Weekly performance of Indian Markets: 01/10/21 to 08/10/21
Nifty 50 has started its October journey on a positive note. It gained 363.15 points from 17,532.05 on October 1st to 17,895.20 on October 8th. It is equal to 2.07% rise.
Government’s proposals made stocks like IEX and MCX to soar. In a big development, government has decided to sell the stake in Air India to Tata Group. Air India will return to Tata Group after serving as a government company for 68 years. The Tata group’s holding company, Tata Sons through its wholly-owned subsidiary Talace Pvt Ltd submitted a winning bid of Rs .18,000 Crore as the Enterprise Value of Air India. The Tata Group will retain ₹ 15,300 crore of Air India’s debt and pay ₹ 2,700 crore cash to the government.
The partial and/or total shutdown of chemical plants in China made chemical stocks to rally. Especially, Deepak Nitrite was in focus. In a nutshell, our markets were predominantly buoyant, regardless of the performance of global markets.
Today i.e., October 7th, the Nifty auto index has posted gains of 4.4%. Four of the top 5 gainers on the Nifty 50 are auto makers. Especially the Indian multinational automotive manufacturing company Tata Motors rallied over 12%. It has become country’s second largest auto manufacturing company in terms of market capitalization. Today its market cap crossed Rs.1.25 lakhs.
Then what made the stock to rally? The global financial services firm, Morgan Stanley has increased its target price for the stock to Rs.448 from Rs.298 a share. The Tata Motors DVR’s target price has raised by Rs.300 from Rs.119 a share. Both the Tata Motors and the Tata Motors DVR shares were upgraded to overweight from equal weight.
In its report the agency has said that in their belief the Indian business of Tata Motors will show incremental upside growth. They expect that 2022-23 would be good for Indian auto makers, especially for Tata Motors. It also said that Tata motors is going to see robust operating and financial leverage gains. It expects that in best case scenario the company will achieve zero net debt target by 2024. It also expects that the Indian business to turnaround from losses to profits by financial year 2023.
This report made the stock to soar up to 14%. But it shed some of the gains and settled at 12% gains from previous day’s closing point. The stock closed at Rs.376.50 on Nifty 50. This was its new 52-week high price. It was the top gainer of today.
These gains may sustain or not. But the company is turning around its fortunes. It has set an ambitious goal regarding EV segment. However, like its national and global peers, Tata Motors has also been facing the semiconductor chip shortage due to the global supply chain disruption. This has been the major concern for the auto makers for a couple of quarters. Reports say that it will continue for some time. On the other hand, the auto makers have already started searching for alternative sources like shifting to silicon carbide instead of silica. But these steps take some time to give a solution.
In three days, the market price of the Indian specialty chemical major, Deepak Nitrite has rallied nearly 21% from 2382.45 (on October 1st) to 2886.80 (on October 6th). What’s the reason? The Q2 results of this company are yet to come. Then what made the stock price to soar after a couple of days of correction? The one and only cause is the continuing power crisis in China. This has been resulting the partial or total shut down of several chemical plants in that country.
As per reports, nearly 25% of chemical production has been hit by this energy crisis in China. China is one of the largest suppliers of both raw materials and intermediate goods for chemical industry. As a result, prices of many chemical compounds have risen significantly. This means, globally raw materials for chemical industry are now becoming more expensive. This will impact our chemical industry too. But this is one side of the story.
On the other hand, Indian chemical sector is seeing an opportunity of growth and demand for its products. Especially for companies, which are not much dependent on China for their inputs are more buoyant. For example, Deepak Nitrite, Aarti Industries, and other specialty chemical manufacturers have seen their market capitalization on a rise.
This is not the first instance when Indian chemical companies have seen an opportunity. Recently, China started restricting the production capacity of chemicals plants due to environmental concerns. Then companies like Deepak Nitrite, Vinati Organics, etc. have grabbed the opportunity. And after the outbreak of the pandemic, several industries have seen shift from China to India and other countries. Chemical industry is also one of them. These are one of the reasons for the rise of Deepak Nitrite as a dominant player in this sector. Particularly in the manufacturing of phenol and acetone, it became the largest player in India. And it is the leading producer of sodium nitrite in the world.
