Forex reserves hit record high at $359.917 bn

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India’s foreign exchange reserves continue to rise to hit a record level of $359.917 billion as on April 8, data from the Reserve Bank of India (RBI) show.

India’s foreign exchange reserves continue to rise to hit a record level of $359.917 billion as on April 8, data from the Reserve Bank of India (RBI) show.

The central bank data show that in the week-ended April 8, India’s forex reserves rose by $157.40 million from the previous week.

As on April 8, foreign currency assets (FCA), which forms a key component of the reserves rose by $159.3 million from the previous week to $335.845 billion. FCA are maintained in major currencies like US dollar, euro, pound sterling, yen, etc. However, the foreign exchange reserves are denominated and expressed in US dollar only.

The movements in the FCA occur mainly on account of purchase and sale of foreign exchange by the RBI in the foreign exchange market in India, income arising out of the deployment of the foreign exchange reserves, external aid receipts of the central government and revaluation of the assets.

Gold reserves, however, remained unchanged at $20.115 billion. Special drawing rights (SDR) from the International Monetary Fund fell by $0.90 million from the previous week to $1.501 billion.

SDR is an international reserve asset created by IMF and allocated to its members in proportion of the members’ quota at IMF. The country’s reserve position in the IMF, however, fell by $1 million to $2.455 billion.

Source: http://www.financialexpress.com/article/industry/banking-finance/forex-reserves-hit-record-high-at-359-917-bn/237598/

Lending for small companies is a $300 million business

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While bigger SME lending players like Lending Kart and Capital Float aim to close their next funding rounds, a slew of smaller players have emerged in the last year viewing the space as a segment where at least 10 strong players can coexist.

Amongst the new players, Puneet Dalmia-backed CoinTribe, which was launched in February, uses a proprietary algorithm to link up multiple data sources ranging from the credit bureau to social media determining the credit worthiness of an SME within minutes. The startup has tied up with private sector banks that use their platforms to process SME loans.

“Our ticket size for loans range between Rs 30,000 to Rs 20 lakh. We offer an interest rate of 13-18% and receive upto 30 applications on a daily basis,” said Amit Sachdev, cofounder at CoinTribe. The fintech player has an acceptance rate ranging between 25 and 30% for all of its applicants.

Tracxn Labs-backed LoanZen has not tied up with any banking partners yet and focuses on disbursing its loans from the capital raised in its first round. The startup, which claims that it receives up to 20 applications daily, offers loans up to Rs 10 lakh at an interest rate, ranging between 18 to 24%.

“We aim to complete the credit risk evaluation in a matter of minutes and disburse loans within 3 days. Since sectors like kirana stores and budget hotels cannot avail of loans from traditional banks, there is a lot of room for several players to emerge in this space,” said Madhu Sudhan, cofounder of LoanZen. The startup uses an artificial intelligence-based system to carry out the credit risk evaluation and looks at parameters like bank, taxation and accounting data. LoanZen claims to have disseminated loans up to Rs 50 lakh in the month of March.

According to Gaurav Hinduja, the co-founder of Capital Float, SME lending is a very deep vertical in India, despite banks and NBFC’s lending approximately $150 billion to this sector.

The unmet need is still over $300 billion and at least 20% of this can be tapped by new age tech lenders.

“It’s definitely not a winner take all market and we will see several startups attacking different niches in the market. We are likely to see at least 10x growth in fintech alternate lenders. There will also be a growing number of interesting partnerships between institutions and new fin tech lenders,” added Hinduja. Abhishek Goyal, the founder of Tracxn, believes that despite several players entering the SME lending sector, few will survive the current funding climate.

Source: http://economictimes.indiatimes.com/articleshow/51818398.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Sebi may soon revisit start-up listing norms

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The Securities and Exchange Board of India (Sebi) may soon review its framework for listing of start-ups, including e-commerce firms, while incorporating suggestions from various stakeholders to make this platform much more vibrant.

The Institutional Trading Platform (ITP) is yet to see any start-up listing ever since an easier set of compliance and disclosure requirements was notified in August 2015.

These norms have been put in place to encourage Indian start-ups and entrepreneurs to remain within the country rather than go abroad for funds.

Under the rules, start-ups can list on the separate ITP of stock exchanges such as BSE and NSE.

The platform is open to only institutional investors and high networth individuals (HNIs), while retail investors have been excluded in order to safeguard small investors against a higher level of risks associated with this platform.

Many start-ups believe that the current listing norms are unattractive for them to list in India. Moreover, not a single company got listed on the relaxed ITP platform.

