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B U S I N E S S

GDP expected to grow at 9.2 pc: CII
New Delhi, July 15
Indian economy is expected to show a marginal decline in GDP growth to 9.2 per cent in the current fiscal from 9.4 per cent in 2006-07 with services sector and industry maintaining the momentum, CII has said.

BSNL Board to review GSM tender today
New Delhi, July 15
State-run BSNL's Board will meet on Monday to review the 45.5 million GSM line tender which has come under question from telecom minister A Raja who has asked the PSU to renegotiate the price with the lowest bidder.

Traders’ kitty grew during price rise: Study
New Delhi, July 15
While the farmers and consumers have been hit hard by price rise, middle- men have walked away with tons of money, said a study by Assocham.

Tatas eye $50 billion turnover
Mumbai, July 15
Tata Group expects to more than double its turnover to $50 billion this fiscal with the acquisition of Anglo-Dutch steel firm Corus.

PNB keen to enter Pak
New Delhi, July 15
Punjab National Bank (PNB), which began its century-old journey from Lahore, wants to renew its ties with the historic city by opening a branch there.

Market Update
Quarterly results to drive bourses
Last week, the market continued its winning streak on strong buying momentum in index pivotals. Strong markets across the globe, fresh buying at higher levels, healthy inflow from foreign funds and domestic mutual funds and anticipation of a robust set of first quarter results triggered the rally on the bourses.

Tax Advice
No IT return if income below taxable limit
Q. I am a senior citizen and PAN card holder. My income details for the year 2006-07 are as follows:


Youngest income taxpayer

Krishhey Sameer Thacker bites his PAN card after entering the record book as the youngest Indian who pays income tax in Mumbai on Sunday.
Krishhey Sameer Thacker bites his PAN card after entering the record book as the youngest Indian who pays income tax in Mumbai on Sunday. — PTI photo

EARLIER STORIES

 

 

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GDP expected to grow at 9.2 pc: CII

New Delhi, July 15
Indian economy is expected to show a marginal decline in GDP growth to 9.2 per cent in the current fiscal from 9.4 per cent in 2006-07 with services sector and industry maintaining the momentum, CII has said.

According to the chamber, the agriculture sector would show a moderate 3 per cent growth, against 2.7 per cent in 2006-07.

Industry and services sector are expected to grow at 9.4 per cent and 11.2 per cent, respectively during 2007-08.

"On the whole, CII expects the GDP growth to be 9.2 per cent during 2007-08, with agriculture growing at 3 per cent, industry at 9.4 per cent and services at 11.2 per cent," the chamber said in its 'state of the economy' report.

The Indian economy had registered a 9.4 per cent GDP growth in 2006-07, highest in the past 18 years, due to a stellar performance by manufacturing and services sectors.

In its quarterly analysis of economy for the Jan-March period, the chamber said in spite of appreciating rupee impacting exports, country's GDP grew at 9.1 per cent primarily led by 19.35 per cent growth in corporate earnings.

It said appreciating rupee had a negative impact on profits of textile and leather sectors during the fourth quarter with profit margin expected to erode further to 10.4 per cent during the next six months.

Service sector companies registered a 45.68 per cent growth in profits compared to 10.32 per cent growth in the corresponding quarter last fiscal. Manufacturing sector, however, reported a slowdown in profits during the quarter to 7.91 per cent from 15.17 per cent in Q4 2005-06.

The chamber, however, cautioned that the continuous decline in oilseed production could act as a hurdle to agricultural growth in the country.

CII pointed out on the need to restructure domestic pricing policy of various crops as farmers are switching from oilseeds crops to more lucrative alternatives like wheat and gram. — PTI

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BSNL Board to review GSM tender today

New Delhi, July 15
State-run BSNL's Board will meet on Monday to review the 45.5 million GSM line tender which has come under question from telecom minister A Raja who has asked the PSU to renegotiate the price with the lowest bidder.

