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RBI puts 4 PSBs under watch on asset quality concerns

The Reserve Bank has put four public sector lenders, including IDBI Bank and Indian Overseas Bank, under watch and advised them to stay off risky assets so that their financial health is not stressed further.

While UCO Bank also figures in the list, the name of the fourth lender could not be immediately ascertained.

Sources said these lenders were on the RBI’s radar as their financial health may not improve after the central bank’s asset quality review (AQR) comes to an end on March 31.

These banks have been advised by both the Finance Ministry and the RBI to improve their financials, look for avenues for capital infusion and create a self-sustaining model by selling assets, they added.

Queries sent to the RBI did not elicit any response, while no comments were available from the four lenders.

RBI had embarked on the AQR exercise from December 2015 and asked banks to recognise some top defaulting accounts as NPAs and provide for them.

The move resulted in a spike in bad assets with lenders recognising over Rs 1 lakh crore of bad assets in the December quarter alone.

On an year-on-year basis, the gross NPA of Indian Overseas Bank (IOB) increased by 52 per cent to Rs 34,502.13 crore at the end of December 2016, while the loss stood at Rs 554 crore.

Similarly, the gross NPA of IDBI Bank spurted by 80 per cent to Rs 35,245 crore and it booked a loss Rs 2,255 crore.

The government recently shifted IDBI Bank’s MD and CEO Kishor Kharat to Indian Bank. M K Jain, MD and CEO of Indian Bank, was in turn moved to IDBI Bank.

Kolkata-based UCO Bank’s bottomline too is expected to remain under stress during the fourth quarter ending March 31.

Its gross NPA during the third quarter surged by 49 per cent to Rs 2,181.26 crore and the loss was Rs 437 crore.

IOB was also put under ‘prompt corrective action’ in 2015 when its gross NPA touched 10 per cent.

The RBI has specified certain regulatory trigger points as part of the prompt corrective action (PCA) framework. They include three parameters -- capital to risk weighted assets ratio (CRAR), net NPA and Return on Assets (RoA), for initiation of certain structured and discretionary steps.

Beware! Your employer can cut your salary sharply

While diligent paperwork helps claim tax benefits, with employers under pressure from the government, any lapse in documentation by an employee will lead to sharp cuts in salary, warns Vikas Kumar director, personal tax, PwC India.
Illustration: Uttam Ghosh/Rediff.com

Last year, Rahul Sharma, an employee with a reputed fast-moving consumer goods company, realised the importance of paperwork and timely submission of investment documents to his employer when he received a fifth of his monthly salary.

This year, he was relaxed when he got the official e-mail from his payroll department for investment papers and other tax-related documents before January 20.

However, without reading the e-mail carefully, he gave copies of his investment documents against the declaration submitted at the beginning of the year.

Unfortunately, he missed out on the newly-introduced requirement of making such claims in the prescribed Form 12BB.

He again got a shock when he discovered that his January salary was lower than what it should have been.

When he called the personnel concerned, the latter rattled off his mistakes: Not submitting Form 12BB for claims like house rent allowance (HRA), leave travel assistance (LTA) and interest on the housing loan.

Once again, Sharma had to make amends by filling up the required form and providing the missing documents.

Like Rahul, you too could face similar problems if you fail to give investment documents to your employer with Form 12BB.

Introduction of new form

With the change in law and introduction of this form (12BB), all claims like LTA, HRA, Section 80C investments, and interest on home loans have been put under tight scrutiny by employers, as they have the obligation to obtain, assess and verify the necessary evidence for the claims filed by employees for enjoying various deductions.

Earlier, in the absence of a standard process and form, different employers followed different approaches. Some even relied on self-declaration made by employees.

This form has been introduced in the current financial year and became applicable from June 1, 2016.

It has to be filled, self-certified and submitted to the employer.

• How you can get up to Rs 7 lakh+ tax exemption

This is a significant change from last year. Any attempt by employees to self-verify a false declaration or inaccurate particulars may attract penal consequences under the Income-Tax Act.

Pay heed to paperwork

In the current scenario, employees should take the required paperwork seriously to avoid higher deduction of taxes.

The changes to the rules also enhance the risk of selection of the filed return for scrutiny or verification by the tax authorities.

You also need to be diligent to avoid an adverse cash flow situation in the final months of the year.

Let us now turn to how employees can go about obtaining various deductions, and the supporting documents they need.

Section 80C

The limit of deduction under this section is Rs 1.5 lakh.

For many, this is exhausted by their contribution to the Employees Provident Fund (EPF), deducted by employers every month.

If this hasn't happened (because your employer is exempted from PF contribution), ensure you have put money in other prescribed instruments eligible for Section 80C deduction.

Give details of these investments in Form 12BB, along with supporting evidence.

Similarly, for other deductions claims -- under Section 80, medical premium under (80D), contribution to the National Pension Fund under 80CCD -- you need to fill details in this form.

HRA

You can claim this exemption on rent paid by you for an accommodation.

