Will Budget 2018 rejig tax slabs, clarify tax treatment on Bitcoin? Here are a few expectations

Tax experts expect FM Arun Jaitley to raise the investment cap under Section 80C of I-T Act to around Rs 2.5-3 lakhs.

Will Finance Minister, Arun Jaitley, provide relief to individual tax-payers in the coming Union Budget? With the Budget to be the last full one of present government of Prime Minister Narendra Modi, there are hopes that it might include major reliefs for taxpayers with an eye on the general elections in 2019.

“With the implementation of GST and the demonetisation decision, during last 1 year, as per Government’s own statements, the tax base and number of taxpayers under tax net have increased significantly.  In view of this, the Government may give some significant relief to taxpayers in the Budget,” Rakesh Nangia, Managing Partner, Nangia & Co told.

Nangia feels that among other things, there are expectations that the government might slightly alter the tax-slabs and increase the investment cap for tax relief under Section 80C of the Income Tax Act.

Nangia listed out the following expectations from the Budget:

Rejig in income tax slabs: Presently, taxable income up to Rs. 2.5 lakhs is exempt from tax from individual taxpayers.  Income falling between slabs of Rs 2.5 lakhs to 5 lakhs, Rs 5 lakhs to 10 lakhs and above Rs. 10 lakhs are taxable at rate of 5%, 20% and 30% respectively. Substantial relief to middle income group taxpayers may be available, if the Government rejigs the tax slabs and introduce another slab of 10% for income slab between Rs 5 lakhs to Rs 10 lakhs.  Further, limit of Rs 10 lakhs for applying highest tax rate of 30% may also be revised upwards considering increased expenditure levels.

Increase in limit for investment in tax-saving schemes: Presently, deduction of a maximum Rs 150,000 is allowed to all individual taxpayers for investing in various tax saving schemes, such as EPF, PPF, life insurance schemes, National Savings Certificates, ELSS, etc. under section 80C.  Additional deduction of up to Rs. 50,000 is allowed for investment in National Pension Scheme under section 80CCD (1B).  The Considering the increase in cost of living and consequently increase in need for higher savings, it is expected that the cap of permissible deductions under above-mentioned sections may be increased to around Rs 2.5-3 lakhs, to encourage individuals to save more towards their retirements.

Increase in monetary limit for medical reimbursements, transport allowances: It is also expected that limits for certain tax free reimbursements/allowances to salaried taxpayers, such as Rs. 15,000 per annum for medical reimbursements, Rs 1600 for transport allowance, etc. may be increased to meet the increased cost of medical and transportation.

Archit Gupta, Founder & CEO, ClearTax, hopes that the medical reimbursement limit should be doubled to Rs 30,000. “Saving tax on medical bills has always been a popular demand. A limit of Rs 15,000 is barely enough for even a small family, let alone a big one. With doctor consultation fees increasing by the day and a child’s vaccination going up to Rs 2000 for just one shot, it will only be fair if the government raises the limit to at least Rs 30,000,” he said.

Measures to make NPS preferable: Saving for Retirement! Most of us do understand why it is important to save up for the post-retirement years but it’s still a concept oblivious to some. For the matter of fact, EPF or PPF or a property are the only three resorts people count upon for the most needed years. While EPF is tax-free, returns are quite low and it can be really difficult to accommodate such goals. PPF has an Rs 1.5 Lakh limit owing to which one cannot invest a lot of money in it. In such a case, NPS is a product which can help taxpayers invest for retirement as it invests in equity to match the risk profile. But NPS is still not preferred due to the taxation of at least 20% of corpus at the time of withdrawal. Besides, a major half must also be invested in an annuity. What will make this an effective and endorsed mode of investment is if a higher corpus is allowed to be withdrawn without tax implication, as well as raise the annuity rates for NPS.

Clarity on bitcoin taxation: Despite RBI’s cautionary for investors about bitcoins not being authorised; they continue gain more popularity in India. The government should already talk about the tax implications of investing in Bitcoins and also whether this will require disclosure in tax returns forms or not.

LTCG exemption on equities should continue: Since the indirect taxes collections being lower than expected, the government may have to find other ways to boost revenue. Taxing long term gains from equity markets that currently enjoy 100% tax exemption could be one option. However, this will not make a good news for the middle class that is finally reaping the benefits of investing in equity over long term. Post the demonetisation, a massive amount of money has already gone into equity markets, so hoping this does not participate in 2018’s Budget policy.