Sources said the Board will take a decision on the three-member panel report on the review of the tender, keeping in mind the minister's queries and suggestion to put 3G services out of the tender for the time being and focus on 2G or normal voice services.

The other option before the Board is to look at reducing the 3G component of the tender, which is 25 per cent at present. The Board may also look at scrapping the 3G part completely.

One of the key query of the minister is relating to the earlier board decision of selecting Swedish vendor Ericsson at a higher price of $107 a line and not considering Motorola which has supplied 2G GSM lines at a price of $69. Motorola was disqualified by BSNL's tender evaluation committee on the ground that it was not capable of delivering 3G equipment.

The Board has to explain to the minister the grounds of Motorola's disqualification.

The Board is expected to take a decision to ask Ericsson to lower the price to below $85, failing which a rebidding cannot be ruled out in which Motorola could be allowed to participate.

The meeting assumes importance as BSNL employees' union, which went on a day's strike this week demanding immediate placement of order to check subscribers' loss, has given 15 days time to the PSU to arrive at a decision. — PTI

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Traders’ kitty grew during price rise: Study
Tribune News Service

New Delhi, July 15
While the farmers and consumers have been hit hard by price rise, middle- men have walked away with tons of money, said a study by Assocham.

The average difference between wholesale prices (WSP) and minimum support prices (MSPs) during 2002-07 was 33 per cent, while the consumers paid 60 per cent more than the WSP, said the study ‘MSP Vs WSP and their impact on retail prices’.

Barring wheat and paddy, MSP and WSP differential for essential items like moong, urad, gram, arhar, on an average, was 33 per cent in 2002-07 against their striking variance of 60 per cent in WSP and retail during the five-year period, said the study.

The price difference between MSP and WSP for moong was highest by 45 per cent in 2002-07 and trend is unlikely to be reversed.

It further points out that for gram, the difference was 38.8 per cent, urad 25.4 per cent and arhar 21.4 per cent. The average of which works out to be about 33 per cent against their average price differential of 60 per cent with retail prices at which consumers bought them in the period. For wheat and paddy, the difference between MSP and WSP was 11.52 per cent and 3.97 per cent, respectively, which is well within the acceptable limits.

Assocham president Venugopal N. Dhoot said: “The WSP benefited multiple times middlemen and traders, particularly for sale of essential commodities and worst hit in the process remained the farmer and the consumer.”

He, however, hoped that with retail players like Reliance and Subhiksha opening up their retail outlets, consumers would benefit and farmers would get reasonable price for their produce as organised retailers source their supplies directly from farm land for end users without involving middle men in the process.

The MSP for paddy had shown a growth of 1.8 per cent in 2006-07 whereas WSP had a growth of 7.56 per cent in the same period.

The MSP for wheat had shown a growth of 15.38 per cent in 2006-07, which is the highest in the commodities under consideration. The gap between the MSP and WSP growth of wheat is 11.52 per cent and has highest gap of 31 per cent in the year 2006-07.

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Tatas eye $50 billion turnover

Mumbai, July 15
Tata Group expects to more than double its turnover to $50 billion this fiscal with the acquisition of Anglo-Dutch steel firm Corus.

"We should touch the $50 billion turnover mark in FY08. With a 30 per cent growth this year, our $22 billion turnover in FY07 will become $28 billion in FY08. Corus would bring in an additional turnover of $22-23 billion," a top Tata official said here today.

The Ratan Tata-led corporate major is also betting big on its inter national businesses, which are expected to contribute 50 per cent of the total turnover in 2008, he said.

In 2006-07, the international business contributed only 30 per cent of the $22 billion turnover, which worked out to $6.7 billion.— PTI

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PNB keen to enter Pak

New Delhi, July 15
Punjab National Bank (PNB), which began its century-old journey from Lahore, wants to renew its ties with the historic city by opening a branch there.

“We are looking at expanding operations in SAARC nations and will prefer to open a branch in Lahore or Karachi,” PNB managing director K C Chakrabarty said.

