Indian markets may decline in 12 months: Jim Walker

ere is a real buzz in Asia right now as economies in the region here power head. How are you viewing the investing environment in Asian economies, particularly when it comes to India? 

It is quite interesting to look at how people are viewing the region. You quite rightly said people are seeing it powering ahead, but this is very much on a year on year basis. Last year in the first half of the year, economic activity was weak. This year because of something about rebound looks as if the region is powering ahead, but some of the momentum is probably slipping though especially as we start to see problems arising in the US and in Europe going into the second half of this year. 

India, in particular, the valuations are pretty stretched. The economy seems to be doing quite well. At the same time, interest rates are definitely going to go up further from and the export sector will be struggling. So if anything at the moment, we would actually be taking some trading profits in India. 

Monsoon though in India has been normal this time around and Indian companies are reviving their capex plans as well. How do you see these two factors playing on rural and corporate incomes in the coming months? 

Certainly the improvement in the monsoon this year is a huge benefit for India. It takes a lot of the pressure of consumer prices because the expectation will be a much better harvest, much better vegetable supply, some of the facts is behind the high CPI and the high PPI over the course of the last year. 

So inflation will come off relatively sharply in India and that really improves disposable income rather than incomes per se. It means that Indians will have much more available money to spend on other things other than essentials, food in particular. So that is positive going forward for broadening of the demand base in India and of course an improvement in real incomes as food prices come down. So the normal monsoon is a major positive right across the board. 

Just shifting focus since you did talk about US, what are your views in growth investment economies, particularly the US right now? Now looking at the recent jobs data and housing prices, do you see FED going for another asset buying spree to support growth if required because El-Erian of PIMCO recently said that US recovery is indeed losing momentum and the situation is getting alarming? 

We sent a message to our clients a couple of months ago in June with a report that was just called double dip. So our view of the prospects for the US, and I am afraid for Europe as well, is that it will probably go back into recession over the course of the next 2 to 3 quarters. That is really a consequence of the policies of being forwarded by the FED, done by other central buyings as well as governments around the world. There has not been new revival in the private sector across Europe and the US basically because there is too much debt in the first place and that debt is now being paid down with no revival in the private sector and cutbacks in the public sector. 

NRIs face tax threat under DTC

The new direct taxes code could bring a large number of global Indians under the tax net as it does away with a provision that allowed individuals to escape tax in any country citing double tax avoidance. 

The new legislation, introduced in Parliament on Monday, says an individual shall be resident in India in any financial year if he is in the country for more than 59 days in that year and has been in India for more 365 days in the four preceding financial years. A number of Indian industrialists including Vedanta’s Anil Agarwal and Essar’s Ravi Ruia have acquired non-resident status over the years. 

“The DTC has only attempted to clean up the provision in line with the laws globally,” said an official with the central board of direct taxes (CBDT), the apex direct tax arm of the government. 

A phrase “being outside India” in the existing income tax law exempted individuals who stay outside the country for six months from paying taxes. This was prone to misuse and allowed individuals to escape tax in any country, the official said, requesting anonymity. 

The new code is expected to come into effect from April 1, 2012. 

More than 25 million Indians stay overseas and one million visit the country every year. A large number of NRIs particularly those working in the gulf countries usually visit India for longer durations. 

“This could result in a situation wherein the overseas income of NRIs may be subject to tax under certain situations,” said Vikas Vasal, executive director at consulting firm KPMG. 

Amitabh Singh, partner at Ernst & Young, said this could become a dampener for the overseas Indian population who routinely visit India to meet their relatives and friends. 

“They will now have to restrict their stay to less than 60 or be in danger of becoming tax residents,” he said. 

NRIs who have spent 365 days in the last four years, which is permissible under the current income tax law, are at the risk of becoming a resident and facing tax on their global income. 

They will be given relief from payment of tax for two years on their global income in the transition period when they become resident from non-resident, a CBDT official said. 

The income tax department can define the term “visit” more tightly to ensure that there is no misuse instead of removing the provision altogether, Mr Singh of Ernst & Young said.

7 tips for achieving financial security

Every cloud has a silver lining. The recent global economic slowdown too has reinforced the virtues of austerity.

But you don't have to wait for that big stock market crash or the next big bank to go kaput to strengthen your financial immunity. Here are some tips to help you ensure your finances stay strong come hail or high waters...

1. Make austerity a habit

This is a lesson most Indians don't even need. But for those who do, living within your means is the best way to counter any headwinds in the larger economy. Stay debt-free, avoid luxuries you cannot afford, avoid wastage and expenditure that can be avoided and know where your pennies are being spent every month.

