Income from services abroad not taxable in India

I have been working in Nigeria since September 2013. I have completed 185 days of stay outside India in the financial year of 2013-14. My offshore salary gets credited from Singapore to a normal savings bank account in India. Am I supposed to pay any tax for FY2013-14?

To have the non-resident Indian status for FY2014-15, do I again need to complete 183 days stay outside India? —Snehanshu Mohan Dutta Considering that your stay in India does not equal to 182 days or more during FY14 due to employment outside India, you would qualify as a non-resident as per income tax laws in India. In case of a non-resident, only such income which is received, accrues, arises or is deemed to accrue or arise in India is taxable in India. Income in the nature of salary is deemed to accrue or arise in India only if the services are rendered in India.

 Since the services in your case are rendered outside India, the salary income can be stated to be accruing outside India. However, since you receive the salary in your savings bank account in India, a question also arises whether the salary credited in India is considered to be received or deemed to be received in India. The Agra bench of the Income-tax Appellate Tribunal (ITAT) in a recent judgement in the case of Arvind Singh Chauhan vs. ITO (ITA No. 319 and 320/Agr/2013) held that the income earned by the individual from a shipping company and credited to the Non-resident Rupee (NRE) account in India is not taxable as it does not accrue or arise in India and cannot be deemed to accrue or arise in India as the services were rendered outside India. Further, the Tribunal held that the income should also be considered to be received outside India as the assessee was in lawful right to have received the salary at the place of employment, and it was as a matter of convenience that the salary was thereafter transferred to the Indian account.

In the light of the fact that the salary accrues to India on account of the services rendered outside India and I am assuming that the lawful right to receive the salary in your case arose in Nigeria, the salary earned by you could be considered as not taxable in India. But if you have earned any salary income prior to September 2013 or earned any other taxable income during FY14 in India, it would be taxable. With respect to your residential status on return to India, you may note that you will qualify as a resident of India for income tax purposes if you have stayed in India for 182 days or more during the fiscal or you have stayed in India for 60 days or more in the current financial year and 365 days or more in the preceding four financial years

.

Shah Mohammad Abdul Qadir

     PGDM 3sr Semester

IMT college Of Management

    Greater Noida,U.P

Syndicate Bank- Bhushan Steel fiasco: Banks in a spot over 'mistaken identity 

MUMBAI: Is one of the men arrested in the scandal over alleged bribes for higher loan limits the victim of mistaken identity? Lenders certainly hope so. One of the two companies said to be involved in the affair is Bhushan SteelBSE 4.96 % Ltd — vice-chairman Neeraj Singhal was among those arrested, apart from Syndicate BankBSE 0.00 % chairman and managing director SK Jain. Also held was executive Arun Agarwal. But he doesn't work for Bhushan Steel, he's chief financial officer of Bh .. 

anand maurya

pgdm-3sem

as govt looks to ease fuel constraint



Mumbai: Asian markets are trading mixed. According to Bloomberg, investors are waiting for more economic data from China. US stocks closed higher on Friday. S&P 500 rose 0.5% to 2,007 as lower-than-estimated jobs data fuelled bets the Federal Reserve won’t rush to raise interest rates in a hurry. Read more. The government plans to spend Rs.75,600 crore to supply electricity through separate feeders for agricultural and rural domestic consumption, reports Mint. 

This outlay also includes expenditure towards an integrated power development initiative, which involves strengthening sub-transmission and distribution systems. Keep an eye on Bharti Airtel Ltd. According to The Economic Times, the 

company may reach an agreement on the sale of its telecom towers in Nigeria for more than $1 billion in three weeks. State Bank of India (SBI) prepared a three-year schedule for raising the share of its international business in the 


balance sheet to 25%, reports Business Standard. Currently the share of overseas business stands at 18%, the report says. Oil and Natural Gas Corp. Ltd (ONGC) is betting big on Krishna Godavari basin block’s crude oil reserves, reports Mint. The block, which is yet to start production, is estimated to see a peak production of up to 70,000-90,0000 barrels per day. Coal India Ltd (CIL) is planning to take steps to clear supply bottlenecks, including augmenting output to 615 million tonnes (mt) by fiscal 2017, reports PTI. The company dispatched 353.83mt of coal to the power sector in fiscal 2014. 


Mahindra and Mahindra Ltd (M&M) is looking to strengthen its presence in the automobile industry through 

alliances with global auto majors, reports The Economic Times. According to the report, the company is exploring alliance opportunities with Swedish carmaker Saab and Peugeot Citroen of France. National Buildings Construction Corp. Ltd (NBCC) may see some action. Air India Ltd is likely to enter into an agreement with the company to help monetise its assets, reports The Economic Times.



