HDFC Bank became the first lender to increase its fixed deposit rates by up to 75 basis points after RBI raised key short-term rates. With deposit rates going up, the bank may also raise lending rates in the next few weeks, HDFC Bank executive director Paresh Sukthankar said. The revised fixed deposit rates would be effective from July 30. “We have decided to raise deposit rates across various tenor between 25-75 basis points. The rate hike was logical as the banking system is expected to remain in marginally deficit situation coupled with expected strong credit growth in the coming days,” he said.

Mumbai: Anxious that interest rates may move up quickly and that they may have to pay more to attract deposits later, banks on Wednesday rushed to announce higher deposit rates. Among the banks that announced an increase were HDFC Bank, Central Bank and Laxmi Vilas Bank.

Bank of India (BoI) executive director M Narendra said it would be raising deposit rates by 25-50 basis points in a month’s time, while State Bank of India (SBI) chairman OP Bhatt said the bank would be floating a 15-year retail bond issue for Rs 200-300 crore.

On Tuesday, Reserve Bank of India (RBI) raised the repo rate by 25 basis points and reverse repo rate by 50 basis points. While private sector lender HDFC Bank hiked its fixed deposit rates by 25-75 basis points across tenures, the state-owned Central Bank of India increased rates on term deposits up to Rs 1 crore by 25-50 basis points effective August 1. Corporation Bank had raised term deposit rates on the eve of the RBI policy review, and now offers 25 basis points more for deposits up to Rs 1 crore with a maturity of 33 months — 1,000 days to be precise.

Paresh Sukthankar, ED, HDFC Bank said: “We have decided to raise deposit rates across tenures between 91 days and 6 months, by anywhere between 25-75 basis points and are offering larger increases in short-term rates. The increase shouldn’t impact our margins, since the cost will be passed on to borrowers.”

More importantly, Sukthankar added that the bank would review its base and lending rates soon, saying he expected lending rates would reflect the higher cost of deposits. S Sridhar, CMD, Central Bank, said: “We have increased deposit rates in two categories, by 50 basis points at the shorter end for 46-90 days and by 25 basis points for maturities of over one year but less than two years. We are likely to revise interest rates in other buckets too.”

SBI chairman Bhatt observed on the sidelines of a press conference that interest rates must start rising from August-September and that they should begin on the deposit side with a rise of at least 25 basis points. “In an environment where there is an upward bias to interest rates, deposit rates will move up first before lending rates go up.

However, that will not necessarily pressure margins, since loan growth should be substantial enough to offset…

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This post was submitted by Rishi Kumar Maurya.

Haste is waste: Tax returns are better belated than inaccurate
The last week of July witnesses the same drama unfolding every year.

In spite of having four whole months after March 31 to file tax returns, some taxpayers (or should I say most?) typically procrastinate, and then in the days leading up to the end of this month, there is a mad scramble to file the returns.

Now, those who find themselves in this situation shouldn’t panic. As has been mentioned in this column before, though July 31 is the due date, one can file the return till March 31, 2011 without incurring any penalty.

What is important is not this due date of July 31, but the fact that the return should be filed with accurate information where neither the income is inadvertently under-reported nor any expense or deduction overlooked due to lack of time. However, if any tax is due, the taxpayer should arrange to pay the same immediately — the return can then be filed in due course.

In fact, the return for 2009-10 can even be filed by March 31, 2012. Such a return is termed as a ‘belated return’ and may attract a penalty of Rs 5,000 if filed after the end of the assessment year. So in short, if you file your return after July 31, 2010, but before March 31, 2011, it would be a belated return, but no penalty will be imposed. Needless to add, a tax return is always better belated than inaccurate.
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An example of haste causing waste, is the case of Rajiv, (name changed) who was more interested in filing the return on time even after knowing about the belated return facility. For 2009-10, he earned long-term capital gains from sale of property. In his hurry to file the returns, he simply forgot that expenses related to improvement of property too can be indexed along with the cost.
In other words, he duly indexed his cost of acquisition but missed indexing the expenses and ended up paying a higher tax than what was actually due.

Had he waited and reviewed the computation without being in a mad hurry to e-file the return, he could have saved a neat packet. So, in a nutshell, do not be in a hurry to file the return per se. First ensure that the return is correct and complete in all respects and then arrange to get it filed.

Going by this theme, this article is a discussion on common exemptions and deductions where there is a potential for oversight or error on the part of the taxpayer. An understanding of the same would help the reader optimise his/ her tax return, not only in terms of paying lesser tax but also making it error-free.

