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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS

B U S I N E S S

Punjab laggard in economic growth
Haryana, Himachal surge ahead
New Delhi, December 23
Punjab, once a food bowl and the most prosperous state of the country, has lagged far behind in the economic growth during the past five years with recording only 4.5 per cent gross state domestic product (GSDP) whereas its neighbours Haryana and Himachal Pradesh have surged much ahead.

Spectrum Allocation
GSM operators seek review of norms
New Delhi, December 23
GSM mobile operators have asked the government to seek afresh the views of regulator TRAI on spectrum allocation norms and suspend till such time, distribution of initial or additional frequency. Meeting this condition means that no new GSM operator will be issued LoI and licences, and existing GSM operators will have no new competition — both bad for the sector's growth.

India Inc against regulation on M&As
New Delhi, December 23
The recent amendment to the Competition Act will impede mergers and acquisitions (M&As) in India as it makes it mandatory for companies to seek prior approval from regulatory authorities, industry chamber CII said. "M&A activity in today's context is an engine for economic growth.



EARLIER STORIES

 
Mobile handset major Nokia has signed up Bollywood actor Shah Rukh Khan as its brand ambassador and targets to launch more than 40 new handsets next year.
Mobile handset major Nokia has signed up Bollywood actor Shah Rukh Khan as its brand ambassador and targets to launch more than 40 new handsets next year. — UNI photo

Tax Advice
Rebate on contribution to wife’s PPF a/c allowed
Q. I have PAN and file income tax return regularly. I have P.P.F. account. I want to open a PPF account in the name of my wife who is a house wife.

Market Scan
Invest in MF schemes
The Sensex touched its all-time high of 20,408 points on December 17, but last week when the market closed at 19,162 points on December 20, it was down by 1,246 points. Taking last week from December 16 to December 20, the market was down by 868 points (4.33 per cent). On December 16 (Monday), the market was down by 769.46 points. On the next trading day, the Sensex plunged by another 181 points. There were only some marginal gains during the last trading days of the week.

 

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Punjab laggard in economic growth
Haryana, Himachal surge ahead
Tribune News Service

New Delhi, December 23
Punjab, once a food bowl and the most prosperous state of the country, has lagged far behind in the economic growth during the past five years with recording only 4.5 per cent gross state domestic product (GSDP) whereas its neighbours Haryana and Himachal Pradesh have surged much ahead.

According to the 11th plan document, approved by National Development Council (NDC) in its recent meeting here, the average GSDP of Punjab for 10th plan period (2002-07) was merely 4.5 per cent, placing the state in the company of backward states at the lowest pedestal in terms of economic growth.

But Punjab's immediate neighbours, Haryana and Himachal Pradesh, have shown a remarkable success story with recording an average growth rate of 7.6 per cent and 7.3 per cent, respectively, during the 10th plan period.

As per the NDC document, the performance of Punjab on economic front during the 10th plan period was only marginally better than backward state like Madhya Pradesh, which recorded an average growth rate of 4.3 per cent.

But all thunders were stolen by Gujarat, put on a fast track of development by its controversial Chief Minister Narendra Modi , as the state registered a stupendous GSDP growth of 10.6 per cent, much above the national average of 7.6 per cent during the same period.

Even during the 11th Plan, the picture does not seem to be rosy for Punjab as its economy is expected to grow only at a lower rate of 5.9 per cent, against the projected growth target of 6.4 per cent envisaged in the new plan document.

Even if Punjab improves its growth to projected 5.9 per cent level, it still will be lowest among the states and only equal to Jammu and Kashmir, which relied heavily on central subsidies due a peculiar security situation there.

The growth rate of 5.9 per cent for Punjab will be much less than the national GDP average target of 9 per cent set out by the Planning Commission for the 11th Plan period 2007-12.

The main reason for low growth in Punjab, was cited due to continued low agriculture growth. Once a leader in implementing the “green revolution” schemes successfully and maintaining the food supply to the entire country, the agriculture sector is expected to grow only by 2.4 per cent in Punjab if it continued at the present pace against the target of 4 per cent during the 11th Plan.

Even the poorer states like Bihar, Orissa and Rajasthan are expected to do better with a much faster growth of 7.6 per cent, 8.8 per cent and 7.4 per cent, respectively, the document indicated. The smaller hill states of Uttarakhand, Himachal and Nagaland are set to record handsome growth of 9 per cent, of course with liberal central aid they get as special category states.

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Spectrum Allocation
GSM operators seek review of norms

New Delhi, December 23
GSM mobile operators have asked the government to seek afresh the views of regulator TRAI on spectrum allocation norms and suspend till such time, distribution of initial or additional frequency.

Meeting this condition means that no new GSM operator will be issued LoI and licences, and existing GSM operators will have no new competition — both bad for the sector's growth.

