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Wednesday, May 31, 2023

Japan asks India to rescind plan to appeal ICT ruling at WTO Read more at: https://economictimes.indiatimes.com

 


Synopsis

Japan has asked India to withdraw its appeal to the World Trade Organization's (WTO) ruling against New Delhi's tariff on technology goods. The WTO had found in favour of Japan, Taiwan and the European Union in April, stating that India had breached global trading rules. At a DSB meeting on Tuesday, the US supported Japan’s appeal, claiming that India's tariffs negatively affect foreign businesses and limit access to technology for Indian firms ..

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Saturday, May 27, 2023

SHRADDHANJALI ON THE PUNYATITHI (DEATH ANNIVERSARY ) OF MY RESPECTED FATHER SHRI YASH PAL SINGHAL JI TODAY ON MAY 27.

 



MAY- 27- 2018

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Friday, May 26, 2023

One year of rising interest rates: How debt funds weathered the storm and came up a winner? :-Money Control May 26, 2023.

 

One year of rising interest rates: How debt funds weathered the storm and came up a winner?

The Reserve Bank of India started raining interest rates (repo rate) in May 2022. Since then, it has hiked the Repo rate 250 basis points. Accrual funds benefitted from the rate hike cycle while, duration funds have been a mixed bag. Here, we analyse how debt funds responded to the rate hikes

 DHURAIVEL GUNASEKARAN & NIKHIL WALAVALKAR
 
MAY 26, 2023 / 08:34 AM IST


When the interest rates are hiked the savers are happy and borrowers frown. Debt funds have a mixed bag. While the short-term focused debt funds categories such as liquid and overnight funds see their portfolio yields go up leading to better returns, the rising yields pull down the long-term bond prices, bringing the Net asset value (NAV) of long duration debt funds.
2/9
The Reserve Bank of India (RBI) has raised the interest rate by hiking repo rate by 250 basis points since May 2022. (Read here: RBI pauses rate hikes. Time to ride debt funds) The money market rates took cue and started climbing up. The 10 year g-sec bond yield more a market determined benchmark for the financial market was slowly going up through CY2021 anticipating rate hikes by central bank. However, it peaked on June 16, 2022. The markets discounted future by adjusting the yields based on the information flow – be it communication from central banks or the macro-economic indicators such as inflation and economic growth.
The best way to manage a rising interest rate cycle is to keep the portfolio duration low. Fund managers prefer to remain invested in relatively short term bonds, as these bonds see relatively less price erosion when rates rise. For example, among accrual products like Banking and PSU debt funds as well as Short Duration funds reduced their portfolio duration (Macaulay Duration) to 1.9 years and 1.5 years respectively in May 2022, down from 2.5 years and 1.9 years respectively a year ago. Similarly, gilt funds cut the portfolio duration to 2.3 years in May 2022 compared to 4.7 years in May 2022. However, as per the latest data as of April 2023, these schemes have raised the portfolio duration to 2.6 years, 2.1 years and 4.5 years respectively.
3/9
The best way to manage a rising interest rate cycle is to keep the portfolio duration low. Fund managers prefer to remain invested in relatively short term bonds, as these bonds see relatively less price erosion when rates rise. For example, among accrual products like Banking and PSU debt funds as well as Short Duration funds reduced their portfolio duration (Macaulay Duration) to 1.9 years and 1.5 years respectively in May 2022, down from 2.5 years and 1.9 years respectively a year ago. Similarly, gilt funds cut the portfolio duration to 2.3 years in May 2022 compared to 4.7 years in May 2022.
However, as per the latest data as of April 2023, these schemes have raised the portfolio duration to 2.6 years, 2.1 years and 4.5 years respectively.
4/9
Accrual focused funds benefitted from the rate hike cycle. The returns they generated in the year after the rate hike cycle begun exceeded the returns they generated in a year before the rate hike cycle begun. Debt funds schemes investing in long duration bonds however, have been a mixed bag. The active management of duration and the early peaking of 10 year bond yields in June 2022 influenced the returns they offered.