House rent allowance

Take HRA. Though the following point has been covered in previous articles, the misperception is so widespread that I think a reiteration is warranted.

HRA and home loan provisions are two different issues as far as the Income-Tax Act is concerned and one does not influence the other. So, you may own a flat or any number of flats, either in the same city that you work or anywhere else in the whole of India or for that matter abroad — this will, in no way influence the HRA deduction that you are entitled to.

Conversely, notwithstanding the amount of HRA that you receive, your home loan deductions on the EMIs for the house that you have bought or intend to buy will not be affected.

But note that it is not compulsory for your employer to provide HRA. So what happens if you stay in a rented house, but your company doesn’t pay you HRA? How can you claim deduction on your rental payments? For this, you need to take recourse to Section 80GG of the Income-Tax Act. This section provides a deduction on rent paid in excess of 10% of your total income to the extent to which such excess does not exceed i) 25% of your total income or ii) Rs 2,000 per month, whichever is lower.

Section 80C

Generally, Section 80C is synonymous with deductions available in respect of payment of life insurance premiums or investments in Public Provident Fund (PPF), National Savings Certificates (NSCs) and tax-saving mutual funds (ELSS).

However, even tuition fees paid to any school or college for full-time education of up to two children is allowed as a deduction. Also, recently, investments in Nabard bonds, senior citizen saving schemes and post office term deposits have been added to the list of eligible investments.

Public Provident Fund

Regarding PPF, most know that deduction is available in respect of contributions made in the name of self, spouse or children. However, did you know that the combined investment limit for yourself and your minor children is Rs 70,000? We have come across several investors who invest Rs 70,000 for themselves and additionally in the name of minor children. This is not allowed under PPF rules.

Housing finance

With respect to housing finance — the principal portion of the EMI paid in respect of your house is deductible. However, in order to claim the deduction, the house needs to be owned for five whole years. If you sell your house in the interim, the earlier deductions claimed are to be added back to your taxable income in the year in which the house is sold.

Section 80E

Yet another deduction is Section 80E, which offers a tax break in respect of education loans. Interest paid on the loan is fully deductible without any limit for eight successive years starting with the year in which the interest is first paid. Earlier, this deduction had a ceiling of Rs 40,000. Also, it used to be available only to the person taking the loan. So if a student were to take the loan, he/ she didn’t really have the taxable income to avail the deduction.

And if parents were to take the loan, the deduction wasn’t available to them as it was not used for the parents’ education but that of the child. Thankfully, this anomaly has been corrected and now interest paid on a loan taken for the education of children and even the spouse may be deducted.

Capital gains

The Securities Transaction Tax (STT) paid is not allowed as an expense in calculating your capital gains. Secondly, in respect of adjusting capital losses, note that any capital loss can be adjusted against capital gain income only and not against any other type of income.

However, the taxable capital gain may be adjusted against other losses such as business loss or loss under house property. Even within the umbrella of capital losses, note that though short-term loss may be adjusted either against short-term gains or taxable long-term gains, any long-term loss can be adjusted against taxable long-term gain only.

Unadjusted capital losses may be carried forward to be set-off against eligible capital gains for eight years. However, this facility is not available if the tax return is not filed within time.[Story Source]

This post was submitted by Rishi Kumar Maurya.

MUMBAI: HDFC Bank, Lakshmi Vilas Bank and Central Bank set off a round of deposit rate hikes to attract funds to meet accelerating investment and consumption, but lending rates may stay where they are, at least for now, as banks’ high profitability provides a cushion.

Rates are being raised between 25 basis points and 75 basis points across maturities. A basis point is 0.01 percentage point.

The increases come a day after the Reserve Bank of India raised key policy rates and sent signals that it is on course to keep it going until it manages to temper the demand pull price increase, which forced it to raise inflation forecast for the year to 6% from 5.5%.

“Considering that liquidity in the system has moved into a negative terrain and that there is a strong potential for loan growth, we think it is the appropriate time to raise deposit rates,” said Paresh Sukthankar, executive director at HDFC Bank. “The transmission to base rate will take a few weeks.”

Base rate is the minimum at which a bank can lend. The second-largest private bank said it will pay 25 basis points more for two-year deposits at 7.5%, and 7% for one year. These are effective July 30. The sharpest increase of 75 basis points, to 5.25%, is for six months, where temporary factors may keep the market tight.

Lenders are raising deposit rates as loan growth is higher than deposit rates, absorbing the excess funds that banks had. To keep the business going smooth, they need to constantly attract funds, which are finding their way into higher-yielding investments such as real estate and stocks. But lending rates are not rising since banks benefited from cheap funds after the credit crisis, instead of passing it on to customers.

