realistic. It creates infrastructure first before granting permission to airlines to buy long-haul and medium-haul aircraft. Those, who have had an opportunity to have a look at China's national and international airports are of the firm view that its advancement is much more visible than many countries in Europe and the USA/Canada.

In sharp contrast, India's planning in this area has been thoughtless. Orders for buying aircraft are being placed without taking adequate measures in developing infrastructure in the areas of parking bays, terminal concourses and runways.

Many private players are facing financial problems. But out of sheer exuberance and bravado, they have been placing orders for even mammoth super-jumbos. At the recent Paris Air Show, two Indian private players placed huge orders for the aircraft acquisition. The orders have caused surprise and shock because existing airports have no room for landing and parking of these aircraft. It means there will be more congestion on ground in the already murky situation in Indian skies.

According to statistics, only 62 domestic and 12 international airports are being regularly used. Airports at Mumbai and Delhi handle bulk of traffic. Only 243 airports have paved runways and another 98 airports are merely air-strips. Most of these 341 airports are under control of defence which continues to be wary of allowing civil operations to take place. Two ministries, civil aviation and defence, are now trying to work out how civil and defence operations can be organised simultaneously. The operations are more than possible if ministries undertake the problem with open minds. The defence, in particular, must come out of the dog in the menger's attitude.

It is laudable that the Airports Authority of India (AAI) and private parties will pool their resources to develop thus-far neglected airports. The development of these airports is essential. But what is more essential is to create infrastructure at already used national and international airports so that the humongous A-380 aircraft can land and take-off.

About a decade ago, the AAI had draw up a plan that it would modernise non-metro airports. During this period between 1997 and 2007, the progress in this regard has been negligible. The Bangalore international airport for example, continues to face many bottlenecks. This is because there is little coordination between politicians and civil servants. They continue to pull in different directions in Karnataka. This is causing delay.

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Investor Guidance
No tax on inherited amount
by A.N. Shanbhag

Q. I am the only successor of my mother, who died in January 2002. She had invested in mutual funds and bank FDs. Total investment made by her was to the tune of over Rs 30 lakh. Based on her death certificate as well as survivorship certificate, the MFs redeemed the units in my favour and the amount was received in my bank account at the latest NAVs. I gifted the whole redeemed amount to my wife, who has now invested the funds in various bank FDs. The FDs are giving dream returns nowadays and my wife did not have any income of her own. Kindly let me know my tax liability arising from this amount inherited.

— Ashish Muzumdar

A. The difference between the value of units as on the date of death of your mother and the redemption value of the units is taxable as long-term capital gains for the year during which the units were redeemed. If these were equity-based schemes (equity holding over 65 per cent) the same are exempt.

2. The amount inherited by you from your mother and gifted by you to your wife is tax-free in the hands of the recipients.

3. The clubbing provision is applicable. The income of your wife from the gifted amount from you is taxable in your hands.

Incidentally, you took an unnecessary risk by not asking for redemption immediately after the death of your mother. Your family would have suffered immensely had you passed away in the meantime. Moreover, you may have to attend to the tax liability, if any, of your mother for the year of her death and subsequent years after. Had you filed her returns in the style of ‘estate of Mrs Muzumdar’, you possibly could have saved the tax for this period with consequent penalty and interest for late payments.

HRA exemption and loan

Q. The question is regarding income tax on house property. Please guide as to how and who would be able to indicate the fair rental value, municipal value, standard rent, which will help us in arriving at our annual value.

Will I be eligible for exemption on the principal repayment under Section 80 C if I claim full exemption on interest towards housing loan?

Can I claim both HRA and interest on housing loan?

Currently, I am staying with my parents in a rental building. Though I have taken the property (this is the first house I am buying), which is now under construction (expected to get possession by March-June 2008), I have no plans to shift to the new house. I will continue staying in the rental premises only. The house where I am currently staying and the new property taken by me are at a distance of about 20 mt only. Can I claim : (a) HRA and interest on housing loan (b) full interest on my housing loan (taking the current interest rate my interest may be around 3 lakh per annum). (c) Also, please let me know if all this has to be done by me individually or if I give the details to my office, they will during submitting my Form 16, reflect it?

— Hemlatha

A. As this is your first house, there will be no annual value and hence, there will be no tax on the same. Yes, you can claim deduction under Section 80C on principal payments up to Rs 1,00,000 as well as interest deduction up to Rs 1,50,000. But, this you can do only after you take possession. The interest before taking possession will be deductible in five equal instalments beginning in the year in which you take possession. The combined limit is Rs 1,50,000. You can also simultaneously claim HRA exemption, provided you pay rent. Your owning another property or the distance of the same from the rented property has nothing to do with this. You may submit the details to your office and they will take the same into consideration while deducting tax at source on your salary income.

