SPECIAL COVERAGE
CHANDIGARH

LUDHIANA

DELHI


THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS
B U S I N E S S

Next fiscal likely to be tough: PM
Shillong, January 3
Expressing concern over the 'effects' of global slowdown on the Indian economy, Prime Minister Manmohan Singh today cautioned that the next fiscal could be 'more difficult'. "We are facing a new challenge due to the global meltdown. The next fiscal could be more difficult," Singh said a day after the announcement of the second stimulus package by the government.

FinMin seeks to milk 3G auction
New Delhi, January 3
The Finance Ministry’s advice on doubling the reserve price for the 3G spectrum and WiMAX has been viewed as an effort by the government to bolster the earnings through the auction which could see the foreign players staying away.

Raju’s admirers create website for support
Hyderabad, January 3
The beleaguered chairman of Satyam Computers B Ramalinga Raju has found support from an unexpected corner: the cyber space.



EARLIER STORIES



Aviation Notes
Make passport must between India, Nepal
The border of Nepal is porous. It is a known fact. Several areas at approach and exit points have huge weak zones for exploitation. It is an appropriate time to adhere to the passport norm between India and Nepal to reduce loopholes for many crimes, particularly attempts of hijacking.

Investor Guidance
Gift from spouse’s sister tax-free
Q: I am an earning lady and have given some amount to my brother as loan on interest @ 12% p.a. Now I want to give some amount (Rs 4 -5 lakh) as gift to the wife of my brother. Will the interest received by my brother’s wife when she invests this gifted amount be treated as her income or will it be clubbed into mine for tax purposes? Is it objectionable from an income tax point of view?





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Next fiscal likely to be tough: PM

Shillong, January 3
Expressing concern over the 'effects' of global slowdown on the Indian economy, Prime Minister Manmohan Singh today cautioned that the next fiscal could be 'more difficult'.

"We are facing a new challenge due to the global meltdown. The next fiscal could be more difficult," Singh said a day after the announcement of the second stimulus package by the government.

However, the Prime Minister claimed that despite the global economic slowdown, India would achieve a growth rate of close to 7 per cent this fiscal.

Singh, who was in Shillong to inaugurate the 96th Indian Science Congress, said, "Global economic slowdown is a challenge before the country. World is affected by economic slowdown. We are also affected by the slowdown as world economy is interlinked."

Stating that the exports of the country was also being affected by the slowdown, Singh said, "We need to minimise the impact. New packages have been announced, which will help us in stemming the adverse effects of the slowdown." Dr Singh also asked Indian industry to invest more in R&D and boost demand for science and technology graduates and researchers.

"Look at the role played by public investment in nuclear energy, space and defence-related industry in creating the demand for science and technology graduates. We need a wave of such investments from the private sector, so that young people are encouraged to seek a career in science," he said.

He added that "demand-side stimulus must come from institutions and industry".

"Several schemes and programmes based on public-private partnership have been launched. We are encouraging partnership programmes with the corporate sector to promote privately-funded research. I am happy to learn that Nasscom and Ficci have been engaged in this effort," said Singh.

Singh also assured to double the investment in science from the present one per cent of the national income to two per cent. — PTI 

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FinMin seeks to milk 3G auction
Girja Shankar Kaura
Tribune News Service

New Delhi, January 3
The Finance Ministry’s advice on doubling the reserve price for the 3G spectrum and WiMAX has been viewed as an effort by the government to bolster the earnings through the auction which could see the foreign players staying away.

According to industry experts, the already inflated base pricing for the 3G spectrum coupled with inhibitive starting up costs for the foreign players has already forced them to stay away from the auction process itself.

As a result, the government is seeking to rake in as much as possible in its exchequer by doubling the reserve price for the spectrum.

The Finance Ministry has asked the Department Of Telecommunications (DoT) to double the reserve price for pan-India 3G auction to Rs 4,040 crore from the current Rs 2,020 crore. It has also asked the department to double reserve price for the WiMAX to Rs 2,020 crore.

In a letter to the department, the Finance Ministry has asked it to submit a fresh proposal to the CCEA after making this change.

Experts point out that the fresh bid by the Finance Ministry to increase its earnings would not only lead to a further delay in the auction, which has already been put off twice and was now slated for January 30 from the earlier date of January 16, it will definitely keep the foreign players at bay. Incidentally, the poor response that the DoT received had forced it to put off the auction from January 16.

However, the move has also worried the DoT officials. Already reeling under the effect of the 3G spectrum auction being ignored by the foreign players, they feel that such moves could greatly impair the domestic growth also.

One of reasons for the foreign players possibly staying away is also the inhibitive starting up costs. The new players would have to invest minimum Rs 20,000 crore to support a small customer base of 50 lakh.

