[aaykarbhavan] Business standard news updates 10-2-2013

Retail investment scheme to get a push

BS REPORTER Mumbai, 9 February Nineteen days before presenting the Budget, emphasising the need to bring in more retail investors into financial instruments, Finance Minister P Chidambaram today said he would make the Rajiv Gandhi Equity Savings Scheme (RGESS) more attractive. He was addressing the stock broker community at the launch of MCX- SX. On a day the finance minister used his packed schedule in the country's commercial capital to build confidence about the economy, he also said the financial regulators should simplify the know- your- customer (KYC) requirements and make those uniform. The minister also dismissed the Central Statistics Office's ( CSO's) growth projection, saying the economy was already seeing green shoots and was likely to grow at a higher rate of 5.5 per cent this financial year. It could improve to 6- 7 per cent in 2013- 14. He asked banks to improve their operational efficiency to bring down interest rates and hand- hold companies facing financial stress. Banks should give impetus to consumer loans, especially home and educational ones and put pressure on builders to cut prices as a step to push demand, he said during an interaction with senior State Bank of India executives. He also said it would be difficult to retain the current employment levels if the economy did not return to seven per cent growth. " For India, eight per cent growth rate is imperative —seven per cent to retain the existing employment level and eight per cent to absorb new people," he said. He made his displeasure with the CSO estimate clear by saying the calculations used were not accurate. " I know all of us are concerned about the low growth reported by CSO. Many in the government believe the data, based on the which CSO projected a growth rate of five per cent is dated," he said. Chidambaram said the economy was beginning to see an upturn, albeit at a very slow pace. " It is not a V- shape upturn. It is a very long and shallow U. In the second half of this year, there are indications of green shoots in the economy. Going forward, we believe it will return to 5.5 per cent," he said. Chidambaram, who formally launched RGESS in a separate function organised by BSE, said different sets of regulations to invest in financial products were putting off investors. "We have too many regulations. It is important KYC norms for all intermediaries under a market regulator converge and become one set of norms. We cannot have multiple KYC norms for intermediaries and participants under one regulator. And worse, different sets of norms between different regulators," said Chidambaram. He asked regulators to make attempts to prevent a crisis rather than act after one broke out. "The crisis of 2008 can be attributed to the fact that the innovators remained one step ahead of the regulators. I would urge regulators remain astep ahead of innovators. If innovators employ two nerds, regulators must employ three," he said. FM also bats for simpler, uniform KYC norms across asset classes RUN- UP TO THE BUDGET 2013- 14 PRE- BUDGET NOTES Highlights of Chidambaram's speeches in Mumbai |Growth: India could growat 5.5% in FY13, againstCSO's estimate of5%; targetof 6- 7% growth nextyear and 7- 8% in FY15 |Employment: Economic growth of7% mustto retain currentemploymentlevels |RGESS: Norms for tax- saving RGESSto be made simpler in Budget |KYC: There is need for a uniform know- yourcustomer regulations across assetclasses |Options: Need to bring back options marketto India |Realty prices: Banks should putpressure on property developers to cutprices

 

