PM assured no retrospective taxation Wrote To Ex-UK PM Brown In 2010 That Voda Will Have Protection Of Law

New Delhi: Finance minister Pranab Mukherjee's move to amend the law retrospectively to get merger and acquisition deals such as the Hutch-Vodafone transaction in the tax net may cause embarrassment to the government, especially after Prime Minister Manmohan Singh's assurance to Gordon Brown in 2010, the then British Prime Minister. 

    "I can assure you that Vodafone will have the full protection of law and access to the legal system in India. I also understand there is no retrospective application of taxation and a recent court judgment has affirmed this position," Singh said in a letter to Brown on February 5, 2010. Brown, a former finance minister, like Singh, had written to the Indian Prime Minister twice in December 2009, questioning the jurisdiction of Indian tax authorities to levy capital gains tax on Vodafone, the plea the telecom giant took in the court. In his response, the Singh made it clear that the action taken by the income tax department "was based on specific facts of the case" and came with the assurance that "a transparent and growth-oriented environment for profitable international investment" will be provided. 

    Two years later, Mukherjee, after a setback to a tax claim of Rs 11,000 crore in the Supreme Court, has proposed to amend the Income Tax Act with effect from April 1962 to ensure that the government does not lose revenue. While the Budget proposal has come in for strong criticism from all quarters, the finance ministry has sought to defend the move arguing that it cannot lose revenue. In fact, Mukherjee had gone to the extent of saying that there will be "fiscal chaos" if the law was not amended and cited the trend of retrospective amendments to argue his case. 

    "Retrospective fiscal legislation normally should not be done. There is no two opinion about it. But at the same time, I cannot create a fiscal crisis and fiscal chaos. Suppose, if I do not do it and because of a court judgment Rs 5 lakh crore revenue is to be returned, will it be possible?" the finance minister had said during a post-Pudget meeting with journalists.

Manmohan Singh

Army chief fires another letter salvo Forwards TMC MP Missive To CBI For Probe On Lt Gen Suhag

New Delhi: The Central Bureau of Investigation (CBI) will seek the defence ministry's nod to probe Lt Gen Dalbir Singh Suhag, who is alleged to have been involved in corruption as the head of the Special Frontier Force (SFF), officials said here on Thursday. CBI sources also said "we have asked Cabinet the secretariat to give details of probe, if conducted" in the matter. 

    The CBI is examining a letter written by Trinamool MP Ambica Banerjee, alleging corruption by Lt Gen Suhag in procurements for the SFF, officials said. The MP's written complaint was forwarded to the CBI by army chief Gen V K Singh, along with a covering letter, seeking a probe into the allegations. 

    Banerjee's allegations, made last May, pertain to the period when Lt Gen Suhag was the SFF's inspector general. He currently commands the Dimapur-based 3 Corps and is in line, after Lt Gen Bikram Singh, to be the army chief. 

    Banerjee has alleged that kickbacks were paid in the deals relating to supply of crucial equipment for SFF, ranging from night vision devices and communication systems to parachutes, sources said. The MP has named a number of senior army officers who have allegedly received kickbacks in these deals, they claimed. CBI sources said the agency will also write to the MoD as the matter relates to procurements for SFF, a secret force working with the Research & Analysis Wing (RAW), India's external intelligence agency that falls under the Cabinet secretariat. SFF is also known as 'Establishment-22' and was raised after 1962. 

    Meanwhile, CBI officials on Thursday said they have been unsuccessfully trying to contact Gen V K Singh for the past 2-3 days. The agency is likely to talk to Gen Singh about Banerjee's letter on Friday, when it takes a formal complaint from him on the Rs 14 crore bribery allegations in the Tatra truck purchase. Sources told TOI it will register a case by this weekend after taking a formal complaint from Gen Singh.

The CBI may now probe Lt Gen Dalbir Singh Suhag after the army chief forwarded Trinamool MP Ambica Banerjee's letter alleging that the Lt Gen, as the head of the Special Frontier Force, was involved in a procurement scam

India will be No. 1 economy by 2050: Report

Mumbai: India will outpace China to become the world's largest economy by 2050, boasting a Gross Domestic Product (GDP) of $86 trillion, forecasts a report by global property firm Knight Frank and Citi Private Bank. Leading the elephant's charge will be Mumbai and New Delhi, which will feature in the list of top 20 cities globally within the next ten years. 

    "China will overtake the 

US to become the world's largest economy by 2020, which in turn will be overtaken by India in 2050. The Indian economy will reach a size of $85.97 trillion in terms of purchasing power parity by 2050 while the Chinese GDP would be $80.02 trillion during the same period,'' said the report. The US—currently the world's largest economy—is expected to have a GDP of $39.07 trillion by 2050. 

    In terms of growth from 2010-2050, India would be the second fastest, with its economy growing at a rate of 8% annually during the period. 

GROWING GLORY 

• The report, by Knight Frank and Citi Pvt Bank, forecasts that by 2050, India's GDP at $85.97 trillion will overtake China's $80.02 trillion. The US will be third with $39.07 trillion 

• From 2010-50, India will grow the fastest, at 8% p.a. 