Borrowing costs for home owners and aspiring car buyers may not rise as fast since banks can refrain from doing for fear of reduced demand. Their profitability would not be crimped substantially, since they did not pass on all the cheap funds they got from RBI after Lehman Brothers collapsed.

The central bank cut the repo rate, the rate at which it lends to banks, by 425 basis points, to 4.75% from 9%, between October 2008 and February this year. The banks’ response was not proportionate, especially in lending.

During the period, banks cut 1-3 year deposit rates by 400 basis points to a low of 6%. But the benchmark lending rates hardly moved by 100 basis points between 14.25% and 13.25%. This action by banks boosted their profitability, leaving the customer poorer.

Net interest margins of banks got a boost. Axis Bank’s is at 3.7%, Punjab National Bank’s 3.9% and HDFC Bank’s 4.2%.
These high margins leave scope for slower gains in lending rates even if the central bank keeps raising rates. “The base rate will go up only when the average cost of deposits goes up and thus there will be some lag effect for revising lending rates,” said JM Garg, chairman and managing director at Corporation Bank.
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David Andrews, CEO of Xchanging, who is part of Cameron’s business delegation on this visit, signed the MoU with KEONICS managing director Harikumar Jha, in the presence of Yeddyurappa. “It is a great privilege to extend business in Karnataka,” Andrews said, adding, “We have received tremendous cooperation from the state government. We are looking forward to expand our business in the state.”

Yeddyurappa said the state would extend full cooperation to the company in developing the SEZ. After the recent Global Investors Meet (GIM) in Bangalore, several major IT companies were looking to set up business in Karnataka, the chief minister said. “We have decided to focus on developing tier-2 cities in the state to attract IT investment,” he added.

Chief secretary SV Ranganath pointed out, “Even in the midst of global economic recession, the IT exports from the state had grown 40% last year. To encourage the IT sector further, we are, for the first time in the country, setting up an Information Technology Investment Region (ITIR) at Devanahalli.”

In his message to the chief minister, British prime minister Cameron said: “I welcome this latest news from David (Andrews) and his team in Karnataka. My government is keen to lay the foundations of enhanced relations between Britain and India for decades to come.”
[Story Source]

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This post was submitted by HarshitAgarwal.

Investors are finding themselves with a new kind of balancing act — one in which they have to juggle with three major regions posing three significantly different circumstances.

Europe’s bank stress testing, the focus of much of the past week’s market focus, is but one ball in the air.

First there is the United States, which is believed to be facing another slowdown, if not a double-dip recession.

Then there is Europe, suffering a debt crisis and austerity-bound, yet suddenly surprising everyone with an unexpected burst of economic vigor.

Thirdly, comes Asia, growing away so merrily that investors are beginning to be concerned that too much zeal will be exercised in trying to slow things down.
On top of that there is the decoupling of economics and earnings — keeping bond yields down and lifting stocks. The latest investment flow data from EPFR Global showed “yield hungry but skittish” investors flooding into bonds, but world stocks are up more than 7% for the month.

“We are really in a much more difficult stage of the recovery right now,” Michala Marcussen, head of global economics at Societe Generale, said at a briefing with Reuters journalists.

She described markets as struggling with a “rotating crisis” in which one problem in one region becomes the focus of concern, only to be quickly replaced by another in another region.

“That ping pong is likely to go on for some time,” she said.

EUROPEAN TIGER?

Entering the new week, investors will first have to deal with any fallout from the stress tests of 91 European banks, due out of Friday after much fanfare.

Markets have been fairly calm about the tests, which, with Greece and other peripheral euro zone economies in mind, were designed to see how banks would fare in serious future crises.

The consensus has been that some smaller banks may fail but that the amounts needed to recapitalize them against future crises would be manageable or indeed in many cases have already been put on one side by governments.

Franz Wenzel, strategist at AXA Investment Managers in Paris, sees no broad impact for equities from the results, even if a number of small banks need to have capital hikes.

“Recapitalization will affect the usual suspects: small regional banks. But all this will be done in a smooth and harmonized way with local authorities, and it shouldn’t be a market-disruption event,” he said.

Of much more impact, however, may be highly surprising signs of economic revival in Europe.
European purchasing managers’ indexes in the past week showed private sector business activity accelerating in July, surprising economists who had expected a slowdown.

They indicated third-quarter euro zone growth of around 0.6-0.7%, double the 0.3% forecast in the most recent Reuters poll.

This was followed up by German business sentiment posting a record jump in July to its highest level in three years.

