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THE TRIBUNE SPECIALS
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TERCENTENARY CELEBRATIONS

B U S I N E S S

More relief for Re-hit exporters
Govt notifies tax refund on three more services
New Delhi, October 6
Fearing that hardening of rupee would further decelerate exports from employment generating sectors, the government today notified refund of tax paid by exporters on three additional services of general insurance, technical testing and analysis, and inspection and certification.

National Investment Fund launched
New Delhi, October 6
The government today launched a National Investment Fund (NIF), made up of money from sale of equity in state-run companies, to finance social sector schemes and revive sick central public sector units.

ONGC to invest $1 billion
Mumbai, October 6
Along with its two partners —Reliance Industries and British Gas, state-owned ONGC plans to spend an additional $1 billion on the Panna-Mukta-Tapti (PMT) fields, off the Indian west coast, over the next few years to increase gas and oil output.

Comprehensive FDI policy soon: Nath
New Delhi, October 6
Pointing that there was a need to streamline the existing FDI policy to attract foreign investment along with technology and best practices, union commerce minister Kamal Nath said he would present before the union cabinet for approval a comprehensive FDI policy within 10 days.

Axis Bank cuts floating home loan rates
Mumbai, October 6
Private sector lender Axis Bank has reduced floating interest rates of home loans by 0.50 per cent for existing and future customers, a senior bank official said today.

Aviation Notes
Need to lift ‘night curfew’ rule on Indian airports
Airbus Industrie and Boeing are selling as many aircraft to Asian countries as to Europe and the USA. Asians, in general, and Indians in particular, require as much sound sleep as Europeans and Americans. Noise pollution is as much disturbing to Asians as to 'Whites'. Japanese, Chinese, Thais and Indians are now travelling as much as Westerners.

Investor Guidance
No tax on foreign income under RNOR status
Q: I want to return permanently to India after completion of many years of living in the USA. Can you please let me know if there is any best time for returning, in relation to tax and other related matters, and the reasons behind it?


A Sotheby's employee poses next to the "Hanging Heart" by US artist Jeff Koons, which is on view for the first time in the US prior to being auctioned in New York.
A Sotheby's employee poses next to the "Hanging Heart" by US artist Jeff Koons, which is on view for the first time in the US prior to being auctioned in New York. The Hanging Heart, part of Koons' Celebration series, weighs 3,500 pounds (1,590kg), is almost nine feet (3m) tall and took 10 years to make from conception to completion. The sculpure will be put on sales by Sotheby's in an auction on November 14 and is expected to fetch a price of $15 to 20 million. — AFP

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More relief for Re-hit exporters
Govt notifies tax refund on three more services
S. Satyanarayanan
Tribune News Service

New Delhi, October 6
Fearing that hardening of rupee would further decelerate exports from employment generating sectors, the government today notified refund of tax paid by exporters on three additional services of general insurance, technical testing and analysis, and inspection and certification.

In a move to provide some more cushion to the exporters hit by the appreciating rupee, which has appreciated to a record high of 39.36 to a dollar, the government also decided to allow interest to be paid on Exchange Earners Foreign Currency (EEFC) on outstanding balances to the extent of $1 million per exporter.

The government also expanded the coverage of sectors for the special interest rate on pre-shipment and post-shipment credit to include textiles (including handlooms, jute and carpets), readymade garments, leather products, handicrafts, engineering products, processed agriculture products (including processed cashew, coffee and tea), marine products, sports goods, toys, solvent extracted de-oiled cake, plastics and linoleum and all exporters from the SME sector.

The period, for which the reduction in the interest rate is applicable, is now been extended from December 31, 2007 to March 31, 2008. In July, the government had announced reduction of maximum interest rate for pre-shipment and post-shipment credit to BPLR minus 4.5 per cent in respect of the outstanding amount for the period April 1, 2007 to December 31, 2007. It had also agreed to provide the requisite interest subvention of 2 per cent points to scheduled commercial banks.

A notification issued by the finance minister extended refund of service tax paid by exporters on additional three taxable services, which are not in the nature of ‘input services’, but could be linked to export of goods.

The government had last month announced exempting services rendered by ports, road transport and railways from the purview of tax.

Welcoming the notification, commerce minister Kamal Nath said this would partially provide relief to exporters, whose margins have been hit by the rising rupee.

In this context, he informed that the Prime Minister Manmohan Singh has asked Economic Advisory Council chairperson and former RBI Governor C Rangarajan to spell out further measures which may be required to spur up the export sector and also the industrial activities in the country.