• Mumbai will be ranked 16th and New Delhi 20th among global super-cities within the next 10 years 

• Nagpur and Surat will be the other cities to watch out for by 2050 GROWING CLOUT 

'India, China will 

be economic 

centre of gravity' 

Mumbai: A report by Knight Frank and Citi Private Bank forecasts that India will beat China to become the world's largest economy by 2050. Going only by GDP growth, the wealth report says Mumbai and New Delhi will rank among the top 20 global cities in the next decade. While Mumbai is ranked 16th, New Delhi is 20th on the list of cities surveyed in terms of economic activity, political power, quality of life, and knowledge and influence. The report also named Surat and Nagpur among the fast-growing cities to watch out for by 2050. 

    "We believe the cities to watch in 2050 are the 400 emerging market middleweights — fast-growing cities with populations between 200,000 and 10 million. This dynamic group includes many cities that are not household names today: Linyi, Kelamayi and Guiyang in China; Surat and Nagpur in India; Concepcion and Belem in Latin America," it said. 

    Citing calculations by London School of Economics professor Danny Quah, the report predicts that the world's economic centre of gravity, a theoretical measure of the focal point of global economic activity based on GDP, will shift eastwards to lie somewhere between China and India. Professor Quah calculated that in 1980, it was in the middle of the Atlantic. 

    The growing importance of Asia is also reflected in the rise of its super-wealthy population. For the first time, the number of Asians with at least $100 million in disposable assets has overtaken those in North America. "There are now 18,000 centa-millionaires in the region covering South-East Asia, China and Japan. This is more than North America, which has 17,000, and Western Europe with 14,000," the report says. South-East Asian deca-millionaires (those with $10 million or more in assets) already outnumber those in Europe, and and are also expected to overtake those in the US in the coming decade.

L&T Finance Buys Fidelity’s Mutual Fund Biz in India

WITH . 13,500-CR ASSETS, MERGED FUND TO BE 13TH-BIGGEST IN INDIA

Pips bids from HDFC, Pramerica with reported . 550-crore offer

L&T Finance has agreed to buy Fidelity's Indian funds, becoming the tenth-biggest equity fund house in a highly fragmented and competitive market marked by wafer-thin profitability. 

The financial services arm of construction major Larsen & Toubro pipped rivals, including HDFC Asset Management and Pramerica, to purchase Fidelity. The deal will immediately boost L&T's assets to . 13,500 crore, making it the 13thbiggest fund and the 10th-largest on the basis of equity portfolio. "A large part of the L&T Finance business is lending," YM Deosthalee, chairman & managing director of L&T Finance Holdings, told a press conference. "This is part of the move to increase fee-based income which is a steady business over mid-to-long term," he said. Shares of L&T Finance rose 4.6% to close at . 49.80 on Tuesday after a late spurt. "It will be a turning point for L&T Mutual Fund and sad for the mutual fund industry, because a good fund house has decided to walk out of the country," said Dhirendra Kumar, managing director of fund tracker Value Research. Fidelity Deal will Confer Size on L&T Finance 

Experts said the deal will confer size on L&T. "This acquisition will catapult L&T Mutual Fund into the big league of Indian asset managers. With an excellent blend of equity and debt assets, combined with a great brand in L&T and a complementary distribution network, this provides a great platform for L&T Mutual Fund to potentially attain market leadership," said K Balakrishnan, chairman & managing director, Lazard India. But L&T's task of growing the business has been made difficult by global investor unhappiness over the weak performance of the Indian economy and the government's stumbling and erratic response. 

The Budget has been widely panned and foreign investors have turned off the spigot after pouring over 45,000 crore into the markets during January-February 2012. FII purchases so far in March have been a measly $960 million.

The financial details of the transaction were not disclosed, but Deosthalee said the valuation is in line with that of recent deals in the mutual fund industry. Industry sources said L&T has paid about Rs 530-550 crore to buy Fidelity, valuing the deal at 6.2% of Fidelity's total assets under management of Rs 8,881 crore as on December 31. 

L&T, which entered the mutual fund industry in September 2009 by buying DBS Cholamandalam Asset Management, had assets worth Rs 4,616 crore as on December 31. 

Mutual fund industry sources said other bidders had offered to buy Fidelity at higher valuations than L&T —as much as Rs 600 crore — but these funds were not willing to absorb Fidelity's staff, which includes its sales and marketing officials. However, the deal does not include the equity fund management team led by Alexander Treves, the chief investment officer of Fidelity Mutual Fund. 

"The equity fund management team will be with us till the integration process is complete," said Deosthalee. He said Fidelity's India Chief Executive Officer Ashu Suyash will be a key part of the integration process. As per the agreement, L&T will absorb most of the employees of Fidelity Mutual Fund. "Fidelity employees need not worry about this deal. L&T Finance is an equally strong brand. And historically, Indian funds have done much better than foreign fund houses," Deosthalee pointed out. 

The deal comes at an opportune time for Fidelity, which is facing a regulatory deadline to shift its trading desk to India by September. 