This way, even in times of high inflation, you will be able to absorb the price rise because you know where to spend and on what.

Try this test.

If there are multiple incomes coming in your home, try to live within just one of those incomes. This way, even if there are job losses in your family, you will be able to manage just fine and probably won't even feel the pinch at all as your lifestyle won't change much. And will also be able to stash the other incomes away for a rainy day.

2.being mad about money help

Ever heard the story of the ant and the grasshopper? Be the ant, which worked hard when the sun was shining to stash food away for a rainy day. So when the economy is booming and you're getting a fat paycheck with hefty bonuses, skip the latest plasma TV and put it away for when the paycheck goes on a diet and the bonuses dry up.

Also remember to park these funds in 'safe' investment options. State-owned banks, government investment plans come readily to mind. While the stock market may give you great returns, it is usually the first to take a beating when the economy shows signs of nervousness.

Separate your extra loot into two categories -- one for riskier 'great returns' investments and another for 'safe but small returns' plans that can help you during emergencies and recessions.

Don't bank too much on property either. Rentals go south when economy does. So your real estate assets may not be able to cushion you in bad times.

3.More jobs the Merrier

When it comes to income, the more sources you have, the better. Time and company rules allowing, do learn to take on freelance work in addition to your full-time job. Many of us have talents that can actually be monetised.

Discover them and use them to build your bank balance.

This way, even if your main source of revenue, your job, goes, you will have something to fall back on. It also makes all kinds of sense to sharpen any hobbies you have and turn them into money-spinners. There are many Web sites that actually give you the opportunity to offer your expertise on a consultancy basis.

Get busy.

4.Don't put all your Golden Eggs into one Busket 

The more the merrier rule applies here, too. Diversify your investments in different instruments and don't park them just in one. Debt schemes, equities, bank deposits, government investment plans, mutual funds, real estate, gold and silver, the list of places you can park your funds is long. Take your pick.

In fact, spread your investments in such a way that some are the kinds that do better in bad times and the others, in good times. For example, stocks and gold. This way, when the going gets tough, not all your investments will suffer. Some might even do well because of their safe-haven appeal: like gold and bonds. And some will go south together: like property prices and stocks.

The more diversified your investments, the more resilient it is to shocks as something will make up for something else. Do so while picking stocks, too.

Don't invest all your money in the sector that seems to be doing really well right now. Buy shares of companies in different sectors, including defensive ones that are unlikely to suffer even in bad times.

5.make a squeaky  Credit rating

If you find it hard to do all the above, this one is non-negotiable for you. Banks, in a pool called Credit Information Bureau India Ltd, or CIBIL, log every loan you have taken. This is your credit history so banks can check your records before they hand out any loans to you.

If you have defaulted on your previous loans, there will be a black mark against your name at CIBIL. This means you won't be able to get a loan to tide over bad times.

Moral of the story: keep your credit record squeaky-clean. Don't default on loan and credit card payments, see that CIBIL has updated records on loans you have paid off and keep your debts as low as possible.

You can get your credit report from CIBIL for a small payment. Do so to not only check for any inaccuracies but also to know how creditworthy you are and how easy it will be for you to borrow funds should you need them badly.

Remember that when there is slowdown in the economy, banks too get very possessive about their funds and lend only to those who they can trust, that is, those who have a past record of being trustworthy. Be one among those.

6.your Investment be longterm 

Your investments should be able to wait for economic headwinds to blow over. If you are a long-term investor, you can afford to not liquidate your investments and wait it out. Whatever goes up must come down and vice versa -- even if your stocks have plunged big time now, they will eventually rebound.

In fact, when the economy is suffering, get into the investment mode especially in instruments such as equities and mutual funds, which will be available cheaper then.

Being a long-term investor allows you the luxury of staying invested even if your portfolio has lost some value. When recovery happens, all this will reverse itself and the value of your portfolio will rise again. Keeping your investment horizon short means you may be forced to sell even when the value of your investments has fallen.

Take the long view to avoid the rush.

7.know how much risk you can take

A younger person with fewer mouths to feed can always take more risk than an older one with more responsibilities. This is why investment experts tell you to invest more in riskier assets when you are young and become more risk-averse as you grow older.

Do some introspection and ask yourself how much loss you can really absorb. If you happen to lose money you invested in the latest scheme, will you stay in financial dire straits for months? Or can you dismiss it as a bad experience and move on? Let your answer guide your hand.

Also know how much risk you are comfortable with. If you are a risk-averse person but have invested in a risky asset, you may give in to panic when market turns bad and end up with losses. Know thyself and make thy decisions accordingly.