However, according to some experts, the power shortage in China will have a negative impact on those companies of the supply chain which distribute and deliver products to the final consumers like other entities, government etc. This will last for some time. Because these entities are mostly dependent on the raw materials and intermediate products supplied by China. The rising chemical prices is also another reason. On the flip side, the manufacturers of base chemicals and bulk commodities will get benefit.
But these benefits will reap only if Indian power plants are able to fulfill the rising demand. Because we already know that our power plants are also facing the problem of coal shortage.
Therefore, this crisis will create the opportunities on one side and will pose threats on the other side for the Indian chemical entities.
China has been facing a severe power crisis which is making one of the top headlines of this week. This crisis led to power outages and blackouts. As a result, both the industrial and household users are facing trouble. Moreover, as the winter is approaching, the situation is becoming more chaotic.
Power shortages are not a new issue in China. But this time several factors made this problem more serious.
First of all, the production of coal has been disrupted because of the pandemic. Its trade dispute with Australia resulted into reduction in coal imports.
On the other hand, China showed an urge to overcome the pandemic-driven industrial slump. In last few months, China has seen tremendous activity in both the real estate and the manufacturing sectors. This made the country to recover economically. However, these sectors need plenty of units of electricity. That means tons of coal usage. This also causes high carbon emissions.
China’s ambitious climate goals is being the another one. China’s leadership has vowed to make their country “Carbon Neutral” by 2060. The Chinese government has started putting curbs on coal production. This made coal production low. It has also restricted the price of the electricity output. However, coal-based thermal power plants are still China’s major power sources. Both the industrial boom and the ambitious climate goals have made the coal prices to go up significantly. Power plants are hesitating to supply their output at restricted prices as their input costs are increased. As a result, thermal plants started decreasing their production.
All of these made several provinces and regions to face power cuts in order to rationalize the power supply. Both homes and industries have been affected drastically. Especially the energy-intensive industries have been cutting their production hours in order to tackle the power shortage.
In September 2021, China has witnessed major decline in its industrial activities since February 2020. As a result, global investment banks and agencies like Nomura and Goldman Sachs have expressed their concern over future growth. Goldman Sachs has corrected China’s economy growth rate prediction to 7.8% from 8.2%.
To cope with this situation, Chinese government has ordered its top state-owned energy companies to ensure that there will be adequate fuel supplies for the coming winter.
The situation in India:
Indians have also been facing the brunt of rising coal and petroleum prices. Because we are also mostly dependent on coal-based plants. It also has to manage ever-increasing demand for power as its economy is re-opening.
Apart from rising fossil fuel prices, facing the supply-chain disruption is another problem for India. On one side, the temporary shutdowns of Chinese plants have paved way for increasing demand for Indian industrial products. But at the same moment, many industries are seeing shortage of inputs as imports from China are reduced. The cause being either full or partial shut downs of factories in China.
The global scenario:
This power outages could affect global supply-chain also. The world has already been facing widespread supply-chain disruption. From toy making enterprises to mobile phone manufacturers, every industry has been noticing the impact.
Along with China, Europe has also been facing energy crunch. In many European countries, the low production and rising prices of coal and natural gas is becoming a burning issue. Like China, the approaching winter is posing a major concern for these countries.
Amidst, energy equity stocks and futures have seen significant spike in market prices across the globe. For instance, in India, Coal India, Reliance Industries, etc. have rallied remarkably. But as the time passes by, these rallies may fade out due to production and supply chain disruption.
In a nut-shell, this energy crisis could make the post-pandemic global economic recovery more sluggish, if it remained unsolved.