The mutual fund industry has lurched from crisis to crisis since the global financial meltdown of 2008. The ban on entry load — the upfront fee that mutual funds charged investors to pay distributors — in August 2009 has compounded their woes as distributors now have lesser incentive to sell schemes. 

The key challenge for L&T will be to retain investors in Fidelity funds, many of whom had invested in the 'Fidelity' brand. The deal will not make any sense to L&T if it fails to retain these investors, industry sources said. This is more so because apart from assets under management, which can be fickle most of the time, L&T Mutual Fund has not been able to buy out the experienced equity fund management team of Fidelity. But L&T could take heart from the performance of Templeton and HDFC asset management houses after their takeover of Zurich and Kothari Pioneer in the early years of the past decade. The buyouts happened just before the equity boom of 2004-08, helping both fund houses build a sizeable advantage over rivals. 

"We'll be able to retain investors… We're an equally good brand. We have good fund management capabilities to satisfy investors. The integration will also happen at the distributor level," Deosthalee said. 

Tough business conditions have prompted several fund houses to strike similar deals. Japan's Nippon Life Insurance bought 26% stake in Anil Ambani-controlled Reliance Capital Asset Management, India's second-largest mutual fund by assets, for roughly Rs 1,450 crore. The deal valued Reliance Mutual Fund at 6.8% of its total assets under management of Rs 82,305 crore on December 31. In December 2010, Parisbased Natixis Global Asset Management bought 25% stake in IDFC Mutual Fund valuing it at 5.5% of total assets. IDFC had bought Standard Chartered Bank's asset management business for close to 5.7% of its assets in 2009. 

Earlier in 2010, US-based investment management firm T Rowe Price acquired a 26% strategic stake in UTI Asset Management Company, one of India's most profitable mutual funds with a large equity asset base, for about 3.6% of its assets under management. In June 2010, Japan's Nomura bought a stake in LIC Mutual Fund for about 2.5% of the fund's assets. In 2009, IDFC bought Standard Chartered Bank's asset management business for close to 5.7% of its assets.

New property tax system to be tabled today

Mumbai: After rejecting the new property tax system twice last year, the proposal for implementing the capitalvalue based property tax system is once again to be tabled at the standing committee on Wednesday. With no consensus among political parties, the new system was put in cold storage as no party wanted to take the risk ahead of the civic polls. 

    In the budget speech a few days ago, municipal commissioner Subodh Kumar had mentioned that the civic administration would "adopt property taxes based on the capital value system" but was awaiting the standing committee's nod. Data for around 50,000 properties has been entered into the capital value system. "The administration can issue special notices and also finalize property tax bills on capital value as soon as rules for fixation of capital value and rates of property taxes are approved by the standing committee and the corporation. The rules and rates have been proposed to the standing committee," said Kumar. 

    The BMC plans to shift the property tax calculation structure from the rateable value system, based on rent, to a capital value system—based on the property's market price. Under the present structure, property tax is computed on the basis of rent paid by tenants, but now it will be computed on the market rate. 

    The civic body has missed the deadline for implementation of the capital value-based property tax regime. The state cabinet has granted a year's extension for implementation of the system. The legislature had approved the switchover in March 2010. 

    The civic body was expected to introduce the system from April 1, 2010. But, with the BMC unable to frame business rules, decide tax rates and collect data of properties to be assessed on time, it was granted the extension. It was again granted time to complete procedures by the end of 2011-12 and implement the new regime from April 1, 2012. 

Govt scraps octroi in Ulhasnagar 

    The Maharashtra government has decided to abolish octroi in Ulhasnagar from March 31; it will be replaced by a local body tax (LBT) from April 1. Traders are happy with the abolition but instead of the LBT system, prefer the Gujarat pattern. The government plans to do away with octroi in all D class municipal bodies in a phased manner. Traders here have often protested against octroi, alleging harassment by Konark Infrastructure, which has been collecting octroi for four years. Prakash Bajaj, president, Ulhasnagar Mobile Association, said, "For many years, the contract has been going to a contractor who has been harassing our traders." Naresh Durgani, president, Federation of Sindhunagar Vyapari Association, said, "We prefer the Gujarat pattern, where the local body charges one percent of the goods." –Pradeep Gupta

Last-minute options to save tax

  Another four days are left for the current financial year to end and you have just that many days to put money in a select few products to save some taxes. Some of the popular options are equity-linked savings schemes (ELSS), pension funds, insurance policies and public provident fund (PPF). Your financial advisor/planner can help you invest in the product which is best suited for you, helping you save up to Rs 1 lakh this year, and also an additional Rs 20,000 through infrastructure bonds. 

    ELSS offered by mutual funds comes with a three year lock-in, which means you cannot withdraw the money invested for the next three years. Similarly, other investment products that offer you tax rebates also come with lock-in provisions. For example, in PPF you can withdraw only after seven years from the date of investment. 

You can save Rs 6,180 

The Budget in February 2010 had given taxpayers a new option to save up to Rs 20,000 every year by investing in notified bonds of infrastructure finance companies. Popularly called infrastructure bonds, the last of such bond offerings, from IDFC, is now open and will close on Friday. If you have not already invested in these bonds, you can put Rs 20,000 in these bonds and claim tax deduction of up to Rs 6,180 for the current financial year, which is for assessment year 2012-13. 

