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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS

B U S I N E S S

Y.V. Reddy RBI hints at tightening monetary policy
Mumbai, September 8
The Reserve Bank has said the lower inflation rates and impressive GDP growth, achieved in past four years, may not deter it from its tight monetary policy stand.

TRAI to regulate unwanted calls in
three steps

New Delhi, September 8
Telecom regulator, TRAI, today announced three-phased manner for the implementation of the National Do Not Call Registry, which would curb the unwanted telemarketing calls, after 45 days of registration with the telecom service provider.

CII in pact with Mexican business council
New Delhi, September 8
Ahead of the visit of Mexican President Felipe Calderon Hinojosa here, the CII has signed a pact with the Mexican business council for foreign trade, investment & technology today to increase bilateral trade and investment ties.

Deora rules out hike in fuel prices
New Delhi, September 8
The government today dismissed media reports on any immediate hike in fuel prices and said the news is based on pure speculation.




EARLIER STORIES

 
An assistant from Shenzhen Jieyong (Starking) Clocks and Watches in Shenzhen prepares a wrist watch display at the world's largest watch and clock fair at the Convention and Exhibition Centre in Hong Kong on Saturday.
An assistant from Shenzhen Jieyong (Starking) Clocks and Watches in Shenzhen prepares a wrist watch display at the world's largest watch and clock fair at the Convention and Exhibition Centre in Hong Kong on Saturday. The fair showcased more than 110 prestigious brands and designer collections from more than 15 countries and regions. — AFP photo

Aviation Notes
Delhi, Mumbai airports’ revamp on track
by K.R. Wadhwaney
The ‘birth pangs’ are reducing at a rattling speed. The work on two over-busy international airports at Delhi and Mumbai is progressing more than satisfactorily.

Investor Guidance
Residents can set off
short-term gains

by A.N. Shanbhag
Q: I have a question related to tax. If I am a person who does not have any other source of income other than the short term capital gains (STCG) from either MFs or shares, and if this amount doesn’t exceed Rs. 1,10,000 in the case of a male and if it doesn’t exceed Rs. 1,45,000 in the case of a female, does this mean that I do not have to pay any income tax at all.

PowerGrid IPO opens on Sept 10
Chennai, September 8
PowerGrid Corp (PGCIL) has said it plans to invest Rs 55,000 crore in the next five years to expand the national grid capacity to 37,000 MW. To part finance these projects, PGCIL is coming up with its initial public offer which would open for subscription from September 10. The price band has been fixed between Rs 44-52.
— PTI

 

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RBI hints at tightening monetary policy

Mumbai, September 8
The Reserve Bank has said the lower inflation rates and impressive GDP growth, achieved in past four years, may not deter it from its tight monetary policy stand.

Addressing the Sveriges Riksbank of Sweden, RBI Governor Dr Y.V. Reddy yesterday asserted that the monetary policy would continue to be vigilant and pro-active to the global uncertainties that pose threat to the stability of the economy.

''While the stance of monetary policy would continue to reinforce the emphasis on price stability and well-anchored inflation expectations and thereby sustain the growth momentum, contextually, financial stability assumes greater importance at the current juncture'', said Dr Reddy.

Referring to key issues of price stability and asset prices, Reddy said growing importance of assets and asset prices in a globally integrated economy has complicated the conduct of the monetary policy, which is focused on price stability issues.

The regulator's comments on monetary policy is believed to be an indicator of the ensuing policy actions, which may even include a further hike in cash reserve ratio (CRR).

RBI, in its annual report, had highlighted higher food prices as a provocative factor in pushing up the consumer price inflation.

''The domestic outlook continues to be favourable and would dominate the dynamic setting of the monetary policy in the period ahead. It is important to design monetary policy such that it promotes growth by contributing to the maintenance of financial and price stability'', Dr Reddy said.

These apart, capital inflows, which have significantly grown to 5 per cent of GDP in past fiscal from an average 2 per cent in 2000-03 period, above the current account deficit, also remained as a matter of concern for RBI. — UNI

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TRAI to regulate unwanted calls in three steps
Tribune News Service

New Delhi, September 8
Telecom regulator, TRAI, today announced three-phased manner for the implementation of the National Do Not Call Registry, which would curb the unwanted telemarketing calls, after 45 days of registration with the telecom service provider.

The TRAI had issued “Telecom Unsolicited Commercial Communications Regulations, 2007”, in June for putting in place a mechanism for curbing the unwanted telemarketing calls. The Regulation prescribed a three months time frame to establish a National Do Not Call Registry (NDNC).

It was envisaged that the NDNC registry would be implemented in three phases — online registration of the telemarketer; registration of telephone users not wanting commercial calls/unwanted calls with their respective telecom service providers so that unsolicited calls are stopped after 45 days of their registration with telecom service providers; and telemarketers to first check their subscriber calling list with the National Do Not Call Registry, so that such registered numbers are not sent the unsolicited commercial communication.

In the first phase of implementation, the National Informatic Centre has designed an online registration module for telemarketers.

As of now, about 14,750 telemarketers having around 4,50,000 telephone lines have already applied with various telecom service providers for getting themselves registered with the Department of Telecom.

