SPECIAL COVERAGE
CHANDIGARH

LUDHIANA

DELHI



THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS

B U S I N E S S

RBI allows $1,00,000 deposits offshore
Move aimed to rein in excess foreign capital
Mumbai, August 12
As part of efforts to flush out excess foreign capital, the Reserve Bank of India (RBI) has allowed resident Indians to open accounts in banks outside the country and transfer up to $1,00,000 (about Rs 41 lakh) a year without its approval.

IT Dept squeezes foreign companies
Extracts Rs 10,000-crore more
New Delhi, August 12
The Income Tax Department has issued notices to foreign companies to pay about Rs 10,000 crore as additional tax after collecting information from other sources and scrutinising their returns.

Plastic money set to pinch more
Mumbai, August 12
Credit cards will now pinch your pockets more as leading banks have hiked the rate of interest charged on card dues by 1-3 per cent per month. Credit card companies usually have a bill cycle of 30-45 days, beyond which they charge monthly interest rate.


A vendor sells badges ahead of Pakistan’s Independence Day celebrations in Karachi on Sunday.
A vendor sells badges ahead of Pakistan’s Independence Day celebrations in Karachi on Sunday. India Inc is steadily making inroads into Pakistan with as many as 424 Indian companies, manufacturing consumer goods, registering their products with Trademark Registry of the Intellectual Property Organisation in this country. Forty-five Indian products were registered with the Trademark in 2003, 92 in 2006 and about 43 in the first six months of 2007. — Reuters







EARLIER STORIES

 

Market Update
Wait till subprime cloud clears
Global markets dictated trend on the Indian bourses last week. Global bourses witnessed alternate bouts of buying and selling caused by risk aversion or risk appetite that, in turn, was driven by how concerned the market was about the US subprime mortgage woes. As more and more institutions across the US got dragged into the subprime quagmire, the Indian markets continued to get affected by weak sentiments.

Tax Advice
No tax relief on notice period amount
Q. I have resigned from my present job from a private sector bank. According to terms and conditions of service, I am required to pay a sum of Rs 88,000 approx. in lieu of requisite notice pay recovery.

Videos
Rs 1 lakh car might get delayed.
(56k)
ONGC-Mittal wins gas block in Trinidad and Tobago.
(56k)





Top



 

 

 

RBI allows $1,00,000 deposits offshore
Move aimed to rein in excess foreign capital

Mumbai, August 12
As part of efforts to flush out excess foreign capital, the Reserve Bank of India (RBI) has allowed resident Indians to open accounts in banks outside the country and transfer up to $1,00,000 (about Rs 41 lakh) a year without its approval.

The residents can now open, maintain and hold foreign currency accounts with banks outside India, the RBI said, while clarifying the provisions of the Liberalised Remittance Scheme (LRS).

The RBI clarification comes on the heels of the union government tightening External Commercial Borrowings (ECBs) to restrict inflow of foreign capital to prevent appreciation of the Indian currency.

The RBI and the Centre have been encouraging people and corporates to invest overseas to tide over problems created by excessive inflow of foreign capital.

The RBI said under LRS, resident individuals can remit up to $1,00,000 in a financial year to acquire and hold immovable property, make investment in financial instruments or purchase any other asset without any prior approval.

Resident individuals, it clarified, could utilise the amount deposited in foreign bank accounts to invest in mutual funds, venture funds, unrated debt securities and promissory notes under the scheme.

Under the LRS, which was announced in 2004 to simplify and liberalise foreign exchange facility available to resident individuals, an individual will have to quote his or her Permanent Account Number (PAN).

The RBI further said the scheme will cover small remittances in the form of gifts and donations up to $5,000 (about Rs 2.1 lakh), implying there will be no separate limit for gifts and donations.

Individuals can also take benefit of the scheme to acquire stocks under the employee stock option plan of foreign companies, provided they are not linked to either ADRs or GDRs.

The scheme can also be used by non-residents to repay loans taken abroad on return to India, the central bank said.

It will also permit reinvestment of the income earned on investments made under the scheme, provided the total amount does not exceed the limit of $1,00,000.

The scheme, however, cannot be used to pay for margins and margin calls to overseas stock exchanges, it clarified.

