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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

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B U S I N E S S

Mixed bag of stimulus goodies for SME sector
New Delhi, January 4
The small and medium enterprises (SMEs) that employ about 31 million people may have a mixed bag of goodies from the two stimulus packages that as been announced in the past few weeks.

RCom starts GSM service in Mumbai
Mumbai, January 4
Reliance Communications (RCom) has ignited another round of price wars between mobile phone companies with a scheme to offer Rs 900 worth of free calls for every subscriber.

Kingfisher’s daily Mumbai-London flight from today
Mumbai, January 4
Expanding its overseas operations, Vijay Mallya-run private air carrier Kingfisher Airlines will launch its daily non-stop Mumbai-London flight from tomorrow.

3G auction may be put off again
New Delhi, January 4
As the confusion over the auction of the spectrum for the third generation (3G) services continues with the Finance Ministry seeking to double the reserve price, reports suggest that the auction may be further put off. It was to take place on January 30.



EARLIER STORIES




Tourists walk along a reconstructed ancient business street in Beijing on Saturday. Economists have warned that the global downturn could mean that China will end the fiscal year with its weakest economic growth for nearly two decades, as China has not posted annual growth of less than 7.6 per cent since 1991.
Tourists walk along a reconstructed ancient business street in Beijing on Saturday. Economists have warned that the global downturn could mean that China will end the fiscal year with its weakest economic growth for nearly two decades, as China has not posted annual growth of less than 7.6 per cent since 1991. — AFP

Tax Advice
Bank term deposit best investment for senior citizens u/s 80C
Q. I am a senior citizen. My income from pension and interest during the financial year 2008-09 will be around Rs 2,20,000 which is not taxable. I have a deposit of more than Rs 1 lakh in post office in NSS account in old scheme. I intend to withdraw this amount in two years and invest the same under Section 80C.

Branch Network
HDFC Bank pips ICICI
Mumbai, January 4
Country’s second largest private sector lender HDFC Bank, which added 658 branches last year, has pipped ICICI Bank in terms of branch network.







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Mixed bag of stimulus goodies for SME sector
Bhagyashree Pande
Tribune News service

New Delhi, January 4
The small and medium enterprises (SMEs) that employ about 31 million people may have a mixed bag of goodies from the two stimulus packages that as been announced in the past few weeks.

The SME businessmen in exports will be facing tough times, but a part of auto component manufacturers, IT and computer hardware makers and steel producers will benefit from them. Concerns regarding accessibility of credit are still there despite the fact that the government has announced setting up of state-level bankers’ committees to monitor credit flows in these sectors.

The stimulus packages are not bold enough to spur demand in the economy and rejuvenate business activity by creating an environment conducive to growth, says PHDCCI president Satish Bagrodia.

An analysis of key sectors in SMEs shows that the difficulty may be prolonged. Though there has been an extension of Duty Entitlement Pass Book (DEPB) scheme and duty drawback benefits on items like knitted fabrics, bicycles, agriculture tools and specified categories of yarn, a demand of five-year tax holiday and two years’ moratorium for term loans would have helped the sector tide over difficult times.

Federation of Indian Export Organisation (FIEO) feels that lack of cheap credit and tax holidays may translate into huge job losses in coming days.

According to industry body PHDCCI, concessions to exporters by way of timely export credit and increase in duty drawback rates across the board would have gone a long way to tide over the current uncertain situation.

The $18-billion auto component industry may find it difficult to tide over the situation because it was asking for priority sector lending status. This industry, which is on the negative list of banks, will now be hit harder. Providing a line of credit to commercial vehicle manufacturers will only help a small part of auto component makers. To add to the woes is lack of export demand and inability to get risk insurance cover against exports. However, restoration of DEPB rates is a relief for this industry.

Information technology and hardware manufacturers in SME segment may get a fillip from the 4 per cent cut in excise duty as it makes products cheaper. The sector depends largely on government demand that has been recession-proof. Though some players will be hurt as a result of dip in export demand and credit crunch, the overall situation may not be that bad for this sector.

Small enterprises involved in manufacturing steel products like TMT bars and other items primarily used in housing and construction will get immense benefit from the announcement of exemptions on countervailing duty on import TMT bars and also on withdrawal of exemptions on basic customs duty on zinc ferro alloys. These exemptions translate into making imported steel products expensive, thus, protecting domestic industry that has been facing rough times against cheap imports. This industry will benefit from the spur given to real estate, housing, road construction and other steel consuming industries.

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RCom starts GSM service in Mumbai
Tribune News Service

Mumbai, January 4
Reliance Communications (RCom) has ignited another round of price wars between mobile phone companies with a scheme to offer Rs 900 worth of free calls for every subscriber.

Under the scheme, subscribers opting for the lowest package would be allowed Rs 10 worth of free calls every day for 90 days.

