Final take: Sinha repackages budget with large tax sops
New Delhi: Despite the initial harsh stance taken by the finance minister, Mr. Yashwant Sinha, he announced a series of industry and market-friendly amendments on direct and indirect tax proposals while moving the Finance Bill 2000 for consideration in the Lok Sabha.

One of the key areas where there was tax relief, is the area of stock options. Bowing to immense pressure from all sections of industry, the finance minister has finally conceded to tax ESOPs not as perks but as one-time capital gains tax at the time of their sale. The other incentives finally given in the budget include, changes include a 10-year tax holiday for software exports from STPs, providing tax-free status to venture capital funds, handsome sops for housing loans and doubling the rebate on investment in infrastructure bonds to Rs 20,000.

In a bid to give impetus to exports, the finance minister announced that the cut-off for the 10-year tax holiday will continue until 2010 for units in STPs and FTZs. This means units registering up to that point would be eligible for a tax holiday up to 2010, as compared to the originally planned date of March 31, 2000. This tax holiday has been extended to all R&D companies in knowledge-based industries, thus helping the pharmaceutical and biotechnology industries.

On the indirect taxes front, Mr Sinha’s focus has been on providing protection to domestic industry by hiking customs duty on a host of commodities like tea, coffee, poultry, meat and their preparations, marble slabs and tiles and non-coking coal.

However, the expected rollback on dividend tax and subsidies has not come, though.

The surcharge on non-corporate assesses having an income above Rs 1,50,000 will continue at 15 per cent. But for purposes of TDS, the surcharge would be 10 per cent to avoid operational complications. Simultaneously, farmers have been exempt from TDS on compulsory acquisition of land. Charitable companies set up without any profit motive have been exempt from MAT.
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Vysya Bank gets IFC to take stake in it
Bangalore: World Bank affiliate, International Finance Corporation (IFC), which already has significant stakes in two other private sector banks in India, namely, Centurion Bank and Global Trust Bank, has agreed in principle to take a 10 per cent stake in Vysya Bank at a price of Rs 150 per share. Parallely, Bank Brussels Lambert (BBL) will also increase its stake by 2.50 per cent at Rs 150 per share to maintain its holding at 20 per cent of the post-issue capital of the bank. The above two proposals will increase the bank's share capital from current Rs 19.82 crore to Rs 22.66 crore and would result in an inflow of Rs 39.7 crore by way of share premium.

Vysya Bank meets the recently declared norms of Reserve Bank of India (RBI) for entering the insurance sector as a majority partner. With ING group being able to take only 26 per cent stake in the new insurance venture, Vysya Bank is expected to have a significant stake. A third partner may also be brought in due to RBI stipulations. As the third partner will have to be an Indian company, market sources speculate that Vysya Bank might take a majority stake of around 50 per cent in the insurance venture.
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Indian Airlines to become headless shortly
New Delhi: With the government dithering over the appointment of a new chief executive, the country’s largest domestic airline, the state owned, Indian Airlines, is faced with a leadership crisis of sorts. Its current chairman and managing director Anil Baijal is due to retire on May 26.

Meanwhile, the only deputy MD of the company, NC Ghosh, is slated to retire by July. The other two posts of deputy managing director are vacant after JRD Rao and Gurdeep Singh retired in February following the decision to reduce the age of superannuation to 58. If no chief executive is appointed by July, there will be no top level official left to pilot the airline.

Despite the PESB (Public Enterprises Selection Board) having invited applications for the top post in Indian Airlines, selection of a new chief executive is not likely to be completed by the time Mr Baijal hands over charge.

Even now IA staffers feel that senior officers from the airline should be given a choice to run the company. In fact, the company had the misfortune of witnessing a procession of nine chief executives since the ’90. All this has led to a feeling that some eminent person from the industry, if not an insider, should be chosen this time.

According to Civil Aviation ministry sources, finding a full-time chief for Indian Airlines now is not going to be an easy task in view of the disinvestment plans worked out by the government. As when disinvestment takes place and the government will hand over the management of the airline to a private sector player, the fate of the company’s chief will be an uncertain one.
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ESOP dream to come true without taxing times
New Delhi : Finance Minister, Mr. Yashwant Sinha, has finally conceded the software industry's long-pending demand for taxing ESOPs at the time of sale, rather than imposing the levy at the time when it is issued to employees in addition to the levy at the time of sale.

Instead of treating ESOP as a perk and imposing income tax on it, the government will impose only capital gains tax when the employee sells the shares. While the major beneficiaries are employees of software companies, other sectors will now be encouraged to utilise this option.

The biggest benefit from this change will be that employees need not pay through their nose to cough up share price as well as the income tax. Now the proceeds from the sale of the ESOP could be utilised to pay the taxes. The capital gains tax applicable would be on the difference between the sale price and the issue price. The rate might differ depending on whether it is long-term capital gains or short-term capital gains. The current practice is to impose income tax on the difference between the issue price and the market price. The finer details for this has yet to be notified by the government.
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