But these are some of the conditions that the GSM lobby wants the Department of Telecom (DoT) to meet to ease the tension arising out of new formula for apportioning spectrum and permission to use dual technology.

On behalf of Cellular Operators Association of India (COAI) Akhil Gupta of Bharti Airtel has been deputed to negotiate with the government.

The first meeting between Gupta and Telecom Secretary D S Mathur was held last week, according to a note by Mathur.

Surprisingly, the COAI has completely ignored the "scientific" report of TEC, which was once accepted in-principle by the government, and also demand for surrendering the extra spectrum held by them beyond the contractual limit of 6.2 MHz.

According to smaller operators, who have been waiting for start-up spectrum for a long time, these are absolutely anti-consumer conditions as this would delay the entry of new players and thus competition and the government should not come under any such pressure.

Also top sources in DoT are of the view, that existing operators are increasing pressure on DoT every day, because they do not want any new LoI to be issued, so as to ensure the existing oligopoly and abnormal profits.

According to Mathur's note, COAI has refused to accept TRAI's recommendations with regard to four metros and A category circles.

Gupta, according to Mathur, has said that TRAI had made recommendations without widely consulting the stakeholders and therefore, the regulator should be asked to do the needful before giving fresh subscriber linked norms.

The demand for seeking TRAI's recommendations anew comes in the backdrop of a report by the Telecom Engineering Centre, which comprises more experts on mobile telecom and has access to industry input than the regulator does. — PTI

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India Inc against regulation on M&As

New Delhi, December 23
The recent amendment to the Competition Act will impede mergers and acquisitions (M&As) in India as it makes it mandatory for companies to seek prior approval from regulatory authorities, industry chamber CII said.

"M&A activity in today's context is an engine for economic growth. Any law that restricts the present status will result in loss of transactions, deny the opportunities for absorption of advanced technologies and impede growth," CII said in a statement.

The recently amended Competition Act has introduced a mandatory notification requirement for all enterprises entering into combinations like mergers, amalgamations and acquisitions.

"This entails seeking prior approval from the Competition Commission of India, which may take up to 210 days to grant such approval. This amendment has come as a surprise to the industry as the Act prior to the recent amendments had a voluntary notification regime and the same was changed, rather surreptitiously," it said.

Considering the growing Indian economy the move is not only ill-timed but also contradicts recommendations of the Raghvan Committee, which formed the basis of the competition law in India, the statement said.

Given the current stage of Indian economy, enforcement of provisions regulating combinations in the market should be deferred, it said adding that the Competition Act can be enforced in phases, starting with regulation of anti-competitive agreements and regulation of combinations.— PTI 

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Tax Advice
Rebate on contribution to wife’s PPF a/c allowed
by S.C. Vasudeva

Q. I have PAN and file income tax return regularly. I have P.P.F. account. I want to open a PPF account in the name of my wife who is a house wife.

My query is: Can I claim benefit in income tax if I make deposit in her PPF account from my income.

If this is not admissible can I deposit in the PPF account of my minor grandson and claim income tax benefit.

— M.P. Garg, Nahan

A. You can deposit the amount of Public Provident Fund contribution to your wife’s account so as to claim the deduction under Section 80C of the Act. This is specifically permitted by sub section 2 clause (v) and sub Section 4 of section 80C of the Act.

Gift to relatives

Q. Gift of Rs 50,000 from any one and any amount from relatives and their descendants and spouses are tax free.

As per Section 64, you say the income from the gifts will be treated as doner’s income and income on such incomes will only be treated as donee’s income.

My wife and sister gifted me some money years back and I got them transferred in my name and last year I sold them after getting them Demat in my name. This long term gain I have shown in my (donee’s) I.T. return.

This year I have gifted Rs 75,000 to my wife by two cheques who has invested them in shares through stock exchange and earned some short-term gain which I shall like to show in her I.T. return.

If I am wrong in both cases please advise the corrective action.

— Manohar Lal

A. The facts given in the query are not very clear. The reply to your queries is being given on the basis that the amount received by you from your wife and sister as gift has been invested in shares which have been put in demat form.

1. The gift by your wife and your sisters have to be treated separately. The gift by your wife will come within the mischief of Section 64 of the Income-tax Act 1961 (The Act) and accordingly any income arising on the investment of the amount of gift given to you will be taxable in the hands of your wife. The gift by your sister is not covered by Section 64 of the Act and, therefore, any income arising from the investment of the amount of such a gift would be taxable in your hands.

2. The gift amount of Rs 75,000 to your wife will be treated as your property and short-term capital gain arising on the sale thereof will have to be declared in your tax return. This is in accordance with the provisions of Section 64 of the Act.

Interest income

Q. What is threshold limit of interest amount exempted from TDS for Financial Year 2007-08. What is way out to avoid TDS deduction in case total income is only from bank FDs and below 1.1 lakh.