The telecom service providers are in the process to verify these telemarketers.

In the second phase, the registration of subscribers for NDNC would commence. The registration is being done through their respective service providers, TRAI said in a statement.

"Once a telephone number is registered, it will take about 45 days for this mechanism to come into effect," TRAI said, adding, in the third phase, NIC has prepared a scrubbing module and the authority is in a process of validating it.

Once the module is functional, the authority will ask all telemarketers to get their calling list scrubbed through this module and telemarketers would be able to call only those numbers which are cleared by NDNC registry, it added.

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CII in pact with Mexican business council
Tribune News Service

New Delhi, September 8
Ahead of the visit of Mexican President Felipe Calderon Hinojosa here, the CII has signed a pact with the Mexican business council for foreign trade, investment & technology today to increase bilateral trade and investment ties.

The agreement signed by Luis Wertman, chairman, Mexico-India business community, and Supriya Banerji, deputy director general on behalf of CII, aims to increase mutual trade, technical and industrial cooperation between the Mexican and Indian industry.

It also aims to promote cultural growth between India and Mexico and provide information and support to businesses on both sides in investment and trade opportunities so as to facilitate access to each other markets. With signing of this MoU, the CII reiterates its commitment to promote Indian Industry in Latin American region.

India's exports to Mexico in 2005-06 were worth $432.85 million, while imports from Mexico were to the tune of $96.18 million.

In May, the two countries had signed a bilateral investment promotion and protection agreement to boost investment flow between the two countries.

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Deora rules out hike in fuel prices

New Delhi, September 8
The government today dismissed media reports on any immediate hike in fuel prices and said the news is based on pure speculation.

Reacting to news reports that the oil ministry is going in for an increase in retail prices of petrol, diesel, kerosene and domestic LPG, petroleum and natural gas minister Murli Deora told UNI that consumers' interest tops the government agenda.

Deora's reaction puts an end to speculations over any immediate price hike, a long pending demand of oil marketing companies.

He said the media report was quoted out of context from a Parliament question which he answered on Thursday in the Lok Sabha, stating that the state-owned oil marketing companies had sought an increase in petrol, diesel, kerosene and LPG. — UNI

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Aviation Notes
Delhi, Mumbai airports’ revamp on track
by K.R. Wadhwaney

The ‘birth pangs’ are reducing at a rattling speed. The work on two over-busy international airports at Delhi and Mumbai is progressing more than satisfactorily.

The private operators, entrusted with the arduous responsibility of translating age-old obsolete structures into modern terminals, are handling the twin-projects professionally.

Judging from the work completed in 15 months (since May 2006), the two airports, in another 10 months, would present impressive looks, to the satisfaction of passengers, visitors and all other users.

The aviation analysts say that bottlenecks and other visible mess on city-side of airports are ‘purely temporary’.

Worldwide, these problems arise when airports are restructured, redesigned, remodelled and renovated.

All authorities, technical and non-technical, are unanimous in saying that it is easier to raise new airport at vacant land than redo the existing infrastructure.

The man-made congestion at Delhi’s domestic departures will considerably reduce as, at the behest of the aviation ministry, some operations are being shifted from I-B to I-A. Currently, eight airlines operate from I-B, while only two (Indian and Kingfisher) handle departures from I-A.

Since the construction is going on at priority basis on the domestic side, the departures should be equally split in building, that is, five from I-A and five from I-B.

As the Prime Minister’s Office (PMO) and civil aviation ministry are closely monitoring the work of two private consortiums, the analysts feel that deadlines in achieving the projects will be achieved.

The entry by Tatas will provide further fillip to the civil aviation. JRD was the pioneer; now Tatas are raising a second greenfield airport on the outskirts of Jamshedpur.

Soon, Tatas will send a detailed proposal along with feasibility data to the
Jharkhand government.

The Tatas are of the opinion that eventually the airport would be expanded to handle even wide-bodied aircraft. The initial budget for the project will be about Rs 1,000 crore.

The existing airport is solely operated by Tatas. But the new airport will have consortium of companies, including Tatas.

Maybe, the Airports Authority of India will also be a part of consortium.

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Investor Guidance
Residents can set off short-term gains
by A.N. Shanbhag

Q: I have a question related to tax. If I am a person who does not have any other source of income other than the short term capital gains (STCG) from either MFs or shares, and if this amount doesn’t exceed Rs. 1,10,000 in the case of a male and if it doesn’t exceed Rs. 1,45,000 in the case of a female, does this mean that I do not have to pay any income tax at all.

Alternatively if the gain exceeds the above mentioned amount even by a rupee, then my understanding is that he/she would have to pay tax at the rate of 10 per cent flat. Let me know if my understanding is correct in this regard.
— Charudatta

A: For a resident, the entire basic exemption is available for setting off the short-term gain. In other words, in the case of a non-senior lady, say the STCG is Rs 1,60,000, she will have to pay tax @10 per cent on Rs 15,000 only. However, regardless of the amount of STCG (lower or higher than the basic exemption), this facility is not available to NRIs.

