Tax-highlight

NEW DELHI, Nov 2: Following are the highlights of the recommendations made by the task force on direct taxes:

* Income tax rates proposed at 20 pc for earnings of Rs 1-4 lakh and 30 pc for over Rs 4 lakh.

* Exemption limit should be raised to Rs 1,00,000 from Rs 50,000.

* Standard deduction should be lifted.

* All exemptions on savings and other income, except for handicapped, should be lifted.

* Abolition of dividend tax, long-term capital gains tax and wealth tax.

* Tax should be imposed on agri income of non-agriculturists.

* Tax Information Network (TIN) system to process TDS, advance tax and refunds.

* Corporate tax rate should be reduced to 30 pc from 36.75 pc.

* MAT should be abolished.

* No tax on dividend distributed by companies.

* All exemptions to be lifted. (PTI)

Sensex fell 4 pc in Samvat 2058

MUMBAI, Nov 2: The Hindu year Samvat 2058 has been a year replete with despair and despondency for the stock market investors and punters with the benchmark sensex shedding about four per cent during the year, albeit better than the previous Samvat year.

Indian bourses have not been isolated case of weakness as the stock markets world over were passing through a turbulent phase during the period. In fact, as compared to the decline in the world equity markets, the fall in the Indian market has been modest.

The benchmark sensex of the Bombay Stock Exchange (BSE) declined by 126.61 points (4.11 per cent) during the year under review as compared with a massive fall of 18 per cent in the Samvat 2057 ended on November 13, 2001.

The disinvestment initiatives of the Union Government in the state owned companies, downward trends in the interest rates, reforms in the capital market were some of the positive developments during the Samvat 2058 .

While, the recent political impediments in the privatisation of PSUs, terrorist attacks, communal violence in Gujarat and poor monsoon rainfall were among the negative developments. The union budget presented by then Finance Minister Yashwant Sinha also lacked the feel-good factor for the capital market.

Mirroring the overall trend, the BSE sensex started the Samvat year at 3131.04 points touched the high of 3712.74 points (february 26), fell to the year’s low of 2834.41 (october 28) and finally ended at 2950.58 points, registering a net decline of 126.61 points (4.11 per cent) from the previous close in the Samvat 2057.

In the overseas, during the same period (November 13, 2001 and October 31, 2002) the Nasdaq composite index recorded a fall of 562 points (30 per cent) at 1328.93 points (1892). Dow Jones composite index lost 13 per cent at 8397 (from 9750) and Nikkei in Tokyo registering a decline of 13.40 per cent at 8685.72 points (from 10030.56).

Marketmen are hopeful of an encouraging trend in the new Samvat 2059 as they felt the market has now been bottomed out. Markets in the US were also started picking up in the last couple of trading sessions while the encouraging quarterly results from the major corporates and the likely disinvestment of oil PSUs in the coming days expected to provide boost to the sagging stock market, dealers said. The privatisation began with the controversial disinvestment in the Bharat Aluminum Company (BALCO) and the Government successfully completed disinvested its stake in the hotel corporation of India, IBP, CMC, VSNL and IPCL.

The Government has been facing a rough weather over the proposed privatisation of BPCL, HPCL and NALCO following ‘ideological differences’ among parties in the coalition Government and off the Government.

However, the Government had assured that the privatisation would be completed as per the schedule and announced its commitment towards the continuation of economic reforms.

The Reserve Bank of India’s (RBI) monetary policies were the welcome features for the market, but generally failed to make a wider impact, it was observed. The central bank’s easy liquidity policy and the efforts of making available easy liquidity.

The drop in the interest rates from 6.50 per cent to recently 6.25 per and reduction the cash reserve ratio from nearly 7.5 per cent to 4.7 per cent in the year’s period provided a cushion to the market.

The Rs 14,000 crore package for the restructuring of Unit Trust of India (UTI) announced by the Government was yet another positive announcement fail to prop up the market sentiment too discounted by the market.

The year 2002 was declared as the ‘All India Drought Year’ in view of less than normal rainfall in the country further dampened the sentiment in the stock market.

The market will enter into the Samvat 2059 on Monday when trading at the BSE and National Stock Exchange (NSE) would be conducted for a special Muhurat trading session for the new Samvat, with the hopes of reversal in the market. (UNI)

Krebs Biochemicals net profit rises 9 per cent in Q2

NEW DELHI, Nov 2: Krebs Biochemicals Ltd has registered 9 per cent rise in its net profit for the second quarter in the current financial year.

The net profit for the quarter, ending September 30, 2002, stood at Rs 4.95 crore as against Rs 4.54 crore in the same period last year.

Total income rose by 16.95 per cent to Rs 21.31 crore for Q2 as against Rs 18.22 crore in the corresponding period last year, the Hyderabad-based company said in a statement.