    Interestingly, this year's Budget has not specifically spelt out about the continuation of infra bonds for next fiscal, so there is some ambiguity whether the similar bonds will be available next year. 

    The ground rule for investing in infra bonds is first to check the credit ratings for these instruments, assigned by the ratings agencies. Higher a company's/bond's ratings, lower is the risk associated with it. These bonds are for a 10-year tenure, and come with a lock-in of five years, meaning one cannot sell these bonds for the first five years after investing. You can avail of the annual interest-payment option or the cumulative option. IDFC is paying 8.43% per annum on these bonds. Under the cumulative option, at the current rate of interest, your initial investment will more than double at the end of the 10-year tenure. But you will not get any money during these ten years. 

    Another important point to note here is that although you can claim tax deductions on your initial investments of up to Rs 20,000 in these bonds, the interest that you earn every year from these bonds is not tax free. Every year when you file your returns, the interest income from infrastructure bonds should be included in your income. 

YOU STILL HAVE TIME 

Equity Linked Savings Scheme (ELSS) of a Mutual Fund 

Consult your financial advisor and if these plans are suitable for you, ask how much to invest. Once you know that, your advisor can help you invest in the right plan, or you can also call the fund house to help you out Pension funds You can choose from select fund houses offering pension plans Insurance policy Again, check with your financial advisor and select the right one suited to your long term goals PPF You can open an account & deposit up to Rs 1 lakh Infrastructure Bond 

From IDFC (up to Rs 20,000): Your broker can help you; this is over and above the Section 80C limit under which you can invest up to Rs 1 lakh to lessen your tax burden

Leave-licence: State plans 16,000% hike in stamp duty

Move Will Hit City's Realty Market Hard

Mumbai: The cash-strapped Maharashtra government says it wants to restore Mumbai to its past glory of being the country's global financial capital. But the way it is going about is bound to leave many investors gasping. Seeking to increase its kitty, the government has proposed an up to 160 times hike in stamp duty for leave -and-licence agreements for residential and commercial properties. 

    The government has proposed 0.1% stamp duty on the market value of the residential property, or 1% of the premium plus average annual rent (deposit) paid (whichever is higher) for up to 36 months. 

    For commercial lease agreements, the duty for 60 months would be 0.4% of the property value. The maximum stamp duty payable now for commercial premises is Rs 50,000 for 60 months and Rs 25,000 for 60 months for residential ones. 

The govt will earn 

1,000cr a year, but at what cost? 

• A bank or an MNC that has signed a leave-and-licence agreement for one lakh sq ft for 60 months in BKC will now have to pay Rs 80 lakh as stamp duty. Currently, the maximum stamp duty payable is Rs 50,000 

• An individual renting a flat in Nariman Point for 36 months will have to pay Rs 41,000 as stamp duty. If the agreement is for 60 months, he will have to shell out Rs 82,000 against the prevailing maximum stamp duty of Rs 25,000 High rates will make stamp duty dearer 

    If the proposal to amend the Maharashtra Stamp Act, 1958—which is likely to be tabled in the state legislature soon—is accepted, it is bound to have an impact on the city's already sluggish commercial market. 

    For individual leases between 36 and 60 months, the rate proposed is 0.2% of the market value of the residential property or 2% of the premium, plus average annual rent paid (whichever is higher). For commercial leases, the proposed duty is 0.4% of the market value of the property. So a bank or corporate entity that has signed a leave and licence agreement for one lakh sq ft for 60 months in the BKC would have to fork out Rs 80 lakh on the property valued at Rs 200 crore. Similar is the case with residential premises. An individual will have to pay Rs 41,000 as stamp duty for a Rs 4 crore flat taken on leave and licence for 36 months at Nariman Point. If the agreement is for 60 months, the lessee will have to shell out Rs 82,000. Pranay Vakil, chairman of Knight Frank, says on the face of it the impact of the hike seems tremendous as property rates in the city are high. Of the state's total tax collection, nearly 60% comes from VAT and 20% from stamp duty. The balance 20% is mobilized from state excise tax, electricity duty and vehicle tax. The government hopes to mobilize at least Rs 1,000 crore annually from its proposed revision.

‘Property Registrations in Mumbai Fall 11% in Feb’

Small discounts fail to work; buyers hold back on hopes of rate cuts

Property registrations in Mumbai fell 11% year on year in February, as consumers continued to shy away from buying homes and offices. However, developers can draw some relief from the fact that the absolute number of registrations rose to 4,203, which is relatively higher than the bottom of 4,060 witnessed in November 2011. 