The central bank also said individuals will not be allowed to invest money, directly or indirectly, in countries like Bhutan, Nepal, Mauritius and Pakistan through the scheme. It also clarified that individuals will not be permitted to buy lottery or sweepstakes tickets or proscribed magazines and items restricted under Schedule II of the Foreign Exchange Management (Current Account Transactions) Rules, 2000. — PTI

Top

 

IT Dept squeezes foreign companies
Extracts Rs 10,000-crore more

New Delhi, August 12
The Income Tax Department has issued notices to foreign companies to pay about Rs 10,000 crore as additional tax after collecting information from other sources and scrutinising their returns.

"The IT Department has raised demand for additional tax amounting to Rs 54,823 crore from corporates and individuals, including Rs 9,890 crore from foreign companies till March 31,” a finance ministry official said.

He added that foreign companies have been asked to pay Rs 9,400 crore additional corporate tax and Rs 496 crore as income tax.

Foreign companies have to pay 40 per cent corporate tax, 2.5 per cent surcharge and 3 per cent educational cess.

In fact, the Central Board of Direct Taxes (CBDT) has asked chief income tax commissioners to ensure that foreign companies are taxed properly, especially after the Supreme Court’s decision in the Morgan Stanley case on captive BPOs in which it had held that the IT Department cannot tax a part of the global income of a foreign company by attributing it to its India-based BPO.

According to the CBDT’s action plan for 2007-08, “another area of concern is liaison officers, maintained by foreign companies in India. Some of them are carrying out business in India.” The action plan approved by the finance ministry is aimed at collecting Rs 2,67,490 crore in direct taxes.

Sources said the finance ministry has expressed concern over the number of foreign companies indulged in tax avoidance by passing profits of their Indian subsidiaries to the parent companies through under-voicing of products and services to the group companies.

They pointed out many of these companies were misusing tax exemptions under double taxation avoidance treaties with various countries and claiming that they have only liaison offices in India, who are found to be doing businesses. — PTI

Top

 

Plastic money set to pinch more

Mumbai, August 12
Credit cards will now pinch your pockets more as leading banks have hiked the rate of interest charged on card dues by 1-3 per cent per month. Credit card companies usually have a bill cycle of 30-45 days, beyond which they charge monthly interest rate.

Market leaders like ICICI Bank, SBI Cards and ABN Amro have already hiked rates on review of their cost of funds or a routine need to align with the industry.

By far, ICICI is the market leader in the credit card business with over 80 lakh credit cards against the total market size of 2.3 crore.

Giving rationale of the hike, ICICI Bank Credit Card business head Sachin Khandelwal said the rates on credit cards had not been revised for almost three years.

HDFC is charging in the range of 2.75-2.95 per cent per month for different category of customers. Foreign banking major and a leading credit card issuer ABN Amro had revised the rates about three months back, but it was not across the board.

SBI Cards, a joint venture between the State Bank of India and GE Money, too has increased the interest rates from 2.99 per cent to 3.1 per cent based on spending pattern. — PTI

Top

 

Market Update
Wait till subprime cloud clears
by Lalit Batra

Global markets dictated trend on the Indian bourses last week. Global bourses witnessed alternate bouts of buying and selling caused by risk aversion or risk appetite that, in turn, was driven by how concerned the market was about the US subprime mortgage woes. As more and more institutions across the US got dragged into the subprime quagmire, the Indian markets continued to get affected by weak sentiments.

The BSE Sensex lost 270 points over the last week to close at 14,868. Nifty lost close to 1.5 per cent to close the last week at 4,333. While large cap and mid-cap indices were in the red, small-cap indices ended the last week in green with the BSE small-cap index gaining 12 points to close at 7,904.

While we remain positive on the long-term outlook of the Indian markets, yet short-term seems to be clouded by the subprime woes. Therefore, in the short run, the investor may stay on the fence till a clearer picture of how deep the subprime problem is known. Meanwhile, the volatility will continue to rule the roost.

Technical charts also indicate that short term may turn bearish if the Sensex dips below 14,500.

GSK Consumer Healthcare

GSK Consumer is a dominant player in the malted beverage market. The company’s product portfolio includes brands like Horlicks, Boost and Maltova. Its white beverage brand ‘Horlicks’ laid the foundation for broadening of the malted beverage market in India.

Horlicks is a highly respected brand, having presence in India since 1930. Its subcategories like Junior Horlicks & Mother Horlicks also enjoy good brand equity.

GSK Consumer earns around 4-5 per cent marketing fees by distributing brands like Eno, Aquafresh, Crocin and Iodex for the parent company. Globally, the parent company has several health supplements and products, especially in nutritional healthcare and vitamins space, which hold relevance for the Indian market. The management had already given indication of bringing some products in India from its global basket. The company is also looking at acquisitions in the health drink space to further increase its products.

