Long term capital gain tax: Not a gain to the middle classes

In 2004, when UPA government was in power, then Prime Minister Manmohan Singh scrapped LTCG (Long term capital gain) Tax. The idea was to open attractive investment avenues for the middle-class. In 2018, NDA government has decided to reintroduce LTCG into the tax structure.

LTGC is a tax levied on investors who invest in long term assets like equity, mutual funds, etc. The move to scrap out the tax was to make investment in capital assets more viable and attractive. This was because from a long time Fixed Deposit was a sole form of investments for middle classes. For them, a low rate of interest was a safer choice than taking risks.

According to a report by The Indian Express, this policy brought asset growth of mutual funds from Rs. 3.26 crore in 2007 to Rs. 21.27 crore in 2017. This means that a substantial number of people invested in mutual funds.

Now with the change in stance by the Finance Ministry, a tax of 10 per cent would be levied on capital gains (LTCG) which would accrue gains amounting to Rs 1 lakh or more for the investor, starting April 1, 2018.

Taxpayers around the country are expressing their displeasure with the financial policies in this Budget 2018. Vikram Waman Karve, an Ex-Naval officer and a vocal blogger, mentioned in a tweet that, “LTCG Tax has created tremendous negative sentiment in Stock Market and also a perception that Budget 2018 is an Anti-MiddleClass Budget. There is a feeling that BJP hasn’t handled the Economy well.”

This negative sentiment towards the budget amongst the middle classes has also to do with other policy changes in terms of standard deductions, health insurance and the likes.

Another affectee Nitin Shrotri mentioned in a tweet about the immediate impacts of the new tax. Expressing his disappointment, the auto professional tweeted, “Looking at the fall in sensex I have no courage to check my MF portfolio, @arunjaitley, Please do rethink seriously on LTCG tax.”

The tax is likely to bring down the capital market in its pursuit for increase central government’s revenue.

“I think the government wants to find more avenues to generate more revenues. Definitely, the move is disappointing. This is slightly regressive in my view, especially when investments in equity are picking up, and they should not have done it at this point in time, ” Jitendra Gohil, head of equity research with Credit Suisse Wealth Management India mentioned in an interview to Livemint.

Considering the immediate impact of the Finance Ministry’s decision, there has been slight ups and downs in the stock exchange. For the middle classes, the move may make equity a less likeable option for investments.

Sources:

Livemint, Indian Express

 

 

Singh brothers accused of taking out millions from Fortis

 

On February 9, 2018, both the Singh brothers, Malvinder and Shivinder Singh, resigned from their respective posts as executive chairman and vice chairman. They justified their resignation saying that it will be beneficial for the organisation.

The action which led to their resignation was that they were accused of taking approximately Rs. 4500 crores, about a year ago from the publicly traded hospital company they control., without the approval from the board. Though it was not clear as to how the funds were used.

The record of the accounts was reported on the Fortis Health Care Ltd. balance sheet, both in terms of cash and cash equivalents. Auditor of Fortis, Deloitte Haskins and Sells LLP have denied signing of the company’s second-quarter results until the money is accounted for or returned. But after the Singh brothers resigned, India’s second largest hospital chain Fortis announced that it would report the second and third quarter results on February 13 and will also report the cash and cash equivalents of Rs. 5.4 billion as of March 31.

As reported by the Economic Times, the company’s spokesperson said that Rs. 473 crores were loaned in July 2017. The companies taking loan were automatically considered a part  of the corporate group, thus their loans are expected to be repaid.

These rising legal and financial problems compelled the Singh brothers to back out. They are now trying to sell major chunks of their company, in order to bring about parity in their business.

Sources

Economic Times, NDTV

Budget 2018 empowers SEBI to act tough against non-compliers in Capital Market

Image source: The Hindu

 

SEBI (Securities Exchange Board of India) has been empowered to deal with key market intermediaries such as clearing corporations along with newer entities in the sector such as research analysts and investment advisers as per the changes proposed in the Finance Bill, 2018. Named as Securities Contracts (Regulation) Act 2018, the legislation allows the capital markets regulator to impose fines up to Rs 25 crore or thrice the amount of profit made on the account of non-compliance of rules. The least amount of fine has been fixed at Rs 5 crore. This legislation marks a stark difference from the earlier policies where SEBI was empowered just to warn for non-compliance to erring parties.Additionally, the permanent Board members of SEBI have also been given powers to oversee such non-conforming parties. The new bill also states that for the period of non-compliance the market participants will have to pay a hefty fine of Rs 1 lakh one day.

The move was welcomed by ex-SEBI Officials who stated that in the light of exposure of Indian Capital Markets to newer varieties of hybrid funds like ATF, REIT’S etc. it was important to have a legal deterrent for the process. The twins fold penalty powers with the presence of adjudicating officer for each case is expected to increase the overall quality of disclosure instead of a routine check approach.

SEBI was merged with Forward Markets Commission in 2015-16 in the light of National spot Exchange Scam.

