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CHANDIGARH

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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS

B U S I N E S S

IFCI foreign equity limit up to 74 pc
Mumbai, October 20
Industrial Finance Corporation of India (IFCI) today said the total investment limit for foreign institutional investors has been raised to 74 per cent in the company.

Indian economy not overheated, says IMF
Washington, October 20
The International Monetary Fund (IMF) has said the fall in inflation rate and slowdown in credit growth were positive signs, but the RBI must remain vigilant to prevent overheating of the Indian economy.

Forex reserves up by $5.3 b
Mumbai, October 20
The foreign exchange reserves of the country increased by a $5.356 billion to stand at $256.686 billion for the week ended October 12. The forex reserves had increased by $3.568 billion at $251.330 billion for the week ended October 5.

Return to Roots
Nooyi books apartment in Chennai
Chennai, October 20
Indra Nooyi, the India-born chief executive of Pepsico, has booked a sprawling apartment worth Rs 6.5 crore ($ 1.6 million) in the city’s Poes Garden, a posh neighbourhood that the likes of J Jayalalithaa and Rajnikant call their home.

Indra Nooyi
Indra Nooyi



EARLIER STORIES

 

Nod to ICICI for branch in NY
New York, October 20
The US regulators have given permission to ICICI Bank, the second largest financial lender in India with assets worth over $91 billion, to open a branch here.

Hooda woos NRIs in Canada
Toronto, October 20 
Inviting NRIs among other potential players to invest in the state, Haryana Chief Minister Bhupinder Singh Hooda today said the government is considering to give them preferential treatment in allotment of land and other fiscal incentives.

Reliance revives ‘Vimal’
Mumbai, October 20
Reliance Industries Ltd has re-launched its iconic textile brand ‘Vimal’ with a new logo and ready-to-wear apparels. Almost a three-decade old brand, Vimal was one of the first textile brands to attain great popularity in the mass segments in India.

Aviation Notes
Deteriorating Facilities
Private carriers gain ground
The civil aviation in the country is not burning bright as minister of state for civil aviation Praful Patel keeps claiming from time to time. It is in a total mess as involved players - private construction companies and the Airports Authority of India (AAI) - are engaged in

Investor Guidance
Capital gains to be invested only in residential property

Q: Please answer the following queries —
1. If one earns capital gains from sale of house, can one save taxes by investing the same in a plot of land?

Video
PF companies entitled to 26% FDI.
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IFCI foreign equity limit up to 74 pc 

Mumbai, October 20
Industrial Finance Corporation of India (IFCI) today said the total investment limit for foreign institutional investors has been raised to 74 per cent in the company.

The shareholders at the AGM held recently approved the raising of FII limit in the company to 74 per cent from 24 per cent presently, the company informed the Bombay Stock Exchange.

As on September 30, foreign institutional investors held 21.2 per cent stake in the company.

Currently, IFCI is in the process of inducting a strategic investor by sale of 26 per cent stake in the company. It has already shortlisted eight entities out of 10 which had submitted expression of interest (EoI) while two entities — Newbridge Capital of the US and Kotak Mahindra Bank had opted out of the race.

GE Corporation, Industrial Development Financial Company Ltd, Cargill Financial Services Corporation, Natixis, the Blackstone Group are in the fray. The three consortia — Sterlite Industries (India) Ltd, Morgan Stanley and Co consortium, WL Ross and Co LLC, GS Capital Partners (VI) Fund, Standard Chartered Bank and HDFC, Shinsei Bank Ltd, PNB and JC Flower and CO LLC are also in the race.

The company will start the process of inviting the financial bids next week and expects to finalise the stake-sale process within two-and-a-half months.

Earlier this week, IFCI CEO and MD Atul Kumar Rai said the company would float request for proposal (RFP) within a week and expects to receive bids in two months' time. It hopes to finalise strategic investor in two-and-a-half months.

Rai also said there could be a consolidation of bidders, indicating the number of bidders could go down from the present eight. — PTI 

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Indian economy not overheated, says IMF

Washington, October 20
The International Monetary Fund (IMF) has said the fall in inflation rate and slowdown in credit growth were positive signs, but the RBI must remain vigilant to prevent overheating of the Indian economy.