 Apollo Hospitals Enterprise Ltd plans to open 12 hospitals in the next three years, reports PTI. The expansion entails an investment of Rs.2,032 crore, the report adds.
 NHPC Ltd has told the Union power ministry that it may report a loss in the current fiscal year, reports Mint. Failure to start construction of the Lower Subansiri project, delay in payments by the Jammu and Kashmir government and low 

tariff will have an Rs.988 crore impact on NHPC, the company reportedly told power ministry. The planned merger of Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) is likely to take place by July next year, reports PTI. BSNL offers services in the entire country except Delhi, Mumbai. MTNL provides services in these two 

zones. Lastly, Rajiv Rattan, founding chairman of Indiabulls Power Ltd, will invest Rs.360 crore through preferential shares in the company, reports Mint. This investment is at a 30% premium to the company’s Friday closing price of Rs.9 per share on BSE.

by;
md.aquil alam
iimt college of management
source; live mint

Asian markets warm up for Fed rate rises

Asian markets warm up for Fed rate rise

9th September 2014

Faced once again with the prospect of rate rises in the United States, investors in Asia are no longer selling and running as in the past, choosing instead to stay in markets like India and South Korea, that are relatively sheltered from global forces.

 

The two bouts of market turmoil in May 2013 and January this year demonstrated the perils of selling out of markets prematurely and indiscriminately.

This time, investors have already begun preparations for a rise in US rates by mid-2015 at the earliest, albeit with a degree of caution about the different moving parts to the policy story.

For one, central banks in Europe and Japan could soon be injecting stimulus, which would compensate the world for the cash the Federal Reserve is withdrawing.

And secondly, it is entirely plausible that US growth disappoints, thereby keeping yields down but pushing stock markets sharply lower.

Standard responses to a spike in US rates, such as avoiding Indonesia, India and other countries which rely on external funding, may no longer be appropriate, given how rapidly Asia has changed in the past year.

The region's current account deficits are smaller, bond yields are high and currencies already quite weak. Governments perceived to be more reform-oriented have taken over in India and Indonesia, and Asia's rallying stock markets are backed by robust growth in company earnings.

"You should be in countries where idiosyncratic forces are more dominant drivers than the global forces," said Jahangir Aziz, head of Asian research at JPMorgan. "They allow you to hedge against global changes."

As of now, both Asian equity and bond markets are still riding a six-year long rally spurred by the heavy quantitative easing policies of the Fed and other developed economies.

But investors are prone to worry, says Aziz, and this abnormally long period of very low volatility and memories of the vicious selloff in 2013 have made them uneasy.

"There could be significant pre-emptive reaction in the market to the likelihood of better US growth, jobs or inflation numbers. That is where the concern is," he said.

Pick the neutral trade

The basis for investment is belief that, unlike the scares in 2013 and early 2014, the Fed will raise rates only when it is confident that the economy is on track for higher growth, more jobs, better demand and investment.

"You are at that stage of the global cycle where the traditional growth or high-beta assets are what you want to own," said Huw McKay, Westpac's chief Asian economist based in Sydney. "You don't want to be back in safe haven assets such as US bonds."

The decision to stay invested in high growth emerging markets in Asia is the simpler one.

Markets are pricing little change in the already low US yields — 10-year yields are around 2.4 per cent, and the forwards markets indicate little to no growth or inflation prospects. The equity market meanwhile is consistently reaching for record highs.

The more challenging issue for investors is that of deciding which shoe drops first, bonds or equities. As yields rise, bond prices would drop.









"Secular stagnation is being priced into the bond markets, strong nominal growth is being priced into the equity markets. One of these is more wrong than the other, or even both could be wrong," said UBS strategist Bhanu Baweja.









Still, that happy co-existence of surging bond and equity prices could very well continue, and should fund managers sell before an actual turn in the market they could risk underperforming peers and global indices.









"You've got to survive to that point," says Baweja. "You can't go short the markets right now."









The consensus however ends there.









Westpac's McKay finds India has made greater strides in fixing its current account problem, more so than Indonesia which was one of the worst hit in 2013. Plus, in a scenario where a rise in US yields is preceded by strong global growth, India's services exports would benefit hugely.









McKay also reckons the winning markets this time might be in countries, like South Korea, that offer foreigners a seamless transfer from equities to bonds.

"If you have both asset classes to offer in local currency, you can actually see a transfer rather than switching out of the currency altogether to go back to the dollar," McKay said.









JPMorgan's chief Asian economist Jahangir Aziz warns that now is not the time to look for global plays, or heavy bets on assets linked to US Treasury yields or broader emerging market risk.