Now, Sebi is likely to review the ITP norms soon. It will also incorporate suggestions from various stakeholders to make this platform much more vibrant, sources said.

Sebi’s Primary Market Advisory Committee (PMAC) has also suggested that norms should be reviewed as the matter progresses.

Under the notified rule, minimum trading lot and the minimum application size have been kept at Rs 10 lakh so that only sophisticated and large investors come in.

For their listing, Sebi also relaxed the mandatory lock-in period for promoters and other pre-listing investors to six months, as against three years for other companies.

Besides, the disclosure requirements for these companies have been relaxed.

The companies can, however, graduate to the main platform later and the small investors can also invest at that time.

Earlier this month, Infibeam Incorporation made a stock market debut becoming the first e-commerce player in the country to get listed. The firm got listed on the main-board instead of institutional trading platform.

Source: http://www.business-standard.com/article/markets/sebi-may-soon-revisit-start-up-listing-norms-116041500531_1.html

Key changes in new Income Tax Return (ITR) forms

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The Finance Act, 2015 abolished the wealth-tax. Thus, taxpayers are no longer required to file returns of wealth tax from assessment year 2016-17 onwards. However, the Hon’ble Finance Minister in his budget speech had announced that information which was to be furnished in wealth tax return will now form part of Income Tax Returns (ITR).

Thus, in new ITR forms, namely, ITR-1, ITR-2, ITR-2A and ITR-4S the Government has imposed obligation on Individuals and HUFs having income exceeding Rs 50 lakhs to furnish information regarding assets and liabilities.

2.0 Changes made in new ITR forms:-

2.1 Declaration of value of assets and liabilities by Individuals/HUF earning above Rs 50 lakhs:-

[ITR 1, 2, 2A, 3, 4, 4S]

The new ITR forms introduce a new Schedule requiring individuals/HUFs to declare the value of assets and liabilities if their total income exceeds Rs. 50 lakhs. Assets include immovable assets and movable assets. Under the heading immovable assets, taxpayers have to disclose cost of land and building. Under movable assets cost of Jewellery, bullion, vehicles, Yachts, boats, aircraft and cash in hand need to be disclosed. Further, such taxpayers need to disclose all liabilities in relation to such assets.

Note: Individuals and HUFs with income exceeding 25 lakhs, filing ITR-3 and ITR-4 were already required to furnish information of their assets and liabilities. Now such threshold limit of 25 lakhs has been increased to 50 lakhs in new ITR-3 and ITR-4 for disclosure of details of assets and liabilities.

2.2          TCS credit for individual taxpayers:-

[ITR 1, 2, 2A]

Sub-section (1D) was inserted in Section 206 by the Finance Act, 2012 to reduce the practice of cash payments for purchase of bullion and Jewellery and for curbing the flow of unaccounted money in the trading system.

Section 206(1D) provides that the seller of bullion and Jewellery shall collect TCS at 1% of sale consideration from buyer if such sale consideration is received in cash and it exceeds:

i) 2 lakh, in case Bullion; and

ii) 5 lakh, in case of Jewellery.

However, in the absence of any row in the ITR Forms (ITR 1, 2 and 2A), individual taxpayers were unable to claim credit of such TCS. Therefore, new ITR Forms provide an option to claim TCS by the individual taxpayers.

2.3          Firms can file ITR-4S for presumptive income:-

[ITR-4S]

Under the existing provisions of Rule 12, firms were required to file ITR 5 even for presumptive income. The amended Rule 12 would now allow firms to file ITR 4S for presumptive income. Accordingly, a separate row is provided for in ITR 4S to claim deduction of interest and salary paid by the firms to the partners.

2.4        Additional deduction for contribution to NPS under Section 80CCD :-

[ITR 1, 2, 2A, 3, 4 and 4S]

A new sub-section (1B) was introduced in Section 80CCD by the Finance Act, 2015 to provide for an additional deduction of upto Rs. 50,000 for investment in National Pension Scheme. Accordingly, a new row is now introduced in the ITR Forms to claim benefits of such additional deduction.

2.5          Details of pass through income of business trust or investment fund:-

[ITR 2, 2A, 3, 4, 5, 6, 7]

As per provisions of Section 115UA and Section 115UB,pass through status is provided in respect ofincome [other than income from business or profession] of business trust/investment fund. Thus, income distributed by the business trust/investment fund is to be taxed in the hands of the unit holders.

The new ITR Forms have a new ‘Schedule PTI’ for reporting of pass through income of business trust/investment fund. Following details should be provided by such trust in ITR forms:

■  Name of business trust/investment fund

■  PAN

■  Head of income

■  Amount of income

■  TDS on such amount, if any.