The total expenditure also rose to Rs 14 crore in Q2 against Rs 11.05 crore during the same period last year.

The percentage of non-promoter share-holding has fallen to 53.85 per cent in Q2 as against 61.46 per cent during the same period last year, the statement added. (UNI)

Kelkar panel suggests drastic steps to end ‘exemption-raj’

NEW DELHI, Nov 2: Kelkar task force on tax reforms today suggested drastic steps to end "exemption-raj", proposed 2-slab income tax rates of 20 and 30 per cent with a Rs 1,00,000 exemption limit and bringing in agricultural income of non-agriculturists under the tax net.

The consultation paper on direct taxes submitted by the task force to Finance Minister Jaswant Singh today mooted wide ranging reform of corporate tax by reducing the rate to 30 per cent from the present 36.75 per cent for domestic companies and to 35 per cent from 40 per cent for MNCs, besides abolition of dividend tax and minimum alternate tax (MAT). The panel headed by Finance Minister’s advisor Vijay Kelkar proposed abolition of wealth tax and long-term capital gains tax while scrapping of standard deduction and tax incentives on savings.

Giving details of the recommendation, Kelkar told reporters the main tax policies suggested raising exemption limit to Rs one lakh from Rs 50,000 now, a 20 per cent tax on income of Rs 1-4 lakhs annually and 30 per cent for beyond Rs four lakhs.

"Indian taxation system is now in the grip of exemption-raj as the Indian economy was earlier under licence raj, which leads to leakages, unaccountability and lack of transparency," he said, adding the measures though reduce tax rates, would be revenue neutral with removal of exemptions. Kelkar said the task force was in favour of "big-bang" approach to carry forward the direct tax reforms.

Taking into consideration the political aspects for carrying forward such drastic changes, it also provided a second option of phasing out the exemptions and reduction in tax rates in a three-year period.

The task force, which made its recommendations in two volumes, suggested a tax information network (TIN) system through the nationwide network of National Securities Depository Ltd (NSDL) to tone up tax administration, enabling taxmen to focus on inspection and assessment only.

The TIN system would assess the tax deducted at source (TDS) of all tax payers, process advance tax and refunds.

Kelkar said the Government could outsource NSDL’s hardware and software infrastructure, which can be readied within four months.

The panel, which has already submitted its recommendations on indirect taxes, has suggested two-slab customs and excise duties doing away with most exemptions and a 2-year framework for implementation.

On the controversial issue of taxing agricultural income, Kelkar said "the agriculture income of non-agriculturists were being increasingly used as tax-shields for laundering funds resulting in leakages of revenue of Rs 1,000 crore annually."

To tax these income, he said the States could pass a resolution under article 252 of the constitution authorising centre to impose tax on agriculture income. All taxes collected by centre, net of collection costs, could be assigned to the States, he added.

For this purpose, a separate tax return form should be prescribed for tax-payers deriving income from agriculture income, he said, adding these recommendations would help additional resource mobilisation by states without touching 95 per cent of the genuine farmers, who would in anyway not fall under tax net when exemption limit is raised to Rs 1,00,000 per annum.

The proposed rental arrangement with states could be packaged with the rental arrangement for services, which is now being proposed as a measure to compensate states for any possible revenue loss while implementing nationwide value-added tax (VAT) from April 2003.

Elaborating on reform of personal income tax, Kelkar said dividends received by individuals are proposed to be fully exempt.

Besides, it favoured eliminating tax rebate schemes under section 88 of income tax act for savings, section 88b for senior citizens and section 88c for women (additional Rs 5,000 standard deduction) and exemptions under section 80l for interest income and dividends, and section 10 for interest income from bonds, securities and debentures.

The only exemption that the panel kept untouched was given for handicaps under section 80dd and for those having handicapped children under section 80u.

Tax sops for housing loans is suggested to be phased out in three years. It is proposed to be reduced to Rs 1,00,000 in 2003-04 from the present Rs 1,50,000, and further to Rs 50,000 in 2004-05 and nil in the next year.

The residential status of "resident but not ordinarily resident" would be eliminated.

The income-based deduction under section 80d should be converted into a tax rebate at 20 per cent subject to maximum Rs 3,000 per annum.

The benefit of deduction under section 80ddb should be withdrawn. However, consistent with international practice and special circumstances of senior citizens, deduction under medical expenses may continue to be allowed as tax rebates at 20 per cent with maximum Rs 4,000.

The income-based deduction for education expenses under section 80e should also be continued at a rate of 20 per cent with a maximum Rs 4,000.

On tax administration, Kelkar said amendment to the income tax act was needed to simplify procedures and make provision for allowing appeal against all orders and intimation imposing additional burden on tax payers.

