News

The sector had attracted FDI worth USD 6.11 billion 2008-09.

However, inflows in the sector, including financial and non-financial services were highest in comparison to other segments, State Minister for Commerce and Industry Jyotiraditya Scindia said in a written reply.

Of the USD 4.39 billion FDI, about USD 1.99 billion came from Singapore.

As per the data of the Department of Industrial Policy and Promotion, computer software and hardware, telecommunications, and housing and real estate were the other sectors that attracted highest FDI.

"As far as the life industry IPO guidelines are concerned, the matter is very advanced and is currently with a body of Sebi," J Hari Narayan, chairman, Insurance Regulatory and Development Authority, or IRDA, said at the sidelines of a Ficci conference on Friday.

Currently, most private insurance ventures are 74% owned by Indian arm and 26% by the foreign insurance partner. Once the rules are notified, the Indian partners will be able to raise public equity to fund expansion.

Rules for public offers by general insurance companies will, however, be ready in a couple of months. "As regards the non-life companies, a lot of work has to be done on valuation and (guidelines) should be ready in a couple of months," he said.

Besides, state-owned Life Insurance Corporation, 22 private companies are offering life insurance policies. The general insurance sector has 21 players which include four state-owned companies.

Several private sector insurers, including Reliance Life have shown interest in tapping the capital market. The regulator also voiced concern at the differential charges levied by health insurers based on the mode of payment. Mr Narayan said a parliamentary committee in 2006 had recommended that it was necessary to regulate medical costs and impressed upon the government the need to set up a health regulator.

The permission to relocate units will be given on a case-to-case basis by the BOA, a commerce department official has said. The board, chaired by commerce secretary, clears SEZ proposals and frames rules guiding these zones.

Permission to relocate could easily be granted to units that are yet to start their operations or units that have started sourcing inputs but not started production, he said. BOA may take a cautious approach in cases where production and exports have started. "Where production and sale of goods have started in a unit, one has to consider provisions for income tax exemptions for migration of goods," he said.

The BoA, therefore, decided that permission would be given to units seeking transfer on a case to case basis.

Allowing SEZ units to shift base could help in business consolidation as companies with several units in different SEZs would have the option of bringing them under one roof. It would also help if for reasons of geographical proximity to a source of input or to a market, a unit owner wants to move to another SEZ. "While it is not a frequent request that we get, but for reasons of consolidation or geographical proximity, a unit may want to shift. We thought that there was no harm in allowing them to do that," said L B Singhal, director general, export promotion council for EoUs and SEZs and a member of the BoA. The commerce department is also likely to come up with guidelines for transfers so that adequate monitoring takes place during the process.

DTC will change this. Property held for less than a year is called a short-term gain and the profit is added to your income. If you gained Rs10 lakh in a property flip and you are in the 30% tax bracket, you will pay an additional Rs3 lakh as tax. If you have held it for more than a year, then you can index your property to wipe out the rise in property value due to inflation and pay the tax on the real (ex-inflation) gain. The tax rule remains the same; the profit gets added to your income and you pay at the marginal tax rate.

The other change is that in the base date for the calculation of tax on the value of the property will be shifted from 1 April 1981 to 1 April 2000. The impact of this depends on the age of the property. Says Hemal Zobalia, executive director, KPMG: "You stand to gain if your property is old and was acquired some 15-20 years back, but if you have a relatively new property, acquired post-2000, you will lose."

The big relief for home loan borrowers is the continuation of the tax deduction of Rs1.5 lakh. The August 2009 discussion paper had proposed doing away with this tax break and was met with huge resis- tance. This tax break is back on the cards.

Exemptions given on unit-linked insurance products (Ulips), equity-linked saving schemes, national savings certificates and post office term deposits under Section 80 C of the Income Tax Act too may end next year.

The revised discussion paper on DTC released yesterday proposed to exempt provident fund, new pension system (NPS), approved pure life insurance products and annuity schemes from paying tax at the withdrawal stage. It did not provide any clarity on other saving instruments, currently exempted from tax at all three stages -- investment, accumulation and withdrawal -- called EEE (exempt-exempt-exempt) in tax parlance.

A finance ministry official said, "Ulips, fixed deposits, saving schemes will be taxed like another financial product. Tax relief should not be the driver for investment into any product."

Source: Business-standard All bank FDs may come under tax net

"It is clearly good for India Inc," said Mukesh Butani, head, tax practice at BMR & Associates. "However, it is not clear as to what would be the rate of MAT, presently at 18 per cent."

