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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS
B U S I N E S S

Slowdown Crisis
Turnaround to begin from Oct, says PC

Hyderabad, February 15
The recession-hit economy would begin to show signs of turnaround from October, the Union Home Minister P Chidambaram said today. Though the next financial year will begin on a tough note for the country, the situation will start improving a few months later, he said here.

Oil cos cut ATF prices
New Delhi, February 15
Public sector oil companies today slashed jet fuel or ATF prices by 3.7 per cent, the 10th reduction since September.

Exporters demand loan relaxation
New Delhi, February 15
In view of the global economic meltdown that has affected the export sector, the Federation of Indian Exports Organisation (FIEO) has requested the government to incorporate some relaxation so as to provide much-needed support to make the export sector competitive and sustainable.

Sapient confirms large-scale layoffs
New Delhi, February 15
Software major Sapient today confirmed the large-scale layoffs in its three facilities at Gurgaon, Noida and Bangalore, as a result of global meltdown and the resultant loss in business.



EARLIER STORIES



Market Update
Interim budget to set the tone
The interim general budget will set the tone for the stock market this week, which will be unveiled during trading hours on Monday. The stocks rose, this week, on expectations that the forthcoming interim budget will contain fiscal incentives to revive sagging growth, after official estimates showed the economy expanded at its slowest pace in six years. Because of the general elections due by May this year, a full budget for the 2009-10 financial year that begins in April is expected only after the general elections.

Tax Advice
No rebate on amount deposited in granddaughter’s PPF a/c
Q. My minor granddaughter (son’s daughter) is having her PPF account under the guardianship of her father. My son is a income tax payee and having his PPF account also. He has deposited the amount in PPF accounts during the financial year 2008-09 as under:

 





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Slowdown Crisis
Turnaround to begin from Oct, says PC
Suresh Dharur
Tribune News Service

Hyderabad, February 15
The recession-hit economy would begin to show signs of turnaround from October, the Union Home Minister P Chidambaram said today. Though the next financial year will begin on a tough note for the country, the situation will start improving a few months later, he said here.

“The 2009-10 will be a difficult year for our economy but there will be a turnaround from October or little thereafter,” Chidambaram said after inaugurating a Union Bank of India branch at Banjara Hills.

Exuding confidence that the country would register a 7 per cent growth, the Minister said, “With right leadership and policy, we will steer through difficult times as India has several factors going in its favour — demographic advantage and high degree of confidence in its economy. The 21st century is going to belong to Asia and India.”

He said a right mix of policies and leadership was required to steer the country through these difficult times. Claiming that the UPA government had succeeded in taming the inflation, Chidambaram said it would go down further in the coming months.

“Inflation remained a monster seven months ago but we successfully tamed it,” he said. Expressing satisfaction over the performance of public sector banks, the Home Minister informed that the government had no plans to dilute its equity in these banks below 51 per cent.

While banks all over the world were collapsing, the Indian banks had emerged stronger. He attributed the robust health of PSU banks to the UPA government’s policy of owning 51 per cent or more of equity.

“The last five years had vindicated the UPA’s policy and the same would continue in the next five years,” he said.

Chidambaram asked the banks to stand by its customers during difficult times by making loans affordable, providing more capital, rescheduling loans and modifying interest rates.

Appealing to the banks to further cut down lending rates in tune with the downward trend in inflation, he said, “Interest rates must be modified when there is an opportunity. Banks, right now, have been investing more than lending but they should step up lending and stand by the customers in difficult times. We still need greater policy support in this regard.”

“Our economy did well even in slowdown, thanks to our strong banking, insurance and services sectors. Besides, our farmers too have contributed to the growth story because of which our economic growth rate has been close to 9 per cent,” Chidambaram said.

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Oil cos cut ATF prices

New Delhi, February 15
Public sector oil companies today slashed jet fuel or ATF prices by 3.7 per cent, the 10th reduction since September.

Aviation Turbine Fuel (ATF) prices in Delhi were slashed to Rs 29,158 per kilolitre, effective midnight tonight, an official of Indian Oil Corp, the nation's largest fuel retailer, said.

The fuel used by airlines till today was priced at Rs 30,288 per kilolitre. After today's Rs 1,130 a kilolitre reduction, jet fuel is priced at early 2005 levels.

For the 3.3 per cent increase in rates on January 16, jet fuel prices have been reduced for the 10th time today since September 1, 2008, when international crude oil prices started to decline.

In Mumbai, home to the nation's busiest airport, ATF rates were down by Rs 1,191 per kl to Rs 29,985 per kl today.

ATF prices had peaked to Rs 71,028.26 per kl (in Delhi) in August on international crude prices touching historic high of $147 a barrel. But they have since been slashed every month till October and twice in November. — PTI 

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Exporters demand loan relaxation
Tribune News Service

New Delhi, February 15
In view of the global economic meltdown that has affected the export sector, the Federation of Indian Exports Organisation (FIEO) has requested the government to incorporate some relaxation so as to provide much-needed support to make the export sector competitive and sustainable.

