Regulations
India to revise tax pact with Mauritius to curb black money
Seeking to plug loopholes in the existing bilateral treaty that inhibit steps to curb black money, India on Tuesday said it has signed a protocol agreement with Mauritius to prevent evasion of taxes on income and capital gains by entities of either side.
 
"The protocol for the amendment of the convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains between India and Mauritius was signed by both countries today at Port Louis," an official statement said.
 
The pact comes on a day when the finance ministry listed the steps taken to curb generation of black money by Indians within and outside India and that it has uncovered indirect tax evasion worth Rs.50,000 crore and undisclosed income of Rs.21,000 crore in the past two years.
 
Among other measures in the protocol pact with Mauritus is to have a source-based taxation of capital gains on shares. 
 
India gets taxation rights on capital gains arising from sale of shares in an Indian firm on or after April 1, 2017, while, also protecting investments in shares that were acquired before that date. Such tax will be limited to 50 percent of the domestic tax rate of India with caveats.
 
The benefit of 50 percent rebate in tax rate during the transition period from April 1, 2017 to March 31, 2019 shall not be available if the Mauritius company, including a shell firm, does not pass the test of having a bonafide business. 
 
"A resident is deemed to be a shell or a conduit company if its total expenditure on operations in Mauritius is less than Rs.2,700,000 (Mauritian Rs.1,500,000) in the immediately preceding 12 months," the statement added.
 
This apart, interest that accrues in India to a Mauritian bank will be subject to withholding tax in India at the rate of 7.5 percent of debt, the claims or loans made after March 31, 2017. But the claims before this date have been exempt.
 
The finance ministry said this protocol will tackle long-pending issues of treaty abuse -- where ill-gotten money is first sent to Mauritius through havala transactions, and then comes back as a legitimate investment. This is called round-tripping.
 
"The protocol will improve transparency in tax matters and will help curb tax evasion and tax avoidance. At the same time, existing investments -- investments made before April 1, 2017 -- have been grand-fathered and will not be subject to capital gains taxation in India.".
 
The government has taken a series of steps to tackle the generation of black money.
 
Listing the steps taken to curb black money, the finance ministry said in a separate statement on Tuesday that a new income disclosure scheme had been formulated for those holding undeclared assets to declare them and pay a total tax and penalty of 45 percent.
 
Further, amendments have also been made to the Prevention of Money Laundering Act to enable the attachment and confiscation of equivalent assets in India where the asset located abroad cannot be forfeited. 
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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DYNAMICLEVELS

7 months ago

The revised tax treaty with Mauritius wherein only genuine Mauritius based companies will be exempted from capital gain tax in India.All money routed through Mauritius will be liable to fall under the purview of this tax.

HUL’s volume growth disappoints at 4% for the March quarter
Hindustan Unilever Ltd (HUL) reported low revenue growth of 3.4% to Rs7,809 crore from Rs7,555 crore for Q4FY15-16. Its net profit growth stood at 7% with its profits in the current quarter at Rs1,090 crore. The operating profits rose 10.5% to Rs1,379 crore. The volume growth was extremely muted at 4%, which was lower than analyst expectations. Its volume growth in Q2FY15-16 stood at 7%, which subsequently declined to 6% in the third quarter. 
 
On the margins front, it reported 240 basis points rise in gross margins to 52.6% due to soft input prices. However, the growth in EBITDA (earnings before interest, tax, depreciation and amortisation) margins was lower at 130 basis points due to higher advertising costs and staff costs. Its EBITDA margins for the quarter stood at 18.5%. Its advertising costs rose by 6% to Rs1,090 crore, while its staff costs rose by 15% to Rs446 crore from Rs388 crore. 
 
The soaps and detergent segment posted just 2.1% sales growth, while personal products posted 2.8% growth for the quarter. These two segments are critical for the company, accounting for nearly 75% of its revenue in FY15-16. Its beverages and packaged foods segment did better reporting revenue growth of 6.1% and 11.7% respectively. Each of its categories – soaps and detergents, personal products, beverages and packaged foods, reported single digit volume growth for the year. 
 
 
The management stated that the market slowed down further, especially in the drought affected rural areas. The management has guided that in the near-term, market growth improvement is largely dependent on the rural segment. The company has benefited from soft input prices in the last year. However, the management expects a pick-up in commodity costs in the near term. In general, analysts do not expect a pick-up in growth due to weak macro environment and a competitive environment in the sector, especially from Patanjali Products, which has been able to clock nearly Rs5,000 crore of revenues in FY15-16. 
 