Pranay Sinha, Senior Fund Manager- Fixed Income, Nippon India Mutual Fund points out that financial markets tend to discount future. “The 10year yield moved up from 6.25 percent to 7.55 percent between the period Oct 2021 to June 2022 while the actual repo rate hikes happened between May 2022 to Feb 2023.” Similarly the 10year rates have come down in anticipation of RBI going in pause and softening of macro-economic variables like consumer price inflation and current account deficit. The movement in global yields and expectations of pause by global central banks have also played a part, he added. As the long term bond yields came down, despite hike in repo rate, the debt funds investing in long term bonds posted attractive returns, in excess of 8 percent.
5/9
Pranay Sinha, Senior Fund Manager- Fixed Income, Nippon India Mutual Fund points out that financial markets tend to discount future. “The 10year yield moved up from 6.25 percent to 7.55 percent between the period Oct 2021 to June 2022 while the actual repo rate hikes happened between May 2022 to Feb 2023.” Similarly the 10year rates have come down in anticipation of RBI going in pause and softening of macro-economic variables like consumer price inflation and current account deficit. The movement in global yields and expectations of pause by global central banks have also played a part, he added.
As the long term bond yields came down, despite hike in repo rate, the debt funds investing in long term bonds posted attractive returns, in excess of 8 percent.
6/9
Accrual funds with duration ranging between 2 to 3 years, saw some brunt of expectations of rising interest rates in the year before the repo rates started going up. Average 1-year rolling returns of both banking & PSU debt funds and corporate bond funds categories saw a decline to 1.7 percent in June 2022. The same however climbed up gradually as the markets started building in a case of pause in rate hikes.
Manish Banthia, Deputy CIO - Fixed Income, ICICI Prudential AMC believes that RBI is approaching the fag-end of the rate hike cycle, with an elongated pause expected post peak in interest rates.
Joydeep Sen, corporate trainer -debt, sees slim chance of a cut in repo rate in this year. “However, if a repo rate cut takes place then the yields on money market instruments and bonds with residual maturity of less than one year will also go down,” he adds.
If the short term rates continue to remain elevated at current levels, then accrual funds will benefit.

Debt schemes investing in relatively long term bonds are more susceptible to changes in interest rates. For example, long duration funds saw the one year rolling returns fall to negative 2.7 percent in June 2022 compared to positive four percent in June 2021. The expectations of rate hike ensured that the bond prices fall and the NAVs are hit. As the expectations of rate hike gave way to expectations of an early pause and possible rate cut in future, the long duration fund bounced back quickly. As on May 23, 2023, the one year rolling returns stand at 10.5 percent. Sinha sees the 10 year benchmark bond yield pricing in pause in rate hike cycle with a possibility at of the next move being a rate cut. “Any deterioration in growth data locally could put pressure on RBI to cut rates and could lead to fall in 10y benchmark yields,” he says.
7/9
Debt schemes investing in relatively long term bonds are more susceptible to changes in interest rates. For example, long duration funds saw the one year rolling returns fall to negative 2.7 percent in June 2022 compared to positive four percent in June 2021. The expectations of rate hike ensured that the bond prices fall and the NAVs are hit. As the expectations of rate hike gave way to expectations of an early pause and possible rate cut in future, the long duration fund bounced back quickly. As on May 23, 2023, the one year rolling returns stand at 10.5 percent.
Sinha sees the 10 year benchmark bond yield pricing in pause in rate hike cycle with a possibility at of the next move being a rate cut. “Any deterioration in growth data locally could put pressure on RBI to cut rates and could lead to fall in 10y benchmark yields,” he says.
Though liquid and overnight funds tend to benefit from the rising interest rates, the accrual focused schemes with portfolios of two to three years duration did better. After MPC meet held in February 2023, the expectations of possible pause in rate hikes ensured that the yields of the bonds held come down and the NAVs of these schemes got some facelift. Investment demand for these bonds also went up as the investors decided to lock in their money in relatively less risky debt fund offerings after switching out from very short term focused products such as liquid and overnight funds. Banthia attributes superior returns in the last couple of years to the fund house’s strategy to reduce duration with the thought that rate hike cycle would be steep. “We avoided the short end of the curve as it was riskier than the long end of the curve. Through this cycle, we were overweight floating rate bonds which provided good margin of safety. All of these calls played out well and aided in the fund performance,” he adds.
8/9
Though liquid and overnight funds tend to benefit from the rising interest rates, the accrual focused schemes with portfolios of two to three years duration did better. After MPC meet held in February 2023, the expectations of possible pause in rate hikes ensured that the yields of the bonds held come down and the NAVs of these schemes got some facelift. Investment demand for these bonds also went up as the investors decided to lock in their money in relatively less risky debt fund offerings after switching out from very short term focused products such as liquid and overnight funds.
Banthia attributes superior returns in the last couple of years to the fund house’s strategy to reduce duration with the thought that rate hike cycle would be steep. “We avoided the short end of the curve as it was riskier than the long end of the curve. Through this cycle, we were overweight floating rate bonds which provided good margin of safety. All of these calls played out well and aided in the fund performance,” he adds.
9/9
As the markets started discounting the expectations of early pause in rate hikes, the long duration funds and 10 years constant maturity funds emerged winners among debt funds that invest in relatively long tenured bonds. Many investors would like to invest in long duration bond funds and gilt funds. However, not all find 10 year benchmark bond yield attractive at current sub-7 percent levels.
“With RBI's inflation target shifting to 6 percent now compared to 4 percent earlier, the 10-year G-Sec would be attractive only at a yield of close to 8 percent,” Banthia says.
Sen advocates matching your time horizon with the duration of the scheme if you are keen to invest in long duration funds. “It helps in riding out interim volatility and you need not unnecessarily worry about timing,” he adds.
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Thursday, May 25, 2023