2.6 Disclosure of details regarding partnership firm by a partner:-

[ITR 3, 4]

In ITR forms there is a separate ‘Schedule IF’ wherein partners are required to disclose the name of the partnership firms in which he is a partner. Now partners have to disclose whether such firm is liable to transfer pricing audit under Section 92E. Separate column has been inserted for such purpose in ‘Schedule IF’.

2.7 Share of income from firm/AOP/BOI:-

[ITR 3, 4, 5, 6]

Share of income from partnership firm, AOP and BOI is exempt from tax in hands of recipient. However, such exempt income had to be disclosed in old ITR forms under ‘Schedule EI’. Now, disclosure of such exempt income has been done away with in new ITR forms.

2.8 Deduction of additional investment allowance:-

[ITR 4, 5, 6]

Section 32AD was inserted by the Finance Act, 2015 to provide for an additional investment allowance to an undertaking set-up in the notified backward areas in the States of Andhra Pradesh or Telangana. Suitable safeguards have been provided in the provision for restricting the transfer of the plant or machinery for a period of 5 years. On transfer of such asset within five years, the amount of deduction already allowed shall be deemed as income from business or profession (i.e., deemed income under Section 32AD) in the year of transfer.

A separate row has been inserted in new ITR forms to claim such deduction under Section 32AD. Further, a separate row is provided to offer the deemed income to tax under Section 32AD.

2.9 Effect of Income Computation and Disclosure Standards (‘ICDS’):-

[ITR 4, 5, 6]

New ‘Schedule ICDS’ has been inserted in ITR forms wherein effect of Income Computation and Disclosure Standards (‘ICDS’) on profit needs to be disclosed.

2.10       Percentage of commercial receipts by a trust:-

[ITR 7]

The Finance Act, 2015 has substituted the proviso to Section 2(15) to provide that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, unless:

i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and

ii) the aggregate receipts from such activity or activities during the previous year, do not exceed 20% of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year.

In other words, advancement of any other object of charitable purpose shall not be deemed as charitable if receipts from any commercial activity exceed 20% of total receipts. Accordingly, a new row is inserted in ITR 7 to disclose percentage of commercial receipts vis-à-vis total receipts in order to ensure that such condition (as given hereinabove) is not violated.

2.11       Application of income by a trust:-

[ITR 7]

Income of charitable or religious trust is exempt if 85% of its income is applied for charitable or religious purposes in India. If income applied for charitable or religious purposes during the previous year falls short of 85% because such income has not been received during the year or due to any other reason, an option is given to assessee to apply such income in future years in prescribed manner. Assessee has to choose such an option by filing Form 9A to the Assessing Officer before due date of filing return of income under Section 139(1).

Now a separate row is provided in new ITR 7 requiring trust to confirm if it has filed Form 9A to exercise such an option and the date of filing of such form.

2.12       Details to be given by Universities, hospitals, educational institutions:-

[ITR 7]

Exemption under sub-clause (iiiab) and (iiiac) of Section 10(23C) is available to universities or educational institutions, hospitals or other institutions which are wholly or substantially financed by the Government, subject to certain prescribed conditions. The Finance Act, 2015 has amended the provisions of Section 139 to provide that such entities covered under clauses (iiiab) and (iiiac) of Section 10(23C) shall be mandatorily required to file their returns of income.

Now such universities, hospitals, educational institutions, etc., have to disclose their name and annual receipts in new ITR 7. Further, they are also required to disclose the amount eligible for exemption in ITR 7.

2.13       Minimum Alternate Tax (MAT) disclosure:-

[ITR-6, 7]

The Finance Act, 2015 had excluded following incomes for computing MAT liability:

i) Share of a member in the income of the AOP/BOI, on which no income-tax was payable.

ii) Passive income (like capital gains, interest, royalty, FTS) accruing or arising to foreign company if income-tax payable thereon was less than 18.5%.

iii)  Amount representing:

–          Notional gain on transfer of a capital asset, being share of SPV to a business trust in exchange of units allotted by that trust referred to in clause (xvii) of Section 47; or

–          Notional gain resulting from change in carrying amount of said units; or

–          Gain on transfer of units referred to in clause (xvii) of section 47.

iv) Loss on transfer of units referred to in Section 47(xvii) (subject to conditions)

 

Consequently, the Finance Act, 2015 had provided for addition of related expenditure on aforesaid income while computing MAT liability.

Separate row have now been inserted in ITR forms to incorporate such changes.