"With the actions RBI took over the last 12 months... monetary conditions in general have been tightened. You are seeing inflation coming off and some slowdown in credit growth. These are all good things," Kalpana Kochhar, senior adviser in the Asia Pacific Department said.

The IMF official said there were still some underlying pressures like capacity constraints.

On foreign exchange markets and the appreciation of the Indian rupee, Kochhar said the pressure on the exchange rate is going to continue not because of any current account surplus but that India is a "story" that everyone wants to be a part of. — PTI

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Forex reserves up by $5.3 b

Mumbai, October 20
The foreign exchange reserves of the country increased by a $5.356 billion to stand at $256.686 billion for the week ended October 12.

The forex reserves had increased by $3.568 billion at $251.330 billion for the week ended October 5.

Foreign currency assets expressed in US dollar terms included the effect of appreciation or depreciation of other currencies, such as the euro, pound sterling and yen, held in its reserves.

During the week, gold reserves and Special Drawing Rights remained static at $7.367 billion and at $2 million, respectively.

The reserve position in the IMF came down by Rs 7 crore to stand at $437 million. — PTI

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Return to Roots
Nooyi books apartment in Chennai

Chennai, October 20
Indra Nooyi, the India-born chief executive of Pepsico, has booked a sprawling apartment worth Rs 6.5 crore ($ 1.6 million) in the city’s Poes Garden, a posh neighbourhood that the likes of J Jayalalithaa and Rajnikant call their home.

Nooyi, who was born in the city and graduated from the Madras Christian College before moving on to the US, is an avid fan of Carnatic music and apparently likes to visit the city in December-January when it hosts the annual classical music festival. Renowned Carnatic singer Aruna Sairam is an aunt of Nooyi.

The booking of the apartment also incidentally comes days before Nooyi’s birthday - October 28. Nooyi was last month named America’s most powerful businesswoman by Fortune magazine for the second year in a row.

The 4,100-sq ft apartment, in the vicinity of the residences of former Tamil Nadu chief minister Jayalalithaa and film icon Rajnikant, is part of a residential project promoted by builder KGEYES Residency Private Ltd.

Nooyi, who is credited with helping Pepsico look beyond aerated drinks business and sell fast foods over a decade back, became the company’s CEO last year. — PTI

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Nod to ICICI for branch in NY

New York, October 20
The US regulators have given permission to ICICI Bank, the second largest financial lender in India with assets worth over $91 billion, to open a branch here.

The branch would engage in wholesale banking business, including trade financing and factoring services to US-based subsidiaries of Indian firms, the US Federal Reserve said.

Mumbai-based bank engages primarily in corporate and retail banking and also has foreign exchange operations.

Through its subsidiaries, the bank provides insurance, brokerage, investment banking and asset management services.

The bank, the US Fed said, has policies and procedures to comply with the Indian laws and regulations and the Reserve Bank of India guidelines regarding anti-money laundering.

Besides, it has also taken additional steps on its own to combat money laundering and other illicit activities.

Its application, they said, met the requirements of International Banking Act and it is also supervised by RBI.

The regulators also found the ICICI Bank's risk management standards consistent with those established by the Basel Capital Accord and its capital is in excess of the minimum levels that would be required by the accord.

The Life Insurance Corporation of India and other government-owned companies together own 9.6 per cent shares and are the largest shareholders.

The Singapore government directly owns 1.8 per of the bank's shares, while another 6.5 per cent is indirectly owned by a wholly-owned investment firm of Singapore's ministry of finance.

Currently, the bank has representative office in New York and operates non banking activities. Besides, it also has centres in Canada, the UK, Bahrain, Russia and Sri Lanka. — PTI

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Reliance revives ‘Vimal’

Mumbai, October 20
Reliance Industries Ltd has re-launched its iconic textile brand ‘Vimal’ with a new logo and ready-to-wear apparels.

Almost a three-decade old brand, Vimal was one of the first textile brands to attain great popularity in the mass segments in India.

The new Vimal will also offer ready to wear apparels for men including shirts, trousers, suits and jackets.