Experts point out that any global telecom player with experience in 3G services would first have to acquire a mandatory universal access service licence (UASL). A pan-India UASL costs Rs 1,651 crore. This along with the auction price, transmission, infrastructure and equipment cost would cross a figure of Rs, 20,000 for the start up alone. Besides, a minimum subscriber base of 50 lakh would be required for an operator to reach the break-even point that experts point out does not make good business sense.

Raising of the WiMAX cost could also have a similar effect on the auction process, experts said.

Reports also suggested that the Cabinet Committee on Economic Affairs is also slated to look at the TRAI proposal of levying an administrative charge of two per cent on the highest bid on a recurring basis that could further act as a dampener.

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Raju’s admirers create website for support
Suresh Dharur
Tribune News Service

Hyderabad, January 3
The beleaguered chairman of Satyam Computers B Ramalinga Raju has found support from an unexpected corner: the cyber space.

The Netizens across the globe are signing in to express their solidarity with the software icon, whose company had helped boost India’s image as a favoured global IT destination.

The admirers of Raju have created a website “www.Ramalingaraju.com” to enlist support for him from across the globe. A visitor to the site is struck by an extraordinary outpouring of sympathy for the embattled chairman of the country’s fourth largest IT company.

With a tagline “Satyameva Jayate”, the website describes Raju as “pride of the nation, not just of Andhra Pradesh”, who has built an IT empire and a string of charity organisations.

The site is flooded with comments, almost all of them eulogizing him, from people across the world.

“This is definitely one of the darkest moments for all of us?. The media is not talking about the good things that Ramalinga Raju, the icon of IT industry, has done but only talking about corporate mis-governance and ethics. We feel that a man of his stature and nature does not deserve anything like this at all. The very thought of some talking and thinking bad about him is heart-wrenching. You have guided us for 21 years and just one decision will not make us lose the confidence and trust in you. You will continue to be our hero,” the homepage of the website said, without identifying its promoters.

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Aviation Notes
Make passport must between India, Nepal
by K.R. Wadhwaney

The border of Nepal is porous. It is a known fact. Several areas at approach and exit points have huge weak zones for exploitation. It is an appropriate time to adhere to the passport norm between India and Nepal to reduce loopholes for many crimes, particularly attempts of hijacking. This is far more vital than deployment of sky marshals.

The issuance of passport will help reduce another malpractice of hard-core Indians turning non-resident Indians (NRIs). Hundreds of Indian citizens are holding this illegal status with the dubious method of travelling to the Middle-East, Europe or Singapore and return via Kathmandu. The users’ passports remain ‘unstamped’ on arrival and in the records of the Indian government, they are NRIs.

Many of India’s problems vis-a-vis neighbouring countries like Sri Lanka, Bangladesh, Bhutan and Nepal will be reduced if the External Affairs Ministry adheres to ‘more realistic’ policy.

Flight inspection

The directorate-general of civil aviation (DGCA) has to have a full-fledged unit of the flight inspection to reduce gross violations and indiscretions of commanders and pilots. The FID was initiated when pilot-turned-Prime Minister Rajiv Gandhi was in command. Then the unit under the control of the Denzil Keelor and S.S.Panesar functioned like a well-oiled machine and air violations reduced. Now, incidences like near mid-air clashes, instances of drunken flyings, mishaps on ground and in air and even bird-hits are on the increase because the pampered tribe of pilots refuses to adhere to norms of discipline.

The directorate has issued warnings and caution notices to erring pilots and others but they have so far proved ineffective.

In turmoil

The unprecedented recession, rise and fall of oil prices, fluctuating fare structure, terror tremor in Mumbai, agents’ commission problem, unrealistic ground realities , fog-related disruptions and harrowing times for passengers in terminal buildings have compelled travelling public to return from air to rail.

The fog-related delays, diversions and disruptions seem to be beyond the control of the Indian aviation authorities. Airlines, particularly private operators, are non-cooperative saying that they can’t afford to spend huge amounts on training of pilots when we are already passing through difficult times.

If the government is spineless in removing curfew of night flying from some powerful countries, it should issue an advisory to airlines to re-schedule their operations during these two foggy months. This will help operators save a lot of money on paying parking charges, providing hospitality to stranded passengers, overtime to cockpit and cabin crews and cause less inconvenience to passengers. 