— S.S. Bhatia, Ludhiana

A. There are various limits specified by section 194A of the Act in respect of interest income received from various entities. These are as under:

(a) Rs 10,000, where the payer is a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution, referred to in section 51 of that Act);

(b) Rs 10,000, where the payer is a co-operative society engaged in carrying on the business of banking;

(c) Rs 10,000, on any deposit with post office under any scheme framed by the Central Government and notified by it in this behalf; and

(d) Rs 5,000 in any other case:

In case your total income is below the taxable limit and you are of the age of 65 years or above you can file form 15H with the payer so as to claim exemption from the deduction of tax at source. If you are of the age which is less than that specified hereinabove, you may file Form 15G to claim the aforesaid exemption in case your total income is below the taxable limit.

Tax liability

Q. I am a senior citizen of 68 year. My total income which consists of pension, salary, rental, interests etc. comes to Rs 32,500 approx per year. I am filing my I.T. return every year and paying the tax after availing rebate under Section 80-C and also as senior citizen. I have only one daughter who is married and has two daughters, who are minor and studying in the school. My wife is no more, and I am all alone.

Out of love and affection and also being “Maternal grand father (Nana)” want to help my grand children (daughter’s daughters) by depositing certain amount in their P.P.F. A/c every year through cheques so as to safe guard their future.

Kindly advise as how much maximum amounts I can deposit in their P.P.F. A/cs as gift every year and also advise about the tax liability if any.

— J.C. Batra, Panchkula

A. You may deposit any amount in the P.P.F. Account of your grand daughters but the same would not be eligible for any deduction in your hands under section 80C of the Act. In accordance with the aforesaid section the deduction is allowable in case the amount is deposited by an individual in his own account, his wife’s account or in the account of any child of such individual. There is no monetary limit for the amount of gift to be made to your grand daughter. The maximum amount permissible for deposit in a P.P.F. Account is Rs 70,000.

Gains from ULIP scheme

Q. Kindly clarify if either or both of long-term and short-term capital gains from ULIP scheme of UTI is/are taxable and in case of yes then rate at which income tax is to be paid during F.Y. 2007-08.

— Tarsem, Patiala

A. The long-term capital gain is taxable @ 20 per cent plus applicable surcharge and education cess. The short-term capital gain is chargeable at the normal slab rates. The short-term capital gain would be added to the assessee’s other income so as to arrive at the slab rate. 

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Market Scan
Invest in MF schemes
by J.C. Anand

The Sensex touched its all-time high of 20,408 points on December 17, but last week when the market closed at 19,162 points on December 20, it was down by 1,246 points. Taking last week from December 16 to December 20, the market was down by 868 points (4.33 per cent). On December 16 (Monday), the market was down by 769.46 points. On the next trading day, the Sensex plunged by another 181 points. There were only some marginal gains during the last trading days of the week.

This sharp decline in the market indices during the last week is due to many factors. Normally foreign companies close down their annual accounts on December 30 and foreign investors sell their investments to boost up their accounts. The Reserve Bank of India’s notification asking banks not to give payment guarantees to foreign institutional investors at their purchases also led to FIIs heavy selling in the Indian market. The US economy is slowing down and even top US experts believe that the US economy will slow down appreciably during 2008. The housing loan defaults continue in spite of the fact that the Federal Reserve has cut down the interest rates. The US President has frozen interest rates payable on selected sub-prime floating rate mortgages of the initial rate for the next five years. Consumer-confident surveys also indicate sluggishness and decline. Recession in the housing sector is a negative factor in the US economy.

Any sharp recession in the US economy is bound to affect the export earnings of the Asian economies. For this reason, the year 2008 will also affect the Asian economies. The Indian economy may be less affected for its export earnings from US are relatively lower than other Asian economies. The Indian market may, however, suffer from lower foreign funds as well as from checks which have been imposed by the Reserve Bank of India.

High international crude prices will also affect the Indian economy as the petro rates for consumers in India are likely to be raised shortly. The stock market may either move within a short range or move down further during this week.

Avoid making any investments at this time though some blue-chip scrips like ABB, L&T, Sesa Goa and BHEL have come down but they may soon recover. Bank deposit rates have already been reduced and a further reduction is possible. Investors should move away from retail equity investments to mutual fund schemes which are likely to maintain a minimum of 10 to 12 per cent tax-free returns. Many of the good mutual fund schemes will declare their dividends in March. That would be a proper time to invest in these schemes when they go on ex-dividend basis. Some of the good schemes are: HDFC Mutual Fund’s Prudent Fund, DSP Merrill Lynch Mutual Fund’s Tiger Scheme, UTI’s Infra Income Scheme. Sundram’s Mutual Fund’s Balance Fund Scheme which has declared a 30 per cent dividend during the last fortnight and has now ex-dividend NAV of Rs 18.67. It is likely to declare a 30 per cent dividend payable next December 2008.

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