“We are all very proud of this moment of reviving the Vimal brand which I am sure will once again regain the market leadership it enjoyed and top-of-the-mind recall,” said Nita Ambani, wife of Mukesh Ambani, who has been involved in all aspects of the re-launch.

The apparels will be available in sub-brands Vimal Red with popular pricing for younger age groups and Vimal White, a range of formals with premium pricing.

The Vimla Black sub-brand will be the top-end brand designed in Italian fashion inspired by thoughts and guidance of Italian designer Maurizio Bonas. — PTI

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Hooda woos NRIs in Canada

Toronto, October 20 
Inviting NRIs among other potential players to invest in the state, Haryana Chief Minister Bhupinder Singh Hooda today said the government is considering to give them preferential treatment in allotment of land and other fiscal incentives.

The state will be setting up an NRI nodal office to attract investment and assist NRIs in doing business in the state, Hooda said, adding "Plans are also there to give concessionary residential lots in prized locations to settle them and make them feel at home".

Priority industrial plots in key areas will be allotted to assist them in setting up their businesses. The state was willing to consider tax concessions for NRIs akin to those given by Himachal Pradesh and Punjab, he said here while concluding his North American business promotion tour.

His mission consisted of automobile and textile business executives who met their Canadian counterparts, including the Magna Group that has major plans for India.

Haryana's proximity to Delhi (it surrounds Delhi from three sides) is a boon to the state, which through a domino effect provides infrastructure, highways and transportation as a backbone to the states development, he added.— PTI

 

 

Aviation Notes
Deteriorating Facilities
Private carriers gain ground
by K.R. Wadhwaney

The civil aviation in the country is not burning bright as minister of state for civil aviation Praful Patel keeps claiming from time to time. It is in a total mess as involved players - private construction companies and the Airports Authority of India (AAI) - are engaged in

settling their own scores. Their petty battles and politics are adversely affecting the renovation work. There is more lofty talk than constructive and creative work at international and national airports.

As if these problems are not enough, there are series of litigations pending against the merger of Indian and Air India. The court cases against AAI are also mounting.

Indira Gandhi International Airport (IGIA) is the most chaotic. Areas near two runways are littered with rubbish and rubble making it look more like a jungle than an international airport. Bird hits and near air-miss are on the rise. The bird hit has been a chronic problem but, beyond formation of high-power committees, nothing preventive is being done.

When a delayed India/Air India flight from Bangalore to Delhi landed at IGIA on October 17, it was taxied to an isolated bay. The passengers, including disabled, semi-disabled and senior citizens, were made to board a rickety bus, which had only a few seats. An elderly, healthy lady with baggage was standing near the foot-board. The bus moved with a jerk and she almost toppled as the door stayed open for a few seconds.

A day earlier, on October 16, an Indian/ Air India flight from Delhi to Bangalore had to stand in queue for more than 50 minutes before it got clearance from the ATC (air traffic controller). According to commanders, the ATCs give preference to private operators for fringe benefits and keep national carrier’s flights on hold. Corruption in the ATCs is on the increase. If the discipline is not inducted, it can cause a lot of embarrassment to the authorities.

On both Air India flights from Delhi to Bangalore on October 16 and Bangalore to Delhi on October 17, the refreshment served to economy passengers was an ‘apology’. While there is some improvement in cabin service, there is a marked deterioration in snack/meal area. No wonder, some regular passengers are switching to private carriers from Indian and Air India.

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Investor Guidance
Capital gains to be invested only in residential property
by A.N. Shanbhag

Q: Please answer the following queries —

1. If one earns capital gains from sale of house, can one save taxes by investing the same in a plot of land?

2. If one builds a house on that plot after two years can one save capital gain tax? Even if the house is rented out? If the house is sold?

3. Will capital gains from sale of a plot be treated as capital gains from sale of a house?

4. A house sold in the current year was renovated (improvement) 10 years earlier as per plans submitted to the municipality. However, there is not evidence of the expenses incurred. Can the owner consider the advantage of the renovation (additional expenses) to calculate capital gains?

— Tambe

A: 1. No. Section 54 requires the capital gains to be invested only in a residential property.

2. The assessee can claim exemption under Section 54 by investing the long term capital gains (not the entire sale proceeds) to purchase a residential house within one year before or two years after the date of sale of the old house. Alternatively, a residential house may be constructed within three years after the date.