Tax exemption limit on leave encashment increased to Rs 25 lakh for non-government salaried employees ;-ET May 25,2023

 

In line with the budget 2023 proposal, the finance ministry has notified the increased ceiling for encashment of earned leave that is exempt from income tax via a notification dated May 24, 2023. This will come into effect from April 1, 2023.

“In exercise of the powers conferred by sub-clause (ii) of clause (10AA) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government, having regard to the maximum amount receivable by its employees as cash equivalent of leave salary in respect of the period of earned leave at their credit at the time of their retirement, whether superannuation or otherwise, hereby specifies the amount of Rs. 25,00,000 (twenty-five lakhs rupees only) as the limit in relation to employees mentioned in that sub-clause who retire, whether on superannuation or otherwise.This notification shall be deemed to have come into force with effect from the 1st day of April, 202,” stated the finance ministry circular.
This move is a positive for non-government employees as they will benefit from increased tax exemptions for leave encashment paid against accumulated leave balances over time.

According to finance minister, Nirmala Sitharaman, in her Budget speech, “The limit of Rs.3 lakh for tax exemption on leave encashment on retirement of non-government salaried employees was last fixed in the year 2002, when the highest basic pay in the government was Rs.30,000/- pm. In line with the increase in government salaries, I am proposing to increase this limit to Rs.25 lakh.”

Encashment of Leaves
If you work in the private sector, your leave encashment after retirement or resignation is taxable as "Income from Salary." They can, however, claim an exemption under Section 10 (10AA)(ii) of the Income-tax Act.

Any payment received as a leave encashment at the time of retirement or otherwise upon leaving the work is exempt up to the least of the sums listed in Section 10 (10AA)(ii). The ceiling has now been increased to Rs.25 lakh from earlier Rs 3 lakh.


As per the Income tax website, “In case of non-Government employees (i.e., other than the Central or the State Government employees), leave salary exempt from tax under section 10(10AA) (ii) will be least of the following:

1. Period of earned leave in months (*) × Average monthly salary (**)
2. Average monthly salary (**) × 10 (i.e., 10 months’ average salary)
3. Maximum amount as specified by the Central Government i.e., Rs. 3,00,000 Different amounts (i.e., ceiling limits) are specified by the Government for different years.
4. Leave encashment actually received at the time of retirement.”



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Tuesday, May 23, 2023

IMPORTANT UPDATES

 1. Taxpayers can now file returns for AY 2023-24 through Income Tax Return (ITR) forms ITR-1 and ITR-4 on the e-filing portal in online mode with pre-filled data.


2. Responding to concerns of taxpayers over the imposition of 20% TCS on International Credit Card and Debit Card transactions under the Liberalised Remittance Scheme (LRS) from July 1, the Central Government said no TCS will be collected on small transactions up to Rs 7 lakh. 

3. The Directorate of Income Tax (Systems) has issued a User Guide for Submitting Response to Notices and Letters Received under the e-Verification Scheme, 2021 Version 1.0.

4. The Directorate of Income Tax (Systems) has issued FAQs for Submitting Response to Notices and Letters Received under the e-Verification Scheme, 2021.

5. GSTN Enables Functionality to Find Invoice Reference Number (IRN) through Document Number dated May 18, 2023. It is to inform you that the Goods and Services Tax Network has introduced a new function that allows users to find the Invoice Reference Number (IRN) by using the Document Number.

6. No Service Tax on User Development Fees Collected by International Airport being a ‘statutory-levy’: Supreme Court of India. 

7. MCA has set up a Right to Repair portal that allows citizens to get their gadgets and vehicles repaired without losing their warranty.

The portal is now live and currently covers four sectors – consumer durables, electronic devices, automobiles, and farm equipment.