 

2.14       Disclosure of Audit information:-

[ITR 5, 6]

In new ITR forms there is a separate row for disclosure of following details if taxpayer is liable for audit under any Act [other than the Income Tax Act]:

1)         Act and Section under which taxpayer is liable for audit

2)         Date of furnishing of Audit Report.

2.15 Deduction of sum paid for purchase of sugarcane:-

[ITR-5]

The Finance Act, 2015 had inserted Section 36(1)(xvii) to provide that co-operative society, engaged in the business of manufacturing of sugar, could claim deduction of expenditure on purchase of sugarcane to the extent of price approved or fixed by the Government. Expenditure in excess of such fixed price was to be disallowed.

 

New ITR-5 has inserted a separate row for disclosure of sum which is disallowable under Section 36(1)(xvii).

2.16 Deduction under section 80JJAA:-

[ITR 4, 5]

Old provisions of section 80JJAA, inter alia, provided for deduction to an Indian company, deriving profits from manufacture of goods in a factory. The quantum of deduction allowed was equal to 30% of additional wages paid to the new regular workmen employed by the assessee in such factory, in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment was provided.

With a view to encourage generation of employment, the Finance Act, 2015 had amended Section 80JJAA so as to extend the benefit of such provision to all assessees having manufacturing units rather than restricting it to corporate assessees only.

New ITR-4 and ITR-5 forms now contain a separate row for such taxpayers (other than corporate taxpayers) to claim benefit of such deduction under Section 80JJA

Private sector lender Federal Bank to support startups

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Jumping on to the startup bandwagon, Kerala based private sector lender Federal BankBSE -1.38 % is opening incubation centres in Bangalore and Ernakulam exclusively for startups. These would be specialised lounges within Federal Bank branches meant for funding advisory, regulatory support and if required even for direct investment.

“We have a dedicated startup fund worth Rs 25 crore which we would like to use to fund or lend to promising startups. These lounges, named Launchpad, with fast internet connections, support staff from the financial world and advisory mechanisms would be the perfect breeding ground for future entrepreneurs,” said Shyam Srinivasan, managing director, Federal bank.

The lounge would be manned by bank officers who would be capable of dealing with the financial requirements of the startups as well as local specialists who would be able to advise on regulatory issues that entrepreneurs need to handle.

“We are talking to 3 or 4 startups daily. The challenge for a bank is to move away from a conservative credit mind set to a more entrepreneurial mind set and to accept the fact that out of 40 or 50 investments only one might take off. So even we are in the process of understanding how to engage with startups better,” he said.

The bank follows the footsteps of HDFC Bank and Bank of Baroda to integrate their platform with mobile payments application Chillr. The addition that Federal Bank brings to the Chillr app is that they would allow even non Federal Bank users to instantly open a Federal Bank account through a selfie and Aadhar identification number and allow them to receive payments through Chillr.

“This is just another offer in the suite of offerings for the customer. We are in the major discovery process slowly there would be convergence in this field,” said Srinivasan.

How FIIs outsmart domestic investors

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Domestic investors have a lot to learn from their foreign institutional counterparts, who seem to have mastered the art of timing, raking in the moolah in the midst of market volatility.

On the other hand, domestic investors mostly buy when foreign institutional investors (FIIs) are booking profits at higher valuations, limiting their own upside.

For example, in the current rally, most of the FII purchases were in 2012 and the first half of 2013, when the price-to-earnings (PE) multiple of BSE 500 companies had hit a multi-year low.

In contrast, most of the accumulation by domestic investors, through mutual funds and insurance companies, occurred in 2015 when BSE 500 companies were trading at a multi-year PE high. FIIs accumulated India’s top-listed companies at an average valuation of around 16 times and offloaded it to domestic investors at around 24 times their value (see chart).


In all, FIIs’ stake in BSE 500 companies was up 550 basis points between March 2012 and March 2015, at an average PE of around 16 times the companies’ combined trailing 12-month net profits. FIIs stake peaked in the March 2015 quarter, coinciding with the peak in valuations of BSE 500 companies. One basis point is one-hundredth of a per cent.

The analysis is based on the end-of-quarter shareholding pattern, market capitalisation and quarterly net profit of BSE 500 companies, beginning the March 2006 quarter. The sample is based on the data for 358 companies where the data is comparable across the period.

Analysts attribute this to the steady nature of fund flows FIIs receive, while domestic institutional investors are at the mercy of inflows from retail investors, which tend to take place late in the cycle.