Non-euro zone member Britain also surprised with its economy growing twice as fast as expected in the second quarter of this year propelled by a sharp pick-up in services and the biggest rise in construction in almost 50 years.

Investors being investors, of course, these robust numbers triggered some new concerns about monetary tightening — hence the spike in the euro and pound against the dollar.

WEAKLING AMERICA?

The biggest piece of data likely to focus investors’ attention in the coming week is U.S. second-quarter GDP, out on Friday.

The U.S. economy is clearly coming off the boil, if, indeed, it was boiling. After three quarters of solid growth it is showing signs of slowing with firms still reluctant to hire and the housing sector seemingly unable to exit a prolonged rut.

It was enough, during the past week to prompt promises from Federal Reserve Chairman Ben Bernanke for more action if there are further signs of faltering.

This would particularly be the case if jobs don’t pick up.

“We are ready and will act if the economy does not continue to improve, if we don’t see the kind of improvements in the labor market that we are hoping for and expecting,” he told the House of Representatives Financial Services Committee.

This admission that all is not well has broad implications for investors even if other global drivers — major emerging market economies, such as China, and now Europe — are still on the upswing.

The question could turn out to be whether markets and other economies can thrive without the U.S. engine. History suggests not.
[Story Source]

This post was submitted by Harshit Agrawal.

“A lot of new companies are setting up presence in the state and the existing ones are on expansion mode. We expect that about 20,000-25,000 new jobs would be added this year,” he said.

Last year IT companies in the state had hired almost 15,000 freshers pushing the number of total workforce to nearly a lakh. According to Das, major IT firms like PwC, Capgemini and Cognizant are expanding, making room for further job generation.

According to him, in last three years, the employment in IT sector at West Bengal has become almost 2.5 times in comparison to what it was in 2006. There are about 90,000 people working in the IT sector in the state at present.

Talking to reporters on the sidelines of an interactive session organised by the Bengal Chamber of Commerce, Das said, “it (land acquisition for the IT companies) has slowed our speed, but could not stop us. For us, 2009 was a golden year.” While, other states had witnessed a de-growth in the IT and ITeS space, West Bengal has reported a double digit growth during 2009.

West Bengal has increased land earmarked for the IT companies to about 300 acres at Rajarhat and handed it over to IT and IT infrastruture companies including TCS, Unitech, DLF, RMZ, Shapoorji Palonji. Moreover, the state has also earmarked 130 acres at Bantala and 10 acres at Nonadanga.
More than 20,000 are likely to be hired this year in the IT and IteS sector in the state, said state information technology minister Debesh Das.

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This post was submitted by Harshit.

Right now, Mittal’s philanthropy through the Bharti Foundation has touched the lives of 30,000 underprivileged children and the telecom czar has pledged to put more money aside to expand this number to at least 100,000.

In 2000, when the telecom sector was in the midst of a revolution, Mittal realised that connecting communities in small towns and villages through mobiles was not enough. They needed the power of education. And the Bharti Foundation was set up to make this possible.

In an interview with PTI, Mittal said: “The focus of the foundation is education for the poor in the villages. Nearly 30,000 students are already there in 236 schools. We are determined to take it to 1,00,000. This will be the single largest intervention by any corporate in the history of this country.”

Mittal has already donated Rs 200 crore towards various educational initiatives.

The first generation entrepreneur, who has been ranked among the top philanthropists in the country, feels that money is not going to be a limiting factor for his initiative. “Whenever money is required, we will put in cash,” he said.

Mittal, who started his business as a bicycle manufacturer and is now leading the over USD 8 billion business conglomerate Bharti Enterprises, is also ready to part with his stake in the company for charity. “We will put in cash or (dilute) stake” whenever required, he added.

The company he founded is the largest mobile phone operator in terms of subscribers in a country where mobile phones are seen as a tool for economic empowerment. Everyone from fishermen to street vendors use mobile phones across the country, thus gaining access to information such as the market price they need for growing their business.

At Bharti Enterprises, there is absolute belief in education being the most important tool for social and economic development in India. This belief is what led to the launch of the Satya Bharti School Programme in 2006.

Currently, 236 Satya Bharti Primary Schools are operational, reaching out to approximately 30,000 children across the states of Punjab, Rajasthan, Haryana, Uttar Pradesh and Tamil Nadu.

Of these 236 schools, 49 schools are adopted government-run schools, reaching out to about 6,000 children across the Neemrana and Amer blocks of Rajasthan.

