Cost inflation index for 2013-14 raised

The Central Board of Direct Taxes (CBDT) in month of June 2013has specified a value for the cost inflation index for 2013-14.

A brief insight into Cost Inflation Index as declared by CBDT

In year 2012-13 the index was 852, and this year it is 939 which signify that there has been a 10.2 per cent rise in the cost inflation index for 2013-14.

Use of Cost Inflation Index

A cost inflation index helps in reducing the inflationary gains, thereby reducing the long-term capital gains tax payout for a taxpayer. The index is useful for income-tax assesses in the computation of tax on long-term capital gains (for indexation purposes). In the previous year (2011-12), the cost inflation index increased 8.5 per cent. As per the income-tax law it is required by the CBDT to state the cost inflation index for a financial year after factoring out 75 per cent of average rise in consumer price index for urban non-manual employees for the immediately preceding financial year. The model of indexation has been conserved even under the proposed direct taxes code, which may come into force from 1 April 2014.

Indian Money in Swiss Banks Dropped to Record Low

The official figures by the Swiss National Bank (SNB) in Zurich on 20 June 2013 unveiled that the Indian money found in Swiss banks dropped down to record lowest level at 9000 crore Rupees or 1.42 billion Swiss francs. The official data released by the Swiss National Bank (SNB) is a part of annual report of Swiss Banks released by SNB.

The overall funds held by Indian entities as well as individuals included 1.34 billion Swiss francs being held by entities and individuals directly while another 77 million Swiss francs held through wealth managers or fiduciaries at 2012 end. The data indicated that Indians’ money in Swiss banks dipped down around 35 percent or 4900 crore Rupees in 2012. Fiduciaries are the wealth fund managers that hold wealth of Indian private families or holders in numbered accounts. It is also important to note that this was steeper than the 9.1 percent dip in funds held by entities from all over the world in Swiss Banks. The overall funds held by the entities from across the world also hit all-time low of 1.4 trillion Swiss francs at 2012 end. In the beginning of 2012, the overall funds of Indians in Swiss banks was almost 14000 crore Rupees or 2.18 billion Swiss francs. In the meanwhile, the funds from across the world in Swiss Banks in the beginning of 2012 were 1.5 trillion Swiss francs or 1.65 trillion US dollar.

These funds from India in the Swiss banks are described by the SNB as liabilities of the banks towards Indian clients. It is also important to note that these figures are the official ones released from Swiss authorities and they are not the indicator of the black money of Indians held in Swiss banks.

The funds held by the Indians in Swiss banks at the end of 2006 was at a record height of 6.5 billion Swiss francs or more than 41000 crore Rupees, but it declined by more than 5 billion Swiss francs or 32000 crore Rupees since then. For the clients from all over the world, the total funds in the Swiss banks was at record height of 2.6 trillion US dollar by the end of 2007 but since then it has dipped down by more than one trillion dollars. According to the SNB data, the funds of Indians held directly in the Swiss banks decreased steeply by around 700 million Swiss francs in 2012 to 1.34 billion Swiss francs in 2012. In the meanwhile, the funds held by Indians through fiduciaries halved to 77.4 million Swiss francs in the year 2011, which marked the sixth year of decline in a row. The direct liabilities of Swiss banks towards the Indian clients include funds which are held in the deposit accounts as well as savings accounts by the Indian corporate houses, financial institutions as well as individuals.

Disinvestment of 5 Percent Paid Up Equity in NLC Approved

The Cabinet Committee on Economic Affairs on 21 June 2013 approved disinvestment of 5 percent equity of Neyveli Lignite Corporation (NLC). This 5 percent equity was approved out of its holding of 93.56 percent through an Offer for Sale (OFS) in the domestic market according to Securities and Exchange Board of India (SEBI) rules and regulations. NLC is authorised the capital of 2000 crore Rupees, out of which the subscribed as well as issued equity capital was 1677.71 crore Rupees as on 31 March 2013. This comprised of 167.771 crore equity shares of face value of 10 Rupees each. After this disinvestment, the holding of the Government of India in NLC would drop down to 88.56 percent.

About Neyveli Lignite Corporation (NLC)

• Neyveli Lignite Corporation (NLC) is the Central Public Sector Enterprise.

• It has Navratna status under the administrative control of the Ministry of Coal.

• It was incorporated in the year 1956 under the Companies Act, 1956.

• The objective of the company is meeting the electricity demand of the southern states of India by excavating lignite for generation of power.

• At present, NLC has the lignite mines and power stations in Tamil Nadu and Rajasthan.

Restrictions on Co-Operative banks for Loans against Gold coins

Reserve Bank of India on 7 June 2013 extended the restriction on advance against gold on co-operative banks set to curb the demand for gold. The decision taken by RBI was in the backdrop of Government raising the import duty on gold to 8 per cent from 6 per cent. As per the RBI, while granting advance against the security of specially minted gold coins sold by banks, state/central co-operative banks should ensure that the weight of the coin(s) does not exceed 50 grams per customer. RBI has also asserted that the amount of loan to any customer against gold ornaments, gold jewellery and gold coins (weighing up to 50 grams) should be within the board approved limit. An advisory has also come up from the Central Bank in regard to selling of gold coins. High rise in gold imports has become a cause for concern for both the government as well as the RBI as it is putting pressure on the current account deficit, which is likely to be around 5 per cent of the GDP in 2012-13. If we see the statistics of gold imports there is surely significant spurts in first two months of current fiscal 2013-14, to present an appropriate figure the average imports stood at 152 tonnes in April and May 2013. The monthly average import in 2012-13 was 70 tonnes. The increase in gold import is accredited to the bend in its prices in the international market.

