DTC may moderate tax rates, hints finance ministry official

New Delhi: Taxpayers may get relief in terms of tax rates in the proposed Direct Taxes Code (DTC), which is likely to replace the 50-year-old Income Tax Act from the next fiscal, reports PTI quoting a key financial ministry official.

"We are in the process of reducing the rate of tax and DTC will be a good example in that direction," Central Board of Direct Taxes (CBDT) chairman S S N Moorthy said at an Associated Chambers of Commerce and Industry (Assocham) tax conference.

He further said India is coming down to a realistic platform where the rates will be almost in line with international standards. "We are in the process whereby we have to be taxpayer friendly, we have to be in tune with international standards."

At the same time, the government would take measures so that the flight of revenue from India can be checked.

The DTC bill is likely to be tabled in this session of Parliament so that it could replace the archaic Income Tax Act from 1 April, 2011.

In the first DTC draft, the government had proposed a substantial widening of the tax base. It had suggested imposing 10% tax on income of Rs1.6 lakh-Rs10 lakh, 20% on income of Rs10 lakh-Rs25 lakh and 30% beyond Rs25 lakh in a year.

The proposed tax slabs were even substantially wider than the increase in the Budget 2010-11. The Budget imposed 10% tax on income of Rs1.6 lakh-Rs5 lakh, 20% on Rs 5 lakh-Rs8 lakh and 30% on over Rs8 lakh in a year.

However, the revised draft on DTC did not talk over tax rates and finance ministry officials said the slabs given in the first draft were just illustrative.

The second draft also said that the rates proposed in the first draft could be calibrated, after it dropped contentious proposal of taxing long-term savings like provident funds at the time of withdrawal. This means that tax rates may not be moderated so sharply, as was given in the first draft, but some rate cuts would be there.

Mr Moorthy further said that direct tax collections of Rs4.3 lakh crore for the current fiscal are on track.

"The target for the current year is about Rs4.30 lakh crore. Fortunately we are on track. We are growing at the rate of 15%," he added.

He further said tax deduction at source (TDS) collection, which constitutes a major chunk of direct tax, is not adequate but it would pick up. "This year we are going at the (TDS) rate of about 37.5% which is not adequate enough but anyways it will pick up."

Last year, TDS collection touched around 38% of the total revenue. It was about Rs1.40 lakh crore.


Cement stocks surge, but the rally may fizzle out

The fundamentals of the industry have not changed; supply will continue to outstrip demand, and prices will be hit further

Cement stocks enjoyed a huge rally across the board yesterday mainly on reports of a 2% hike in western India - CLSA says cement dealers confirmed a 2% hike in Mumbai. Cement stocks went up anywhere between 3%-8%.

Somewhere there was an element of catch-up too - cement stocks have been underperforming the indices. So what does one make of this rally? Well, to be very honest, this looks like a one-off rally - and by the looks of it, it is already fizzling out. Nothing seems to have changed fundamentally.

Most brokerages are advising clients to not read too much into yesterday's rally. Today's CLSA report to its institutional clients states: "Over FY11-12, we expect effective supplies (17% CAGR) to outstrip demand (9% CAGR) which would take down industry utilisation rates to 20-year low of ~80%. Cement prices have already corrected by 10%-35% over the last 3-4 months and we expect pressures to continue over the next few quarters."

The report also says that while dealers have confirmed the ~2% price hike in Mumbai, they are sceptical about the market's ability to absorb it given demand-supply issues.

A channel check update for July by Anand Rathi just three days ago observes that while all-India production declined 0.2%, dispatches rose 2.2% y-o-y - they grew 16% in the west but declined 4% in the centre. The south was still leading in capacity additions. The report said 6 million tonnes have been added in March 2010, but is not yet reported by the Cement Manufacturers Association. All-India utilisation has dropped to 75%, (it was 85% same time last year, and 79% last month) - the south and north recorded lowest utilisation. Volume outperformers were JPA, Orient, Dalmia, UltraTech and India Cements (note that JPA has new capacity) while laggards were ACC and Ambuja. The report states, "prices in August slipped Rs8-12 a bag in the western and central regions; they have been stable in all other regions. In the south, price increases in certain pockets couldn't be sustained. Demand during July-August has eased, chiefly due to shrinking demand from construction at government projects and in real estate. Dealers do not expect any major price cuts in the next two to three months." So, in short, nothing much has changed in the last two months.

Religare has a different standpoint. The brokerage says, in a report dated 4th August, that it sees FY11 as the trough year for cement and expects prices to bottom out in the September quarter. The basis for this assumption is an expectation of an improvement in demand led by higher infrastructure and real estate off-take, rise in capacity utilisation as incremental additions ease off, and a firming up of cement prices. The report also talks of attractive valuations since stocks have corrected 8%-28% over the past four months limiting downside and M&A activity in the sector, fuelling a re-rating. None of these arguments feel right, at least at the moment - so in the short-to-medium term, the flat to negative trend in cement prices could continue.

