Minister Pranab Mukherjee released the draft of the Direct Taxes Code 2009 (DTC 2009) for discussion and debate after which the final Code will replace the IT Act, 1961 with effect from April 1, 2011.

The draft proposes drastic changes in personal taxation and tax administration. It seeks to simplify the tax structure by doing away with plethora of tax exemptions, ushering in moderate levels of taxation, improving the efficiency and equity of the tax system by eliminating distortions and expanding the tax base. It begins the simplification process by removing the confusion about ‘assessment year’ and ‘previous year’ (which confused the taxpayers about the year for which the returns were being filed) by replacing them with the unified concept of ‘financial year’. Now, to under-stand how the DTC 2009 proposes to simplify it further, let’s first look at the changes proposed in the tax structure.

Huge Relief for Taxpayers

The massive increase in income tax slabs was totally unexpected and created a huge buzz among individual taxpayers. Although the basic exemption limit has been retained at Rs 1.60 lakh (Rs 1.90 for women and Rs 2.40 lakh for senior citizens), the 10 per cent tax slab upper limit has been hiked from Rs 2.50 lakh to Rs 10 lakh, 20 per cent tax slab has been hiked from Rs 2.50 lakh-5.00 lakh to Rs 10 lakh-25 lakh, while the 30 per cent tax slab has been hiked from Rs 5 lakh to Rs Rs 25 lakh (See Table-I). Now, that’s a massive hike in tax slabs and, no wonder, the DTC 2009 has warmed the hearts of all taxpayers, especially salaried taxpayers.

The reason is simple. An individual taxpayer drawing an annual salary of Rs 6 lakh is presently liable to pay Rs 84,000 as tax, while his tax liability under the new tax code would be just Rs 44,000! That’s straightaway reduction in tax liability to the tune of Rs 40,000 and that too without availing any tax exemptions!

Hike in Exemption Limit

DTC 2009 proposes to raise the exemption limit for savings and

investment from the present Rs 1 lakh available under Section 80C of the Income Tax Act, 1961, to Rs 3 lakh under the proposed Section 66 of DTC 2009. The tripling of the exemption limit would provide more relief to taxpayers who invest in approved provident and superannuation funds, life insurance schemes and New Pension System. This is aimed at encouraging long-term savings and investments. Hence, if a person draws a salary of Rs 6 lakh per annum and fully avails of the exemptions of Rs 3 lakh under Section 66, he would be liable to pay tax of only Rs 14,000 under the DTC 2009 as against his tax liability of Rs 54,000 under the IT Act, 1961.

Tution Fees & Interest On Education Loan

Actual tution fees paid to school, college or university in India for the purpose of full-time education of two children during the financial year would be eligible for deduction under Section 67 of the DTC 2009. Such full-time education would also include play schooling and pre-schooling. However, it would not include any payment made toward development fees, donation or payment of similar nature.

Apart from tution fees, the interest paid on education loan taken from bank or financial institution for higher education would also qualify for deduction under Section 68 of the DTC 2009. Such deduction would be allowed in respect of the initial financial year and seven financial years immediately succeeding the initial financial year or earlier.

Health Insurance Premium & Medical Treatment

The health insurance premium paid by an individual for insuring his own health would be eligible for deduction under Section 69 of DTC 2009, subject to a maximum of Rs 15,000 per annum (Rs 20,000 for senior citizens). A further deduction of Rs 15,000 would be eligible for insuring the health of the individual’s parents (Rs 20,000, if the parents are senior citizens). In the case of medical treatment, the actual amount paid for treatment of specified diseases during the financial year would be eligible for deduction under Section 70 of DTC 2009, subject to a maximum of Rs 40,000 (Rs 60,000 for senior citizens). However, the deduction would be reduced by the amount received from an insurer for the medical treatment.

Wealth Tax

Apart from hike in income tax slabs, the DTC 2009 proposes to raise the

wealth tax threshold limit from a miniscule Rs 30 lakh to a huge Rs 50 crore. To top it all, the tax rate would also be slashed from 1 per cent to just 0.25 per cent. This effectively means that only the super rich having wealth in excess of Rs 50 crore would have to pay wealth tax, while others having wealth less than Rs 50 crore would be spared the burden.

The Minuses

Of course, not everything is goody-goody about DTC 2009. It proposes to do away with quite a few exemptions and deductions which are currently available under IT Act, 1961. Currently, interest paid on housing loan is deductible upto a maximum of Rs 1.50 lakh, while principal repayment of housing loan qualifies for deduction upto a maximum of Rs 1 lakh. Hence, the maximum consolidated benefit for both principal and interest is to the tune of Rs 2.50 lakh. This would be no longer available under the DTC 2009, which is a major setback for those who are repaying home loans.

