Tax code may foil vessel phase-out plans

Shipping companies plan to replace old vessels with newer ones. But these moves may be affected due to the tonnage tax code and the additional tax on capital gains earned from such phased-out vessels

With the decline in asset prices for new ships, many shipping companies are planning to replace their fleet with newer vessels. However, the tonnage tax and the additional capital gains tax charged on earnings from phased-out or sold vessels could be a stumbling block, says a tax expert.

“As per the tonnage tax code, shipping companies have to pay tax as per their total tonnage and not on a profit or loss basis. When you sell a ship, you realise a certain amount and when you realise more than the depreciated value, it is a capital gain, which is not covered in the tonnage tax code. Thus, the company has to pay an additional tax on this capital gain,” said Samir Kanabar, partner for tax and regulatory services, Ernst and Young.

Talking about the likely effect of this tax on the balance sheets of shipping companies, he said, “For the phasing-out of single-hull vessels, a 9-12 month window is available. In this period, people will either be upgrading or selling (their fleet). This will thus start reflecting in the next two to three quarters in their books.”
 
Typically, companies which are actively buying new ships, also have a considerable number of vessels to be phased out. Shipping Corp of India (SCI) has recently placed an advertisement for two more new ships. Moneylife had earlier reported that SCI had 10 single-hull vessels to be phased out, out of which it has already sold five ships. It plans to sell the remaining five by 2010.

GE Shipping is planning to sell five single-hull ships for scrapping. “We may not necessarily phase out all the vessels by 2010. We will plan the phase-out as per the opportunities available and will consider fixing a fleet-age limit of 25 years,” said Anjali Kumar, head of corporate communications, GE Shipping.

Mercator Lines also plans to phase out three of its existing single-hull vessels ahead of the implementation of the International Maritime Organisation (IMO) guidelines on phasing out of single-hull vessels.

Apart from the phase-out, the tax expert pointed out that shipping companies are buying new ships and selling old ones even if it is not mandatory, in order to have a younger fleet. “In terms of buying a new ship, the tax code does not matter, other than the added tonnage tax. However, you have to pay an added tax on the capital gains from the old ship sale,” Mr Kanabar said.

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COMMENTS

Krishnaraj

7 years ago

While I appreciate the article, frankly there is nothing new. Anyone with industry knowledge knows that there is no tonnage tax on sale of ships and capital gains needs to be paid.

In my view the ticking bomb - if you will - is the arrival of MAT on gross assets in the new Tax Code. It will create such a large hole in the already struggling businesses that most players will be tempted to register their ships outside India....a coverage of that would be interesting

Bank sells ‘mandatory’ insurance plan to 70-year old NRI

A 70-year-old non-resident Indian woman was lured into buying an insurance plan by paying a single premium of Rs10 lakh when she approached a bank to open an NRE account

Mis-selling by institutions like insurance companies is not new. However, with more and more financial institutions entering the insurance market, customers of a particular institution are being lured and sometimes even forced to buy co-branded products. One such incident highlights the need for stricter practices by insurance companies.

About a year ago, a 70-year-old non-resident Indian (NRI) woman went to one of the largest private sector banks in the country to open a non-resident external (NRE) account. While opening the account, an executive from the bank lured the lady into buying a co-branded insurance product under the pretext of ‘mandatory’ rules. He also told her that she will have to pay the amount of Rs10 lakh only once. With no option left for opening the account, the lady obliged and left for her overseas home.

“When that lady returned after 12 months, she was asked to pay one more premium for the insurance plan. Since the bank would not return the money which she had paid for the first premium, she was again forced to pay the second instalment for the insurance policy that was forced upon her,” revealed an independent financial advisor (IFA).

It was later found that the executive who had sold the lady the insurance policy was no longer working with the bank.

In another case, another executive from the same bank has allegedly duped a 60-year-old into paying a premium for an insurance plan for one year and later told him to forget about it.