The bank’s board has already given approval for opening branches in Pakistan and PNB has applied to the RBI for regulatory approvals.

PNB, which was set up in Lahore in 1895 by legendary freedom fighter Lala Lajpat Rai, had 23 branches in Pakistan before it shifted its entire operations to India after Partition.

The RBI and the State Bank of Pakistan, last year, had agreed in-principle to allow banks from India and Pakistan to open two branches on a reciprocal basis on mutually agreed terms between the regulators. — PTI

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Market Update
Quarterly results to drive bourses
by Lalit Batra

Last week, the market continued its winning streak on strong buying momentum in index pivotals. Strong markets across the globe, fresh buying at higher levels, healthy inflow from foreign funds and domestic mutual funds and anticipation of a robust set of first quarter results triggered the rally on the bourses. The BSE 30-share Sensex jumped 308 points last week, to settle at a record closing high of 15,272. The Nifty added 119 points to record a closing high of 4,504.

This week, the trickle of results will most likely turn into a torrent and in the short term, will mostly dictate which way the markets move next. Although there are not likely to be big disappointments, we believe much of it is already priced into majority of the stocks. Also any spike in crude oil prices from the current levels may put brakes on rally. As per the latest data, Brent crude was hovering at the $77 a barrel mark. Hence, investors need to be cautious and should not get carried away by the momentum.

PNB

PNB has historically maintained one of the highest proportions of lowcost current and savings account deposits in the PSU (public sector undertaking) banking sector (last 5-year average is 47 per cent), which has partially hedged its net interest margins (NIM). This has been due to its diversified presence in the rural and semiurban areas. Going forward, given the firmness in interest rates, the replacement of the highcost borrowings with equity funds and lowcost deposits is expected to improve its NIM further.

In the next 5 years, around 1,500 employees of the bank will be retiring per year, thus considerably lightening its wage burden (as most of these employees are in the high salary bracket). While the bank does not intend to refill the vacancies as it is rationalising its franchise and employees base, it will be recruiting only technical staff, at relatively lower salary levels as compared to the retirees. We expect this cost advantage to rationalise the bank’s cost efficiency and bring down its cost to income ratio at par with that of its peers in the sector.

A slowdown in retail credit and narrow spreads spells better fortune for banks that have higher concentration of corporate assets and lowcost deposits along with good asset quality. PNB perfectly fits into this matrix. Sustenance of a healthy current and savings account mix and little deterioration in asset quality also reiterates the operating efficiency of the bank. Going forward, with technological upgradation and aggressive growth strategies, the growth prospects of the bank appear enthusing. Based on the risk-return matrix, we believe that the stock is attractive from a three-year perspective.

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Tax Advice
No IT return if income below taxable limit
by S.C. Vasudeva

Q. I am a senior citizen and PAN card holder. My income details for the year 2006-07 are as follows:

 

 Rs

Pension 

 1,21,000

Rent 

 60,000

Agriculture 

 40,000

Total 

 2,21,000

As my tax liability is nil, is it necessary for me to file the IT return or not when my income (excluding agriculture income) is less than Rs 1,85,000?

— G.S. Gill, Mohali

A. On the basis of facts given, your total income, without claiming any deduction under Chapter VI - A of the Act, is below Rs 1,85,000, the maximum amount on which tax is not chargeable in case of senior citizens. In view thereof, you are not required to file a return of income even under the newly introduced proviso to Section 139 of the Act.

Form 15H

Q. I am a senior citizen and my date of birth is January 13, 1936. I have some FDRs and interest income from them is below the taxable limit. I have no other source of income and I am residing in my own house. The bank is deducting TDS at the rate of 10 per cent on interest at the source itself. My wife and me depend on FDRs’ interest.

Please advise whether the bank should deduct TDS on such FDR deposits if Form 15G/15H, as applicable, is given to the bank when the total income is not taxable? Exemption is allowable as I have attained the age of 71 years.