Another major setback for the taxpayers is the withdrawal of tax benefits for investing in various tax saving schemes such as equity-linked savings schemes (ELSS) and unit-linked investment plans (ULIPs) offered by mutual funds, National Savings Certificate, National Savings Scheme and Monthly Income Scheme offered by post offices, 5-year fixed deposits by banks, etc.

A Good Beginning
All in all, despite the minuses, the Finance Minister has made a good beginning. The advantages offered by DTC 2009 would far outweigh its disadvantages. After the FM incorporates various suggestions offered by the people and institutions, one can hope that final DTC 2009 would offer a much better deal to the taxpayers than it does in its current avatar.

Source : http://tinyurl.com/2vmy8bb

Prime Minister Manmohan Singh said he appreciated the Supreme Court’s sentiment behind its suggestion about distributing foodgrain free to the poor, but made it clear that it was not a practical idea.

“How can foodgrain be distributed free to an estimated 37 percent of the population which lives below the poverty line,” Manmohan Singh asked during an interaction with editors at his official residence. He said this when asked about a recent Supreme Court order directing Agriculture Minister Sharad Pawar to distribute foodgrain free to the poor instead of allowing it to rot.

It was not possible to give free foodgrain to all the poor, Manmohan Singh said, adding that he had not not seen the final judgment of the court.

The prime minister stressed that he respected the “sentiments” behind the decision and assured that a way would be found to ensure that the people’s needs are met at a time when foodgrain is rotting.

“I do recognise that food should be available to the people below poverty line at concessional prices. We have not not allowed any increase in the issue price of foodgrains to people below poverty line since 2004,” he said.

The government had taken adequate steps in this direction to make food available to the poor at affordable prices, the prime minister said. He, however, qualified this by stressing that making food available free would destroy incentives to farmers to produce more. If there was no no food available, there would be nothing to distribute, he said.

Source : http://tinyurl.com/2brq7hs

The Indian rupee extended gains to its strongest level in nearly four weeks on Monday afternoon, boosted by the gains in the domestic sharemarket and the dollar’s losses versus major currencies.

At 1:20pm, the partially convertible rupee was at rS46.46/47 per dollar, after hitting Rs46.4550, its strongest since 11 August, and above its Friday’s close of Rs46.63/64.

The index of the dollar against six major currencies was down 0.2% and most Asian currencies were stronger against the dollar.

The dollar dipped on Monday and looked poised to test a 15-year low against the yen after failing to retain gains made after US jobs data, although caution about Japanese intervention deterred further yen buying.

Less-dire-than-expected US payrolls data last week eased market anxiety over chances of a global slowdown and boosted demand for the euro and growth-leveraged currencies.

Indian shares were trading 1.6% higher, taking cues from strong Asian markets.

One-month offshore non-deliverable forward contracts were quoted at Rs46.66, weaker than the onshore spot rate.

In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were both at 46.6125, with the total traded volume on the two exchanges at about $2.05 billion.

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With a view to reach out to more customers, the National Stock Exchange (NSE) is gearing up to launch mobile trading through nearly 800 registered brokers in early October, an NSE official said.

Currently, only about 10-15 big brokers who have the infrastructure offer mobile trading but at very high costs.

“For the first time in India, NSE is taking steps towards facilitating nearly 800 members and their clients (total 12-million investors) to trade through the mobile infrastructure set up by NSE from early-October,” the NSE official said, adding that it had 1,200 active brokers.

In early October, the NSE will enable any registered broker or a client to trade through their mobile phones. Clients can place orders, view positions and trade from anywhere in the country, the official said.

NSE’s 50 randomly picked brokers will start getting market data on their mobiles from September 6. The market data facility will be extended to all brokers and investors on their mobiles, effective from September 13.

The data includes the best bid and ask prices of Nifty stocks, other stocks, derivatives and currency.

Mobile trading will be conducted similar to Internet trading. It will be facilitated on the NOW software that NSE provides to its brokers free of cost. The market data will also be provided free on brokers’ cell phones and later on investors’ cell phones.

NSE has facilitated mobile trading on its hardware. Then brokers will be given a URL on their cell phones. When they get access, they will have to put in a user id and password to ensure identification, to ensure there is no risk because it’s being done from their cell.

Once clients go through these formalities, they can look at the prices and market data. The links will be just like they are for Internet trading.

Through the NOW platform, there will be connectivity given to the Internet National Exchange of India, which will be connected to the service providers. They will be connected to the cell phone towers and then to the mobile.