On the provisions for search and seizure, the panel favoured abolition of the scheme of rewarding officers engaged in these activities.

It also said no seizure of stock shall be made by any agency so as to disrupt the manufacturing and delivery schedule of export goods barring certain exception based on prime facie evidence.

On refunds, it proposed replacement of existing cumbersome and manual systems by more efficient IT-based systems. A designated bank should be authorised to issue computerised refunds on the lines of dividend and interest warrants issued by companies, it added.

To improve collections, banks sould be networked to the TIN for receiving payments online besides instant accounting of tax collections and digitised TDS returns.

It also proposed 4-month timeframe for processing all tax returns and with operation of TIN, the tax department should concentrate on its core function of assessment and inspection. (PTI)

Maharashtra, AP sites for nuclear power plants

PANAJI, Nov 2: Nuclear Power Corporation of India is awaiting the centre’s nod for building have six nuclear power plants awong the coast line in the eleventh five year plan.

Chairman and Managing Director of Nuclear Power Corporation of India Dr V K Chaturvedi, who was here for the seventh Indo-Russian Joint Cordination Committse meeting, rold reporters today that though three coastal sites of six units (five in Maharashtra and one in Andhra Pradesh) of 11,000 mw have been selected by the sites selectlon committee, approval if the centre is awaited.

‘Dr Chaturvedi said, the Seventh Joint Cordination Committee meeting was held in Goa to review the progress and development of Kudankulam project in Tamil Nadu, a joint Indo-Russia venture consisting two units of one thousand mw each which will be operational in the year 007-2008. He said, once the project is commissioned the rate of the power will be cheaper.

Director General of Atom Stroy Export Russian Company in Moscow V V Kozlov who was also present said, Russia already has orders of five units, two in India, two in China and one in Iran. He said, China and India have a big market for nuclear projects. (UNI)

Gujarat Informatics Ltd wins award at Infotech Show

GANDHINAGAR, Nov 2: Gujarat Informatics Limited (GIL), the State Government’s nodal agency to promote IT investments has won the ‘best display award’ for showcasing its capabilities in attracting technology industries at the five-day Infotech Show bangaloreit.Com-2002 concluded yesterday.

According to an official statement issued here today, this is the second time the state is bagging this distinction. Despite the prevailing downturn in the IT sector and several other adversities, the State Government’s work in Motor Vehicle Department and in e-governance has made Gujarat a model state even for Andhra Pradesh, it added.

The use of IT in transportation division saw a four-fold increase in revenue, it added.

The show, billed as Asia’s biggest infotech show was inaugurated by the President of India, A P J Abdul Kalam.

The Chief Minister of Andhra Pradesh, Chandra Babu Naidu and Chief Minister of Karnataka, S M Krishna were present on the occasion. Mort than 200 companies and over a dozen countrles including the Government of Germany, Singapore, UK, Sri Lanka, Korea, Japan and Mauritius participated in the fifth annual trade show. (UNI)

Industry witnessing revival: Jaswant

NEW DELHI, Nov 2: Stating that the industrial revivial is quite evident of late, Finance Minister Jaswant Singh today questioned the traditional way of looking at impact of decline in agricultural production on the economic growth.

While there is anticipation that food and non-food production would see some decline due to drought, the traditional view of the downturn on the economic growth has to be re-assessed, Mr Singh said releasing a book, titled macroeconomics and monetary policy here.

Agriculture contributes less 25 per cent of gross domestic product though it still employs 65 per cent of the workforce, the finance minister said buttressing his point.

He said industrial growth stood at 5.7 per cent in September, mainly led by consumer goods. Citing an example of "boom" in consumer goods, he said demand for motorcycles grew by 30 per cent in September.

Just-constituted 12th Finance Commission Chairman C Rangarajan said earlier agriculture used to affect the economy through two routes: providing resources to the agro-based industries and generating demand for the industrial goods. In the present context, agro-based industries could replace its requirement with imported goods and similary industries could witness a rise in demand from overseas.

The effect of drought depends on the contribution of the agriculture to the economy, which has reduced in the present scenario, and the size of drought. The recent drought has been substantial in western Rajasthan, which does not contribute much to the overall agriculture, he said.

The book, published by Oxford University Press, is dedicated to Mr Rangarajan and contains 14 chapters, written by eminent economists including nobel laureate lawrance R Klein. The book is edited by Mr Montek Singh Ahluwalia, Director, Interntional Evalutation Office, IMF, Mr Y V Reddy, Executive Director for Bangladesh, Bhutan, India, and Sri Lanka in IMF, and Mr S S Tarapore, former Finance Secretary. All the three have also contribute to the book as authors. (UNI)

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