— G.S. Rihal, Phagwara

A. You can file Form 15H with the bank and the bank will not be liable to deduct tax at source in respect of your interest income on FDRs. This facility has now been provided in Section 197(1C) of the Act.

Tax liability

Q. My son has been engaged as service provider (doctor) by zila parishad on contract basis for three years in a rural govt dispensary w.e.f. June 1, 2006. He is getting Rs 30,000 p.m., out of which he is giving Rs 4000 p.m. to paramedical staff and Rs 1,000 p.m. to safai sewak. Besides, he is paying electricity and water bill, arranging stationary items, paying transport charges for collection of medicine and for attending official meeting, bear other allied expenses of govt dispensary such as phone charges, organising medical campus, using own conveyance for attending duty/other official work and purchasing medical magazines. He is paying Rs 2,500 p.m. as home rent to his grandmother.

(A) Please calculate his tax liability on the basis of following detail for 2006-07 (June 2006 to February 2007)

 

 Rs

Contract money to be received 

 2,70,000

Payment to paramedical employee 

 36,000

Payment to safai sewak 

 9,000

Misc Expenditure 

 22,500

House rent @ Rs 2,500 p.m. 

 22,500

 

 90,000

Saving (LIC and medical claim insurance) 

 20,000

(A) Is any receipt/bill/or any other record required to be maintained by him for items stated above?

(B) Any other guideline you feel necessary for saving/filing tax return.

— Subash Sharma

A. The replies to your queries are as under:

(i) The amount of professional fee should be accounted for June 2006 to March 2007 because the financial year, for tax purposes, is April 2006 to March 2007. Accordingly, the professional fee should be Rs 3,00,000. The net income would work out as under:

 

 

 Rs

Professional fee 

 

 3,00,000

Less: Payment to paramedical employee and safai karmachari for 10 months 

 50,000 

 

Miscellaneous expenses 

 25,000 

 

 

 

 75,000

 

 

 2,25,000

Tax on the above amount would work out at Rs 20,400. This is inclusive of the education cess payable on tax.

(ii) The deduction for the rent paid would be allowable to your son subject to the following conditions:

(a) The rent paid is in excess 10 per cent of total income.

(b) The rent, paid, is for the purposes of his own residence and subject to his filing a declaration in Form 10BA along with the return of income.

(c) The deduction can be claimed if no residential accommodation is owned by your son, his spouse, minor child or by HUF, of which he is a member.

(d) Your son is not entitled to exemption under Section 10(13A) of the Act i.e. he is not entitled to the exemption of house rent allowance.

(e) The maximum deduction allowable is Rs 2000 p.m.

I have not allowed the deduction for rent paid while computing the total income as above since the query does not indicate the compliance with regard to the above requirements.

(iii) For claiming deduction in respect of payment to paramedical staff, safai karmachari and for other misc expenses, complete supports should be kept by your son. It would be better if he maintains complete accounts for the receipts and expenses incurred by him. Such receipts and expenses should be fully supported.

PPF account

Q. PPF account in the name of my minor grand-daughter was opened in December 2001. The account is under the natural guardianship of her mother.

My grand-daughter, along with her mother, has gone to Canada in May 2004, under permanent resident visa. They are likely to stay there. The account is in operation as I deposit some amount every year.

Whether the account can continue till maturity as I deposit some amount in that account every year or the account has to be closed? If so, what is the procedure? Would there be any liability or formality as far as Income-tax is concerned?

— Ram Nath Sud, Chandigarh

A. According to Rule 3(3) of the Public Provident Fund Scheme, 1968, non-resident Indians (NRIs) are not eligible to open an account under the scheme. However, if a resident becomes NRI, subsequently during the currency of the maturity period prescribed under the scheme, he may continue to subscribe till its maturity on a non-repatriation basis. Further, there is no liability or formality with regard to the Income-tax in this respect.

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