The long-term capital gains tax [LTCGT] or tax on capital gains made from investment in equity shares and units of equity oriented funds [whose underlying investment is in shares] held for more than one year was withdrawn in 2004-05. This was to encourage long-term investment in equity shares and give boost to the capital market. In budget for 2018-19, finance minister, Arun Jaitely has re-introduced LTCGT @ 10% on capital gains made in excess of Rs 100,000/- annually. However, the gains accruing from existing investment in equity shares prior to January 31, 2018 will be grandfathered. This implies that any appreciation in the value up to this date will not be considered for computing the taxable gain. For instance, investment...
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Corporate tax sans exemption – miles away
While, presenting the union budget for 2015-16, finance minister, Arun Jaitely had announced that the corporate tax rate would be reduced from existing 30% to 25% over a period of 5 years. This was to be synchronized with withdrawal of all exemptions available under the existing dispensation. In the budget for 2016-17, for new projects set up after April 2016, the tax rate was reduced to 25%. Further, companies with turnover less than Rs 5 crore were charged 29% plus surcharge. In 2017-18, the tax rate for small companies was further reduced to 25% even while increasing the qualifying limit to Rs 50 crore. In the budget for 2018-19, Jaitely has given the benefit of 25% rate to all companies...
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Fiscal road-map abandoned midstream
In his budget speech for 2016-17, finance minister, Arun Jaitely announced the government’s intent to review Fiscal Responsibility and Budget Management [FRBM] Act with a view to make the target flexible to make it range bound instead of a fixed number as had been the position hitherto under the extant Act in vogue since 2003. Accordingly, a committee under Mr NK Singh, Chairman, Fifteenth Finance Commission, was set up to examine this issue besides revamping of the Act. The committee recommended a fiscal deficit target of 2.5% of gross domestic product [GDP], revenue deficit of 0.8%, a combined centre-state debt ceiling of 60% and central debt ceiling of 40% by fiscal 2022-23, end point of its six-year medium term fiscal road-map. It also recommended...
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National Health Protection Scheme – an election gimmick
In yet another demonstration of his commitment to take care of majority of the poor, in the last budget [2018-19] of its term before the next general elections in 2019, Modi government has announced a National Health Protection Scheme [NHPS]. Touted as the world’s largest public health care program [bigger than even Obamacare in USA], it seeks to provide health insurance cover of up to Rs 500,000/- to 100 million poor and vulnerable families. Taking an average family size of 5 persons, the benefits are expected to reach 500 million individuals or 40% of India’s population. In his budget speech, the finance minister, Arun Jaitley quipped “It is taking health care to a new aspirational level as it is going...
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Can pakoda seller be at par with beggar?
In an exhaustive interview given to a news channel on the eve of the New Year 2018, prime minister, Modi cryptically observed “won’t you consider a vendor selling ‘pakodas’ [a most preferred snack consumed all over India] and earning Rs 200 per day as a job”. The observation has added fuel to a raging debate over the employment generation record of the NDA government. The grand old national party, Congress is not tired of lashing out at the government for its alleged failure to redeem its election promise of generating 20 million jobs every year. Reacting to Modi’s observation, P Chidambaram, a senior Congress leader and former finance minister under UPA has opined “if selling pakoda is tantamount to creating...
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PSU divestment – is NDA following UPA footsteps?
The sale of 51.11% shareholding of the union government in Hindustan Petroleum Corporation Limited [HPCL] – a public sector undertaking [PSU] in the downstream oil segment – to Oil and Natural Gas Corporation [ONGC] – another PSU in the upstream oil and gas segment is expected to be consummated by January 31, 2018. This is estimated to yield a whopping about Rs 37,000 crores for the exchequer. Together with Rs 55,000 crores already mobilized: Rs 34,000 crore from sale of share in 24 PSUs [vide buyback offers, initial public offerings and offer for sales]; Rs 17,000 crore from listing of insurance companies like General Insurance Corporation [GIC], National Insurance Company [NIC] and Rs 4,000 crore from sale of holdings in...
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Building an egalitarian society – Modi alone can’t do
Just around the time Prime Minister, Modi was hard selling India as a preferred investment destination during his inaugural address at the 48th World Economic Forum [WEF] Annual Meeting, Davos – citing its far reaching economic reforms, expanding market opportunities, huge demographic dividend and inclusive development agenda, the annual Oxfam survey has brought to the fore a glaring statistics regarding on income inequalities in India. According to Oxfam, about 73% of the wealth generated during 2017 was appropriated by a 1% of the population [a steep jump of 15% over the corresponding figure 58% during 2016]. At the same time, almost 50% Indians – covering mostly the poor – saw their income increase by mere 1%. These numbers are out...
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Will SEBI protect minority shareholders of Tata entities?
The Securities and Exchange Board of India [SEBI] is looking at whether Tata Sons’ plan of becoming a private limited company from a public one would impact shareholders, especially minority shareholders of listed Tata entities that own shares in Tata Sons. Meanwhile, new structure has also been challenged before National Company Law Tribunal [NCLT]. Tata Sons Limited [TSL] is the primary holding company of over US$ 100 billion conglomerate having presence in almost every major sector viz. power, steel, automobiles, telecomm, chemicals, information technology [IT] etc. It has controlling interest in high profile companies such as Tata Motors Ltd [TML], Tata Steel Ltd [TSL], Tata Consultancy Services [TCS], Tata Power Ltd [TPL], India Hotels Co. [IHC], Tata Chemicals Ltd [TCL] [to name a...
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Urea subsidy – price for populism and greed
With pressure building on union budget, it is time to take a re-look at fertilizer subsidy which was allocated Rs 70,000 crores during 2017-18 and is a major factor contributing to high fiscal deficit. Here, we focus on urea – a major source of nitrogen – which accounts for over 70% of total subsidy. Subsidy on each ton of urea produced/imported and sold to farmers is the excess of cost of production/import and distribution over maximum retail price [MRP] controlled by government at a low level. Of the nearly 24 million tons of urea produced in India, over 80% is based on use of natural gas as feedstock/fuel. Of the total gas requirement, 2/3rd comes from domestic production and 1/3rd...
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Is India prepared for next oil shock?
The hike in price of diesel to a record Rs 61.74 per litre [Delhi] and petrol to a three year peak of Rs 71.18 per litre [Delhi] is a warning signal that the honeymoon period that India enjoyed for about three-and-a-half year beginning June 2014 may have come to an end. The prices of diesel and petrol broadly follow the movement in the international price of crude oil which India imports to meet around 82% of its requirements. The international price of crude oil declined from the peak of US$ 117 per barrel in June 2014 to a low of US$ 27 per barrel in February, 2016. During 2016, it increased slightly but still kept low at around US$ 40...
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