The high speed connectivity is given from the exchange to the cell phone as fast as Internet speeds through BSNL, Airtel and Tatas, the official said.

The main advantage of mobile trading will be anyone sitting in Sikkim or Siliguri can also see market data at the same speed as brokers or registered clients.

The mobile trading offering was in keeping with NSE’s philosophy of reaching out to people in smaller towns, semi urban and rural areas without their spending any money on the infrastructure, he said.

People who have low-end phones with GPRS connections can also use this facility, which means 99 per cent of the mobile users are covered.

Also, if someone travels abroad and is a registered client with a broker, the client can trade from there directly with the exchange, even from a number that is different from the India number because the client would be writing the user id and password.

However, the broker will have to provide the software to his client to facilitate mobile trading from his end.

Commenting on the safety issue, the official said that safeguards have been built-in to ensure that the right people trade and messages are not tampered with. The identification will be done through user id and password, the message integrity through end-to-end encryption so that others can not see and it can’t be tampered with and the data will not be stored in the mobile for long.

Among top 2 Asian bourses with highest volumes

The country’s leading bourse, the National Stock Exchange (NSE), has been rated as one of the top two Asia-Pacific bourses, boasting the highest volume of trading in financial derivatives contracts, a report by global consultancy Celent said. The study, which examined the growing clout of Asia- Pacific derivatives exchanges worldwide, said the region’s strong economic growth has resulted in a strong interest in derivatives trading. The Korea Exchange (KRX) and India’s NSE have emerged as the most successful bourses in Asia and also figure among the leading exchanges globally in terms of their financial derivatives contract trading volumes.

Source : http://tinyurl.com/39lou5q

More NRIs may fall under the tax net if the Direct Taxes Code (DTC) Bill proposal to impose a levy on their global income if they stay in India for more than 60 days in a year is approved by Parliament.

As per the existing Income Tax laws, an NRI is liable to pay tax on global income if he is in India in that year for a period or periods amounting to 182 days.

Furthermore, in case an NRI resides in India for a period of 365 days or more over a period of four years prior to the assessment year, he is also liable to pay tax on his global income.

The new DTC Bill has proposed to make an NRI liable to pay tax on global income is he resides in India in a particular year for a period or periods amounting to 60 days, down from the existing provision of 182 days in the existing Income Tax Act.

However, the present dispensation for taxation of global income if an NRI resides in India for 365 days or more over a four-year period has been retained in the proposed DTC.

The DTC hopes to plug loopholes with the proposed changes with the aim of preventing tax evasion through this route, said a senior Finance Ministry official.

In addition, the DTC has also removed the ‘Resident Not Ordinarily Resident (RNOR)’ category to simplify the tax laws, the official said.

Now, there will be only two categories, ‘Resident’ and ‘Non-Resident’, the official added.

Commenting on the proposal PwC Executive Director (Tax) Kuldeep Kumar said, “With this change, a non-resident would be at greater risk of becoming an ordinary citizen and become liable to pay tax in India as the threshold limit has been reduced.”

There would be liability on a resident belonging to a country where the tax rate is lower than India and there is a Double Taxation Avoidance Agreement (DTAA) between both the countries. The non-resident would be considered a resident if the threshold limit of stay has been exceeded for the purpose of imposing tax.

In the case of a resident of a non-treaty country, which India has no DTAA with, the tax burden would be higher if he exceeds the threshold limit of stay in India, Kumar said, adding that he has to pay tax on all the global income in India as well as the country of residence as per the prevailing tax laws…

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Nearly a million bank employees owing allegiance to the All India Bank Employees Association (AIBEA) will go on a one-day token strike on 7 September in support of a general strike called by national trade unions to protest government policies.

The strike call was given by trade unions, including INTUC, AITUC, HMS, CITU, AIUTUC, UTUC, TUCC and AJCCTU, under the banner of the National Trade Convention to protest a host of issues like foreign direct investment in public sector banks and entry of foreign banks amongst others.

The trade unions are also protesting an amendment in the Banking Regulation Act section 12(2) that seeks to remove 10 per cent cap on voting rights and making it up to 74 per cent, which they say, is aimed at handing over private sector banks to foreign banks.

Employees from public, private, foreign, cooperative and regional rural banks, would join the strike, AIBEA said in a press release.

The proposed strike is expected to affect normal functioning of banks in the country, the Indian Bank said in an intimation to the Bombay Stock Exchange (BSE).

AIBEA had served a notice of strike on the Indian Banks Association (IBA) on 11 August 2010 and the IBA had subsequently advised constituent banks to take necessary action, including wage-cuts as per extant guidelines of the government and the IBA.