While asserting that there is still space for additional measures for the exporters hit by the hardening of rupee, the minister pointed out that there can’t be generalisation of the impact of rupee on the exports as a whole.

Asked whether the government would revise the export target of $160 billion set for FY 2007-08, Nath said, “I don’t think there is a need for revising the target. We are still hopeful of meeting the target.”

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National Investment Fund launched

New Delhi, October 6
The government today launched a National Investment Fund (NIF), made up of money from sale of equity in state-run companies, to finance social sector schemes and revive sick central public sector units.

The fund, with an initial corpus of Rs 994.82 crore generated from PowerGrid Corporation's IPO, would be managed by UTI Asset Management Company and asset management arms of the State Bank of India and the Life Insurance Corporation.

Launching NIF, finance minister P Chidambaram handed over a cheque for the sum of Rs 994.82 crore to the three AMCs.

While UTI AMC and SBI Funds Management were given Rs 368.91 crore each to manage, LIC Mutual Fund was handed over the remaining Rs 257 crore.

NIF will be operated by these fund managers under discretionary mode of the Portfolio Management Scheme, which is governed by SEBI guidelines.

The three largest public sector fund managers have been appointed to manage NIF for two years, extendable on the basis of their performance subsequently.

As much as 75 per cent of the annual income of the fund will be used to finance select social sector schemes which promote education, health and employment. The residual 25 per cent of the annual income will be used to meet the capital investment requirements of profitable and revivable CPSEs.

A part time Advisory Board has been constituted to advise the CEO, NIF on various aspects of functioning of the fund like investment strategy, allocation of funds to the selected fund managers, negotiation of management fee and charges to be paid to the fund managers. — PTI

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ONGC to invest $1 billion

Mumbai, October 6
Along with its two partners —Reliance Industries and British Gas, state-owned ONGC plans to spend an additional $1 billion on the Panna-Mukta-Tapti (PMT) fields, off the Indian west coast, over the next few years to increase gas and oil output.

"The JV partners plan to further invest about $1 billion in the PMT fields over the next few years and are working with the Government of India to progress expansion projects that may further increase the current production rate by about 60 per cent by 2009," union petroleum minister Murli Deora said here after inaugurating the Tapti Compression and Processing Platform (TCPP).

ONGC has 40 per cent stake in the unincorporated joint venture while RIL and BGEPIL, a subsidiary of BG Group Plc, have 30 per cent interest each in the venture.

Deora said the JV partners have already invested $800 million in the PMT fields over the last five years. The fields currently produce around 8 per cent of India's oil and gas production, he said. Gas output from the PMT fields has gone up to 17 mmscmd, he said. — PTI

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Comprehensive FDI policy soon: Nath
Tribune News Service

New Delhi, October 6
Pointing that there was a need to streamline the existing FDI policy to attract foreign investment along with technology and best practices, union commerce minister Kamal Nath said he would present before the union cabinet for approval a comprehensive FDI policy within 10 days.

“The objective of the new comprehensive FDI policy would be to ensure more economic and business activity and employment generation,” Nath said. He categorically said that the policy would not include FDI in multi-brand retail, as the report from the committee set up on the issue is yet to submit its report.

Asked to comment on attacks on some of the retail chains in some parts of the country, the minister said “retail has had a very contentious beginning in many countries, including Thailand, Indonesia. We need to have a policy to ensure that there is no dislocation of existing employment without providing alternative employment opportunity.”

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Axis Bank cuts floating home loan rates

Mumbai, October 6
Private sector lender Axis Bank has reduced floating interest rates of home loans by 0.50 per cent for existing and future customers, a senior bank official said today.

The industry practice was to acquire fresh customers by offering a lower rate on floating loans "but we want to maintain a parity between both our existing and future customers," Axis Bank's assistant vice-president Imtiaz Ahmed told PTI here.

The rate has been brought down from 11 per cent to 10.5 per cent for both categories, he said, adding that the revised rate comes into effect from October 1.

The bank (formerly UTI Bank) has, however, not effected a change in its fixed home loans rate, which remains at 13 per cent.

"We have no immediate plans to have a re-look at our fixed rate," Ahmed said, adding that nearly 95 per cent of the bank's home loan customers were opting for floating rate.