Stocks in Asian markets

Q. I have been reading a lot of articles about international stock markets and most of the pundits say that Korea, Thailand and even Japan stocks offer better value then the BSE/NSE. Now, if one accepts this then how does one go about finding which MF to invest in (which trades/holds stocks in Asian and other international markets)?

— Chandgadkar

A. Very soon, we should see domestic Indian mutual funds coming out with schemes that will offer international stocks. Fidelity MF just closed one NFO where up to $100 million would be invested in Asian stocks. Right now, the problem is that Indian mutual funds have to invest at least 65 per cent of the funds in domestic equity to keep the tax-free status. This leads to only a part of the money being invested outside. Representations in this regard have been made to the CBDT and SEBI and soon there should be some modification in the law. Then, there would be many more schemes that offer this service.

Tax on mutual funds

Q. I have invested in some mutual funds directly. All three funds have entry loads.

(a) Is it true that I can avoid these entry loads if I invest in one of the debt funds (fixed income funds) and keep invested for more than a year and later shift/transfer from the debt fund to equity funds?

(b) If there is any TDS at all, shall I get back the tax if claimed while filing?

— S. R. Sukhi

A. There would be no benefit in terms of avoidance of loads even if you adopt this approach. In terms of tax on mutual funds in India the following is the gist:

The dividends are tax-free in the hands of the recipient. TDS is applicable for both long and short-term capital gains from non-equity scheme. The provisions of tax on capital gains are applicable for switch between schemes and even for a switch within the same scheme from one option to another option. However, this is not applicable for switch from ‘dividend’ option to ‘reinvestment of dividend’ option and vice versa.

The authors may be contacted at: wonderlandconsultants@yahoo.com

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BRIEFLY

CPI-IW up by 1 point
Shimla, June 30
All-India Consumer Price Index Number for Industrial Workers (CPI-IW) on base 2001-100 for the month of May increased by one point and stood at 129 points, according to Labour Bureau here. During May, the Index recorded an increase of four points each in Jalapaiguri and Rourkela centres, three points each in Madurai, Bhilai and Belgaum centres, two points in eight centres and one point in 25 centres. — UNI

Forex reserves
Mumbai, June 30
India's forex reserves increased by $1.534 billion for the week ended June 22 at $212.549 billion as against $211.015 billion during the seven-day period ended June 15. The reserves had increased by $1.468 billion during the week ended June 15 as compared to the preceding seven-day period. Foreign currency assets (FCAs) increased by $1.532 billion to $205.178 billion during the week ended June 22, as per figures released by the RBI. — PTI

Air Deccan pact
Bangalore, June 30
Low-cost carrier Air Deccan has tied up with India Post, which will enable booking air tickets at Internet-enabled neighbourhood post offices in Karnataka. More than 500 such post offices in the state would offer the facility, officials said. Air Deccan executive chairman Capt G.R. Gopinath said over 1,56,000 post offices across the country offered a great prospect for the airline to reach people in smaller cities and towns. — PTI

Tommy Hilfiger
New Delhi, June 30
Tommy Hilfiger has lined up major expansion plans in India which includes opening up of more retail stores and experimenting with new formats to market its range of apparels and accessories in the country. "We have just completed phase I of our expansion and would be undertaking phase II in a rapid expansion mode. Currently we have nine exclusive stores in seven cities and by the end of this year we would make it to 20 stores in nine cities," Tommy Hilfiger India CEO Shailesh Chaturvedi said. — PTI

Govt bonds
New Delhi, June 30
The government will raise Rs 10,000 crore through the sale of 10-year and 29-year bonds on July 6. While Rs 6,000 crore would be mopped up from a new 10-year bond, Rs 4,000 crore would be raised through the government stock 2036 carrying a coupon rate of 8.33 per cent. Up to 5 per cent of the amount in both stock would be allotted to eligible institutions, according to an official release here. — PTI

Zero-balance a/c
Nahan, June 30
All residents of Sirmaur district will be facilitated with a zero-balance bank account. This was announced by the deputy commissioner, Sirmaur, R.S. Negi, while presiding over a district-level meeting yesterday. The gram panchayat pradhan will be authorised to attest the antecedents of the applicant desiring to open an account. — TNS

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