Banks have also been advised to inform the public about the proposed strike through notices prominently dispalyed at individual branches.

Source : http://tinyurl.com/2gyjqg6

The stock exchange regulator has asked all listed companies to convert 50 percent of their non-founder holding to dematerialised form by Oct 31 to continue trading in the normal segment on stock exchanges. Trading of securities in companies, which do not meet the new criteria deadline, would happen in the trade for trade (TFT) segment only, the Securities & Exchange Board of India (SEBI) said in a circular.

Trade-for-trade refers to stocks in which trades must be settled on the same day with delivery of securities. SEBI also said stocks would be traded in the TFT segment for the first 10 days in case of mergers, capital reduction, corporate debt restructuring, securities admitted directly from another exchange, except if the securities are traded in the derivatives segment.

The move would hardly impact trading patterns of big companies, Tarun Sisodia, head of research at Anand Rathi brokerage, told Reuters over the telephone. “There are small companies and defunct companies, which have a substantial portion of promoter-shares in dematerialised form… the move is for these firms,” he said. If a company fails to meet the new norm, trading shall take place in TFT segment for the first 10 days with the applicable price band, SEBI said.

Source : http://tinyurl.com/2dqpey5

Food price index rose 10.86 percent and the fuel price index climbed 12.71 percent in the year to Aug. 21, government data released on Friday showed.

Food inflation accelerated from the previous week’s annual rise of 10.05 percent and fuel inflation was at 12.57 percent in the previous week. The primary articles price index was up 15.19 percent, compared with week-ago’s reading of 14.75 percent.

The wholesale price index, the most closely watched inflation gauge in India, rose 9.97 percent in July from a year earlier after remaining above 10 percent for five months until June.

Source : http://tinyurl.com/33wl8qp

Brazilian state oil company Petrobras will sell up to $64.5 billion in new stock — one of the largest in capital markets history — to raise funds for the world’s biggest oil exploration investment plan.

At Thursday’s closing price for the stocks, the company would raise 67.8 billion reais ($39.2 billion) from the sale of common shares and another 43.8 billion reais ($25.4 billion) from the preferred shares, making it one of the world’s largest- ever stock offerings.

Petrobras expects to begin bookbuilding Sept. 3, and price the share sale on Sept. 23.

The plan has become the financial cornerstone of the company’s $224 billion five-year investment plan meant to turn Brazil into a major oil exporter by tapping oil buried deep

under the ocean floor in a region known as the subsalt.

The company faces skepticism by investors who have questioned the high price for the oil reserves to be used in the state-backed oil-for-shares swap arrangement, which has

sparked fears Petrobras may be overpaying for the assets and diluting shares.

Under the terms of the $43 billion oil-for-shares swap, Petrobras said on Wednesday it agreed to exchange part of the stock to be issued for development rights to 5 billion barrels of offshore oil at a price of $8.51 per barrel — far above the $5 to $6 per barrel that markets saw as fair.

The swap will endow Petrobras’ assets with valuable oil reserves.

The segment of the share sale outside the oil-for-share swap is primarily targeted at non-government and minority shareholders, who will provide the only cash in the operation.

Their participation will be crucial for Petrobras to shore up its balance sheet, which has been stretched by heavy borrowing to finance its ambitious offshore plans.

Government leaders have also said they plan to boost the state’s participation in the company’s capital to around 40 per cent current levels near 30 per cent, which has left some investors nervous about greater state sway in the company.

Analysts said the large size of the share swap with respect to the entire operation — authorized by shareholders for up to $85 billion — shows the government expects it will be able to pick up a considerable number of shares not subscribed by private investors.

Petrobras’ preferred shares, its most widely traded class of stock, closed at 27.60 reais on Thursday while common shares closed at 31.24 reais.

INVESTOR INTERESTBut some investors say those concerns have already been priced into the…

Source : http://tinyurl.com/3x5lcev

If, by the wave of a magic wand, we had a squeaky clean bunch of people running the Commonwealth Games, would we be able to do a fabulous job? Would we be able to do what Beijing did with the Olympics? As the dirt flies around our Games preparation, this is the question that’s been bothering me. So I am digressing from the world of personal luxury to explore instead what would definitely be a luxury for the nation today: a beautifully organized Commonwealth Games.

I was in Beijing a couple of months ago and right from landing at the swish Norman Foster-designed airport—built for the Olympics—it had me marvelling about China’s ability to put up spectacular buildings and enormous infrastructure networks with the ease of a child playing with Lego. As I drove to my hotel—on multi-lane, tree-lined, First World highways—the other part of my brain couldn’t help but compare and cringe about our inability to construct competently. Pictures of half-finished, debris-strewn Commonwealth Games sites and the dug out, tangled up roads went through my head.