Make the above suggestions a way of life, in financial sickness or health. That way, even Great Depression II won't be able to faze you or your banker. Your time starts now!

How the Direct Tax Code will affect you

Is today a taxing Monday? The Direct Tax Code bill has been introduced in the Parliament today. If you wonder whether that concerns you, then yes, as effective April 1, 2012, it is likely to replace the Income-tax Act of 1961 under which you currently pay tax. 

The fine print of the revised DTC bill which is eagerly awaited will be the third update of the Government’s proposal on the Direct Tax Code (after its introduction in August 2009 and the release of the revised discussion paper in June 2010). There have been enormous discussions around what this bill will offer against its earlier versions and the existing Act. 

As an individual tax payer, the key watch-out areas, include – 
—          Income tax slabs 
—          Capital gains tax regime
—          Tax implications on withdrawal of retirement savings
—          Wealth tax

There have been considerate amount of discussions on a favourable change in the income tax slabs as against the current slabs, though not as beneficial as the original DTC. This includes increase in the income-tax threshold for exemption and no additional levy of surcharge and education cess. It will be very interesting to wait and watch what the bill contains finally and whether individual tax payers get any substantial relief from tax.

If the capital gains tax regime introduced in the bill is in line with the revised discussion paper on DTC, there will be adverse tax implications mainly on sale of listed securities on the exchange. 

Currently under the Act, no tax is required to be paid on securities held for more than a year from the date of acquisition and sold on the stock exchange on which securities transaction tax is paid. In addition to this, for securities held for less than one year, the tax liability is restricted to 15%. However, under the DTC, there has been some relief granted to the tax payers by providing for a specified percentage deduction from income / indexation benefit depending on the nature of security on assets held for long term. However, in case of short term assets, there is no relaxation to the tax payer and tax will be required to paid as in case of any other ordinary income.

Also, as per the revised discussion paper on DTC, the security will be required to be held for a period of one year from the end of the financial year in which it is acquired to be construed as long term. This could lead to a scenario, wherein a security acquired in the beginning of the financial year may be required to be held for almost 24 months to consider the gains arising from sale of such securities as long term capital gains. This may also, result in an overall preference to acquire securities towards the end of a financial year.

There were also certain news reports that indicate that the Government had decided to maintain status quo on capital gains taxes. It is unclear whether the status quo is with respect to the current law or with respect to the proposals contained in the revised discussion paper.  

The Government has also proposed to restore back the taxation of retirement savings, in the nature of provident fund contributions and pure life insurance and annuity products, to the Exempt-Exempt-Exempt scheme from the earlier proposition of Exempt-Exempt-Tax scheme under the revised discussion paper in the DTC. This will be a good relief for the retired individuals given that the Indian economy does not have a social security system in place and also considering the inflationary pressures on the economy. It is pertinent to note that the EEE scheme does not seem to be extended to ULIPS, ELSS, etc. which may still be governed by the EET scheme of taxation from a prospective basis unless the Government includes these also under the EEE net in the bill. 

Wealth tax under the provisions of initial DTC, was required to be paid only on wealth in excess of Rs. 50 crores at a tax rate of 0.25% but on all assets including financial assets i.e. investments in shares. Under the current tax regime, wealth tax is required to be paid @ 1% on wealth in excess of Rs.30 lakhs. The Government however under the revised discussion paper has stated that the exemption limit from wealth tax is substantially high and that unproductive assets may not be subject to wealth. It will be interesting to know finally how much wealth the government exempts from tax under the bill and whether investments in shares and other securities will be included for wealth tax purposes. 

Considering that the revised discussion paper had addressed the major concerns that the industry at large had placed before the Government, it will be very interesting to read and analyse the Direct tax Code bill to know whether the UPA Government achieves in reducing the aam aadmi’s tax burden and its proposition to make the Direct Tax Code a simple and predictable one.

Indian officials to meet to decide BlackBerry ban

MUMBAI, India — A decision could come tonight in Mumbai on whether to ban some BlackBerry services in India.

Tuesday is the government-imposed deadline for the device's maker, Ontario-based Research In Motion, to give security agencies access to encrypted data.

A spokesman for India's home secretary says he'll meet with telecommunication and intelligence officials to discuss BlackBerry security issues.

The spokesman declined to discuss details of the talks. They're expected to determine whether some one million BlackBerry users in India will be able to use their corporate email and instant messaging services after Tuesday.

RIM has shown few signs of capitulating to New Delhi's demands.

It's facing widespread concern over its strong data encryption. Some governments in the Middle East and Asia worry it could be used by militants to avoid detection.