Simplification of tax laws: Nobody wants a layered tax system which unfortunately is the case today. With all the redundant layers of taxes on merely a good or a service, the clutter needed to be fixed immediately. Which is why the government set up a special task force for the simplification of direct taxes. Let’s hope this task force rejuvenates our tax system and adds relevance to it.

Tax benefits on Philanthropy: India is progressing overall, no doubts. But there are few areas such as sanitation, education and healthcare that need severe care, funding and attention. Apart from the government taking measures, individual philanthropists can play a critical role in changing the conundrum of a situation. While philanthropy is actually a fitting idea, allowing tax benefits will only encourage more people. As of now, tax benefits are only available on donations made under Section 80G or to projects eligible under section 35AC, only when pre-approved by the government. Extending tax benefits to individual philanthropists who make large donations in education and healthcare sector, will definitely encourage others too.

Govt willing to hand-hold young entrepreneurs: PM Modi

Addressing the students of the Gautam Buddha University in Greater Noida on the occasion of the inaugural programme of the 22nd National Youth Festival, Modi, via video- conferencing, said one had to make the beginning alone and if the person was committed to the path chosen, others would join him.

The youth of today should become job creators and think out of the box, for which the government is willing to hand-hold them for setting up start ups, Prime Minister Narendra Modi said today.

He also said that while patience was a virtue, it should not stop the youth from coming up with innovative ideas for the benefit of the country and society.

Addressing the students of the Gautam Buddha University in Greater Noida on the occasion of the inaugural programme of the 22nd National Youth Festival, Modi, via video- conferencing, said one had to make the beginning alone and if the person was committed to the path chosen, others would join him.

“Do not worry. Move ahead, take the first step. The government is with you,” he said, referring to those youth planning to set up start-ups.

The prime minister assured them that they would not have to worry about bank guarantees, loans and a heavy paper work as they would get all the help from the government.

“We will hand-hold you. Then, you are yourself capable of moving ahead,” he told the gathering where Uttar Pradesh Chief Minister Yogi Adityanath was also present.

Referring to the Centre’s Mudra scheme, Skill India and Startup India funds, Modi said there were enough platforms to help young entrepreneurs think out of the box and begin something new.

He also urged the people to make sports an integral part of their lives.

Bharat 22 ETF AUM drops by over Rs 3,000 crore in just one month

With a bunch of the fund’s total assets coming from rich, short-term investors, it came as no surprise when some of them redeemed their holdings one month into the investment.

Despite receiving the highest subscription for a new fund offer in the history of the Indian mutual fund industry, the Bharat 22 ETF has seen its assets under management (AUM) drop by over Rs 3,000 crore in just one month.

With a bunch of the fund’s total assets coming from rich, short-term investors, it came as no surprise when some of them redeemed their holdings one month into the investment.

Of course, as was with the total assets managed, the level by which the fund’s asset base dropped in a month is also a first for the MF industry. Some of the smaller fund houses in the country don’t even manage assets worth Rs 3,000 crore.

According to data compiled by ICICI Prudential AMC, which managed the Bharat 22 ETF, the scheme’s total AUM as on December 31 stood at Rs 6,243 crore, roughly 33 percent lower than the Rs 9,319 crore at the end of November.

The Bharat 22 ETF is a part of the government’s overall disinvestment program. After getting bids worth over Rs 31,000 crore for the ETF, the government decided to retain Rs 14,500 crore, which is more than double the scheme’s current AUM.

“ICICI Prudential AMC-managed Bharat 22 ETF saw a wide participation from across the investment categories, including retail investors. As of December 2017, only 0.6% of the number of applicants have redeemed their investments,” a spokesperson of ICICI Prudential AMC was quoted as saying by DNA Money.

The spokesperson added that in the fund house’s view, Bharat 22 ETF still remains one of the most attractive propositions in the market, allowing investors to own stakes in the crown jewels of the Indian economy.

SBI to raise Rs 20,000 crore via bonds for affordable housing

Country’s largest lender State Bank of India plans to raise Rs 20,000 crore through long term bonds to fund affordable housing.

Country’s largest lender State Bank of India (SBI) plans to raise Rs 20,000 crore through long term bonds to fund affordable housing.

SBI had earlier proposed to raise Rs 5,000 crore for the purpose.

