Sunday, March 3, 2013

Important Changes

Finance Minister P Chidambaram’s Budget proposals yesterday had an important change in the law on the income tax deduction for political funding.
The Finance Bill, 2013, has proposed to disallow deduction of any sum contributed through cash in computation of income for tax purposes from April 1, 2014.
The move, along with the one per cent TDS on property transactions above ? 50 lakh, is being seen as a step to counter movement of unaccounted income.
Currently, under the provisions of Section 80GGB of the Income Tax Act, any sum contributed by an Indian company to any political party or an electoral trust in the previous year is allowed as deduction in computing the total income of the company.
A similar deduction is available to an individual, other than alocal authority and an artificial juridical person under section 80GGC. There is no specific mode provided for making contributions to political parties.
“With a view to discourage cash payments by the contributors, it is proposed to amend the provisions of aforesaid sections, so as to provide that no deduction shall be allowed under section 80GGB and 80GGC in respect of any sum contributed by way of cash,” said the memorandum explaining the provisions in the Finance Bill, 2013.
An internal paper of the Central Board of Direct Taxes had said the Election Commission of India had expressed serious concern about the crores in cash being deposited with some political parties, and regarding the manner of spending. It had also pitched for fixing a limit beyond which all contributions to political parties should be made through account payee cheques only.
[1]A sum contributed by an Indian company to any political party or electoral trust in the previous year is allowed as a deduction now [1]The Budget has proposed a 1% tax deduction at source on any property transaction above ? 50 lakh
Action likely soon on more powers to Sebi

Friday, March 1, 2013

Budget to help India Inc save 25,000 cr in 2 years

India Inc has a good reason to step up capital expenditure ( capex).
With the Budget proposing an additional investment allowance of 15 per cent for assets acquired and installed in the next two years for over ₹ 100 crore in capital spending, companies are expected to get a total benefit of ₹ 25,000 crore.
According to an estimate by the Centre for Monitoring Indian Economy ( CMIE), India Inc plans fresh capital expenditure of around ₹ 5,00,000 crore in 400 projects in the next two financial years. “ There will be a saving of up to five per cent from our capital cost and this will help new units to break even faster,” said Ashok Bhandari, chief financial officer, Shree Cement.
Reliance, the Birlas and the Tatas, which have a number of projects lined up, will benefit from this move. So will public sector companies.
The estimated saving of around ₹ 25,000 crore on project cost is equivalent to 7.3 per cent of the aggregate profits of BSE- 500 companies in FY12. The savings will flow directly into their bottom line and improve the financial viability of projects.
Aditya Birla Group flagship Grasim Industries would be another gainer. The company, with subsidiary UltraTech Cement, is investing ₹ 16,000 crore in augmenting fibre and cement capacities. Nearly a third of this amount is likely to be spent in the next financial year and the company can claim investment allowance on it. K K Maheshwari, managing director of Grasim Industries, said the move would definitely boost their investment plans. He did not quantify the benefit.
“This would imply an almost doubling of the commissioning of manufacturing projects compared to what has been seen in the previous two years,” said CMIE’s managing director Mahesh Vyas. One of the top beneficiaries of this scheme would be Reliance Industries, which intends to invest around ₹ 1,00,000 crore in the next five years. RIL is investing $ 8 billion (₹ 43,784 crore) in expanding its capacity in petrochem and refining and to roll out its telecom business by the year- end.
“The scheme will surely benefit our planned capex at Manesar and Gurgaon,” said Ajay Seth, chief financial officer of Maruti Suzuki, without giving the actual savings. In the last three years, the company had spent on an average ₹ 2,000 crore every year on capex.
15% allowance on capital expenditure would help PSUs, too SOME BIG BENEFICIARIES
Companies with strong balance sheets and a ready pipeline of projects would benefit. The deduction is in addition to regular depreciation benefits and includes investments in equipment and machinery but excludes those in land and buildings
(₹ crore) Company Expected capex* Savings**
IOC 30,000 1,500 ONGC 21,900 1,095 Hindalco 20,000 1,000 SAIL 27,300 1,365 RIL, Jamnagar 16,000 800 MRPL 12,200 610 NMDC 15,500 775 Grasim 5,500 275 Maruti Suzuki 4,000 200 Shree Cement 1,500 75
*During FY14 and FY15; ** At the rate of 5% of capex amount Source: CMIE, company reports