The chamber has suggested that there should be an increase in drawback and DEPB rate by 3 to 5 per cent. “China, which is India’s major competitor, has increased rates by 5-7 per cent whereas we reduced it by 2-3 per cent in September 2008. The chambers has sought an exemption from fringe benefit tax because this is a tax on marketing and in these troubled times discourages exporters to aggressively market in new markets,” FIEO chief Sakhtivel said.

Exporters are working on wafer thin margins and taxation of the profit leaves them with no money for modernisation and expansion of manufacturing. IT exemption will also provide some liquidity to the sector and add to their competitiveness as they are loosing many orders. This relief should be provided on net foreign exchange basis so as to benefit the traditional sectors of exports more.

Creation of an export development fund for providing marketing exposure to MSME exporters should be increased. At present, the support given under the Marketing Development Assistance Scheme with total allocation of less than Rs 100 crore for promoting exports of $200 billion is just a drop in ocean, says FIEO.

The government should provide moratorium on term loan to exporters for a period of two years as they are facing toughest competition of the century and road ahead is more challenging.

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Sapient confirms large-scale layoffs
Girja Shankar Kaura
Tribune News Service

New Delhi, February 15
Software major Sapient today confirmed the large-scale layoffs in its three facilities at Gurgaon, Noida and Bangalore, as a result of global meltdown and the resultant loss in business.

It, however, said the persons who had been laid off had received severance packages and full outplacement services.

Reacting to the news item published in “The Tribune” on Sunday, a spokesman for the Cambridge, Massachusetts-based company said 300 employees across the board had been laid off. Reports had suggested that junior and trainee-level employees could have been handed the pink slips as it employs a large number of people at that level.

In a statement issued here, the company said, “Businesses worldwide are feeling the impact of the economic downturn and, as a result, are reducing budgets and delaying projects. In order to adjust to this changing demand environment, Sapient has exited about eight per cent of its people”.

Sapient employs approximately 6,400 persons globally and “as a result of this rationalisation 300 people in India have been impacted,” the company said.

It added that the exited people had received severance packages and full outplacement services, and will be considered for re-hiring on a “fast-track” basis, if the company finds that it again needs their skills and experience.

"These people were laid off to right size the company. They were at different levels of the management," a spokesman for the company said while adding that Sapient has two-thirds of its workforce in India.

Despite the short-term softness in demand, Sapient remains well-positioned in two large markets — IT services and interactive marketing.

“The company will continue to make strategic investments and targeted hires in several areas that are expected to drive success in 2009, including trading and risk management, marketing services and government services,” the company spokesman said.

Incidentally, reports said that the employees were laid off without any notice and armed guards were deployed around the offices on Friday and Saturday to stop sacked employees to enter the office premises.

In May last as well, the company had sacked 160 employees at the three centres and that rounded off to almost four per cent of the workforce.

While this time it used guards to prevent the employees from entering the premises, last time Sapient India managing director Sandeep Dhar had reportedly sent an email to employees to announce the sacking.

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Market Update
Interim budget to set the tone
by Lalit Batra

The interim general budget will set the tone for the stock market this week, which will be unveiled during trading hours on Monday. The stocks rose, this week, on expectations that the forthcoming interim budget will contain fiscal incentives to revive sagging growth, after official estimates showed the economy expanded at its slowest pace in six years. Because of the general elections due by May this year, a full budget for the 2009-10 financial year that begins in April is expected only after the general elections.

Stocks also got the boost after the inflation figures came in on Thursday. Inflation based on the wholesale price index (WPI) rose 4.39 per cent in the year through 31 January, 2009, much lower than the previous week’s annual rise of 5.07 per cent.

Global markets also hold the key to a surge in the domestic bourses. A recovery of the world economy and a thaw in the global financial markets could boost domestic stock markets as Indian firms need large sums of money to fund their capital expenditure plan. After a tough 2008, global markets have yet to convincingly recover amid doubts about the economic outlook, despite multi-pronged efforts by policy makers worldwide that have included tax cuts and lower interest rates.

Back home, any disappointment from the interim budget may spark a selloff as the market has witnessed a decent rebound from a recent low on expectations of offer of tax sops and sector-specific stimulus package to revive economic growth.

In our view, the interim budget would not be a big event but for a little tinkering here and there on the tax front. The market would be enthused if the STT (securities transaction tax) is cut.

This week, we once again recommend the buying of the defensive stock, GSK Consumer, with 2-3 years’ perspective.

GSK Healthcare

Huge segmental growth potential, strong brand recall, strong balance sheet and cash flows make GSK Consumer one of the best players in the FMCG space. Furthermore, its growth strategy of launching new products, capacity expansions and targeting new segments will continue to drive its growth in future. Investors may buy this stock with a minimum two years’ perspective.

The company’s flagship brand, Horlicks, and other brands like Boost, Viva and Maltova continue to perform well. GSK plans to double its revenue in the next four years in India. This company plans to achieve through focus on new launches through continuous innovations.

The company is planning to introduce products from its global parent’s portfolio in oral care, energy drink and other segments over the next three to four years.