Subscribers would have the option of purchasing top-up cards for denominations as low as Rs 10, the company said.

RCom, which formally launched its GSM mobile services in Mumbai today, said in addition to the above offer, the subscribers would be allowed free calls to other RCom phones in Mumbai, Maharashtra and Goa between 11 pm and 6 am.

The company, which originally offered services on a CDMA platform, says it is now technology neutral with the launch of GSM services. On December 30, 2008, the company launched GSM services in 11,000 towns across the country.

In the coming months RCom will roll out its coverage across 24,000 towns and six lakh villages, company chairman Anil Ambani said.

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Kingfisher’s daily Mumbai-London flight from today

Mumbai, January 4
Expanding its overseas operations, Vijay Mallya-run private air carrier Kingfisher Airlines will launch its daily non-stop Mumbai-London flight from tomorrow.

“We are set to launch our first flight from Mumbai to London tomorrow,” a Kingfisher Airlines spokesperson said here today, adding: “The flight has almost 100 per cent occupancy”.

Mumbai-London is the airline's second overseas route after its Bangalore-London flight was launched in September last year.

The airline has deployed a brand new Airbus 330-200 aircraft.

Kingfisher has also plans to launch Mumbai-Hong Kong operations from January 12 and the Mumbai-Singapore flight from January 16. Kingfisher flights from Bangalore and Chennai for Sri Lanka capital Colombo will start from January 19. — PTI 

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3G auction may be put off again
Girja Shankar Kaura
Tribune News Service

New Delhi, January 4
As the confusion over the auction of the spectrum for the third generation (3G) services continues with the Finance Ministry seeking to double the reserve price, reports suggest that the auction may be further put off. It was to take place on January 30.

While on one hand the industry remains divided over whether the move to raise the base price is justified at the last minute, on the other it is a worried lot as there is no clarity as yet when the auction would actually take place.

The industry is also worked up about the fact that the prevailing confusion and the attempts by the government to rake in as much revenue as possible in the absence of foreign players is only giving the state-run telecom companies - BSNL and MTNL - further advantage on rolling out of the 3G services.

Some of the private telecom operators have also reportedly written to the Department of Telecom (DoT) to hold allotment of spectrum to the state-run telecom companies in abeyance keeping in view the prevailing confusion over the auction.

While the state of flux continues, reports suggest the DoT is expected to agree to the latest suggestion to hike the reserve price.

The DoT is expected to agree to the suggestion as even the telecom regulator Telecom Regulatory Authority of India (TRAI) had earlier suggested that any allocation of spectrum in the future should be in accordance with the market forces.

Since the DoT had allocated 2G start-up spectrum of 4.4 MHz along with the licence at Rs 1,658-crore for all-India, one of the mobile operators justified the reserve price of Rs 4,040 crore for five MHz of 3G spectrum. However, some others say with the pricing already quite inhibitive, the further hike would prove to be a deterrent to the industry on the whole.

Reports suggest that it could well be by the middle of the month by when a new Cabinet note on the reserve price and some other suggestion is prepared and sent to the Cabinet secretariat. Comments from other ministries concerned were expected in the next 3-4 days following which the telecom commission may finalise its views on the subject.

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Tax Advice
Bank term deposit best investment for senior citizens u/s 80C
by S.C. Vasudeva

Q. I am a senior citizen. My income from pension and interest during the financial year 2008-09 will be around Rs 2,20,000 which is not taxable. I have a deposit of more than Rs 1 lakh in post office in NSS account in old scheme. I intend to withdraw this amount in two years and invest the same under Section 80C.

i) Kindly advise if I can submit Form 15C at the time of withdrawal to avoid TDS.

ii) Also kindly suggest the best investment scheme under Section 80C.

iii) In case of investment in NSC whether the annual interest accrued will be eligible for rebate under Section 80C.

— Raminder Singh, Patiala

A. You can submit Form 15H to the authorities for non-deduction of tax at source at the time of withdrawal of the amount from national saving scheme (NSS) account. The form contains a declaration to the effect that the tax on estimated total income of the previous year in which such income is to be included in computing the total income will be nil.

In the present circumstances, the best investment scheme under Section 80C of the Act would be the term deposit with the bank for five years or a deposit under senior citizen scheme. The interest earned on NSS account is not eligible for deduction under Section 80C of the Act.

Interest on FD

Q. Please refer to the query raised by Sh. Man Mohan Lal Gupta and your reply thereto published in The Tribune. In this connection, I invite your kind attention to Section 168 of the I.T. Act, 1961, according to which the interest accrued on FD’s left by a deceased is the income of the estate of the deceased till the estate is divided among the heirs.

The money will be divided among the heirs on realisation from banks. The income after that will be assessable in the hands of the heir. In view of the above, the legal heirs can credit the entire amount received by them from banks as capital receipt.