"India and Indonesia is where you want to be right now," he said, citing the new governments and possible policy changes in both economies that will proceed regardless of global factors.








Investors should be wary of being too exposed to China, should there be a decline in global demand and therefore in the exports that are driving Chinese growth, he said.






Blackrock's head of Asian equities prefers being more exposed to North Asian markets such as China, Taiwan and Korea, both because of their valuations and healthier current accounts.







"As a recipient of little investor flows in recent years, we believe Asian equities are well placed to receive more interest even if US rates begin to rise," he said. Blackrock has $344 billion of long-term assets under management in Asia.
AJAY SINGH THAKUR

PGDM 3rd sem

How to lose money investing in ‘Buffett inevitables’

There are very few firms in any economy that can grow at 20%-plus per year for more than a decade

Ashesh Shah/Mint

It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price,” wrote Warren Buffett of Berkshire Hathaway in a letter to shareholders in 1989.

Over the past several years, many prominent Indian value investors have repeatedly quoted and taken this Buffett saying to heart. Currently, many of them even seem to be doing quite well. However, the party will crash sooner or later. The sheer financial mathematics of the situation dictates that.

In brief, the logic goes that certain types of companies have a business model which works through thick and thin of the economy, i.e. through the recessions and the high growth phases. They seem to have what is called an “economic moat” and a sustainable competitive advantage. These companies were called “moat companies” or “inevitables” by Buffett.

According to Indian Buffettologists, some of the typical “Buffett inevitables” in India are: Nestle India Ltd, HDFC Ltd, Page Industries Ltd, Procter and Gamble Hygiene and Health Care Ltd, Hindustan Unilever Ltd, ITC Ltd, Tata Consultancy Services Ltd, HDFC Bank Ltd, Titan Co. Ltd, Jubilant Foodworks Ltd, Asian Paints Ltd, Gillette India Ltd, Castrol India Ltd, and others.

The prominent Indian “value investors” say that these companies can be safely bought at a “fair price” since their business model is so strong that even at a “fair price” they are going to deliver returns better than the market returns.

The next step is where the battle is lost. The “fair price” can range from a price-earnings (P-E) ratio of 30 to 60 or even higher in their opinion. One can easily look up the trailing P-E ratios for the above mentioned companies to confirm this.

The chief characteristic that is touted is that these companies are growing their earnings at the rate of 20%-plus. This is, of course, due to internal factors such as continuous capital investments through retained earnings with high profitability and external market demand for their products and services.

It should be kept in mind that there are very few companies in any economy that can grow at more than 20% per year for more than a decade.

Consider a company growing at 25% per annum. If it continues growing at this rate for the next five years, its earnings would be three times larger and over the next 10 years it would be about nine times larger.

So, these are great businesses. What is a fair price for these businesses?

Currently, such companies that have been growing at the rate of 20%-plus are available at P-E ratios ranging between 30 and 60. Is this justifiable?

 

Let’s see what kind of returns can be expected if we buy a company at various P-E ratios. For this, we will consider that the company is growing at 25% for the next several years and then it slows down and its multiple gets de-rated to the market’s average P-E multiple of 18.4. If a company is bought at the P-E ratio of 60 and is held for five years, during which its earnings grow at the rate of 25% per year and at the end it sells for 18.4 times its fifth year earnings, it will deliver a return of -1% compounded.

A company bought at a P-E ratio of 50 with other conditions being the same will deliver 2% compounded returns over the five years.

The table gives the returns for holding for 5, 10, 15 and 20 years for various P-E ratios with similar conditions, i.e. sold at 18.4 P-E multiple after the holding period.

One things is obvious, that even after 20 years of growth rates of 25% per year, one is unlikely to get a 20% return on their investments if they pay more than 40 P-E.

It is very obvious that if one pays at or above this, then over the next five years, one is looking at single-digit returns below fixed deposit returns. This, of course, assumes that the company continues to perform earnings growth at 25% per annum over that period. Any drop in that will produce still lower returns.

At a P-E of 30, the returns are below market growth rates of 16-18%. If there is any drop in the growth rates, say, the company grows at 20% per annum instead of 25%, the returns drop to 9%.

At a P-E ratio of 25, the returns are nearly the same as the markets if all goes well and company grows at 25%. If the growth rate drops to 20%, the returns drop to 13%.

At a P-E ratio of 20, one is going to get higher than market returns if all goes well and market returns of around 18% if the growth rates drop to 20%.

Real money is made when one buys such a company at a P-E ratio of 15. Then one is looking at 30% compounded returns if all goes well and 25% compounded returns if the growth rate drops to 20%. Even if the growth rate drops to 15%, one is looking at a compounded return of 20%. Now that is an investment with a margin of safety and can be called true value investing!