Rules exist for computing this exemption, which depends on the city you live in, the actual rent you pay, and the amount you receive as HRA.

Again, you need to fill Form 12BB which requires details of the landlord, his permanent account number (PAN), rent paid, etc.

There is no need to submit rent receipts in case you draw an HRA up to Rs 3,000 per month.

Further, if annual rent paid exceeds Rs 1 lakh per annum, you also need to provide the landlord's PAN with other details.

In case your landlord does not have a PAN, a declaration from him along with his name and address should be furnished.

If your landlord doesn't give you his PAN details, your employer can deny HRA deduction to you, which will result in higher tax deduction by the employer.

• How to pay tax and claim deductions for joint home ownership

You may still claim HRA deduction at the time of filing the return and claim refund of excess taxes, but it is likely the tax authorities will review your return in greater details later on.

Although you may claim this exemption even if you are paying rent to a family member, the latter should be the owner of the house.

You also need to ensure payment of rent to the family member.

LTA

The law provides exemption against LTA received by an employee for travel by him and his family to any place in India.

The term 'family' includes spouse, children and dependent parents, brothers and sisters.

The amount of exemption is determined by the extent of expenses incurred by the employee, subject to several limits:

Economy air fare, air-conditioned first class rail fare or an equivalent amount, in cases where the origin of journey and destination are connected by rail, or where no rail connection as well as no recognised public transport system exists, as the case may be; or

First class or deluxe class fare of a recognised public transport system, in cases where the origin of journey and destination are not connected by rail and a recognised public transport system exists there.

Submit all the information in Form 12BB with documents of travel, such as tickets, boarding passes, etc.

Other expenses such as lodging, food, sightseeing, etc, are not eligible for exemption.

Interest on home loan

Information such as interest paid to the lender, its name, address and PAN need to be provided in Form 12BB for claiming this deduction.

Keep this information handy while filling this form, along with documents such as bank interest certificate.

Medical, conveyance, others

Although Form 12BB does not require information regarding claims related to medical, conveyance, etc, the employer will ask you to submit documents.

Regarding medical reimbursement claim of Rs 15,000, the employer may ask you for original medical bills.

If the bill is of high value, a copy of the doctor's prescription will also be required.

• Is rent received in cash taxable?

One question that arises is whether Form 12BB can be sent online. This will depend on your employer.

However, this form needs to be verified and signed, and hence needs to be also given in hard copy.

Last, not only should you send all this paperwork to the employer, but also store it properly.

Later on, when you are filing your returns, this paper work will come in handy and will help you save time.

If your return is selected for scrutiny, this paperwork will be helpful in providing details to the tax authorities.

The views expressed here are personal.

HAPPY REPUBLIC DAY :JAY HIND : PROUD TO BE AN INDIAN

BSE's global exchange off to slow start

Trading in other derivative products in currency, commodities expected to begin soon.

BSE's India INX, the country's first international exchange, started trading on Monday at GIFT or Gujarat International Finance Tec-City. Trading remained confined to equity derivatives, more specifically index futures, which registered lukewarm volumes. 

On the first day of trade, only 37 contracts of Sensex 50 futures and another two contracts each of Sensex January and Sensex February futures were traded, going by data on the exchange's website on 6 pm.

Trading in other derivative products in currency and commodities is expected to begin soon.

"Volumes will pick up in a few months," said an expert. "There has to be a compelling case for business to shift to India from other international exchanges. If we compare the different international financial services centres (IFSCs), India still has a long way to go to match up to some of the other exchanges," he said.

The exchange will be a beneficiary of several tax sops, including exemptions from stamp duty, service tax, dividend distribution tax, as well as commodity and securities transaction tax (STT).

This, feel experts, will eventually encourage a lot of investors and traders to take up positions in derivatives products through the route of GIFTCity.

"STT is one of the biggest sore points for investors participating in derivatives and the new exchange will eliminate that. A lot of Indian traders dealing in equity derivatives from Singapore and Dubai could be tempted to set up desks here," said a broker.

India INX will be open for trading for 22 hours every day. The exchange will open for trading activity daily at 4 am when exchanges in Japan open, and close at 2 am when exchanges in the US close. 

BSE will be investing about Rs 500 crore in the international exchange over the next three years.

India INX will be the fastest international exchange in the world in terms of order response time, with a median trade speed of four microseconds.

This is better than BSE's domestic exchange at Mumbai, which has an order response time of six microseconds.

In comparison, the second-fastest international exchange at Singapore has an order response time of 60 microseconds. 

As many as 250 trading members have expressed interest to function at India INX. The latter and the Indian Clearing Corporation had commenced mock trading from India INX's data centre at GIFTCity from December 17 last year.

Several emerging IFSCs around the world, such as those in Shanghai and Dubai, are aspiring to play a global role in years to come. London, New York, and Singapore are among the global financial centres. 

If you have big goals and dreams, it sure won't be EASY to bring them to life, but then, NOTHING in life of significance comes easy.

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