These are only two examples of cheating by executives from financial institutions, who more than often try to sell a co-branded product to innocent customers.

To tackle such increasing fraudulent cases, the Reserve Bank of India (RBI) introduced a banking ombudsman scheme under Section 35 (A) of the Banking Regulation Act, 1949. The Act is in effect from 1995. A customer can register a complaint with an ombudsman if no reply is received from the bank within one month, or if the bank rejects the complaint, or if the customer is not satisfied with the reply given by the bank. If a complaint is not settled within one month, the banking ombudsman may pass an award up to Rs10 lakh or to the extent of the losses suffered by the customer up to Rs10 lakh, whichever amount is lower. Between the years 2002-06, the banking ombudsman has settled around 36,000 complaints.
 

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COMMENTS

R.B.DWIVEDI

7 years ago

The aforesaid articles does not look reliable in the absence of specific details of the name of Bank, Branch, etc, or the details of the insured as the same are not verifiable. If the publisher is sure of the news, the details should be made available without fear.

Shibaji Dash

7 years ago

At least as a starte, the Seniors in the RBI should not share any public platform with the much touted Heads of such banks.

Rajesh

7 years ago

Isnt it obvious that the bank is either ICICI or HDFC? Both are largest private sector banks in India, but I think the modus operandi is more similar to the first one.

Hemant Beniwal

7 years ago

I agree with Niranjan

Niranjan Bangera

7 years ago

Unless you actually name the banks, the above article falls under the category of "Fairy Tales".

If you are worried about defamation cases, you are in the wrong business

Santanu

7 years ago

The whole revenue driven approach where a RM is burdened with a whole lot of different targets like CASA, Loans, FD, Third Party product sale force the RMs to mis sale. Sheer target pressure. Perhaps the model needs to change to more medium to long term relationships with client where client facing RM is also evaluated based on the feedback received from the clients handled by him/her.

Hemant Beniwal

7 years ago

Thanks Moneylife for bringing such cases in front of public but why you shy away with names of these organisations. Tell name of this organisation so people should me more conscious while dealing with them.
Why media play a double standard if some crime is done by a common man they will write XYZ, from this city even colony done this. But if same level of crime is done by a affluent person they will write director of a big financial institution did this. People want to know who is this criminal.
These are my personal views; I don’t know your limitations.

big investor

7 years ago

inspite of para-banking norms as regards selling insurance products (as an agent / referral) this keeps happening.

God save us.

arvindban

7 years ago

Mis-selling of insurance products is rampant...and even the well educated are hoodwinked into buying products that work only for the seller.Banks are often peering into the accounts of their customers to see who is sitting on cash....and close in on them making all kinds of ridiculous claims,meant only to dupe.When a banking agent tires to sell you a retirement plan,the question to ask is 'whose retirmrnt is he talking about' yours or his?

One fails to understand why IRDA cannot make it mandatory for all companies to transparently tell customers for every rupeee that the customer invests ..how much goes into commissions. for agents/banks..year on year..how much is the Administrative charge,ho much is the mortality charge.Most insurance companies pass on over 50 % commissions to banks for the first year and substantial percentage every subsequent year.The structuring of Insurance products is deliberately kept so opaque..that even a qualifies Actuary wld be at loss to decipher it.Structuring of insurance products is nothing short of a scandal.The Regulator is absolutely clueless..and the customer is easy prey for unscruplous banks.

Why cant this bank be made to pay a penalty which is atleast 5 times the money they duped form the Old lady

SUHAS MANGOLI

7 years ago

This is not that new thing in practice and incidently i have come to the feeling that the regulatory authorities are also a party to it as nobody even ever looks into these things the attack is always on small fish that is the individual advisors/agents what is IRDA doing about such things It is also a common practice to force for Fixed Deposit if you want a locker and there are many such things which are going on Apart from this even the journalism is in hand and gloves as these things also never get publicised Actually these different kinds of business should be seperated out or these things are bound to happen and there is nobody who is responsible because of high rate of attiration in pvt Sector

R Balakrishnan

7 years ago

Why not put in the bank name? Surely, a bank to avoid.
Maybe the lady should sue the bank and get the money back. Just because an employee has left the bank, does not exonerate the bank.

pravimayekar

7 years ago

Such banks should be highly penalised and these banks' name should be published by RBI under notification in all newspaper for awareness of public.