Property sales dipped 19% in the island part of Mumbai, while suburbs saw the number fall 9% from a year ago, according to a report by the broking firm Prabhudas Lilladher. In the month, the number of lease transactions grew to 8,515, up 6% from a year ago. However, no offer or incentive scheme seems to be working as outright sales numbers remain weak. Market experts expect this to improve with new launches starting around Gudi Padwa — considered an auspicious time for new purchases — later this week. 
Developers are also pinning their hopes on new launches and are expecting a revival in sales volume on hopes of interest rate cuts by the Reserve Bank of India soon. But many of them are not sure if anything other than a price cut will work. 
"Sales volume has been falling for over a year and a half now, it's scary. It clearly indicates that developers will have to cut prices across the board now, and announce it than making it customer specific," said Ramesh Nair, managing director - west, Jones Lang LaSalle India. 
Although some prospective home buyers are waiting for an interest rate cut, price correction will be the most feasible factor that will attract customers, he said. However, developers do not seem to be convinced that prices can be reduced now. "Given the various proposals in the Union Budget, construction cost will go up by 5%. Apart from this, there is the additional burden of service tax, all of which will be passed on to the consumer. Not much of supply is also likely to hit the market as approvals from various committees and departments are still taking time," said Sunil Mantri, chairman, Real Estate Committee of Indian Merchants Chamber. 
Following the clarity emerging on amended development control rules in January, new launches have started gaining the momentum. However, most developers are in the process of submitting revised project plans to the civic authority to take advantage of new fungible floor space index. This may affect execution at these projects for some time as approvals under new DCR would take at least three months, acting as a further dampener on sales, said Kejal Mehta, real estate analyst at Prabhudas Lilladher. 
Developers have almost failed to attract home buyers in Mumbai, the country's biggest property market, with marginal price discounts and other incentives as they are deferring their decision to buy property in the anticipation of an interest rate cut. In January, property registrations had declined 13% from a year ago to around 4,427 in Mumbai, after witnessing a spike in December to 5,900, led by higher transactions in the secondary market. 
kailash.babar@timesgroup.com 

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HC: Follow DCR rules in Aarey no-devpt zone

Mumbai:Developer RoyalPalms' sprawling projectin Aarey Colony hascomeunder thescanner of the Bombay high court. Declining to stay the sale of over 3.25 lakh sq ft of officespace, a division benchof Chief JusticeMohit Shah andJustice Roshan Dalvi directed the BMC,state government anddeveloper to strictly follow the developmentcontrol regulations(DCR)in the no-development zone. 

    The court was hearing an application filedby activistRajendra Thacker,objecting toRoyalPalms' plan to sell 6,000 sq m of land with sanctioned construction rights in the form of floor space index of 3.35 lakh square feet for setting up IT infrastructure for Rs 85 crore. The judges asked Thacker to file a separate petition if he had grievances in the Royal Palms' case. 
    Advocate Sumedha Rao told the high court that Royal Palms may go ahead with the sale and create third party rights. "It will be at their own risk," remarked the judges. 
    The land, spread over around 240 acres, is located in Marol-Maroshi and falls in the no-developmentzone.Over 73,000sq m of this plot was covered with slums. According to the BMC, it had left out the slum land and allowed development by dividing the area into a tourism development zone (TDZ) and no-development zone (NDZ). Plansfor threehotelswere permitted in the TDZ area, while 14 IT buildings and 78 residential buildings, including 50 bungalows, were approved in the NDZ area. 
    Assistant government pleader G W Mattos told the court that even in an NDZ area, some relaxations are permitted. This allows 20% of the total FSI to be used for constructing IT parks and residences. Setting up tourism infrastructure is also allowed. 
    Advocate Rao claimed that the proposed sale was in violation of rules. The lawyer representing Royal Palms denied the allegations and said that all rules were complied with.

State boon for 24 developers

Mumbai: The state government on Monday said developers will have to pay the authorities only half of what was stipulated in its public parking policy, in a bonanza for those who have already received permission under it. 

    The Brihanmumbai Municipal Corporation (BMC) had earlier said that developers pay 40% of the ready-reckoner rate (RRR) for availing the incentive floor space index (FSI) under the parking scheme. But a notification by the urban development department on Monday reduced it by half, or 20%, of the RRR. 
    This will benefit around two dozen developers who had procured sanctions, including letters of intent and commencement certificates before the controversial policy was amended by civic chief Subodh Kumar last May. Builders who submit proposals now will have to pay the full 40% premium to the BMC and state government. 
    A developer described it as "discriminatory''. Few builders who had got permission moved the Bombay high court, after the BMC insisted they pay the new rates. They contended that the state and not BMC could issue a circular asking them to pay a premium. The court concurred with the developers and Monday's notification was an outcome of its directive. 
    The scheme was introduced by then chief minister Vilasrao Deshmukh in 2008 
and pushed through at breakneck speed by his successor Ashok Chavan. It offered incentive construction rights to builders who erect parking towers on part of their land and hand it over free to the BMC. 
    Last March, chief minister Prithviraj Chavan told the BMC to review the policy. Developers used the scheme to plan 50-60 storey-high luxury skyscrapers, mainly in central Mumbai.