8. Sebi proposed in a consultation paper that if a share in the futures and options segment falls or rises by 10% a day, trading would be suspended for an hour, up from the current 15 minutes, and then allowed to move only a further 2%, down from the current 5%.



By CA Raj Chawla

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HOW TO AVOID UNWANTED VISITOR ?-LEARN FROM JAPAN

 


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Sunday, May 21, 2023

Rs 2000 note withdrawal: Is there a limit on Rs 2,000 banknotes that can be deposited or exchanged? The ET May 19 2023

 

In a surprising move, the Reserve Bank of India (RBI) has notified that it has withdrawn Rs 2000 from circulation, while it will still be considered as legal tender. It has asked banks to provide deposit or exchange facility for Rs 2,000 notes until September 30, 2023.

As per the RBI release issued on May 19, 2023, “Accordingly, members of the public may deposit Rs 2000 banknotes into their bank accounts and/or exchange them into banknotes of other denominations at any bank branch. Deposit into bank accounts can be made in the usual manner, that is, without restrictions and subject to extant instructions and other applicable statutory provisions.”

How much can you deposit at a time?


You can deposit any amount without any restrictions subject to compliance with extant Know Your Customer (KYC) norms and other applicable Statutory requirements.Note that banks will also ensure that such transactions will comply with Cash Transaction Reporting (CTR) and Suspicious Transaction Reporting (STR) requirements, where applicable.


How much can you exchange at a time?


All banks will exchange Rs 2000 banknotes up to a limit of Rs 20,000/- at a time, as per the circular. This limit is applied in order to decrease the public's inconvenience, to ensure operational convenience, and to prevent disrupting the routine operations of bank branches.

Also, one can start exchanging Rs 2000 notes only after May 23, 2023, as per the RBI release.

The Reserve Bank of India has advised banks to stop issuing Rs 2000 denomination banknotes with immediate effect.

Here are some important FAQs related to withdrawal of Rs 2000 from circulation.

Is there an operational limit on the amount of Rs 2000 banknotes that can be exchanged?

Members of the public can exchange Rs2000 banknotes upto to a limit of Rs 20,000/- at a time.


From which date will the exchange facility be available?

To give time to the banks to make preparatory arrangements, members of the public are requested to approach the bank branches or ROs of RBI from May 23, 2023 for availing exchange facility.

Is it necessary to be a customer of the bank to exchange Rs 2000 banknotes from its branches?

No. A non-account holder also can exchange Rs 2000 banknotes up to a limit of Rs 20,000/- at a time at any bank branch.

What if someone needs more than Rs 20,000/- cash for business or other purposes?

Deposit into accounts can be made without restrictions. The Rs 2000 banknotes can be deposited into bank accounts and cash requirements can be drawn thereafter, against these deposits.

















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Thursday, May 11, 2023

GST UPDATES

GST dept vide notification no 10/2023 dt 10th May 2023 has reduced the limit of aggregate turnover for generating E Invoice.


As per the notification, every business enterprise whose turnover is more than Rs 5 cr in 2022-23 shall be required to generate E Invoice from 1st August 2023.

As on date, GST law requires the business enterprise having turnover of more than Rs 10 cr to generate E Invoice. However, from 1st August, E Invoice is required to be generated by business entity having turnover of more than Rs 5 cr


Source:-CA Yogesh Gupta
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ED searches Mumbai offices of Deloitte India, KPMG unit :-The Economic Times May 11,2023

 

Synopsis

The ED searched the Mumbai offices of Deloitte Haskins & Sells (DHS), the Indian arm of Deloitte, and KPMG associate firm BSR & Co. DHS had rotated out as IFIN's auditor in fiscal 2018,while BSR resigned from the role in June 2019 after allegations of irregularities at the non-bank finance company came to light.




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Supreme Court upholds ₹278-crore award in Reliance Infra's favour :-The Economic times

Synopsis

Anil Ambani's Reliance Infrastructure has won a ₹278 crore (~$38.8 million) arbitral award against the Goa government in a dispute related to non-payment of electricity dues. The Supreme Court has upheld the award, setting aside the Bombay High Court's partial quashing of it. The High Court has been criticized for reducing the interest rates on the award, which was given to Reliance Infrastructure after disputes over pricing.





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Tuesday, May 9, 2023

Russian surpluses with Indian banks said to be flowing into local Gsecs

 


Mumbai: Amid hurdles in establishing a strong trade settlement framework outside of the US dollar, a portion of Russian funds in Indian banks is finding its way into domestic government bonds, debt market officials said.

India has been importing discounted oil from Russia since the Ukraine war, leading to a large trade surplus for Moscow with New Delhi.


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