Source: Business Standard, The Hindu

Sensex and NIFTY crash as Dow Jones plunges

 

Image Caption – Sensex plunged 1.61%, while NIFTY crashed 292 points on February 06 in the wake of US market crash.
Image Source: Reuters

 

Mumbai, February 06: The Bombay Stock Exchange extended their losses for the sixth successive session with the benchmark Sensex falling by another 561 points to close at a one-month low of 34,195.94. Along with Sensex, NIFTY recorded a loss of over 292 points at the open. This loss comes in the wake of US markets suffering a setback, with Dow Jones losing 1252 points at its opening on February 06.

After opening at 33,753.78, the BSE Sensex continued its slide to hit a low of 33,482.81 as selling gathered momentum in tandem with weak global leads. However, value-buying emerged at several counters during the late trading session. The benchmark finally ended at 34,195.94, down 561.22 points, or 1.61%.

These crashes in the market can be attributed to the crashes in US markets. The Dow suffered its worst point decline in history February 05. It amounted to 4.6% – the biggest decline since August 2011, during the European debt crisis.

However, there were many stocks that braved the situations and recorded as high as 13% rise in the day. SpiceJet rose 13%, followed by Intellect Design Arena – 9% – Polaris Consulting gained 7.3%, while Crompton Greeves went up 7% among the constituents in the S&P BSE 500 index.

Source: CNN, Business Today

Drop in user time for Facebook

Image source: DADO RUVIC/REUTERS
Caption: It was observed users tend to spend less time on Facebook feed
Facebook tend to be slightly worried as the company sees drop in the users time spend online. It had announced major changes in January to be made on the news feed, but saw less user time even before that. In the last three months roughly 50 million hours a day was observed to be cut down by the users on the social media. For example, fewer viral videos were shown up on feeds.
Mark Zuckerberg went on record to say that, Facebook encourages personal interaction by helping people connect which is more important and is not much bothered about its drop of users online. “We can make sure the service is good for people’s well being and society overall” he added. The decline in users was recorded a little more than two minutes on an average basis, for 1.4 billion daily users.
Facebook’s largest advertising revenue is from US and Canada, and the very same countries saw the drop in daily users by nearly 7,00,000 to 184 million in a quarter. Zuckerberg says that Facebook users often stick around an ad if they show interest in one particular type.

Shahrukh Khan’s Alibaug property under Benami Act

 

Photo caption – Shah Rukh Khan allegedly used land bought for an agricultural purpose for his personal use.
Photo Credits – Mid.day.com

Shahrukh Khan’s farmhouse, Deja Vu Farms in Alibaug has been labeled as ‘Benami’ property by the Income Tax department. A report has been filed against the property before the adjudication authority. Khan is required to answer to this report within 90 days. This notice was issued under Section 24 of the Prohibition of Benami Property Transactions Act (PBPT) in December. If the investigation proves that the property is attached to Benani, the act entails the IT authorities to file criminal charges against the accused. This will make him liable for seven years of imprisonment and pay 25 % of the property’s cost. As per PBPT, a transaction is benami when a property is transferred to one person for a consideration paid by another person.

The property is worth Rs 147 million and spans about 19,500 square ft. The major allegation against Khan is that he purchased this agricultural land claiming that it’s for farming purposes. But instead, he built a private farmhouse in the area.

Reports from The Times of India stated that the Déjà vu Farms Pvt. Ltd was integrated into the website of the Registrar of Companies on December 29, 2004. And the directors mentioned were Ramesh Chhiba and Savita Chhiba, Namita Chhiba, who are Khan’s father-in-law, mother-in-law and sister-in-law respectively.

According to NDTV, in the place of an agricultural land, Khan erected a luxurious bungalow with a helipad, swimming pool and attached his property limits to a nearby beach. The IT officials stated that an unsecured loan of Rs 8.5 crore was given by Khan to Deja Vu Farms. It has also been found that the farmhouse has violated the CRZ (Coastal Regulation Zone) rules.

Ola to enter Australian market

Image Source: OLA
Caption: Ola has captured the Indian taxi-hailing app market entirely in no time
India’s taxi-hailing app service, Ola is stepping up for its first international venture in Australia. Currently, the Australian market is dominated by Ola’s rival in India, Uber. Just like how it captured the Indian market, it may have better plans for the market abroad. The rapid growth of the Bangalore based service which started in 2011, was quick and immense. Ola will soon start the recruitment process of its drivers in Sydney, Melbourne, and Perth, where it plans to launch the service first. The firm has earned massive profits over the years who now claims to have 125 million users in India.
Ola has now appointed a financial technology entrepreneur to manage the feature of Ola Money, where payments of your ride can be done through this digital payment platform of its own. It was backed up by investors from Japan’s SoftBank and US fund Tiger Global Management. The firm is waiting for the regulatory approval from Australia who promises to give high quality and an affordable traveling experience like never before to its customers there.
 
“We are very excited about launching Ola in Australia and see immense potential for the ride-sharing ecosystem which embraces new technology and innovation,” said Ola’s chief executive and co-founder Bhavish Aggarwal to BBC.