“A proposal will be submitted to Executive Committee of Central Board (ECCB)… for approval for issuance of long term bonds of Rs 20,000 crore for financing of infrastructure and affordable housing in domestic and overseas market instead of Rs 5,000 crore intimated earlier,” SBI said in a filing to the stock exchanges.

The bank did not specify whether the borrowing would be in rupee denomination or dollar.

The executive committee of the central board is scheduled to have a meeting on January 17, it added.

Earlier this week, SBI announced plans to raise up to USD 2 billion (over Rs 12,600 crore) by issuing bonds in US dollar or other convertible currency over two fiscals to fund overseas expansion.

It said the fund-raising will take place through a public offer and/or private placement of senior unsecured notes in US dollar or any other convertible currency during 2017-18 and 2018-19.

Last month, the bank’s board had approved raising Rs 8,000 crore through various sources, including masala bonds, to meet Basel III capital norms.

Masala bonds are rupee denominated specialised debt instruments that can be floated in overseas markets only to raise capital.

The bank said it has time till March 2018 to raise the funds.

Banks in India have to comply with the global capital norms under Basel III by March 2019. Internationally agreed time frame for the same is January 2019.

Govt to revamp 300 dry ports in a bid to boost foreign trade

The decision is likely to give a fillip to foreign trade as the study will evaluate the transaction costs involved in trade.

The government is planning to revamp around 300 dry ports across the country in order to ease infrastructural obstacles faced by exporters and importers, thereby boosting foreign trade, according to a report by The Economic Times.

According to a government official who wished to remain anonymous, the commerce ministry has already started the process of reviewing laws governing dry ports, along with subsidies and the various ways in which these ports are funded. The aim is to modernise these ports in accordance with globally followed practices.

The ministry will assess the performance and functioning of inland container depots (ICDs) in approximately 10 countries. The reason behind this is the increased interest in the development of ICDs, air freight stations and container freight stations after the Rs 8 lakh crore Sagarmala project was announced.

The Sagarmala project is aimed promoting “port-led direct and indirect development” and augmenting infrastructure facilities to “transport goods to and from ports quickly, efficiently and cost-effectively”.

A dry port is an inland terminal where international freight can be handled, inspected, temporarily stored and cleared by customs. It is typically located at a place where multiple modes of transport converge and therefore, connects either a rail route or a road route to a sea port.

The decision is likely to give a fillip to foreign trade as the study will evaluate the transaction costs involved in trade. It also aims to establish new dry ports in the country, based on location and logistics.

A dry port can significantly improve the flow of cargo between ships and major land transport networks and free up capacity at congested sea ports by creating a more central distribution point.

US govt drops controversial plan on H-1B visas: Report

The controversial H-1B visa proposal which suggested that the foreigners would have to let go of their H-1B visas if their green card applications are pending with the authorities is now withdrawn, according to media reports.

The Donald Trump administration has dropped a controversial proposal that sought to tighten norms relating to H-1B visa, and among other things, suggested deporting green card applicants whose visas had expired.

US govt had earlier reported that the H-1B visa policy change, if implemented, will in anyway have a short-term impact on India. Now that the policy change has been withdrawn, it has brought in a huge relief for Indians and other foreigners working in the US.

An American publication, McClatchy, reported that the proposal was withdrawn. “The United States Citizenship and Immigration Services (USCIS) is instead considering other methods to promote the Buy American, Hire American policy,” the report said.

Hindustan Times report later quoted a USCIS official as saying that the immigration body “is not considering a regulatory change that would force H-1B visa holders to leave the United States by changing our interpretation of section 104(c) of AC-21, which provides for H-1B extensions beyond the six-year limit.”

“Even if it were, such a change would not likely result in these H-1B visa holders having to leave the United States because employers could request extensions in one-year increments under section 106(a)-(b) of AC21 instead,” the official added.

Media reports had previously quoted officials from the Department of Homeland Security as saying that the government was considering tightening the norms related to the H1-B programme.

The subsequent media coverage sparked an outrage from tech companies, which said the proposal inhibited the flow of talent and would be counter-productive.

Direct tax collections rise 18.2% in April-December

In a statement, the ministry said provisional numbers for direct taxes collections showed an 18.2 per cent growth during April-December.

Direct tax collections soared 18.2 per cent during the first nine months of current fiscal at Rs 6.56 lakh crore, the finance ministry said today.