Equities trade on MCX- SX from Monday

BS REPORTER Mumbai, 9 February India's third national- level stock exchange, the MCX- SX, will go live with equity cash and derivatives trading from Monday. The Financial Technologies- promoted bourse was inaugurated by Finance Minister P Chidambaram today. MCX- SX will trade 1,116 equity stocks on its platform under the permitted category rules. "You ( MCX- SX) have competition from two guys ( BSE, NSE) waiting in the arena, and they will have competition from you. Good luck to all three of you. The competition that all three of you provide will make the stock market a vibrant place for more people to invest their savings," Chidambaram said after punching the first trade order at MCX- SX. Securities and Exchange Board of India ( Sebi) Chairman U K Sinha, also present at the event, advised all the stock exchanges to focus on risk mitigation. " We will ensure regulations are followed with fairness and uniformity." Like BSE's Sensex and the National Stock Exchange's (NSE's) S& P CNX Nifty, SX- 40 will be MCX- SX's flagship index. It will be a free- floatbased index of 40 large- cap stocks, representing the economy's diverse sectors. The base value of SX- 40 would be 10,000 and its base date would be March 31, 2010, the exchange said. Of the 700 members the bourse has signed up, registration of 405 have already been cleared by the regulator, while more clearances will take place in the coming days. Both BSE and NSE have 1,400- 1,500 registered members each. Asked if the bourse had a market share target in place, Vice- Chairman Jignesh Shah said it was not sprinting for a 100- metre race. " We will run a marathon. MCX- SX is a solid institutional set- up with a strong foundation. Market share will come gradually and focus would be on widening the markets." MCX- SX Managing Director &Chief Executive Officer Joseph Massey said other sectoral indices would also be launched and focus would be on broad- basing financial markets. "We will start approaching corporate houses to get companies listed on our platform. Focus will be to develop bonds, the SME segment and interest- rate derivatives, too," Massey said. Trade timings of the bourse would be the same as BSE and NSE, that is 9 am to 3: 30 pm — the first 15 minutes for preopen session and the normal market session till 3: 30 pm. Exchanges can have trading up to 5 pm. The post- close session would be of 20 minutes, from 3: 40 pm to 4: 00 pm. The client code modification time would be up to 4: 15 pm. The special pre- open session would be only for IPO/ relisted securities, for 60 minutes, from 9: 00 am to 10: 00 am, for securities participating in that session. This would be followed by a continuous trading session. "The call- auction trading mechanism will be applicable to the special pre- open session, to determine the opening price of the stocks eligible to participate in that session," MCX- SX said. (From left) MCX Stock Exchange Advisory Board Chairman Ashok Jha, Economic Affairs Secretary Arvind Mayaram, Finance Minister P Chidambaram and MCX Stock Exchange Vice Chairman Jignesh Shah at the launch of MCX- SX, in Mumbai on Saturday. PHOTO: KAMLESH PEDNEKAR AT A GLANCE What's SX- 40? |MCX- SX's flagship index |Afree- float- based index of40 large- cap stocks, representing the economy's diverse sectors |Base value: 10,000 |Base date: March 31, 2010 |MCX- SX's currentstrength: 700 members signed up; registration of405 cleared by Sebi; more clearances in coming days Daily trade itinerary |Trade timing: 9am to 3: 30 pm |Pre- open session: First15 minutes |Post- close session: 3: 40 pm to 4: 00 pm |Clientcode modification time: Up to 4: 15 pm Weight on index (%) "We will run a marathon. MCX- SX is a solid institutional set- up with a strong foundation" JIGNESH SHAH Vice- Chairman, MCX- SX Financials 22.0 Health care 5.1 Industrials 14.8 Oil & gas 14.8 Technology 14.2 Consumer services 0.7 Consumer goods 18.2 Basic materials 4.7 Telecom 2.4 Utilities 3.1   FM launches first IDF BS REPORTER Mumbai, 9 February Finance minister P Chidambaram today launched the first infrastructure debt fund ( IDF) of the country. This IDF is promoted jointly by IL& FS group and Life Insurance Corp of India. "This ( launch of IDF) is an important step in our effort to promote the infrastructure sector in this country," he said, adding it would bring down the cost of infrastructure financing over a long period. Apart from IL& FS, IIFCL and SREI Infra have also got the registration from the Securities and Exchange Board of India ( Sebi) to start IDFs. ICICI Bank is also starting anon- banking finance company IDF. Sebi is considering six more applications to start IDFs. "Foreign investors are interested to invest in such funds in India. But if they must invest in India, we must get our act together. Approvals must be granted quickly, projects must be completed on time without cost over- runs," Chidambaram said. "When an IDF steps in, the bank must be willing to release loans. Banks must recognise that sooner their money is released, they will be able to lend to more projects. The role of IDF is different, they provide long term finance," he said, adding that both banks and IDFs should compliment each other. Meanwhile Hamon Investment Group from Hong Kong has invested $100 million in this IDF. The IDF is targeting $ 1 billon of investment. Capital gains tax exemption for joint property also ARVIND RAO Buying a home is usually a joint decision between a husband and wife. Or at least the investment is in joint names. Typically, the earning spouse is responsible for the entire financial investment including the repayment of the home loan; but the sale agreement and all other property papers record the joint ownership of the property. Any rentals or income earned from the property are also distributed between the two owners. However, if a new property is bought ( in joint names) by a spouse using the sale proceeds of another flat in order to claim the capital gains tax exemption; will the investment done in other spouse's name be entitled to exemption under the Income Tax Act? In one of the recent situations that came up before the Delhi High Court; an individual had sold an inherited flat and earned some long term capital gains. At the time of filing his income tax returns, the tax payer had claimed a deduction under section 54F of the Income Tax Act (' the Act') on the ground that the sale proceeds were invested in the acquisition of a residential home in the joint names of himself and his wife. Section 54F of the Act provides that if a tax payer invests the sale proceeds received from the sale of any capital asset for buying aresidential property; the longterm capital gains on sale of the property would be exempt. The income tax officer, during the course of assessment, took the view that under Section 54F, the investment in the residential house should be made in the tax payer's name and in as much as the residential house was purchased by the assessee in the name of his wife, the deduction was not allowable. He reduced the deduction and computed the capital gains accordingly. At the second appellate level; the authority admitted the tax payer's claim and allowed the exemption from capital gains accordingly. However, the Income Tax department preferred an appeal before the Appellate Tribunal. The honourable Tribunal, while relying on various judgements, was also of the opinion that the exemption under section 54 should be available to the tax payer. It also observed that section 54F being a beneficial provision, enacted for encouraging investment in residential houses should be liberally interpreted to include investment done in the spouse's name too. On a further appeal with the High Court by the Department, the High Court also agreed to the view adopted by the Tribunal. The High Court noted that the entire purchase consideration was paid only by the assessee and not a single penny was contributed by his wife. It held that a purposive construction of the legal provisions is to be preferred as against a literal construction. Further, even if the provisions of section 54F are literally constructed, there is nothing in the section to show that the house should be purchased in the name of the tax payer only. The High Court observed that section 54F does not require that the new residential property should be purchased in the name of the tax payer; it merely says that the tax payer should have purchased / constructed a ' residential house'. It was observed that exemption under section 54 and 54F of the Act which relate to investment of capital gains in a new house property are on similar grounds. In this connection reliance was placed on an earlier decision by the Andhra Pradesh High Court where in it was observed that the object of granting exemption under section 54 of the Act is that a person who sells a residential house for the purpose of purchasing another convenient house must be given exemption so far as capital gains are concerned. The word " assessee" must be given a wide and liberal interpretation so as to include his legal heirs also. Without the liberal interpretation, the object of granting the exemption would get frustrated. Relying on this and other decisions by various judicial authorities, the High Court observed that for the purposes of section 54F, the new residential house need not be purchased by the tax payer in his own name nor is it necessary that it should be purchased exclusively in his name. The High Court further observed that the assessee in the said case has not purchased the new house in the name of a stranger or somebody who is unconnected with him. The same has been purchased only in the name of his wife. The fact that the entire investment for the house has come out of the sale proceeds and that there was no contribution from the assessee's wife is undisputed. In view of the same, the High Court allowed the exemption from long- term capital gains in favour of the tax payer. It may be noted that section 54F of the Act requires that in order to claim exemption, the residential house should be purchased by the tax payer, but does not stipulate that the house should be purchased in the name of the tax payer only. Including wife's name in the property for any other social / economic reasons should not stand in the way of exemption granted by the said provision of the Act. These sections promote impetus to house construction and as long as this purpose is served; other factors should not matter. The writer is a financial planner ABOUT SECTION 54 AND 54F: |New residence need not be in the name of tax payer only |Tax law merely says that tax payer should have purchased/ constructed a 'residential house' |Should include investment done in spouses name too |Liberal interpretation of assessee would include legal heirs also New house need not be in the tax payer's name only