IT return

Q: I have changed my employer midway in the financial year 2006-07 with change of state from Haryana to Punjab.I was filing my return at Yamunanagar earlier.

Now where I will have to file my return. However, I have submitted the same at Barnala office of Income Tax Department.
— S V Sharma

A: You can get your file transferred to your new place of work by writing to the IT department at both the places.

Transfer of MF scheme

Q: I have questions related to mutual fund investments.

(a) If I invest say Rs 25,000 in one of the debt schemes and request for STP (systematic transfer plan) on a monthly basis for Rs 2,000 to one of the equity schemes starting from next month, whether any tax will be deducted while transferring money from debt to equity?

(b) Which one you would suggest for an investor having NIL tax liability - i.e. whether STP from liquid fund or debt fund will give me better return (though I am aware that the returns from these funds might vary based on market vagaries). I understand that for liquid fund one will deduct about 25 per cent tax at source while for debt it will be around 13 per cent.
—Rageshwari

A: The STP is considered to be a transfer and every time, the provisions of capital gains, short-term or long-term as the case may be, will apply. For Residents, there will be no tax deduction at source

The rates of tax mentioned by you are with respect to dividend distribution tax and not for TDS on STP. Unless you invest in the dividend option of the liquid or debt fund, dividend distribution tax will not be applicable to you.

De-listed shares

Q: I have a query on tax liability on selling of de-listed shares. Recently I have sold Syngenta India Ltd. These shares got delisted from exchange 2 months back and the company has given a buy back offer of this share @ Rs. 730/- per share and I have accepted the offer and transferred the shares in there DP account from my DP account and sent them the required acceptance forms.

I think I have not paid any security transaction tax (STT) on this transfer as it was off market transaction. Will I get exemption from paying tax on this sale as the cost of these shares are very low for me and I have got these shares approx. 3 years back.
—Mendha

A: Yes, you are right. There is no STT applied and therefore, the long-term capital gains would be charged to tax @10% without indexation or @ 20% with indexation, whichever is lower.

Upfront charges

Q: Could you please let me know what is the meaning of “upfront charges”, that are generally associated with ULIPs.
— Mirajdar

A: The upfront charges constitute mainly agent commission, policy administration charges, mortality premiums etc. For a typical ULIP, these range from 15 per cent to as high as 75 per cent. This means that from your net premium invested/paid, only 85 per cent to 25 per cent ends up getting invested!! Needless to add, a major chunk of the charges (also known as premium allocation charges) end up as commission in the agents pocket.

Though these charges taper off as the years pass, as a chunk is taken away upfront, the break even period for ULIPs as compared to MFs is in the region of 5 to 7 years if not more. It is only after that period that you really start earning money.....and that too depends upon the market conditions. Lastly, if the performance of the ULIP is not up to the mark, again on account of the high upfront, you are trapped as a sale would involve a loss.

Therefore the key question to ask is how much of my premium gets invested in each of the first three years and then insist on documentary proof of the same. Inquire and ascertain similarly how much is the agent commission, as it directly goes out of your pocket. In fact the best thing to do is to buy term insurance (the cheapest form of insurance) separately and invest the remaining proceeds in a diversified equity MF.

Investment in ULIPs

Q: How would you compare ULIPs with FMPs. Which do you think scores better for a long-term investment, considering the tax benefits as well?
—Madhav

A: ULIPs and FMPs are essentially two different asset classes. FMPs offer a fixed rate of return, whereas the return on ULIPs is not fixed, it varies with the market. Generally as a rule, I would suggest not to opt for an ULIP as the upfront charges of any ULIP are typically high (range of 15 per cent to as much as 75 per cent). For tax benefits, choose a combination of PPF and ELSS mutual fund. And lastly remember, beyond a point tax saving simply not possible. Instead try and maximise/optimise your post tax income.

The authors may be contacted at wonderlandconsultants@yahoo.com

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BRIEFLY

Dollar hits 15-yr low
New York, September 8
The dollar slid to a 15-year low against major currencies on Friday as data showed US payrolls fell last month for the first time in four years, raising recession fears and pressure for the Federal Reserve to cut interest rates. Traders dumped the dollar after the government said the US economy shed 4,000 net jobs last month, the first contraction in employment since August 2003. It also revised downward estimated job gains for June and July. — Reuters

BPL Mobile
New Delhi, September 8
After its proposed sale to Hutch Essar for the Mumbai circle was called off, BPL Mobile Communications has submitted an application with the government seeking licences to operate across India. The company presently offers GSM services in Mumbai and has 1.1 million subscribers. — PTI

Gold surges
New Delhi, September 8
Gold prices surged to seven months high level in the bullion market today on increased stockists buying ahead of festivals amid firming global trend and closed higher by Rs 90 at Rs 9,390 per 10 gram. Trading sentiment remained bullish on reports that the precious metal in the US markets continued to rise to record levels on weakening dollar and rising crude oil. — PTI

Park Avenue
Mumbai, September 8
Park Avenue today announced the launch of Park Avenue Women, a complete range of business wear for women. The first Park Avenue Women line was unveiled by Raymond CMD Gautham Hari Singhania at the Park Avenue flagship store at Khar in north-west Mumbai.— UNI

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