In a statement, the ministry said provisional numbers for direct taxes collections showed an 18.2 per cent growth during April-December.

Direct taxes are made up of income tax paid by individuals, wealth tax and corporation tax paid by companies.

“The net direct tax collections represent 67 per cent of the total Budget Estimates of direct taxes for FY2017-18 (Rs 9.8 lakh crore),” the statement said.

Gross collections (before adjusting for refunds) have increased by 12.6 per cent to Rs 7.68 lakh crore during April to December, 2017.

As many as Rs 1.12 lakh crore refunds have been issued in the period.

The ministry said advance tax collection was up 12.7 per cent at Rs 3.18 lakh crore.

While the growth in corporate income tax advance tax is 10.9 per cent, that in personal Income Tax advance tax is 21.6 per cent.

News Live: Banks asked not to move NCLT against JP Associates, says report

This blog will keep track of key global and local developments impacting business and markets through the day. Important local and global political developments will also find resonance here.

The Reserve Bank of India has ordered banks not to initiate bankruptcy proceedings against Jaiprakash Associates, reports The Economic Times. The move is possibly in anticipation of legal complications after a Supreme Court ruling barred its promoters from selling or transferring assets, bankers said. The ruling was aimed at safeguarding the interests of buyers of homes being built by the company.

Jaiprakash Associates is among 28 companies that banks were directed to refer to bankruptcy court if debt resolution plans weren’t in place by the end of 2017. It is the only company in the list that has received a special dispensation from RBI in this regard, bankers said.

“The regulator has told us to ‘keep on hold’ the move to refer Jaiprakash Associates to the NCLT (National Company Law Tribunal),” a senior bank official said. “The regulator also indicated the move to keep it on hold was ‘with reference to the recent Supreme Court ruling’ that prevents the promoters from selling their assets,” he said.

Hindi as India’s official language at UN: Subject pits Shashi Tharoor against Sushma Swaraj

Sushma Swaraj and Shashi Tharoor got into a debate over Hindi as an official language for India at the United Nations, in the Lok Sabha.

The Lok Sabha on Wednesday witnessed a heated exchange between External Affairs Minister Sushma Swaraj and Congress leader Shashi Tharoor, over Hindi being an official language for India in the United Nations, as reported by Economic Times.

Sushma Swaraj explained that the procedure is long and requires two-thirds of the 193 member countries of the UN to vote in favour of Hindi being an official language in the UN, and also share the resulting financial expenditure in the process.

Swaraj said India was “attempting to get the support of countries like Fiji, Mauritius, Surinam,” where there are non-resident Indians. “When we get that kind of support and the economically weaker countries are also ready to bear the financial burden, it will become an official language,” she added.

When Shashi Tharoor challenged her on why it needs to be pushed, the Minister dismissed his remark as ‘ignorant’.

Swaraj said the government would readily spend even Rs 400 crore on this, when pointed out the process of making Hindi an official language would incur an expenditure of Rs 40 crores. She added, money would, however, not serve the purpose.

She stressed on the fact that Prime Minister Narendra Modi and she spoke at the UN in Hindi. “As far as glory of the language is concerned, the External Affairs Ministry never had so much work done in Hindi as now,” she said.

Shashi Tharoor, against this move, asked why Hindi had to be pushed as the official language when it was not even the national language of India. He demanded to know why we needed an official language at the UN at all.

“Seeking to promote Hindi raises an important question. Arabic does not have more speakers than Hindi, but Arabic is spoken by 22 countries, whereas Hindi is only used as an official language by one country — us,” he said.

He further added that any future Foreign Ministers and Prime Ministers who did not prefer to communicate in Hindi, would be put in a difficult spot and that would be unfair.

“If indeed we have a Prime Minister or Foreign Minister who prefers to speak Hindi, they can do so and we can pay to get that speech to be translated,” he explained.

“The government has to defend its position. I understand the pride of Hindi-speaking people, but people of this country who do not speak in Hindi also take pride in being Indian,” he said.

The statement did not go well with several members of the treasury benches who raised the pitch in protest.

Sushma Swaraj said Hindi was spoken in several other countries as well as by the Indian diaspora abroad. “Saying Hindi is spoken only in India is your ignorance.”

In a written reply, she said India was in touch with 129 countries to make this happen.