In line with the strategy of the company to exit non-core businesses, HUL entered into an agreement for sale of its rice exports business to LT Foods Middle East DMCC. The business was carried primarily through its brands 'Gold Seal Indus Valley' and 'Rozana'. The business was insignificant for the company in revenue terms. It registered a turnover of Rs51 crore in FY14-15. 
 
Earlier, in mid-January, the Board of Directors approved the transfer of the balance of Rs2,187 crore from General Reserves to Profit & Loss Account. HUL has filed an application with the Bombay High Court for its approval. It would also require the approval of shareholders. However, the mode of distribution of this amount, whether by buyback/ special dividend, or any other mode, is unknown. 
 
The stock trades at a premium price-to-earnings (PE) multiple of 47, based on trailing twelve months earnings. The company has robust cash flows and a healthy dividend yield of around 1.7%. HUL declined marginally by 0.8% on the day of the results. However, it recovered today by 2%, closing at Rs862.  
 

 

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Nifty, Sensex may continue to rally – Tuesday closing report
We had mentioned in Monday’s closing report that Nifty and Sensex were headed higher. On Tuesday, the major indices of the Indian stock markets opened weak but still closed with gains. The trends of the major indices in Tuesday’s trading are given in the table below:
 
 
Negative global cues, coupled with profit booking, subdued the Indian equity markets on Tuesday. Consequently, the key indices of the Indian equity markets traded flat -- marginally in the green in the morning. With value buying in capital goods, healthcare and bank stocks lifting prices, by afternoon, the major indices closed with small gains. The BSE market breadth was marginally tilted in favour of the bears -- with 1,315 declines and 1,298 advances.
 
Steel exports fell 27% in April this year to 0.308 million tonnes (mt), while finished steel production in the country grew 3.2% to 7.48 million tonnes in the first month of the current fiscal, as per the steel ministry's latest report. "Export of total finished steel was down by 27% in April 2016 (0.308 mt) over April 2015 and declined by 12% over March 2016," said the report of the ministry's Joint Plant Committee (JPC). India imported 0.654 mt of total finished steel in April 2016, down 15.5% over the same month last year.  According to the provisional data released by JPC, production for sale of total finished steel at 7.487 mt, registered a growth of 3.2% during April over year-ago month. "During April 2016, the ISP (integrated steel plants) producers produced 3.956 mt, which was a growth of 1.2% while production for the other producers was up by 3.3%," the report said. The country's steel consumption posted a 5.2% growth in April 2016 at 5.75 mt over corresponding month last year. The report pointed out steel consumption in April was down 29% as compared to March (2016) consumption under the influence of a declining supply side as both production for sale and imports declined. Steel Authority of India shares closed at Rs42.40, down 1.17% on the BSE.
 
Even as Reliance Industries doesn't intend to offer doles on its 4G handsets under the "LYF" brand, some concessions are certainly expected given the state of play in India's mobile phone and data market, global investment advisory CLSA has said in an analysis. "While Reliance has said categorically it is not looking to give handset subsidies, we expect it to come up with some bundled promotional offerings. In a prepaid market like India, any bundled offering may be very different from the handset-subsidy model popular in several other markets," it said. "Unlike the bundling of the phone with the service, we expect Reliance to bundle the service with phones," it said, adding Jio may offer a phone for around Rs.3,400 and free services in the first 3-months, which can cover a part of the handset price and reduce the cost of ownership. "In fact, in the recently launched invite-based scheme, Jio is offering unlimited 4G data, 1,500 voice minutes and 9,000 SMS free for three months on purchase of a LYF phone," it said referring to the scheme under which each employee is allowed to extend the offer to 10 friends. The brokerage was also upbeat on the use of 4G in India. Reliance Industries shares closed at Rs981.35, down 0.16% on the BSE.
 
The top gainers and top losers of the major indices are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 

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COMMENTS

DYNAMICLEVELS

7 months ago

Yesterday FII have sold 97258 contracts in the futures markets and 282930 contracts in the Options market in the current expiry. Nifty is expected to open gap down at 7795 as per SGX at 8:30 am IST. Small Cap trend change confirmation level is 5089 and Nifty recent low was 7700. We might see continued selling in the market today.

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