GSK Consumer will also be launching new products targeting the bottom of the pyramid segment in the next two fiscals. Government incentives to boost rural and agricultural growth would ensure a strong demand for these products in the coming years. In India, the overall malted beverage penetration is still around 10 per cent of the population, which is indicative of immense potential for this market.

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Tax Advice
No rebate on amount deposited in granddaughter’s PPF a/c
by S.C. Vasudeva

Q. My minor granddaughter (son’s daughter) is having her PPF account under the guardianship of her father. My son is a income tax payee and having his PPF account also. He has deposited the amount in PPF accounts during the financial year 2008-09 as under:-

(i) In his PPF account - Rs 60,000

(ii) In her daughter’s PPF account - Rs 10,000

He will claim a tax rebate under Section 80 C for Rs 70,000

I want to know about the following:

As a grandfather, can I also deposit in her PPF account through a cheque amounting Rs 60,000 i.e. not exceeding the limit of Rs 70,000 of PPF account.

I am a retired senior citizen tax payee and the amount will be deposited / gifted from my pension / taxable income and will not claim the tax rebate under Section 80 C.

Kindly clarify and advise the suitable way.

— Chaman Lal, Ambala

A. The deposit of any amount in PPF account of your granddaughter would not entitle you to claim a deduction under Section 80C of the Act. It will be advisable to gift the said amount to your son who can thereafter utilise the amount so received for depositing the same in PPF account. He will thus be able to claim a deduction under Section 80C of the Act.

Tax liability

Q. I am working in PSEB and the CPF scheme is applicable to me. Every month 10% of Basic + DA (employee share) is deducted from my salary and the same amount (Employer’s share i.e 10% of Basic + DA) is credited to my CPF account by the employer. Will the amount credited by the employer to my CPF account be included in my earnings for the calculation of income tax or not?

— Ravinder Singh

A. The contribution by an employer to employees’ contributory provident fund is not treated as income if the same is to the extent of 12% of the salary. Excess of 12% of salary is taxable. Salary for the purpose of computation of the said 12% means salary including dearness allowance, dearness pay if terms of employment so provide. Salary also includes commission where commission is determined at a fixed percentage of turnover achieved by an employee. On the basis of the facts given in the query, the employer’s contribution being less than 12%, the same would not included in your earnings for calculation of Income-tax.

Tax on arrears

Q. This refers to your clarification dated 1-12-08 and again on 26-1-09 stating that arrears of salary/pension is taxable on a due basis and this holds good. A statement issued by the CBDT and published in the Economic Times on 1-10-08 says that TDS would be implemented only on 40% of salary/pension arrears actually paid in this fiscal. Is there any correlation resulting in deviation from the basic orders this time?

— V. N. Bhatia

A. The income from salary is taxable on a due or receipt basis whichever of the two events occurs earlier. It is on account of this principle that the salary received in advance is assessed in the year of receipt. The clarification issued by the Central Board of Direct Taxes for deduction of tax at source on the amount of 40% of salary/pension arrears is, therefore, linked with the receipt of 40% of arrears of salary/pension. It may be pointed out that in the first instance the Central Board of Direct Taxes had clarified that the tax at source would be deducted on the entire amount of arrears due to an employee as a result of the decision of the Sixth Pay Commission. The deduction in respect of 40% of the arrears has now been made so as to provide a relief to the assessee having income from salary/pension.

Gift by son

Q. I am receiving a sum of Rs 25,000 per month from my son towards the household expenses. The amount is remitted to me by a bank transfer every month from Mumbai where he is employed. Is the amount received from my son taxable? I may add that my son is filing his tax return and this money is being sent out of his taxed income.

— R.S. Adlakha

A. The amount of Rs 25,000 per month received from your son can be treated as his contribution towards the household expenses or as a gift to you. He can reflect the same in his statement of expenditure in the manner he likes. Even if the same is treated as a gift to you there is no tax liability as gift by son to his father is not covered within the provisions of Section 56 of the Act.

Form 15-G

Q. I am 63 years of age. I have been filing my tax return regularly though my tax liability is nil for the past many years. I am submitting Form 15-G with the banks for non-deduction of TDS. My total income is mostly interest from bank and post office deposits. This income goes above the prevailing exemption limit (which at present is Rs 1,80,000 for women) and this is brought down to, say, Rs 1,70,000 by way of investment in PPF, etc under Section 80C.

Kindly advise if I:

(a) can submit Form 15-G to the bank for no TDS?

(b) am required to file tax return in this case?

— Asha, Panchkula

A. Your queries are replied as under:

(i) Form 15G is not applicable to you as your income from interest exceeds the maximum amount not taxable.

(ii) You are liable to file income-tax return as your income exceeds the maximum amount not chargeable without giving effect to the provisions of Chapter VIA of the Income-tax Act 1961 (the Act), which covers Section 80C of the Act. This is in accordance with a proviso to Section 139 of the Act which was introduced by the Finance Act, 2005, effective from 01.04.2006. 

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