Auto December 2017 sales analysis: Growth exaggerated by base effect

We feel most regulatory headwinds are weakening and the situation has returned to near normal. Good monsoon, rural demand and government’s capex push are the tailwinds that will drive growth in the sector.

Auto sales in December 2017 were sharply higher year-on-year, but that’s partly because sales in December 2016 were impacted by demonetisation.

However, we believe in the durability of the emerging trends: strong growth in commercial vehicles (CV) because of good monsoon, improved rural sentiment and increased production of BS IV compliant vehicles; signs of revival in three-wheeler sales following government’s decision to end permit system and revival in exports due to improving global economy.

We feel most regulatory headwinds are weakening and the situation has returned to near normal. Good monsoon, rural demand and government’s capex push are the tailwinds that will drive growth in the sector.

Commercial Vehicle (CV) – Significant growth

The commercial sector has bounced back strongly after setbacks from  demonetization and the BS-IV transition in 2017.

Tata Motors’ reported strong sales number as its innovative Selective Catalytic Reduction (SCR) has been liked by customers. SCR helps reduce diesel engine emissions. Growth in consumption-led sectors like e-commerce, and infrastructure spending by the government funding, along with superior performance of new products increased demand for the new tonnage vehicles,

M&M reported good growth (on a low base) thanks to near normal monsoon, and rural presence of the company. The management expects the growth momentum to continue on the back of some recent refresh launches as well as the better performance of its product portfolio.

Eicher Volvo also witnessed a significant growth of 50.9 percent (Y-o-Y) during December.

Ashok Leyland continue to post strong growth (79 percent YoY) on the back of the low base, good monsoon, and improved rural demand.

Cars Segment – leader continued its mojo

The leader, Maruti, continued to top the chart in PV (passenger vehicle) segment with 10 percent growth, mainly driven by 20 percent growth in UV (utility vehicle).

For Tata Motors, passenger car segment witnessed a strong growth of 31 percent (Y-o-Y) on the back of 406 percent growth in its UV segment, led by strong demand for new generation cars.

Mahindra and Mahindra’s (M&M) passenger vehicle sales declined 7.5 percent year-on-year.

Two-wheeler (2W) segment: TVS is gaining momentum

In two-wheeler space, Eicher continued its dream run, with sales of sub-350 cc bikes growing 20 percent. Sales of 350 cc-plus bikes fell 20.4 percent year-on-year, a trend for the past few months baring October.

TVS posted a strong growth in 2W segment primarily because of 63.7 percent growth in bikes and 50.6 percent growth in scooters. Bajaj’s domestic two-wheeler sales were flat.

Hero, a formidable player in 100/110cc bikes, posted a significant growth of 43.2 percent in the month, however, the December volume was way below the monthly run rate of more than 6L units seen for the last many months.

Three-wheeler (3W): the leader posted strong numbers 

The overall three-wheeler market is showing significant improvement as is evident from the sales number for the December month. This is primarily due to the end of “Permit Raj” in Maharashtra and new 10,000 permits in Delhi. Bajaj Auto, the leader in the space, could capture the growth coming in this segment and posted a whopping 180.1 percent (Y-o-Y) growth in the domestic 3W segment.

TVS also posted a strong growth of 72.1 percent (Y-o-Y) in 3W volumes whereas Atul Auto continued to face challenges and witnessed a growth of 13 percent (Y-o-Y) in 3W volumes.

Tractors: gaining on the back of good monsoon

M&M continue to post significant growth (30.2 percent y-o-y) on the back of healthy monsoon, higher Kharif production and improved minimum support price (MSP) for farmers. The management believes that with the healthy reservoir levels and good progress on rabi sowing, the growth momentum is expected to continue in the coming months.

Escorts also posted a healthy growth of 14.2 percent.

Exports: early signs of improvement

Auto Companies had been struggling in the export markets for long. However, going by the monthly numbers, there appears to be signs of recovery. TVS and Bajaj yet again witnessed a strong growth in their exports. Eicher witnessed a significant growth of 48 percent. Escorts and Maruti struggled in the export market during December.

Bajaj Auto’s performance was on the back of stabilizing currency and retail sector in Nigeria. The management also mentioned that the geographies like Philippines, Latin America, Egypt, East Africa, and Nepal have stabilized. The management believes that the company is on track to achieve 1.5 lakh units of exports per month for the rest of year.

Tata Motors seems to have come out of its problems in export market as it posted a growth of 26 percent.