India is the world’s second largest producer of food next to China, and has the potential of being the biggest. The total food production in India is likely to double in the next 10 years and there is an opportunity for large investments in food and food processing technologies especially in areas of canning, dairy and food processing. We believe the Indian food processing industry is a sleeping giant. The government’s initiative to improve infrastructure across the nation, growing health consciousness, rising literacy rate and rising per capita income would give a fillip to the food processing industry, especially the health food segment.

On account of limited working capital and capex needs, the company has been able to generate a sizeable amount of free cash flows, which it has put to good use in the past by giving out dividends and buying back shares.

Taking into account, the strong brand recall for the company’s products, huge growth potential and investor-friendly policies, the investor may buy the stock at the current levels (Rs 599) with a three-year perspective.

Top

 

Tax Advice
No tax relief on notice period amount
by S.C. Vasudeva

Q. I have resigned from my present job from a private sector bank. According to terms and conditions of service, I am required to pay a sum of Rs 88,000 approx. in lieu of requisite notice pay recovery.

Kindly advise, if I am entitled to claim this deduction from my salary income in my relevant IT return and if not, under what provision of the IT Law?

Further, my new employer whom I will join soon has undertaken to reimburse aforesaid amount i.e. Rs 88,000, approx. on account of shortfall in notice period, would this reimbursement, form part of my salary income?

Also, the amount paid to my present employer by me, is not treated as deductible from my salary from new employee?

Can the same be set off against the reimbursement by new employee in my relevant IT return?

— Rachna Maini

A. 1. The amount payable by you as notice pay recovery is not deductible against salary income under any of the provisions of the Income-tax Act, 1961 (the Act).

2. The amount paid by a new employer towards the reimbursement of Rs 88,000 approx. on account of shortfall in notice period would be a perquisite and taxable as part of your salary income.

Rent to spouse

Q. I am an employee of the Punjab State Electricity Board. My gross salary for the financial year 2006-07 was Rs 2,59,830, including 26,017 HRA. My wife is also a Punjab Government employee and has built a house by taking a loan from the bank. I am paying house rent @ Rs 4,100 per month to my wife and she is taking the income from house property in her gross income.

I submitted the IT statement to my DDO by taking the benefit of house rent allowance of Rs.26,017 but the DDO is not allowing the benefit of HRA as the same is being paid to my wife. Kindly advise whether I can avail the benefit of HRA being paid to my wife or not.

— Rajesh Kumar, Patiala

A. In accordance with the provisions of Section 10(13A) of the Income-tax Act, 1961 (the Act), the exemption is not allowable in case the residential accommodation occupied by the assessee is owned by him or the assessee has not actually incurred expenditure on payment of rent in respect of the residential accommodation occupied by him. In your case, one of the conditions is not applicable as you do not own the house. You have also stated that you are paying rent to your wife. The problem in your case would be to satisfy the tax authorities that the house has been let out by wife to a husband and payment of rent is being actually made to her by you.

The DDO will have to be, therefore, convinced that legally you are not the owner of the house and that the house has been let out to you by your wife and the rent has actually been paid to her by you. The following clarification has been issued by the Board vide Circular No. 11/2006 for deduction of tax from salaries:

“Under Section 10(13A) of the Income-tax Act, 1961, any special allowance specifically granted to an assessee by his employer to meet expenditure incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee is exempt from IT to the extent as may be prescribed, having regard to the area or place in which such accommodation is situated and other relevant considerations. According to rule 2A of the Income-tax Rules, 1962, the quantum of exemption allowable on account of grant of special allowance to meet expenditure on payment of rent shall be:

(a) The actual amount of such allowance received by an employer in respect of the relevant period; or

(b) The actual expenditure incurred in payment of rent in excess of 1/10 of the salary due for the relevant period; or

(c) Where such accommodation is situated in Bombay, Kolkata, Delhi or Chennai, 50 per cent of the salary due to the employee for the relevant period; or

(d) Where such accommodation is situated in any other place, 40 per cent of the salary due to the employee for the relevant period, whichever is the least.

For this purpose, “salary” includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites. It has to be noted that only the expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee subject to the limits laid down in Rule 2A, qualifies for exemption from income-tax.

Thus, house rent allowance granted to an employee who is residing in a house/flat owned by him is not exempt from income tax. The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of rent before excluding the HRA or any portion thereof from the total income of the employee.”