"Our decision to lower rates on our floating home loans is a strategic decision," he said. — PTI

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Aviation Notes
Need to lift ‘night curfew’ rule on Indian airports
by K.R. Wadhwaney

Airbus Industrie and Boeing are selling as many aircraft to Asian countries as to Europe and the USA. Asians, in general, and Indians in particular, require as much sound sleep as Europeans and Americans. Noise pollution is as much disturbing to Asians as to 'Whites'. Japanese, Chinese, Thais and Indians are now travelling as much as Westerners.

Keeping in mind growth of twin sectors, aviation and tourism, and all other human factors, it is time the International Civil Aviation Organisation (ICAO) showed that it was truly an international and impartial body. It should provide a level-playing field to all its affiliates instead of being needlessly selective, as it has been for decades. The ICAO must bear in mind that it cannot afford to treat Asians less equal than Europeans and Americans.

The imaginary and partial rule of 'night curfew' of flights on Indian and some other Asian airports is not only most illogical but most unfair. The ban should be lifted immediately making all 24 hours of the day available to all players, Asian carriers or Western airlines. All airlines and all human beings must be treated on par. If the ICAO hesitates in lifting this unreasonable and uncalled for ban, it will mean that it continues to be racial in its behaviour and policy.

The civil aviation secretary, Ashok Chawla, needs to be complimented for taking up this vital issue in the recently held ICAO assembly in Montreal. What he has projected should have been done at least two decades ago because Europeans and Americans cannot be allowed 'to heads they win and tails Asians lose'. In the 'open house', no door can be kept ajar for some. All players are equal.

Chawla's logical observation or demand for lifting of 'night curfew' was not appreciated by some European members. Local laws cannot supercede international concerns. The progress of aviation and tourism will be faster only when all rules are equal for all players. Restrictive attitude or behaviour will cause avoidable problems.

In the renewed discussion, as agreed by the ICAO bigwigs, the 'curfew' should be thrown away lock, stock and barrel. Technical remedies will not serve the purpose.

American (Houston-based Continental airline) is adding yet another flight between New York and Mumbai, two commercial hubs. European carriers are also trying to secure more space in India. In view of all these developments, any restrictive or confrontational behaviour will be counter-productive.

India is one of the council members of the ICAO. India is also one of the main buyers of the aircraft. China has already become an important aviation player. Its airports are as ultra-modern as they are in the US and Europe. The civil aviation and tourism are burning brightly in Asia. All these factors emphasise that there is an urgent need to have one set of rules instead of two-one for the USA and Europe and another for India and other parts of Asia.

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Investor Guidance
No tax on foreign income under RNOR status
by A.N. Shanbhag

Q: I want to return permanently to India after completion of many years of living in the USA. Can you please let me know if there is any best time for returning, in relation to tax and other related matters, and the reasons behind it?

– Michael

A: If you can, always plan to arrive into India after the 1st of October in any year. This way you can live in India for the rest of the year and yet be an NRI and not pay tax. Also, you can avail of the RNOR status for the next two years. Under RNOR status, your foreign income, if any, is not taxable in India. Also, depending upon the number of years you have stayed outside India, your income abroad could be tax-free up to three years after you become a resident.

Capital gain tax

Q: My wife and I having equity shares of an unlisted company. The share holding is as below:

– acquired 150 shares of face value of Rs 100 each on payment of Rs 15,000 in may 1981.

– got bonus share on 1:1 basis 150 shares in August, 1985.

– got bonus share on 1:1 basis 300 shares in February, 1988.

– got bonus shares on 1:1 basis 600 shares in July, 1990.

– got bonus shares on 1:1 basis 1,200 shares in February, 1992.

– got bonus shares 1:1 basis 2,400 shares in December, 1995.

– got bonus shares of 2,400 shares in 1997.

– got bonus shares of 3,600 shares in April, 1998.

Total number of equity shares held by my wife and me is 10,800 each. Holding pattern and the time of acquisition of my wife is identical to me.

Subscribed to right issue of 4,800 shares in the joint name of me and my wife on payment of Rs 4,80,000, my wife also subscribed to the right issue of 4,800 equity shares on payment of Rs 4,80,000 the date of issue of right shares is March 2003.

We will be selling the above shares to a company, which is getting majority stake in the company and this will result capital gain tax in the hand of me and my wife. My wife is income tax payer having PAN.

I own a flat in Mumbai, where presently we are residing. It is in my name and my wife is a nominee. We also have a flat in Kolkata in the joint name of my wife and me with the first name of my wife.