 

 

--

 

CS A  RENGARAJAN,, B.Com ,FCS, LLB, PGDBM
Company Secretary, Chennai

CONVENOR, CHENNAI WEST STUDY CIRCLE ICSI-SIRC
email csarengarajan@gmail.com

http://www.csarengarajan.blogspot.com

http://companysecretarytalent.blogspot.com/

http://companysecretarybenevolentfund.blogspot.com/

http://csvacancies.blogspot.com/

mobile 093810 11200

CS Benevolent Fund is a collective effort towards extending the much needed financial support to the community of Company Secretaries in times of distress  Let us lend support and join for noble cause.

SHARING KNOWLEDGE SKY IS THE LIMIT

This mail and its attachments (if any) are confidential information intended for persons to whom the email is planned for delivery by the sender. If you have received this mail in error please notify the sender of the error by forwarding the email and its attachments (if any) and then deleting the mail received in error and the relevant email trail in this connection without making any copies or taking any prints.

__._,_.___

receive alert on mobile, subscribe to SMS Channel named "aaykarbhavan"
[COST FREE]
SEND "on aaykarbhavan" TO 9870807070 FROM YOUR MOBILE.

To receive the mails from this group send message to aaykarbhavan-subscribe@yahoogroups.com

Your email settings: Individual Email|Traditional
Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch to Fully Featured
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe

__,_._,___