Commodities Transaction Tax Applicable on Non-Farm Products

Central Board of Direct Taxes (CBDT) on 19 June 2013 announced that the Commodities Transaction Tax (CTT) shall be levied on the derivative contracts of non-agricultural commodities which are transacted via recognised commodity bourses. This rule shall apply with effect from 1 July 2013. It is also important to note that 23 specified agricultural commodities are exempted from this tax. All the processed agricultural items such as guar gum, soya oil and sugar are subject to the CTT on future contracts. CTT will not be applicable to the agri-commodities but it will apply to energy complex as well as metals which are traded in the futures exchanges. Levying CTT at the rate of 0.01 percent on the contract price will have an impact on the commodity bourses. This will happen because the higher cost of transaction would grip the margins of the traders. In the meanwhile, the commodity markets have factored in CTT already, which means that the turnover would not be affected in a huge way. The agricultural commodities which are exempted from CTT include wheat, turmeric, soya bean, red chilli, mustard seed, potato, pepper, cotton, cotton seed, coriander, copra, channa, castor seed, cardamom, barley and almond. It is worth noticing that CTT was proposed for the first time in the 2008-2009 Union Budget. It was not implemented because of widespread opposition.

Pipavav Port Regained Top Position in Seafood Exports

Pipavav port, the first private sector port of India located in Saurashtra, Gujarat, remained at the top most position for second year in a row in FY13 on the basis of quantity. The Pipavav port registered a jump of 6 percent in comparison to 2012-13 financial year. The reason why Pipavav port remained a forerunner in terms of quantity was because it handled lot of pre-processed fish. The export figures by the Marine Products Export Development Authority revealed that Pipavav port handled 233738 tonnes of marine exports in 2013-14 in comparison to 219801 tonnes in 2012-13 fiscal year. In terms of value, nevertheless, Kochi as well as Vizag ports shared almost equal share of earning, i.e., 3344.97 crore and Rs 3265.64 crore respectively in 2013-14 financial year. Vizag registered 26.12 percent jump in terms of value, while Kochi registered 14.22 percent. Pipavav, on the other hand, registered 3 percent increase from 2710.34 crore to 2808.25 crore Rupees.

South-east Asia was the largest buyer of marine products. This was followed by EU, US, Japan, China and Middle East.

About the Pipavav port

• Pipavav port is the first private sector port of India on West Coast.

• The lead promoter of this port is APM Terminals, which is among the largest container terminal operators in the world.

• This port is meant for the liquid cargo, bulk cargo as well as containers.

• The services offered by this port include logistics support, cargo handling as well as pilotage and towage. The port handles bulk, container as well as liquid cargo.

• Pipavav port is situated in Saurashtra, Gujarat, at a distance of 90 km South of Amreli.

• In the year 1998, the concession was given to Gujarat Pipavav Port Limited by Gujarat Maritime Board. Then in the year 2000, this port went into the Joint Venture with Indian Railways in order to initiate Pipavav Rail Corporation Limited. The commercial operations of the port kicked off in the year 2002.

• The Pipavav port is situated along the major trade routes and is also in proximity with major Indian Port of Nhava Sheva.

• The Pipavav port is the captive reefer port.

Indian Bank Association to set up Oversight Mechanism

The Finance ministry on 6 June 2013 has asked the Indian Banks’ Association to set up an independent body to manage the corporate debt restructuring (CDR) mechanism to restrict the use of loan restructuring mechanism only to deserving cases. The decision was taken in light of increasing number of debt restructurings over the past two years. The effect was that, the banks and their clients are taking undue advantage of the CDR mechanism, giving in the issue of non-performing assets’ (NPA) formation. Now, the banks should have the committee which will consist of an expert from the legal field, investigative agencies and finance professional, and the task will be to make sure that there will not be any scope for allegations. The government will set up an independent oversight mechanism which will not have any government representative or serving banker but is supposed to have some experts who inspect from the accuracy point of view whether the case brought up is genuine. The oversight mechanism committee will act as only an advisory body, will help the bank vet a particular case going to the committee which will not be mandatory for a bank. It is important to note that Under Corporate debt Restructuring CDR, there were 106 cases of restructured loans, of 76470 crore rupees in 2012-13, a rise from 50 cases (exposure of 39600 crore Rupees) in 2011-12. Also, apart from the CDR platform, lenders had also gone for significant recast at the bilateral level during the period. As per finance ministry estimate, if all restructured loans are classified as NPA, the gross level of these for public sector banks (PSBs) would shoot up to 11.6 per cent of gross advances, from 4.2 per cent at the end of December 2013.

The estimate suggests reorganized standard advances formed 7.4 per cent of all advances for PSBs.