State govt nod for 2 parking FSI projects

Bldrs To Fork Out 150cr For Construction Mumbai: The state governmenthasclearedtwo public parking projects in Mulund and Worli under its parking floor space index (FSI) policy and will earn nearly Rs 150 crore as premium from builders developing them.      The policy stipulates that a developer who builds a public parking lot on a part of his land and surrenders it free of cost to the BMC, will receive additional construction rights as compensation on the remaining portion.      Allegations of graft were levelled at the policy, which was introduced in 2008, forcing chief minister Prithviraj Chavan to scrap it in 2011. New guidelines formulated by BMC chief Subodh Kumar levied a premium on builders opting for the scheme. Last month, the state government sanctioned Runwal Group's proposal to build a parking lot spread over one million sq ft in Mulund. The land is part of a 20-acre plot where the builder is setting up a residential complex. The amenity will have ground and two underground basements. As compensation Runwal will receive an FSI of 3 for constructing the facility free of cost for the civic body. The builder will also pay a premium of Rs 40 crore, which will be shared equally by the state government and the BMC.      "The parking lot will have a separate entry and exit from the residential complex," said group director Subodh Runwal.      The state government and the BMC will earn Rs 108 crore as premium fromdeveloper K Raheja Corp, whose plan was cleared sometime ago. Raheja will build the public amenity on a portion of its two-acre property in Worli. Late last year, the BMC withdrew the initial permission to 10 of the 15 developers and asked them to submit their proposals under the amended policy framed by Kumar.      The new policy devalued the price of their lands by 30% to 40% because thesedeveloperswereentitledtohefty building concessions under the original policy. The original policy allowed developers to build public parking towers as high as 15 to 20 storeys. In return,thebuilder received a bonanza in the form of additional FSI.      Using the extra FSI, some builders who benefited, announced plans to build luxury skyscrapers. Activists slammed the policy saying it would benefit builders under the guise of providing public parking.  On The Cards  • Runwal Group's proposal to build a parking lot for 1,700 vehicles in Mulund • K Raheja Corp's parking lot for 800 vehicles in Worli

SOPS RUN OUT OF GAS Fertilizer, food, fuel become the new ‘F’ words

While promising to cap subsidies at 2% of GDP, finance minister Pranab Mukherjee has cut the allocation for food, fertilizer and fuel support by almost 14% to Rs 1.8 lakh crore during the next financial year. 

    The reduction comes despite the government's experience during the current fiscal when it saw a Rs 74,000-crore increase in the subsidy bill from what was budgeted at the start of the year. Against the budget estimate of Rs 1.34 lakh crore for 2011-12, the government revised it to Rs 2.09 lakh crore. At the start of the year, the FM and his officers had dismissed all suggestions of the government under-providing, something that most economists had pointed to. 
    Even this year, Mukherjee is facing the same charge. After all oil prices are rising and a poor spell of rain can force the government to import foodgrain. Even fertilizer subsidy depends on external factors. 
    In his speech, the FM, however, promised to fully provide for the proposed Food Security Act. At present the bill is in Parliament and it will take several months before it is cleared. 
    Although the government once again promised better targeting and cash transfers, there is little more than statement of intent and increasing the coverage of several pilot projects that have been going on for years. 
    For the moment, there will only be an information system to track the movement of fertilizer and subsidies and direct transfer will "be implemented in subsequent phases". There was no mention of direct transfers for petroleum products, something that Mukherjee had promised to roll out during the current financial year itself.

TAX TRIMMER: THE INDIA BUDGET CAN HELP YOU GROW YOUR WEALTH. HERE’S HOW

    The single most important provision is Section 80c. Under it, one can invest up to Rs 1 lakh in approved schemes and save up to Rs 30,900 in tax. Investment of up to Rs 1 lakh is deducted from taxable income and tax liability reduced accordingly. 
    Public provident fund (PPF): Investment up to Rs 100,000 allowed. That means, the entire limit of Rs 1 lakh investments allowed under Section 80C can be exhausted by investing in PPF. The return, fixed every year, is currently at 8.6%. This is the only instrument which is completely tax free. Lock-in period: 15 years. Effective post-tax return for a person who pays tax at the rate of 30% is 16.5%. 
    Insurance premia: Investment up to Rs 1 lakh allowed. But annual premium amount should be at least 20% of the sum assured. Lock-in period: 5 years. Returns depend on market. Money received on maturity after five years will be tax free in case of Unit linked Insurance Plan (ULIP). But for general insurance schemes, it will be treated as income of that year and taxed accordingly. 
    Mutual funds: Investment up to Rs 1 lakh allowed in ELSS. Lock-in period: 3 years. Return from these instruments is completely tax-free. But investors are subject to market risks. 
    Tuition fee: Amount of up to Rs 1 lakh paid as tuition fee for education of two children of an assessee can be deducted from total income. Part of overall Rs 1 lakh limit under Section 80C. 
    Repayment of home loan: Repayment of principal up to Rs 1 lakh in a year gets tax benefit under 80C. Amount is deducted from taxable income. Payment up to Rs 1.50 lakh as interest on loan taken to buy house for self-use also exempt from tax. Along with provision of repayment of principal, a housing loan can enable assessee to get income up to Rs 2.50 lakh exempted. 
    Pension fund: Investment up to Rs 1 lakh in pension fund of an insurance company can be deducted from taxable income. Part of overall limit of Rs 1 lakh under 80C. Taxable on withdrawal. 
    Repayment of educational loan: Interest paid while repaying education loan for own, or kin's, higher studies exempt from I-T. Repayment of principal does not qualify for exemption. Not part of cap of Rs 1 lakh under Section 80C. 
    Premium for mediclaim policy: You can claim deduction of up to Rs 20,000 for purchase of mediclaim policy for your parents if they are senior citizens or otherwise up to Rs 15,000. This is besides the Rs 15,000 deduction against purchase of mediclaim policy for yourself.