Corruption is the game spoiler in India—that’s the broad tune we have been humming collectively as a nation, as we watch overpriced treadmills and toilet paper turn into mascots of greed gone berserk. But I have been wondering how China, which too has record levels of corruption, manages to host a magnificent Olympic Games, and in the process build iconic structures such as the Bird’s Nest and the Water Cube. China and India are neck and neck on corruption measures—Transparency International ranks China at No. 79 and India at No. 84, with a Corruption Perception Index score of 3.6 and 3.4 respectively. Chinese politicians and bureaucrats are up to the same hanky-panky as ours, and evidently to the same shameful extent.

Also Read Radha’s previous Lounge columns

Taking corruption out of the running will be a blessing—and a much-needed moral victory—but that in itself won’t deliver a dazzler of a show. China is a winner, despite endemic corruption, because it has three essential enablers that we don’t—it aims higher, it implements faster, and it plays stronger.

Aims higher

China has “satellite vision” whereas we tend to have “in the well” vision. China scans the world to see what is “best” and then sets out to better it. Take the high-speed train network that it is putting in place—when it is finished in 2020 it will be the world’s largest, fastest, and most technologically sophisticated. I had a taste of it: I took the train from Beijing to Tianjin (something like Mumbai to Pune)—also built ahead of the Olympics—and sat in wonder as the speed reached 300-plus kmph, zipping through the 117km distance in half an hour flat. What was equally compelling was the ease with which huge numbers of passengers were processed—it felt like an enormous airport, run so efficiently that even without speaking a word of Chinese I had an incredibly smooth experience right from buying the ticket in Beijing to getting into a taxi at the other end in Tianjin.

The stadiums built for the Olympics are another example of China’s better-than-the-best mindset. The Bird’s Nest isn’t just another stadium—it is a masterpiece on a global scale, utterly modern and unmistakably Chinese at the same time, an instant icon that always makes me smile. The Beijing Water Cube is another stunner. The best architects in the world put in their best effort for the Chinese Olympic structures—Swiss architects Herzog & de Meuron won the prestigious Lubetkin award for the Bird’s Nest; Australian firm PTW Architects (for the Water Cube) and Foster and Partners (for the Beijing airport) were finalists for the same award. Contrast this to what we have made for the Commonwealth Games—even if you set aside the implementation snafus, the vision itself is limited, the aim being simply to have something better than what we had before. How can you dazzle when you aim so low?

Implements faster

This is probably our greatest pain point and China’s shining strength. While our Games preparation is in the hopeless scramble phase, the Chinese were so far ahead of schedule with their Olympic preparations that the International Olympic Committee had to urge them to take it easy. “We had to persuade the Chinese to slow down on their schedule,” Kevan Gosper, vice-chairman of the Olympic Coordination Commission, was quoted as saying in October 2006. Despite the slowdown, the Water Cube was delivered and tested with a national event in January 2008, a good six months before the Olympics start date. The Bird’s Nest was inaugurated in June 2008. All 31 games venues were finished in good time, even the polluted skies of Beijing were cleaned up, and the city itself was dressed up like a bride for her wedding.

Plays stronger

It is finally about the games, the performance of the players, that’s what gets a nation’s pulse racing. While we struggle to put an occasional athlete on the world map, China has steadfastly built its sporting prowess with remarkable results. At the 1988 Seoul Olympics, China ranked 11th with 28 medals; four years later at Barcelona it pole-vaulted to No. 4 with 54 medals; at Sydney it was up to No. 3, bagging 58 medals, 28 of them gold; at Athens it advanced to No. 2, 63 medals in its kitty, 32 gold; and then it put on a breathtaking show on home turf: a haul of 51 gold medals, the highest in the Games, although its total medal tally of 100 was behind the US’ 110. China can clearly build more than physical infrastructure.

Is China perfect? Not by a long shot—the recent 10-day traffic jam near Beijing is a case in point. It struggles with developmental issues just like us, but by using the “aim higher, implement faster, play stronger” principle, it has managed to get streets ahead.

Closer home, the Indian Premier League is a vivid example of the aim-higher-implement-faster-play- stronger principle. Was the IPL a spectacular show? Yes. Was it clean? Doesn’t seem so.

Exactly my point—killing corruption is necessary, but not sufficient. Faster, higher, stronger—the Olympic motto—that’s what we really need to embrace. And build an India that we can truly be proud of.

Source : http://tinyurl.com/2we3mhs