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VRISHTI BENIWAL
New Delhi, 13 February Persons with a taxable income of over ₹ 1 crore annually may breathe easy when Finance Minister P Chidambaram presents his first interim Budget on Monday. A surcharge of 10 per cent introduced in the last Budget on such income may not be extended for another year. Though there were only 42,800 people with income exceeding ₹ 1 crore last year, Chidambaram's interim Budget may make the next government alittle poorer as a major chunk of the personal income tax comes from people earning more than that. As per a Standing Committee report, 63 per cent of the total tax collected in 2011- 12 came from people earning more than ₹ 20 lakh. The relief is also likely to be extended to the corporate sector. A surcharge of 5 per cent and 3 per cent levied on domestic and foreign companies, respectively, may not continue for another year as the government gets ready to face the polls in about two months. In Budget 2013- 14, the surcharge in case of dividend distribution tax was also increased from 5 per cent to 10 per cent. The interim Budget may also bring relief to gold importers as the customs duty on the yellow metal is likely to be reduced by at least two to eight percentage points. Currently, the import duty on gold is 10 per cent. "The finance ministry is considering slashing the import duty on gold," a government official, who did not wish to be identified, told Business Standard. Customs duty on gold has gone up from 2 per cent to 10 per cent in the last two years as the government tried to bring down the current account deficit ( CAD) which swelled to an all- time high of 4.8 per cent of GDP in 2012- 13. The trade deficit remained almost flat at $ 30.02 billion in the third quarter against $29.95 billion in the second quarter. In the second quarter, CAD was $ 5.2 billion or 1.2% of GDP. Now, assuming that services exports do better in the third quarter as the global economy is showing signs of improvement, CAD will be around $5.2 billion. Admitting that the higher duty and other restrictions on gold imports have led to 1- 3 tonnes of gold smuggled into the country every month, the finance minister had recently said the curbs would be reviewed by the end of the year but only after making sure that the government had got a firm grip on CAD. The announcement may come as part of the interim Budget along with some taxation changes. Chidambaram has already hinted at some changes in the interim Budget not requiring amendment to the law. While introducing the additional surcharges on income last year he had said these would be in force only for one year. But since tax rates are not part of the Income Tax Act, nothing stops the finance minister from extending it for another year or letting it get lapsed. "Rates of tax are in the schedule. So, if the government wants it can alter the rates," said Sudhir Kapadia, national tax leader, EY. The interest subvention scheme for short- term crop loans, on the other hand, may continue and farmers repaying loans on time would be able to get credit at 4 per cent per annum. The scheme, which was earlier meant for loans extended by staterun lenders, was extended to private banks last year. However, some other one- time tax benefits such as those to first- home buyers taking loans of up to ₹ 25 lakh may not be extended as that would require an amendment to the law. Such home buyers were allowed an additional deduction of interest of ₹ 1 lakh in the last Budget. Turn to Page 19 > INTERIM BUDGET ON MONDAY Relief on tax surcharge also likely to be extended to the corporate sector; duty on gold expected to be slashed Gold duty may be reduced to 8% as CAD under control Discontinuation of income tax surchargesto hit exchequer Interest subventionfor short- term crop loans may be extended Tax benefits to first- home | Click: Article continued from… retire this April
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One area where the industry expects the finance minister to provide relaxation is tax sops to the power sector. The eligible date for projects in the power sector to avail of the benefits under Section 80- IA of the Income- tax Act is being extended year after year, but since it can be done only by amending the law, Chidambaram might leave it to the next finance minister to take a call in the full Budget in June- July.
"It is an expectation from the industry that the sunset clause for the power sector be extended by another year to March 2015. But since there is no liability to pay the tax in the first three months of the financial year, the issue can be addressed in the full Budget later," Kapadia said. He added the finance minister, if he chooses to, can make a policy statement indicating a desire to continue the power sector holiday benefits by another year to be validated in the Budget to be presented later. >FROM PAGE 1 |
| | Sebi shakes up mutual fund sector
can decide on remuneration; now, management instances of unethical this has been made mandatory. Out- sized compensation packages will likely be curbed as a result, as these committees are to be chaired | |
BS REPORTERS
Mumbai, 13 February The Securities and Exchange Board of India ( Sebi) on Thursday cleared a slew of measures affecting corporate governance in listed entities and the functioning of mutual funds ( MFs). These aim to make independent directors ( IDs) on company boards more accountable and give abigger say to public shareholders in these entities. The capital markets watchdog also cleared a longterm policy on MFs requiring these to maintain a higher capital base and invest a minimum sum in their own schemes, making it more expensive for them to operate. Sebi introduced a number of curbs on IDs, considered torchbearers for minority investors, and brought new restrictions to relatedparty transfers. The regulator, in a statement issued after a meeting of its board of directors, said an ID could be on the board of a maximum of seven companies; it could be no more than three if the person is a wholetime director. The move is in line with the new Companies Act. " This cap is an important way of making sure they are able to perform their duties adequately, especially if the role or responsibility is large. Also, the exclusion with regard to nominee directors is important. They are typically put in place by entities investing in these companies and cannot be considered independent," said Prithvi Haldea, managing director ( MD), Prime Database (an agency focusing on the primary capital market). Sebi also mandated all companies to have at least one woman as adirector on the board and restricted the total tenure of IDs to two terms of five years each. The regulator also mandated companies to make more disclosures on their renumeration policies and to disclose the performance move likely to put more of a spotlight on the pay and performance of senior officials at listed companies. "There are companies in which promoters are paid salaries far higher that what is paid to top management in peer companies. The voluntary corporate governance code had earlier suggested a committee minority shareholders in a disadvantageous situation. involving entities connected to the promoter. A recent instance of an RPT would be the Maruti Suzukis proposal to transfer its proposed Gujarat plant to a company whollyowned by its parent, Suzuki. Sebi also asked listed entities to formulate awhistle- blower mechanism, to help employees report to the behaviour, suspected fraud or violation of the company's code of conduct. " The corporate governance norms are in keeping with current thinking. They empower investors and bring clarity to company boards as regards their roles and responsibilities," said Amit Tandon, MD, IiAS. The new corporate governance norms, which take effect from October 1, will apply to all listed companies. To ensure only serious asset management companies ( AMCs) stay in business, Sebi increased the minimum net worth from ₹ 10 crore to ₹ 50 crore and also asked all entities to invest at least one per cent, or amaximum of ₹ 50 lakh, as " seed capital" in all their open- ended schemes. Seed capital will ensure the 44 players in the sector have a stake in the performance of their schemes. Nilesh Sathe, chief executive officer, LIC Nomura MF, said higher net worth will help ensure serious and stable players enter the business. " Having fund houses invest in their own scheme could help in creating a track record for the fund. It will also help investors take a safe and informed decision while investing," he added. TIGHTENING THE GRIP Sebi revamps corporate governance norms, prods MFs, eases KYC Know- your- customer norms ( KYC) |Currently, intermediaries can access centralised database or do a fresh KYC for a client who is already KYC compliant |Sebi has now said there will be no fresh KYC for those who are already in compliance Corporate governance: |Compulsory whistle- blower policies |Shareholders will have to approve related party transactions |Cap on independent directors, can serve on the boards of up to seven companies |Whole- time directors can serve on boards of up to three companies |No stock options for independent directors |Tenure restricted to two terms of five years |Committee headed by an independent chairman to decide on pay packages Mutual funds |Mutual fund net worth requirement raised to ₹ 50 crore |Fund houses will have to put in up to ₹ 50 lakh of own money in the open- ended schemes it offers to investors |Recommends PSUs be allowed to invest in non- PSU MFs | |
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