“When FIIs were buying in 2012-13, insurance companies and mutual funds were still facing redemption, forcing fund managers to sell their holdings even when the valuations were low. Inflows turned positive only in late 2014 and 2015, when domestic retail investors were convinced about the rally,” said Dhananjay Sinha, head, institutional equities, Emkay Global Financial Services.

In comparison, FIIs receive a significant portion of their funds from large institutional investors in Europe and the US, whose investment sentiment remains steady over a long period.

Others also point to differences in the investing styles of FIIs and their domestic counterparts.

“FII investments are largely fundamental and research-driven compared to domestic investors, most of whom tend to get swayed by market sentiment and herd mentality,” said G Chokkalingam, the founder and chief executive officer of Equinomics Research & Advisory.

This explains why a majority of domestic investors fail to make money in the market, he added.

A similar trend was visible in the rally before the global financial crisis, when FIIs were net sellers for nearly two years in the run-up to the September 2008 crash while domestic investors were buyers.

Despite the trends, some analysts differ.

Nitin Jain, the president and chief executive officer of global asset and wealth management firm Edelweiss Capital, said there is no evidence of domestic investors being less smart than their foreign counterparts.

“We should not paint all FIIs with the same brush. Investment flows from exchange-traded funds, which is retail money – as volatile and sentiment-driven as domestic retail and mutual funds flows. FIIs, on the other end of the spectrum, also get pension money and sovereign wealth funds, which are long-term and their investment style is similar to that of domestic insurance companies,” said Jain.

Source: http://www.business-standard.com/article/markets/how-fiis-outsmart-domestic-investors-116032800052_1.html

E-commerce sees major money inflow

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It is not only Uber, the American taxi-hailing app, that is going all guns blazing in India with massive investment plans. Its biggest competitor, Bengaluru-based Ola, as well as e-commerce entities Flipkart and Amazon, are all planning to pump in big money to stay ahead, even in a scenario when investors are not as ready as earlier in opening their purse-strings.

Uber India has readied itself for another $500 million (Rs 3,300 crore) investment in the next three months, reports suggest. The app service had only nine months earlier committed $1 billion (Rs 6,600 crore) in India. Uber could not be reached for a comment.

For foreign giants such as Amazon, Uber and Alibaba, this country is a big market they all want to capture. Experts believe this is a trend which will continue, as a global economic slowdown will push a chunk of new investments towards India.

“We can clearly see a slowdown in overseas markets, while India is still managing annual growth of seven to eight per cent. So, companies such as Uber, Amazon and Alibaba want to bet big on India. While Amazon was not able to make a dent in China and Alibaba in Europe, they do not want to lose out on India. We will see this trend through the year,” says Amarjeet Singh, partner – tax, KPMG in India.

Ola, rival of Uber in the same segment, is on track to invest a chunk of its $1.3 billion (Rs 8,650 crore) capital raised so far. The firm recently announced it would invest Rs 200 crore in the Delhi-National Capital Region area over the next six months, “towards innovative green fuel technology, leasing of CNG cars and strengthening the system to catalyse greater CNG adoption in the region”, Rahul Maroli, its vice-president for strategic supply initiatives had said.

According to sources, Ola will further make strategic investments in all metro cities, as well as in Tier-II and Tier-III towns. “The company plans to add at least another 550,000 vehicles by the end of this year,” said one. Ola has at least 350,000 cabs and 80,000 auto rickshaws on its platform across 102 cities in the country.

American e-commerce major Amazon had said in October 2014 it was investing $2 billion (Rs 13,200 crore) in India. Later, its executives said the group had an open chequebook for the market. In February, it bought Noida-based payments services provider Emvantage, its first acquisition. This is aimed to help Amazon accelerate the development of payment solutions for customers.

As for Alibaba, the Chinese e-commerce giant, it already has a foothold in Indian e-commerce through its investments. The group is majority stakeholder in One97Communications, owner of mobile payments giant Paytm. Also, online marketplace major Snapdeal raised $500 million (Rs 3,300 crore) from a group of entities last year which included Alibaba.

The Chinese company now plans to directly enter India.

“We plan to enter the e-commerce business in India in 2016,” recently said J Michael Evans, group president. “We have been exploring very carefully the opportunity in this country, which we think is very exciting against the backdrop of (the) Digital India (programme of the government).”

Indian e-commerce giant Flipkart had, in March, infused Rs 338 crore into its online fashion store, Myntra, documents filed with the registrar of companies stated. Flipkart has so far raised $3 billion (nearly Rs 20,000 crore).

Source: http://www.business-standard.com/article/companies/e-commerce-sees-major-money-inflow-116032800986_1.html