A touch of silver for their golden years

 While distributing relief to the salaried, Pranabda made a few concessions for senior citizens. The finance minister announced on Friday that senior citizens will no longer be required to pay advance tax if they are not running "a business/profession". Along with this, he increased the deduction against the premium paid to buy medical insurance to Rs 20,000 from the earlier Rs 15,000. 

    The second change will help save the elderly an additional amount of Rs 1,500 if their income falls in the highest tax slab. And the first will help in reducing the compliance 
burden on senior citizens. The finance minister also increased the deduction for medical treatment of a senior citizen to Rs 60,000 from Rs 40,000. And while at it, he allowed a tax exemption of up to Rs 5,000 for preventive health check-ups. 
    Dr Pratap Reddy, CMD of Apollo Hospital, hailed the exemption for health checks, saying it would encourage early detection of diseases — particularly cancer, heart ailments and diabetes, which are on the rise — and help trim the expense burden.

India:What Budget may have for aam admi

On the indirect tax front, there is expectation that the finance minister may increase service tax rate to 12% from the current 10% to garner more revenues. But such a decision could have negative implications for investors. The government may also decide to increase excise duty by the same amount. 

    A recent report by CARE Ratings noted that the deductions under section 80C may be revised to Rs 1.5 lakh from the existing limit of Rs 1 lakh to provide enhanced options of investment to individual tax payers. There could also be some concessions given to interest on bank deposits to encourage savings. The limit of deduction on interest paid against self-occupied property may be revised up to Rs 3.5 lakh per annum, the report noted. 
    There are also expectations that the Rs 20,000 per annum investment limit under Section 80C, which is exclusively for investing in infrastructure funds, could also be raised to Rs 50,000 per annum to boost retail investments in infrastructure funding. 
    The CARE Ratings report also pointed out that at present Securities Transaction Tax (STT) paid on purchase or sale of shares, derivatives and equity-oriented mutual funds, etc, is not allowed as deduction under the head capital gains. It is allowed only under profit and gains from business or profession and that, too, if the tax payer is engaged in the trading of shares. The STT paid may be included in the cost of acquisition and selling expenses under capital gains. This will help the capital market, the report pointed out. 
    On Friday, the Parliamentary standing committee on finance, in its final report, suggested reworking the current income tax slabs, sought exemption for income up to Rs 3 lakh and suggested that the highest tax rate of 30% should kick in on income of over Rs 20 lakh. To make the tax system more predictable, the panel recommended that the slabs be indexed to inflation, and also said that such a revision should be automatic. This means if in a particular year the rate of inflation is higher, the income level at which the 10%, 20% and 30% rate of income tax would kick in would also go up from the levels at which they were in the previous year. Such a decision will also help the government not to tinker with the tax laws on a regular basis. 
    The report, headed by former finance minister Yashwant Sinha, is seen as a tool that will help the government push through its Direct Taxes Code (DTC). The report also suggested that the exemption limit for life and health insurance, and education loans, be doubled to Rs 1 lakh. It also suggested that a separate deduction of Rs 50,000 be provided for those going for higher education. The other exemption that the Parliamentary panel has suggested is an additional one, of Rs 20,000, for purchasing medical insurance for elderly parents and grandparents. However, what could come as a disappointment for those who have home loans, the panel is silent on interest deduction on housing loan exemption, currently at Rs 1.5 lakh per annum. 
    The committee has recommended an exemption of Rs 3.2 lakh (excluding home loans), up from Rs 2.7 lakh (including home loans) at present. If the government accepts the recommendations of the Parliamentary panel, those with an annual income of up to Rs 6.2 lakh will be outside of the income tax net. Further concessions for women and senior citizens in the tax slabs have also been recommended in the report. The panel has suggested that the senior citizen cut-off age be lowered to 60 years, from 65 now. 
    The slabs suggested by the panel are far more liberal than those suggested in the DTC Bill, although it is lower than what was proposed in the draft Bill in 2009. 
FUTURE TO BE LESS TAXING? 
tParliamentary standing committee on finance has sought an exemption of 3.2 lakh (excluding home loans), up from 2.7 lakh (including home loans) now 
tIf the govt accepts the recommendations, those earning up to 6.2 lakh will be outside of the tax net