There is safety in terms of the future growth rates as well as the future P-E multiples while generating returns that are significantly in excess of the market returns, i.e. true alpha.

This fad of “paying up” for a wonderful business brings back memories of the “Nifty Fifty” companies of 1960s US stock market. Many of these companies were “moat companies”. However, they lost huge money for investors, and only those who held for more than 25 years earned returns close to what the S&P 500 gave or 8-11% per annum. Anyone who lost patience (or faith) in between would have lost a huge chunk of their wealth.

The current crop of prominent “half-Buffettologists” of India is probably making the same mistake. The future returns are not going to look similar to the past returns for them. Their strategy has half the elements of Buffett’s—the “economic moats”—but the the other more important half of discount to conservatively estimated intrinsic value and a margin of safety is missing. The strategy is better described as growth-at-any-price or momentum investing of both varieties, versus price momentum and earnings momentum. Compounding this with a “concentration” strategy is a direct path to disaster.

Buffett would say that the only “inevitable” about this is that it will fail!

By

Shah Mohammad Abdul Qadir

PGDM 2^nd year

IIMT College of Management

Greater  Noida, U.P.

Investment products came first, and then protection

 

 

 

 

Eight years ago, I interviewed with a US insurer to build their business in India. Walking into their headquarters was an eye opener. Every person I met had spent two to three decades in insurance and with one company. Insurance is a business that demands a long-term perspective. Decisions taken today can impact business decades later as insurances mature. Most respected insurers are 100-year-old institutions. Last month, I reached out to six experienced international executives whom I have met over the years and asked them to list international events or trends that have shaped insurance. This is an amazing group. Their cumulative experience of over 170 years spans every continent and they have directly led insurance businesses in over 40 countries. I have synthesized their responses and inferred lessons for India.

 

 

 

The shift from protection-oriented insurance to investment products has fundamentally altered the industry. Most insurers began their existence selling protection and savings. That is a much harder sell than investment. Over the past two decades, insurers have introduced investment products such as variable universal life, unit-linked insurance plans (Ulips) and variable annuities. This has driven growth but also profoundly altered the industry. Now, insurers are exposed to investment cycles that previously left them unaffected. When markets fall, customers lose money and are dissatisfied because they expect stability from insurers.

Unfortunately, India’s development has been diametrically opposite. We first introduced investment products and are now gradually moving to protection. This makes building capability to sell protection much more difficult. The solution lies in creating large groups that can be provided protection cover cost-effectively. The government scheme where Rs.30,000 term cover is given to new account holders is one such example. A trust I know covers over 1,000 of its members with such insurance. Many more groups are possible if insurers actively seek out these opportunities.

Over the past two decades, direct distribution has sparkled. Estimates suggest that 40% of insurance contracts are sold directly to customers without an intermediary. Direct distribution has effectively lowered insurance costs. However, the flipside is that the channel is ineffective for non-commodity, complicated products. High quality tied agents are best for these products but the number of such agents in many markets is reducing. According to ReMark, a global insurance direct-marketing firm, this has led to a drop in life insurance penetration among younger customers in several developed markets. If not managed well, direct distribution can result in people buying products without understanding detailed terms or buying less insurance than they ought to have.

The Internet is the most transformational direct distribution medium. Regulations play a key role in its development. New electronic transaction rules introduced across the world during the past two decades have spurred insurance e-commerce.

Direct distribution in India is nascent and should be encouraged. Payment processes, physical documentation and signature requirements, verification processes and more need substantial overhaul and simplification.

The opening up of Asian markets has fuelled growth for established international insurers. According to reinsurer Swiss Re, 10 years ago, countries belonging to Organisation for Economic Co-operation and Development group accounted for 91% of insurance premiums. Today, this is 81%. China and India are key to international insurers but both countries have been protectionist in a way that is detrimental to local industry development. Therein lies an opportunity. When the Insurance Bill goes through Parliament, there will be renewed interest in India. International insurers are likely to develop direct distribution and protection products.

Internationally, capital requirements are risk-based and increasingly stringent. This is good because capital is linked more closely to specific risks, and insurers must have stronger internal processes and well thought out product design, reinsurance and investment. The downside is that even though insurers do not generate the same systemic risk as banks, they are subject to similar regulatory control.

In India, our solvency requirements are not directly risk-based. We must shift to this risk-based approach. In the short term, capital requirements may actually come down but in the long term we will have a more systematic methodology to determine capital needs.

