Some DTC tax sops this budget itself

Govt May Enhance I-T Exemption Limit In Coming Budget As It Looks To Help Inflation-Hit Families
Deepshikha Sikarwar NEW DELHI

THE government may advance by a year the roll out of some of the income tax measures proposed in the Direct Taxes Code (DTC) to provide relief to inflation-hit households. These measures may form part of the forthcoming budget. "Some measures in the code could be advanced," a senior government official said on condition of anonymity. The DTC is expected to come into force from April 2012. The thinking within the finance ministry is that some relief should be provided to common households in view of the high inflation by raising the personal income tax exemption limit, the official said. Under the current rules, income up to . 1.6 lakh is exempt from tax for individuals. For women and senior citizens, the limit is . 1.9 lakh and . 2.4 lakh, respectively. The DTC Bill was introduced in Parliament last year. It proposes an I-T exemption limit of . 2 lakh. The budget for the ongoing fiscal year had not raised the basic exemption limit and the one for the previous year had increased it only by . 10,000. The plan to advance some of the DTC proposals comes as the government battles mounting price pressures at home. Indias food inflation has remained in double-digits for most of the past year and has played a key role in pushing up the headline inflation. Food inflation for December stood at 15.5%. The wholesale price index rose an annual 8.43% in the month. The finance minister could also recast the income tax slabs. The DTC Bill has proposed changes in the slabs. At present, income over . 8 lakh attracts the highest slab of 30%. The Bill has proposed the 30% rate for income in excess of . 10 lakh. However, since the budget for the current year had sharply widened the tax slabs, it is likely the government may just go for an increase in the basic exemption limit without rearranging the slabs, according to some experts. A slab rearrangement helps taxpayers already under the tax net. "A rise in the basic exemption limit would help people at the lower strata of society while widening of existing tax slabs will help people in low income groups already covered under the tax net," said Vikas Vasal, executive director at KPMG. Since the tax slabs were recast last year only, it would make sense to go for an increase in the exemption limit. But some experts are of the view that fiscal constraints may restrain the government from giving away too much in the current year. The fiscal responsibility framework proposed by the government seeks to cut the fiscal deficit to 4.8% in 2011-12 as against 5.5% budgeted in the current year. The government also needs to set aside more for its flagship schemes, such as the Mahatma Gandhi National Rural Employment Guarantee Act and the Food Security Act. Moreover, unlike the current year when the government had a . 1 lakh crore bonanza from the sale of 3G and broadband spectrum, in the next fiscal it would have to rely mostly on borrowings and tax collections to fund its expenditure.

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Dhanlaxmi plans 1,100-cr war chest to take on competition

Bank Aims To Be Among The Top-Five Private Banks In Terms Of Loans
Sangita Mehta MUMBAI

DHANLAXMI Bank may sell shares or global depositary receipts to private funds and mutual funds to raise 1,100 crore to improve its capital position ahead of the likely entry of new private banks and larger role for foreign banks. We plan to raise money simultaneously through all three routes by the month of May, MD and CEO Amitabh Chaturvedi said in an interview with ET. The bank, which reported a five-fold increase in net profit for the third quarter at 7.26 crore, aims to be among the top-five private banks by 2015-16 in terms of loans and profitability. About 300 crore would be raised through the sale of shares on a preferential basis, another 350 crore to 400 crore through GDR and the balance 300 crore through sales to qualified institutional investors like mutual funds, banks and foreign institutional investors, Chaturvedi said. The bank may allot shares to four investors under the preferential allotment route. All the four would hold about 5% stake and have a lock-in period of one year, he said without disclosing potential investors. They are big players in India. But I dont think any one of them holds banks in portfolio as such. The allotment to private equity investors would be subject to RBI approval. After the share sales, no single shareholder will hold more than 4.9% stake. In 2002, P Raja Mohan Rao held 37% of the bank and was forced to reduce his stake to 10% following instructions from the Reserve Bank of India that no single entity could hold more than 10% in a bank. The board has approved plans to issue 5.5 crore equity shares, which will result in 40% equity dilution. The fresh equity of 1,000 core will enable the bank to lend 25,000 crore. Currently, it has a loan portfolio of 7,750 crore, up 75% over the corresponding quarter a year ago.

GDP grew faster at 8% last fiscal

V Sign For Economy: Better-Than-Expected Savings And Investment Led To Upward Revision In GDP Figures For FY10
Our Bureau NEW DELHI

INDIAS economy grew at a faster pace in fiscal 2009-10 than estimated earlier, the government said on Monday. The gross domestic product (GDP) grew at the rate of 8% as against 7.4% estimated in May last year. The upward revision is based on the quick estimates of national income for the year, the Central Statistical Office (CSO) said. Economists termed the recovery almost V-shaped, which has been accompanied by a rebound in savings and investments. The upward revision could depress the growth for the current year because of the higher base. The economy is projected to grow more than 8.5% in the current fiscal, having notched up 8.9% in the first half. The high GDP growth saw per capita net national income rise 6.1% to . 33,731 crore. The gross domestic savings constituted 33.7% of GDP in 2009-10 as against 32.7% in the year before, while gross capital formation, or investments, constituted 36.5% of GDP, up from 34.5% in 2008-09. Household savings, however, declined marginally to 23.5% from 23.8% in the year before.

This was attributed to a drop in savings in physical assets to 11.7% from 13.1% of GDP. But financial savings increased to 11.8% from 10.8% of GDP. "This is a more firmer set of numbers," said D K Joshi, chief economist at rating agency Crisil. Though most economists do not see the revision having any material impact on the current years growth, an official at the CSO said it could make a minor dent. The first, or advance, estimates of GDP for 2010-11 will be released on February 7. "This is partly a positive as we were expecting an upward revision...we had estimated 7.7% as the revised growth rate," said Shubhada Rao, chief economist at Yes Bank. The revision in the GDP growth estimates was due to incorporation of the latest estimate of services and industries and the impact of the new series of wholesale price index with base year 2004-05. The most significant revision was seen in the community social and personal services, which grew 11.8%, more than double of 5.8% estimated initially. "This increase could be the effect of the fiscal stimulus," said Rao. But the set of numbers released on Monday also surprised some economists as they had factored in a lower level of revision due to the use of new deflator. The agriculture sector saw a small upward revision from 0.2% to 0.4%, but the increase came from forestry and fishing. Farm sector saw a minor decline. Manufacturing growth was revised down two percentage points to 8.8%. "A lower number for the last year could result in an upward bias on the current year's growth rate for the industrial sector," said Madan Sabnavis, chief economist at CARE. Industrial growth, as measured by the index of industrial production, dropped to an 18-month low of 2.7% in November. "Investments have been on a decent level," said Sabnavis.