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Investor Guidance
Gift from spouse’s sister tax-free
by A.N. Shanbhag

Q: I am an earning lady and have given some amount to my brother as loan on interest @ 12% p.a. Now I want to give some amount (Rs 4 -5 lakh) as gift to the wife of my brother. Will the interest received by my brother’s wife when she invests this gifted amount be treated as her income or will it be clubbed into mine for tax purposes? Is it objectionable from an income tax point of view? — Renu

A : There are two legs to the transaction that you propose. The first leg is to determine the tax incidence upon the gift and the second one is whether clubbing would be applicable or not on the income from the gifted amount. In this regard, as per Sec. 56 of the Income Tax Act, the gift received by a person from spouse’s sister will be tax-free. Secondly, the interest earned by such spouse would not be subject to clubbing. In other words, the interest will be taxable in your brother’s wife’s name only and not in your hands. As long as the gift is made legitimately and routed through the normal banking channels and is out of natural love and affection and not as a means of evading tax, the income tax department will not have any objection.

Gift to wife

Q: I have given cash gifts to my wife on her birthday, on our wedding anniversary and on Diwali. So far, the total amount of gifts comes to Rs 1 lakh during the whole year. I desire to know whether she or I will be liable to gift tax.

2. Also, if her sister has given the gift cheque for Rs 40,000, whether she or my wife will be liable to tax? — Dinesh Sitaldas Menghrajani

A: The interest earned by your wife from investments of Rs 1 lakh will be taxable on your hands throughout.

In the case of the spouse, the income on gifted corpus is clubable. Once you have paid the tax on this first-stage interest, it becomes her asset. Any income thereon is not clubbed in the hands of the donor. It is taxed in the hands of the donee.

You have given a gift of Rs 1 lakh. If she invests this amount in RBI Savings Bonds she will earn interest of Rs 8,000 and you have to include this amount in your income chargeable to tax and pay tax thereon. Suppose she invests this amount of Rs 8,000 in additional Bonds. She will earn interest of Rs 8,000 on the original corpus you have gifted and also Rs 640 on the investment of her interest of Rs 8,000. You are required to continue to pay tax on Rs 8,000 but not on Rs 640. In other words, you pay tax on the interest earned on the original corpus gifted to her, but the interest on interest is taxable in her hands.

2) The gift given by her sister to her is gift-tax-free. The interest earned by your wife from investments will be taxable to the hands of your wife. Her sister is not liable to pay tax on that income.

Capital gains tax

Q: I have a 400 sq ft flat at Dahisar. After 20 years I have purchased a second flat of 400 sq ft on Meera Road for Rs 4 lakh.

Both the flats are for personal use and I get no income from these flats.

1] Am I liable to pay income tax? If yes, then how much?

2] The Meera Road flat was booked in 1997. I got its possession and got it registered in May 2008.

When can I sell the flat so that I don’t have to pay capital gains tax? — Shastri

A: 1) If a person owns two houses, only one of these (anyone of his choice) can be treated as self-occupied house and the annual value can be treated as nil. The other will be treated as deemed let out (even if it is not let out) and annual rent will be treated as income to you.

Tax is payable on rental income may not be the actual rent charged. It depends upon several factors like i) Municipal Ratable Valuation and the place where the property is located such as Delhi, Chennai, Mumbai, Kolkata, etc., ii) Fair Rent assessed on the basis of rents fetched by similar properties in the neighbourhood iii) Standard Rent applicable to those cities under the Rent Control Acts of respective states, iv) Actual Rent and v) Unrealised and irrecoverable rent.

You would get first a deduction from the lease rental of municipal taxes paid and thereafter a standard deduction of 30%.

The interest payable on housing loan is also deductible.

The resultant figure is to be added to your other income taxable in India.

The stamp duty, registration fee and other expenses incurred for transferring it in the name of the purchaser as well as the part repayment on a regular basis of the loan taken from some specified sources is eligible for deduction from income tax u/s 80C.

2) Since you have taken possession in May 2008, you can sell it only after May 2011 to be able to save long-term capital gains tax u/s 54EC. If you sell it earlier the profit will be treated as your normal income and taxed as such.

The house at Dahisar, purchased 20 years ago, can be sold any time. If you sell the same before May 2009, the long-term capital gains earned can be set off against the purchase value of the house on Meera Road.

Resident status

Q: I am bringing my family back to the UK along with me. So I would like to take a few investment decisions before we leave.

A couple of questions:

(1) Am I required to change status of my FDs once I become an NRI. (I am already an NRI but my wife is still a resident. So, if we book an FD in her name for say 5 years, will she be required to change the status of that next year?)

(2) What about Post Office investments? If we have MIS / recurring deposits etc. as residents, are we required to change status / pay tax once we become NRI? — Kumar

A: An NRI cannot hold resident bank accounts, whether savings or FDs. Therefore, the status of your wife’s FDs will need to be changed to NRO. Post office investments may be continued only till their maturity. Post maturity, fresh investments in any post office instrument is not available to NRIs.

The authors may be contacted at wonderlandconsultants@yahoo.com

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