Catastrophes are more expensive, severe and common. According to Swiss Re, in 1980, the 10-year average of insured losses was about $10 billion. In 2013, it was $60 billion. Over 80% of these losses are natural disasters but man-made catastrophes such as terrorism are also on the rise. We do not sense this impact in India yet because our insurance penetration is very low. In fact, this puts greater responsibility on the government to provide cover for large-scale catastrophes.

Longevity in international markets is increasing fast and people have not provided for retirement. Consumers as well as actuaries consistently underestimate longevity. Because people live longer, the incidence of critical illness has gone up. So, retirement and elderly healthcare products are a focus across the world. In India, lack of retirement planning has been a perennial issue.

I meet so many elderly people who cannot pay for their daily needs and are forced to depend upon others. Large pension schemes are un-funded. Annuities are conservatively priced and taxed. Retirees have to use up their capital to survive.

Social media is forcing improvements in customer service. Anybody can post their views on an insurer and be read by thousands. The court of public opinion is uncompromising and forcing better service. This trend is also visible in India. Browse through social media and you will find hundreds of specific customer complaints. Often, insurers resolve issues on the social media platform itself. The days of prohibiting agents from posting about a company have gone. Insurers will need to be active social media participants to resolve customer issues.

The group that sent me their observations provided valuable insight. India was the last big insurance market in the world to open up. History is replete with late bloomers who left a mark. That opportunity is still open for us.

 

By

Shah Mohammad Abdul Qadir

PGDM 3rd Sem

IIMT College Of Management

Greater Noida, U.P.

 

PE exits through public markets rise

PE exits through public markets rise

Mumbai: As Indian stocks continue to hit new highs, some private equity (PE) funds are locking in returns by selling their investments in publicly traded companies.

On Wednesday, US-based private equity firm General Atlantic LLC’s arm GA Global Investments, sold 6.5 million shares of IndusInd Bank Ltd for Rs.397 crore. It owned 4.83% stake in the bank, which has now come down to 3.59%.

 

 

General Atlantic is one among many funds that has used the market rally to sell part of their listed investments. According to JM Financial data research, PE funds have sold $1.18 billion worth of investments through public market transactions between January and August this year. This is 75% of the total exits by PE funds so far this year. Over the same period last year, only 20% of total exits happened through the public markets, adding up to roughly $580 million.

 

“Market exits have increased substantially and private equity funds have managed to exit through this route effectively. We expect more exits to happen through the year and the numbers will go up substantially, especially for companies that are listed and where investors are making returns,” said

 Bhavesh Shah, managing director-investment banking at JM Financial Institutional Securities Ltd.

 

On 17 July, First Carlyle Growth VI, the investment entity through which US-based PE firm Carlyle Group had invested in Repco Home Finance Ltd sold its entire stake in the company. It sold nearly 10 million shares for Rs.465 crore. It started exiting the investment last year and has sold its holding in the company for Rs.664 crore on its investment of Rs.108 crore. This worked out to an internal rate of return (IRR) of 38.4% on the investment, according to a person directly involved in the transaction. Carlyle has sold Rs.500 crore in investments through public market exits this year.

 

 

Large PE funds such as Bain Capital, Baring Private Equity Partners India, Saif Partners, Multiples Alternate Asset Management Pvt. Ltd, ChrysCapital Management Co. and others have also sold part of their investments.

 

The largest of these was Bain Capital’s sale of 4.29% stake in Hero MotoCorp Ltd for Rs.1,481 crore, according to a Mint report dated 13 June. Baring India also sold 0.77% in Bangalore-based software services exporter Mphasis Ltd in the June quarter for an undisclosed sum.

 

“The capital market buoyancy will enable funds to exit from their investments. Markets had been depressed for last two-three years and funds now have the opportunity to monetize their investments and return capital to investors” said Keshav Misra, partner and head of investments at Baring Private Equity Partners India. Baring has investments in Muthoot Finance Ltd, Manappuram Finance Ltd , Vardhman Holdings Ltd and TD Power Systems Ltd.

 

“We do have public market exposure and exits are a continuous process and we would be open to mark some exits if we see the price and value is correct,” said Misra.

According to Sanjeev Krishan, executive director and leader-private equity and transaction services at PricewaterhouseCoopers Pvt. Ltd, public market exits will continue as valuations improve.

“If their own assessment of valuations of the company indicates that the underlining company performance is lower than its current valuations they find it a better decision to exit these shares,” said Krishan.

Since the beginning of this year, BSE’s benchmark Sensex has gained 27.94%. On Thursday, it fell 0.20% to close at 27,085.93 points

 

 

md. aquil alam

pgdm 3rd semester

iimt college of management

source.live mint