K.Narayanan

7 years ago

Is RBI not aware of such things?They simply issue a circular and forget about it.It is left to the customer to slug it out in the court or ombudsman.Unless RBI cancels the banking license or at least stop issuing fresh branch opening license the pvt sector banks-read new generation-they will continue to cheat-oh,misselling-The sales executive by hoodwinking the customer obtains the consent and the bank would take the plea that the customer consented for the same.Who is the chairman-part time -of HDFC bank MrJagdish Capoor retd Dy Governor of RBI.He is appointed not for his knowledge on banking-though apprently yes-but for his ability to manage regulatory issues.What action RBI can take on HDFC bank?ICICI bank takes nice care of the inspecting team from RBI.What can you do except bear all such nonsense.Unless RBI comes down heavily on such banks public will have to suffer.When ICICI bank was in trouble a no of times when there was run on the bank it was RBI that came to its rescue.When they loot or harass the customer they don't want RBI to interfere in their freedom to do what they want because they are pvt sector .Amen!

PayPal services to and from India to remain suspended for months

The Internet payment gateway says that its services to and from India will remain suspended for a few months due to revised licensing rules

Popular electronic payment gateway PayPal Inc has said that personal payments to and from India will be suspended for at least a few months until it fully resolves the questions from Indian regulators.

In a blog, Anuj Nayar, director for global communications at PayPal, said that it temporarily suspended local bank transfers and personal payments to and from India to respond to enquiries from Indian regulators, specifically questions on whether personal payments constitute remittances into the country.

"We’re working with the regulators and our bank-processing partners in India to get this resolved as quickly as we can. We realise that this is causing considerable inconvenience to our customers and I want to reassure you that this is a top priority for the leadership at PayPal," Mr Nayar said.

Officials from the Reserve Bank of India (RBI), who previously told Moneylife that the central bank had no idea why this was happening and PayPal doesn't come under RBI's purview, were not immediately available for comments after PayPal admitted that there was some issue with Indian regulators.

Talking about the availability of local bank withdrawals in India, Mr Nayar said that customers should be able to transfer their funds to a local bank within the next few days. "In the meantime, we’re going to restore the money into the PayPal accounts of any customers in India who have initiated a recent withdrawal, so they know that the money is safe in their accounts. Customers will also be reimbursed for any withdrawal fee charges," he added.

In case of any PayPal reversal that has left many customers in India with negative balance, Mr Nayar has advised them to contact the senders and have them resend the payment for purchase of goods or services by clicking on the 'Send Money' tab and selecting 'Purchase'. However, in case of a personal payment, he said, "The sender will need to find another payment method until we restore the service.”

"If you can’t recover the funds from the sender, you can bring your PayPal balance current by logging into the PayPal account and clicking the 'Resolve Negative Balance' link on the ‘Account Overview’ page," Mr Nayar said.

 

User

COMMENTS

Zakir

7 years ago

Its shameless for paypal without any notice they suspended the transaction to Indian paypal accounts.

Rakesh Sharma Jack

7 years ago

Simply pathetic I must say...majority of people who are using PayPal are those who are proving their talents worldwide and such restrictions are proving to be a big hurdle in their way...what else we can do except to wait until this issue is resolved..literally in crossed-fingers position.

Navin

7 years ago

Yet another example of the high handed attitude of the regulators. You and me are also suspect in the eyes of the regulators and the people who matter in this country. Everyone trying to send money is deemed to be a terrorist or money laundered till proved otherwise. Mera Bharat Mahaan!!

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