My main query is to ascertain the capital gain tax and the best way to minimize the tax.

I understand that it is possible to reduce capital gain tax on investment on residential apartment even though one is having a flat at time of having capital gain tax. Since my name is in the Kolkata flat as joint owner, can I avail the benefit?

If the answer is yes, can me and my wife invest in a single flat in our joint name by two separate cheque by each and whose name will be first and whose name will be next in the sales agreement and share certificate.

— Dinyar

A : The only cost you have incurred is Rs 15,000 in 1981-82 and Rs 4,80,000 in 2002-03. The indexed cost would be 15000 x (551/100) + 480000 x (551/447) = Rs 6,74,328.

The tax liability is lower of i) 20 per cent of sale price less than Rs 6,74,328 or ii) 10 per cent of sale price less than Rs 4,95,000. Surcharge, if any, and education cess would be extra.

You have more than one house in your name and therefore the exemption of Section 54F is not available to you. However, your wife can avail of this benefit.

The tax on all long-term capital gains, which are chargeable to tax, can be saved by investing within six months the amount of capital gains in infrastructure-related bonds of NHAI or REC under Section 54 EC. The lock-in period is of three years. The current interest rate is around 5.5 per cent and this is fully taxable. The ceiling on this investment is Rs 50 lakh per financial year.

Home loan deductions

Q: Currently, I am working in Chennai and claiming HRA for tax deduction. I am planning to buy a flat through home loan in Bangalore this year for my mother. I understand, since I don't live in Bangalore, I can claim both HRA and interest on housing loan as deductions from my salary for IT calculation. But, if I shift to Bangalore in near future and stay in a rental house, then in that case, can I claim both HRA and interest on housing loan as deductions. Actually, my mother is dependent on me and she will be staying in the flat in Bangalore and I have to go for the rental house. Since I am not going to earn any rental from my flat, I don't have to add any amount to my ‘income from other sources’ category while calculating the income tax.

— GhanShan

A: The HRA and home loan deductions are separate and distinct. One is not connected with another. As long as you are paying rent, then irrespective of whether you own a property or not, you will be allowed to claim the HRA deduction. Similarly, if you own a property and pay EMI thereon, then irrespective of whether you stay in the property or not, you would be allowed the deduction.

Child education allowance

Q: My company gives me child education allowance at the rate of 100 p.m. for two children. How much of the amount is taxable in for me? Note that I don’t have any children.

— Sarnobat

A: Normally the entire children allowance at the rate of Rs100 per child per month is fully exempt. However, if you don’t have children, you cannot spend it on their education and hence the full amount will be taxable in your hands.

The authors may be contacted at wonderlandconsultants@yahoo.com

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BRIEFLY

Italian FM on IMF panel
Washington, October 6
Italian minister of economy and finance Tommaso Padoa-Schioppa has been selected as the new chairman of the International Monetary and Financial Committee (IMFC), a post for which Indian finance minister P Chidambaram was a serious contender. Padoa-Schioppa succeeds Gordon Brown, the UK's former Chancellor of the Exchequer, who resigned in July 2007. — PTI

Malaysia airlines
Kuala Lumpur, October 6
Anticipating higher tourist influx from India during the coming holiday season, Malaysia Airlines has decided to increase its flight frequencies to Chennai and Bangalore. As part of its new winter schedule, the airline will add two weekly flights to Chennai to the existing seven and will fly to Bangalore four times a week now. The additional service to Chennai will be operational from October 28, on Thursdays and Sundays, while the extra Bangalore flight will start from November 3 and is scheduled for Saturdays. — PTI

Yahoo plan
Bangalore, October 6
Leveraging its current position in the advertisement segment, Yahoo today said it was working out a strategy to consolidate its display and search advertisements to offer a "one-stop" solution to advertisers. Yahoo co-founder and CEO David Filo said they were investing in the advertisement component like "advertisement exchange" to facilitate buying and selling advertising spaces. On Yahoo India's strategy, Yahoo India CEO (R&D) Sharad Sharma said: "The focus would be on adding value to new users entering the market". — PTI

Customer meet
Karnal, October 6
Punjab & Sind Bank organised a customer meet here on Thursday. The meeting was presided over by Harinder Singh, zonal manager, Haryana. He disclosed that in half year ending September 30, the bank’s deposit grew by 9.23 per cent and its advances were up 22.86 per cent. He said the bank would extend core banking facility to 300 branches, which cover 68 per cent of the bank’s business. — TNS

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