Q1 earnings of the cement industry were almost universally disappointing. Companies with higher exposure to the south were more hit than others as this region saw both a supply increase and demand contraction. However, sequentially, most companies posted realisation gains of 2%-3% thanks to a price hike in March 2010. However, prices came under pressure once again towards June and right now, realisations are actually 5%-6% lower than they were in Q1. Investors, especially retail ones, will be well advised to stay away and just observe for the moment, at least for a quarter or so.



sushil suryawanshi

6 years ago

Hi sushil

read this cement sector watch....

Personal finance Friday

EC Media launches e-book reader Wink in India; Fortis MF introduces Fortis Fixed Term Fund-Series 18 C; Religare MF revises exit load under Religare Short Term Plan; ICICI Pru MF declares 10% dividend under two schemes; Dhanalakshmi Bank hikes deposit rates; State Bank of Bikaner and Jaipur hikes interest rates

EC Media launches e-book reader Wink in India  
EC Media International has launched e-book reader called Wink XTS. The device is a multi-functional e-reader that supports upto fifteen Indian languages. Consumers can access e-books, journals, newspapers, magazines (through subscriptions) and selected articles on the Wink e-store. EC Media also plans to launch an e-paper, Winkwire, for its users. The company has also entered retail partnership with Croma, the electronic megastore. The cost of Wink XTS is Rs11,490 and will be available from 1 September 2010. The first 10 books can be downloaded free. Later on, the user has to pay some amount to download the books. However, the user pays 60% to 70% price of the actual cost of a printed book.

Fortis MF introduces Fortis Fixed Term Fund-Series 18 C

Fortis Mutual Fund has introduced a new fund called Fortis Fixed Term Fund-Series 18 C. The fund is a three-month close ended income scheme. The new fund offer (NFO) price for the scheme is Rs10 per unit. The new issue has opened for subscription on 19th August and will close on 23 August 2010. The tenure of the scheme is three months from the date of allotment of units. The scheme offers two option-growth and dividend. The dividend option offers only dividend payout facility. The investment objective of the scheme would be to achieve growth of capital by making investments in fixed income securities maturing on or before the maturity of the scheme. The scheme would allocate upto 100% of assets in debt instruments and money market instruments with low to medium risk profile. The minimum subscription amount is Rs5,000 and in multiples of Rs10 thereafter. The fund seeks to collect a minimum subscription amount of Rs50 lakh under the scheme during the NFO period. Entry and exit load charge for the scheme will be nil.

Religare MF revises exit load under Religare Short Term Plan

Religare Mutual Fund has revised the exit load structure for Religare Short Term Plan. As per the revision, an exit load of 0.25% is payable if units are redeemed on or before 45 days from the date of allotment. No exit load is payable if units are redeemed after 45 days from the date of allotment. Religare Short Term Plan is an open ended income scheme. The investment objective to the scheme is to generate steady returns by investing in short-medium term debt and money market instruments.

ICICI Pru MF declares 10% dividend under two schemes

ICICI Prudential Mutual Fund has declared a dividend 10% (Re1 per unit on face value of Rs10) in ICICI Prudential Dynamic Plan and ICICI Prudential Growth Plan. The record date for dividends is 20 August 2010. The net asset value (NAV) under the dividend plan of the schemes as on 19 August 2010 was Rs19.4103 and Rs18.71, respectively. ICICI Prudential Dynamic Plan is an open-ended equity fund. The investment objective of the scheme is to generate capital appreciation by investing in equity and equity related securities. ICICI Prudential Growth Plan is an open-ended equity fund. The investment objective of the scheme is to generate long-term capital appreciation by investing in equity and equity related securities.

Dhanalakshmi Bank hikes deposit rates

Dhanalakshmi Bank has increased its deposit rates on all tenures upto Rs1 crore by 25-75 basis points (bps). However, the bank has left its lending rates unchanged. The bank has also launched a new term deposit scheme with a 250-day maturity. Short-term deposits with 7-14 days and 15-45 days maturity will now offer 3.5% and 4% interest, respectively, an increase of 0.75%, while those with 366-399 days and 400 days will get 7.5 to 8% returns respectively, up 0.25%. For deposits above five years and upto 10 years, the revised interest rate stands raised by 50 bps to 8.25%.

State Bank of Bikaner and Jaipur hikes interest rates

State Bank of Bikaner and Jaipur (SBBJ) has raised its lending rate by 50 basis points (bps) and deposit rates by 25-50 bps across various maturities. The lending rate of the bank has been increased from 12.25% to 12.75%. Following the increase, home, auto and corporate loans have become more expensive for existing borrowers. For fixed deposit rates, SBBJ increased the interest rate by 50 bps to 3.5% for term deposits of 15-45 days' tenor. For fixed deposits with a tenor between 181 days and less than one year, the new interest rate will be 6.25% against the existing 6%, while one-two year fixed deposits will attract an interest rate of 7.25%, an increase of 25 bps. The interest rate on term deposits of between two-three years' tenor will go up by 25 bps to 7.5%, while interest on the 5-10 years' maturity slab has been increased to 7.75%.


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