Mittal, a recipient of the country’s third highest civilian award, Padma Bhushan, believes that this initiative will help him give back to the society what the society gave to him.
Sunil Mittal, the founder of the country’s largest mobile phone operator, is channeling his wealth towards education for poor children that has the power to change their destiny.

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This post was submitted by Harshit.

“Tracking weak global cues, the market is likely to open with a negative bias on Monday but would recover later in the day,” SMC Global vice-president Rajesh Jain said.

Over the weekend, the Wall Street closed in deep red with the Dow Jones shedding 2.5 per cent and the broader S&P 500 plunging 2.8 per cent.

Analysts admit that the very weak global cues over the weekend would have some impact on the domestic market but it will recover soon.

“The market has been locked in a range in recent days and is looking for clear directions. While good earning growth will help the direction of the market, any positive overseas advice will trigger a rally,” Jain said.

Experts believe that investor confidence is upbeat on optimism of strong June quarter results and the benchmark Sensex may close above the psychological 18,000-mark this week. “Overall, the market sentiment is bullish and the key indices may cross the psychological level on heavy buying.

FIIs are also optimistic about the India growth story and will help the Sensex breach the resistance level,” Geojit BNP Paribas research head Alex Mathews said.

Last week, the Sensex had touched the 18,000-level for the first time in three months, but was unable to sustain the gains and ended with a marginal jump of 0.69 per cent.

“Investors are keenly watching the quarterly numbers and a good show will help the market post smart gains,” Bonanza Portfolio assistant vice-president Avinash Gupta said.

The net investment by overseas investors in the domestic

stocks has reached Rs 39,360 crore (USD 8.6 billion) till July 16, as per the data available with market regulator Sebi.

Brokerage firm CLSA says it is bullish on the Dalal Street for 2010, with robust growth seeing upgrades for a majority of the Asian markets, but cautions that 2011 will be tougher.

According to CLSA, the market is showing some important positives -the US investment cycle, Chinese consumer spending and sustained growth momentum across the Asia-Pacific region.
Financial express latest business and finance news: Markets to remain firm: Analysts

[Story Source]

This post was submitted by Harshit.

The precious metal fell by 20.10, or 1.7 per cent, to 1,188.20 dollar on the Comex in New York, the biggest drop since July 1. The metal lost 1.8 per cent over the week.

Gold with 99.99 purity and 99.5 purity fell by Rs 80 each to Rs 18,585 and Rs 18,485 per ten gram, respectively. They had ended lower by Rs 75 in the previous two trading sessions.

However, sovereign remained steady at Rs 14,700 per piece of eight gram.

Marketmen said in addition to a weakening trend in global markets, reduced offtake at existing higher levels also pulled down precious metal prices.

In line with the general weak trend, silver plunged by Rs 315 to Rs 29,060 per kg and weekly-based delivery by Rs 370 to Rs 28,790 per kg.

Silver coins also tumbled by Rs 300 to Rs 34,100 for buying and Rs 34,200 for selling of 100 piece
Financial express latest business and finance news: Gold slides on lower global cues

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This post was submitted by Harshit.

Home seekers are always advised to make sure that the sale/purchase agreement is in the prescribed form, while entering into an accord with a builder.

Otherwise, home buyers may find that the agreement provided by the builders has additions and alterations, working to the benefit of the developer.

The agreements drafted by builders may feature terms and conditions that are contrary to the provisions of the Maharashtra Ownership of Flats Act and Rules, as well as the Maharashtra Cooperative Societies Act.
To combat this, the authorities have brought out a prescribed agreement form, to protect the interests of the buyers.

Here are some particulars of that prescribed form:

The agreement should specify the date, by which the possession of the flat is to be handed over to the purchaser .

It should clearly mention the carpet area of the flat, including the area of the balconies, which should be shown separately.

It should specify the price of the flat, plus other costs, including the proportionate price of the common areas and facilities, which are to be paid by a purchaser and the intervals at which the instalments should be made.
The agreement should inform the purchaser of the nature of the organisation that is to be constituted by the persons, who have taken or will take the remaining flats in the building.

It should include the nature, extent and description of the common area and facilities. The agreement should clearly state the use for which the flat is intended and also impose restrictions, if any.

The agreement should also have a certificate by an attorney-at-law or advocate , under clause (a) of sub-section 2 of section 3.

It should also have attachments of the property card or extract of village forms VI, VII and XII or any other relevant revenue record, showing the nature of the title of the promoter to the land, on which the flats are constructed or are to be constructed.

The agreement should also have the plans and specifications of the flat, as approved by the concerned local authorities .

[Story Source]

This post was submitted by Harshit Agrawal.