— Yogesh, Ludhiana

A. A perusal of the provisions of Section 168 of the Act would indicate that the provisions therein are applicable where an executor has been appointed by the deceased by virtue of his will. In such a case the assessment is made in the name of the executor in respect of the estate of the deceased. You will kindly observe from the query that there is no mention about the appointment of an executor. The facts in the query clearly indicate that it is a case of a person who has died without making a will and his legal heirs have claimed the maturity amount of the fixed deposit. The reply to the query is based on the facts given therein. In my opinion, the provisions of Section 168 of the Act are not applicable to the facts given in the query.

Tax on FDR

Q. I have an FDR with a bank of Rs 3 lakh with a maturity period of eight years. Every year, I submit Form 15G in April. In August, I sold some shares and got Rs 40 lakh as long-term capital gain. In August, the bank prepared an FDR in same account in which Form 15G was already given. Now interest accrued on FDR will be Rs 2,50,000. I will invest Rs 1 lakh in tax saving scheme. I am 45-year-old.

My question is am I right to do this or should I withdraw Form 15G from the bank and ask it to deduct tax on FDR?

— Neenu Gupta, Rohtak

A. You would not be entitled to file Form 15G because the interest income in your case is much above the maximum amount not chargeable to tax. It will, therefore, be advisable to allow the bank to deduct the tax at source on the amount of interest accrued on the amount of the FD. I hope you are aware that you are liable to pay capital gains tax on the capital gain arising on the sale of shares unless the amount of capital gain has arisen on the sale of equity shares which are listed in the stock exchange and the securities transaction tax has been paid on the sale of such shares. Further, you are obliged to pay advance tax in respect of such capital gain if the same is not exempt from the levy of capital gains tax.

Tax deduction

Q. I am a retired government servant and was granted compensate allowance/pension w.e.f. September 20, 1999 onwards. The D.T.O. (treasury) after calculating the arrears w.e.f. September 20, 1999 to September 30, 2008 deducted Income-tax at the rate of 10 per cent from the gross amount which cost me Rs 35,000.

i) Did the D.T.O. (district treasury office) deducted the income-tax according to the prescribed norms?

ii) Should not the income tax be calculated/deducted on yearly basis instead of gross amount? viz September 1995 to September 2008?

iii) Am I not entitled for exemption limit per year under Section 80 or Section 89(1) of the IT Act, 1961?

iv) Can the recovery of deduction of IT is possible? If yes under which section and how?

— MS Kashyap, H.P.

A. The answer to your queries is as under:

i) It is not possible to ascertain whether the deductions have been made as per the prescribed rates in view of the figures of total income not being available in the query.

ii) The income-tax will be deducted at source in the year in which the arrears are received by the assesses.

iii) You are entitled to a benefit under Section 89 of the Act.

iv) If the tax deducted at source is more than what is due after allowing the relief under Section 89 of the Act, the balance tax would be refundable to you. 

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Branch Network
HDFC Bank pips ICICI

Mumbai, January 4
Country’s second largest private sector lender HDFC Bank, which added 658 branches last year, has pipped ICICI Bank in terms of branch network.

As per the information available on its website, HDFC Bank has a nationwide network of 1,412 branches spread across 528 towns and cities. At the same time, ICICI Bank, the largest player in terms of asset and market capitalisation, has a network of 1,400 branches.

ICICI Bank has already got permission to open another 587 branches, a spokesperson of the bank said.

HDFC Bank has almost doubled its branch network last year through organic as well as inorganic growth route.

Last year, the Mumbai-based bank acquired Centurion Bank of Punjab leading to the integration of 404 branches, while it opened 254 new branches of its own during the year.

The bank also opened its first overseas branch in Bahrain during the year to provide trade financing to corporate clients and wealth management services for NRIs.

Recently, India’s largest insurer Life Insurance Corporation (LIC) of India increased its stake in the bank to over five per cent following acquisition of shares from the open market.

LIC purchased 1.6 lakh shares from the open market hiking its stake in the bank to 5.01 per cent. The equity holding of the insurer increased by 0.04 per cent from 4.97 per cent earlier. As on June 2008, LIC holding in the bank stood at 2.15 per cent, which went up to 4.7 per cent in September. — PTI

Buch may become chief of ICICI Securities

New Delhi: The country's largest private sector lender, ICICI Bank, may consider appointing its executive director Madhavi Puri Buch as the chief of its investment-banking arm, ICICI Securities.

The board of directors of ICICI Bank is meeting tomorrow and besides other issues it may consider appointment of two new functional directors in the place of KV Kamath and Buch.

At present, Buch is the executive director on the board of ICICI Bank. When contacted, ICICI spokesperson refused to comment on the board meeting. — PTI

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