Industrial output rebounds to 6.8%

Doubts Over Data As Production May Have Shrunk 0.6% Sans 92.6% F&B Growth

New Delhi: Industrial production surprisingly bounced back to grow 6.8% in January as government data showed that Indians consumed more manufactured food products, beverages and chewing tobacco during the month. Probably anticipating that their health had improved, manufacturers decided to cut vitamin, fruit pulp and antibiotics output by as much as 54%, data released by the Central Statistics Office on Monday showed. 
    If the data is to be believed, newspaper production went up 57% and pen output was 32% higher, indicating that consumers were reading and writing more. In the absence of an unprecedented 92.6% growth in the food and beverages segment, overall factory output would have contracted 0.6% in January, economists estimated while raising fresh doubts over data quality. 
    "Quality issues in economic data are more pronounced in emerging economies than developed economies but India's official industrial production takes the cake. It appears to have alife of its own and its volatility makes sensible forecasting a challenge and also increases the risk of policy mishaps due to incorrect signals," Rajeev Malik, senior economist at CLSA, said in a research note. 
    Citi's Rohini Malkani and Anushka Shah added, "Industrial production data has displayed a lot of volatility, with even RBI stating that it is 'analytically bewildering… and how poor quality data could potentially mislead policy calculations'." The spurt came even as mining activity contracted and output in three of the six manufacturing segments — capital goods, intermediates and consumer durables — fell. But consumer goods ( 20.2% growth) and non-durables (42.1%) made up for the fall in the other manufacturing segments. 
RBI likely to leave rates unchanged 
Mumbai: Strong industrial production, expensive crude and a weak rupee are likely to deter RBI from cutting key interest rates in the March 15 policy review. "We were expecting a 50 bps cut in CRR without any change in the repo and reverse repo rates in the March 15 meeting. With the RBI effecting a CRR cut, we believe that the March 15 monetary policy is likely to be a non-event," said Indranil Pan, chief economist, Kotak Mahindra Bank. 
    "Today's positive data confirms our view that the RBI will not cut the policy rate during this Thursday's meeting, especially as it has already acted by cutting the CRR by 75bps," said Taimur Baig and Kaushik Das, economists with Deutsche Bank, in a report. TNN

Now, BMC pushes TDR in island city

Mumbai: A BMC proposal seeks to completely overhaul the transfer of development rights (TDR) policy to make it more equitable, in a move that is expected to have far-reaching repercussions on the city's development plan. 

    In his plan which is to be submitted to the state government soon, BMC chief Subodh Kumar has proposed that TDR be allowed anywhere in the city, not be restricted to the suburbs. Its selective use in highend areas of the western suburbs has led to lopsided development, especially in the Bandra-Khar-Juhu belt. 
    A construction boom due to TDR in these localities has put a severe strain on the civic infrastructure, with towers rising on narrow roads with inadequate parking.
PLOTTING A CHANGE 

• Plan says TDR must not be restricted to suburbs. Move to check lopsided development and quicken land acquisition for public welfare 

• Owners to get 1.3 times the plot potential as TDR 

• Non-cessed buildings in island city to get extra 1.33 FSI as TDR 

• Ready reckoner rates of area to determine TDR Activists may oppose new TDR proposal 
Mumbai: With construction boom in some parts of the city putting a strain on infrastructure in those areas, civic commissioner Subodh Kumar is keen to put an end to this "serious distortion" that has been going on for two decades. 
    TDR, introduced in 1991, is a compensation given to private land owners whose properties are reserved by the BMC for public amenities like parks and playgrounds. The owner receives equivalent construction rights which can be used anywhere north of the plot he has surrendered. However, most land owners with high-value properties in the island city were reluctant to hand over their lands because the TDR value in the suburbs was not lucrative enough. As a result, the BMC failed to acquire such amenity plots and the policy faltered. On the other hand, builders redeveloping slum pockets in low-value localities (Mankhurd--Trombay for instance) made obscene profits by using the TDR entitled to them in premium areas like Bandra, Khar and Juhu. 
    The BMC has now proposed that land owners be offered 1.3 times the plot potential as TDR. "This will ensure that compensation is in line with the actual market value, or marginally less or more…the development plan will get implemented speedily without financial cost to the BMC and land acquisition will not be long-drawn,'' the corporation's proposal said. 
    Kumar refused to comment on the new policy, but a developer who has procured a copy of the proposal told TOI, "The new policy may help improve availability of open spaces and reduce discrepancies in the TDR business." However, the proposal is likely to be opposed by urban experts and activists, who fear that allowing TDR in the island city will aggravate the problem. 
    But Kumar's plan says TDR should be generated and consumed uniformly across the city, "reversing imbalanced development in the suburbs". It has recommended that non-cessed buildings in the island city—currently allowed a floor space index (FSI) of just 1.33 during redevelopment, be sanctioned another 1.33 as TDR, taking the total FSI to 2.66. However, cessed buildings, most of which were built more than 70 years ago, today receive virtually unlimitedFSI when they are redeveloped. The commissioner has suggested that FSI up to 4 be allowed on such plots. "The balance, if any, shall be given in the form of TDR'' which can be utilized at another place. "The new policy will take into account relative values of the stamp duty ready reckoner from the area where TDR is generated, the place where it is used and the year in which it is utilized,'' it says. The TDR value will now be linked to the place where it is generated.