3 Capital gains from sale of a plot is not the same as capital gains from sale of a residential house for purpose of saving taxes.

4. We presume that you have got the permission given by the municipality on your record. and you have got proof of the fact that you have renovated the property and the extent to which you have renovated is there in the blueprint. In that case, you can obtain an official chartered valuer to assess your value addition and use this figure for computing the capital gains.

Exemption

Q: Can a person getting HRA and occupying two rented self-occupied houses and also get exemption on the rent paid on both the houses together?

— Maheshwari

A: The act states, “... on payment of rent in respect of residential accommodation, occupied by the assessee...”. The words ‘rent’ and ‘accommodation’ used are singular and therefore, the employee may be required to take any one accommodation of his choice. We do not agree with this view. The assessee surely does not occupy two houses just for fun. He needs two houses and has to pay rent on both the houses. Both these words, ‘rent’ and accommodation’ are many times used in plural sense.

NRI investments

Q: For the past 20 years, I have been living in the USA. This year, I am relocating to India on a permanent basis. What happens to my investments and the NRE FD, which has been giving me tax free interest? Do I have to break them? What is the tax implication on the returns through such investments and the NRE FD, now that I am changing my status to resident in India again?

— Ravindra

A: An NRI, who has returned to India permanently, is allowed a reasonable time to inform all the banks (and companies) about the change in his status wherever he has his investments. On receipt of this information, the bank will redesignate the NRE/FCNR accounts as a ‘resident’ accounts’. These can be run up to their maturity but the interest on NRE becomes taxable from the date of the return whereas the FCNR interest is tax-free as long as the holder remains an NRI or becomes an RNOR. Alternatively, both the accounts can be converted into RFC without any penalty but the interest even on RFC is tax-free only for RNORs. Whether RFC is tax-free or not, withholding tax will be applied at th erate of 30.9 per cent and if the interest is over Rs 10 lakh, the rate will be 33.99 per cent. The NRE SB and NRO SB accounts will be re-designated as ordinary SB accounts. It is also necessary to inform all the companies/DPs where you have investments about the change in your residential status.

Futures and options

Q: My salaried friend in a BPO was trading in futures and options that totalled to nearly Rs 3.8 crore but his loss is Rs 1.5 lakh. The total number of deals are almost 20. Is he liable for tax audit? Also, shortly he may be posted abroad. So, if he becomes an NRI, can he continue to deal in the securities market like before? Can he also carry forward his losses for eight years to set them off against future profits, if any? If he becomes NRI what would be position?

— Ninad

A: The act states that F&O deals are not treated as speculative. It does not state what it should be treated as. Most of the experts feel that this should be treated as business income. Again, audit is required if the business turnover is over Rs 40 lakh or income is over Rs 10 lakh There is no clarity on whether Rs 3.8 crore should be treated as turnover or not. Here also, as per the opinion of many experts, your friend need not get his accounts audited unless the income is over Rs 10 lakh.

Once he becomes an NRI, he will have to open a PINS account to trade in the stock market. He will not be able to trade in the derivative segment. Losses can be carried forward for eight years for future set-off. However, this is only allowed if the tax return is filed and that too in time.

Rent tax

Q: I own a house in Mumbai, where I stay with my family. I have certain business interests in Pune, where I go frequently. As property prices are rising there, I was thinking of buying a place there. This would also be for my personal use and I don’t intend to rent it out. However, one of my CA friends informed me that the second house will be taxed on a notional rent basis. Is this true? How can I be taxed for rent if I don’t rent out the house property?

— Vinod

A: Your CA friend is right. The first property that you buy is exempt from income tax, however, the second property onwards, even if you keep it locked, a notional rent value (based on the market rental value) will be taken as your notional income from the second property. To put it differently, even if you earn no income whatsoever from the second property, it will be taxable as if you have put it out on rent. Also, if you are planning on buying the property using housing finance, for the first property interest payable is tax deductible up to Rs 150,000. However, from the second property onwards, the entire interest without any limit is tax deductible

The authors may be contacted at wonderlandconsultants@yahoo.com 

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