MAT is creditable against corporate tax that can be carried forward for eight years. But the revised direct tax code is not clear whether this credit mechanism will be there.

The original draft code had prescribed a 25 per cent corporation tax and a MAT of two per cent on gross assets for companies. It also changed the basis for computing MAT from book profits to gross assets. MAT was proposed to be paid even during loss-making years, with no set-off against future profits.

Source: Business-standard Minimum Alternate Tax (MAT) Change Brings Smile To Industry

Now, profits made by foreign arms of Indian companies are taxed only when they are distributed through dividend to the parents.

Many Indian companies avoid or defer bringing back profits to India and instead, deploy the funds for overseas expansion. This results in delayed or non-payment of tax on profits made by foreign arms.

Introduction of CFC rules would require an amendment to the Income Tax Act. The government can either introduce the rules in the Finance Bill of 2011 or make the provisions in the second draft of the Direct Taxes Code, likely to be released for public discussion this month.

Source: Business-standard Govt plans new norms to tax profits by Indian firms abroad

India Inc may have to pay higher interest rates to banks as the base rate system kicks in from July 1.

Bankers expect State Bank of India (SBI) to set its base rate close to 8 per cent. Th rate of other public sector banks is likely to range between 8.25 per cent and 9 per cent. Since no bank will be permitted to give loans below the base rate, large companies, which had been getting loans lower than the benchmark prime lending rate, will now have to pay as much as 200 basis points more, bankers say.

Banks will now be more precise in selecting the premium for risk and tenure, resulting in an increase in the loan rates to the corporate sector, say bankers. "Cost of borrowing will slightly increase, to the extent money is borrowed from the banks. Once we determine a base rate, we will not be able to give a loan to any corporate below the base rate. At this moment, there are some AAA companies who are enjoying a 7-7.5 per cent rate," said a banker who was a member of the Mohanty panel on the base rate.

"Banks will be more conscious now about their net interest margins, risk and tenure premium, which they earlier were not. They will also be more conscious about various allocatable and unallocatable costs.

Source:Business-standard Companies May Have To Pay More Under Base Rate System

HRD minister Kapil Sibal has asked higher education secretary Vibha Puri Das to set up a committee to look into the issue of providing "partial autonomy" to higher education institutes to enable them to be flexible in matters of salary for faculty, funding specific projects without having to rush to New Delhi for approval from the ministry.

The committee, to be formed shortly, will consider the parameters of autonomy to institutions. It will submit its report in three months after which the ministry will need to seek Cabinet approval before the institutes are given this flexibility in financial matters.

The decision to consider the possibility of partial autonomy was made in the course of a meeting of the Higher Education Roundtable, headed by Mr Sibal.

It was pointed out by IIT (Madras) director M S Ananth and IIM (Kozhikode) director Debashis Chatterjee that institutes like theirs are unable to take the decision to hire faculty at higher salaries because they need to get approval from the ministry, an exercise that leads to delays and lost opportunities.

They also said that even when companies offer to pay the extra amount required to hire specific experts or professors, the institutes are unable to take a decision as any deviation from norm requires prior approval from the ministry. This limited manoeuvering has meant that the newer institutions have to make do with fewer faculty, as they are unable to attract teaching staff at the current emoluments.

The committee would also consider moving from the system of block grants to norm-based grants for greater manoeuvering space for institutions.

 "The ministry of finance and department of disinvestment are receiving different points of views from public sector enterprises and other stakeholders....So if there is any need for modfication or correction or amendment that will done,", finance secretary Ashok Chawla told reporters on the sidelines of a CII Summit.

The finance ministry had last Friday notified changes in the Securities Contracts (Regulation) Rules making it mandatory for all listed companies to have a minimum public float of 25%.

The new rule implies that any company listing its securities on a stock exchange will be required to have public float of at least 25%. Already, listed companies having a public float of less than 25% have to mandatorily raise their public shareholding by a minimum of 5% every year till it reaches 25%.

Source: Economic Times Early Revisit: Govt Open To Changes in 25% Holding Norms

The Finance Ministry today notified a rule in this regard, the official added.

Earlier, Parliament had approved raising the limit of gratuity to be exempted from income tax.

The Payment of Gratuity (Amendment) Bill, 2010, was passed by the Parliament in this regard in the Budget session.

While the Sixth Pay Commission had raised the limit for Central Government employees, the Cabinet later enhanced the ceiling for the private sector workforce as well

"This matter is not for us alone (to decide), it is a matter which involves the RBI as also the commerce ministry... we will have to coordinate with different ministries to see what is the consensus to be reached about the Big Four (international auditing firms)," corporate affairs minister Salman Khurshid told the news agency on Monday when asked if the government would open the doors for these firms to do auditing here.