Gift by grandparents

Q. I am 23 years old ‘student’ and shall be joining my permanent job in June 2007. During my student life I had been doing tuition job and earning Rs 35,000 to 40,000 per year.

A. My father opened a demat account in January 2003, in my name, with the ICICI Bank, with Rs. 6,100. The following transactions have been made in the said account till March 31, 2007:

1. Financial year 2002-2003

(i) My maternal grandfather (Nana) gave me gift of Rs 20,000 by way of two cheques of Rs. 10,000 each in January and February 2003.

(ii) I invested the above money in shares along with my own savings/ earnings amounting to Rs. 18,000 approx.

(iii) My shares transactions resulted in to “Short Term Capital Profit” of Rs 1,500as on March 31, 2003.

2. Financial Year 2003-2004

(i) My maternal grandfather (nana) further gave me gift of Rs.18,000 by way of a cheque on April 16, 2003.

(ii) I invested the above money in shares along with my own savings/earnings amounting to Rs 25,000 approx.

(iii) My shares transactions resulted in “short term capital gain” of Rs 500 as on March 31, 2004.

3. Financial Year 2004-2005

(i) My share transactions resulted in to “short term capital gain” of Rs 5,500 and “long term capital gain” of Rs. 56,000 as on March 31, 2005.

(ii) All transactions were through authorised broker and STT paid, Hence, no tax paid by me. No Return Filed.

4. Financial Year 2005-2006

(i) My share transactions resulted in to “short term capital loss” of Rs 3,500 as on March 31, 2006.

5. Financial Year 2006-2007

(i) My share transaction resulted in “short term capital gain” of Rs 35,200 as on March 31, 2007.

In July 2006 I have obtained PAN. Till date I have not filed any IT return. My total shares holding as on date is approx. 1.90 lakh.

Is there any tax liability during any of the above years, on me or my grandfather? Is it mandatory to file tax return this year, in view of ‘STCG’ ? How much money, per year, my father or grandfather can gift me, without any tax liability, on any one’s part?

— Kunal Gandhi, Hardwar

A. 1. The income of the above years being below the taxable limit there is no tax liability on the income from tuition fee received by you as also from the capital gain on the sale of shares. There is no tax liability for the monies gifted by your grandfather as no gift tax is applicable presently in the country.

2. The income-tax return is to be filed in case the income of any person exceeds the maximum amount on which tax is not liable to be paid in accordance with the provisions of Finance Act applicable for the relevant assessment year.

3. There is no monetary limit up to which your father or grandfather can make a gift. As stated above no gift tax is leviable in case of gift received from your grandfather or from your father. 

Top

 
BRIEFLY

Stock sale
Chandigarh, August 12
The state government today notified the sale of Punjab Government Stock (securities) of 10-year tenure for an aggregate amount of Rs 500 crore (nominal). The sale will be subject to the terms and conditions spelt out in the notification, an official spokesman said. The auction will be conducted by the RBI at its Mumbai office on August 16. The application form, along with the bids, should be submitted to the aforesaid office on August 16. — PTI

ONGC-Mittal
New Delhi, August 12
Steel tycoon L N Mittal’s joint venture with state-run ONGC Videsh Ltd has bagged a gas exploration block in Trinidad and Tobago, estimated to have reserves of two trillion cubic feet. ONGC-Mittal Energy Ltd won the offshore block, NCMA-2, beating Britain’s Centrica Plc in Trinidad and Tobago’s latest bidding round, industry sources informed. — PTI

TCL unit
New Delhi, August 12
China’s TCL plans to set up a colour TV and DVD player manufacturing unit in north India by 2010 for making India its global sourcing hub and supply to players like Sony and Philips. “The company has grown at a rate of about 20 per cent as compared to last year and we will set up a manufacturing plant here to provide cost benefit and increase our market share,” TCL (India) vice-president Rajesh Rathi said. — PTI

Nepal aviation
Kathmandu, August 12
At least three new international airlines are entering Nepal’s aviation sector to take benefit of the booming tourism industry in the nation, which has showed signs of revival after the decade-long Maoist insurgency came to an end. Oriental Thai Airlines, Etihad Airlines of the UAE and Silk Air, a subsidiary of Singapore Airlines, are entering into the business within a few months, officials said. — PTI

Top

 



HOME PAGE | Punjab | Haryana | Jammu & Kashmir | Himachal Pradesh | Regional Briefs | Nation | Opinions |
| Business | Sports | World | Mailbag | Chandigarh | Ludhiana | Delhi |
| Calendar | Weather | Archive | Subscribe | Suggestion | E-mail |