Existing rules do not allow foreign firms to carry out auditing functions in the country. However, these firms have often been accused of indulging in surrogate practices. At present, these companies are allowed to carry out functions such as advisory, consulting and research only.

Most recently, the name of PwC's member-firm PriceWaterhouse came under the scanner for its role in the Rs 10,000-crore Satyam scam which rocked the corporate world in January last year. The Institute of Chartered Accountants of India-appointed high-powered committee on Satyam has also found that multinational auditing firms have been flouting rules and practising in the country through local affiliates.

Explaining the rationale behind allowing the entry of foreign auditors, Khurshid said, "if they are allowed, we can fix more responsibility on them." However, he added, the interest of domestic firms would be kept in mind while allowing the foreigners to open shops here.

"This is not any more a world in which you can create huge barriers for services or trade; but you have to protect your own territory, your own turf and give your own citizens a level-playing field. Therefore, it is our duty and mandate to ensure that we protect our professionals," Khurshid said.

Entities, which are listed on the bourses, are mandated to announce their financial status.

Companies, which are not listed, have to file their records with the RoC. At present, there are over 8,000 listed companies.

"There is an ongoing problem of companies not filing their records on time," Salman Khursheed, corporate affairs minister said without divulging any further details.

The ministry is also keen to push more companies to go public in a bid to improve transparency and the level of compliance while bringing more depth into the stock market. Khursheed said the issue of non-compliance would be adequately addressed once the National Law Company Tribunal -- the fast track adjudication body --is set up. "Once the NLCT comes up, these cases would be taken up on a priority basis and we can then look at the enforcement issue," Khursheed said.

A source in the ministry said that notices have been sent to the companies that have not filed their records with the RoC on time. Under the system, these companies can be prosecuted, but it is a time consuming process.

Large number of corporate cases will be shifted to the NLCT once it is set up.

There are five projects of the Government, in the recent years, which have come to involve complex system development as listed below-

·      The Tax Information Network (TIN)

·      The New Pension Scheme (NPS)

·      The National Treasury Management Agency (NTMA)

·      The Expenditure Information Network (EIN)

·      The Goods and Services Tax (GST)

Technical Advisory Group for Unique Projects has been constituted with the following Members-

1.      Shri Nandan Nilekani-                                                  (Chairperson)

2.      Shri C.B. Bhave, Chairman SEBI

3.      Shri R. Chandrasekhar, Secretary, Department of IT

4.      Shri Dhirendra Swarup, Former Chairman PFRDA

5.      Shri S.S. Khan, Former Member, CBDT

6.      Shri P.R.V Ramanan, Former Member, CBEC

7.      Dr. Nachiket Mor, President, ICICI Foundation for Inclusive Growth

         i.            Human resource including modification in government rules, procedures etc;

       ii.            Appropriate placement of tasks and allocation of responsibilities within Government;

      iii.            Contracting, commercial terms and charges including procedures etc for competitive bidding, pricing models and suggestions on user charges;

     iv.            Road map from start up to going concern for each of these projects, which would also focus on legal/regulatory change, if any;

       v.            Technology architecture and ways for co-ordination between Centre, States and Local Governments;

     vi.             Possibility of introducing Open Protocols and utilization of open source components of other e-government projects;

    vii.            Security challenges of malicious attacks on the system;

  viii.            Accountability and self-corrective mechanisms; and

     ix.            Protection of individual's right to privacy with focus on safeguards in the IT systems to protect legal and constitutional rights etc.

      The TAGUP has been given a timeframe of six months from the date of its constitution to make their recommendations.

      The details are available at Finance Ministry's website finmin.nic.in.  

According to some estimates, total money raised through this route could amount to Rs 2.10 lakh crore over the next few years. There could be public issues worth Rs 60,000 crore this year itself, with government-owned companies accounting for Rs 40,000 crore. Companies are required to reach the 25% level by adding at least 5% to the public holding every year. For example, a company with 10% public holding will have to make it 15%, then 20% and finally 25% over three years.

The new norm is expected to improve availability of shares for trading in the market and make it tougher to manipulate share prices. ``A dispersed shareholding structure is essential for the sustenance of a continuous market for listed securities to provide liquidity to investors and to discover fair prices,'' the ministry said in a statement.

Finance minister Pranab Mukherjee had proposed the move in his 2009-10 Union Budget speech