Today i.e., 29th September, 2021, has seen another day of correction in Indian stock markets. However, the power sector stocks rallied phenomenally. Tata Power (8.25% up), IEX (6.86% up), NTPC (6.6% up), and Coal India (6.34% up) have seen significant upward movement. The reason behind this is the proposed Electricity Amendment Bill 2021. It has some serious reforms regarding power distribution. We now discuss the salient features of the bill. The Electricity Amendment Bill 2021 desires to allow the private sector players to compete with the state-owned power-distribution companies aka Discoms. This Bill would also enable the consumers to choose discoms (similar to selecting tele-communication services, based upon their preferences). It also proposes to give rewards to the consumers who wish to shift to solar power. At present most of the discoms are in heavy losses and debt-ridden. Government has started several schemes to revive but they are not fully successful. The public-private partnership in power-distribution is not a new thing in India. In cities like Delhi, Mumbai and Ahmedabad private players are already operating. On the flipside, the proposed bill has been facing opposition. Several states expressed their concerns over the private players’ participation. They have fears regarding possible high tariff rates which would impact rural areas and especially agricultural sector. There is another amendment which proposes to impose higher penalties on states for failure to meet Renewable energy Purchase Obligations (RPOs). At present many states have failed to reach the targets and urged the Central Government to rationalize the penalty structure.
The Cabinet Committee on Economic Affairs chaired by the Hon’ble Prime Minister, Shri Narendra Modi has given approval for listing of M/s. Export Credit Guarantee CorporationLtd. (ECGC), an unlisted CPSE through the Initial Public Offer (IPO) on the Stock Exchange under the SEBI’s (Issue of Capital and Disclosure Requirements) Regulations, 2018.
ECGC Limited is a wholly-owned CPSE of Government of India set up with the objective of improving the competitiveness of the exports by providing Credit Risk Insurance and related services for exports. The Company intends to increase its maximum liabilities (ML) to Rs 2.03 lakh crore from Rs 1.00 lakh crore by 2025-26.
The proposed listing of ECGC Limited would unlock the true value of the company, promote ‘people’s ownership’ by encouraging public participation in the equity holding of the company and also promote Corporate Governance through transparency and greater accountability.
Listing may enable ECGC to mobilize fresh capital from the market either through the same IPO or subsequently through a Follow-on Public Offer (FPO) and thereby help in increasing the Maximum Liability cover for it.
The disinvestment proceeds will be used for financing of social sector schemes.
The Rs 2,768 crore IPO of Aditya Birla Sun Life AMC, the AMC arm of the Aditya Birla Group, will open for subscription today, September 29. It is a joint venture of Aditya Birla Capital Limited and Sun Life AMC to issue 3.88 crore equity shares through IPO.
The price band for this IPO has been fixed at Rs 695-712 per share. Under this, Aditya Birla Capital will sell 28.51 lakh and Sun Life AMC 3.6 crore equity shares. The IPO of Aditya Birla Sun Life AMC will be open for subscription this week on Friday, October 1.
China’s central bank announced that all transactions of crypto-currencies are illegal, effectively banning cryptocurrencies, such as trading crypto, selling tokens. Know details here.
China bans cryptocurrency 2021: China’s central bank, the People’s Bank of China, on September 24, 2021, announced that all transactions of crypto-currencies are illegal, effectively banning financial activities involving cryptocurrencies, such as trading crypto, selling tokens, transactions involving virtual currency derivatives. China had banned trading cryptocurrency in 2019 but the nation remained as one of the world’s largest cryptocurrency markets. The price of the world’s largest cryptocurrency Bitcoin fell by almost 10 per cent to around $40,000 after China issued a nationwide ban on cryptocurrency mining.
“Virtual currency-related business activities are illegal financial activities, it seriously endangers the safety of people’s assets,” said the People’s Bank of China. “And foreign websites that provide such services to Chinese citizens online is also an illegal activity,” added China’s Central Bank.
China had banned trading cryptocurrency in 2019 but the nation remained as one of the world’s largest cryptocurrency markets. Therefore, in order to shut down cryptocurrency mining in all its forms, China made a significant crackdown in 2021.
May 2021: China banned banks and payment firms from providing services related to cryptocurrency transactions. It also warned investors against speculative crypto trading. The National Internet Finance Association of China, the Clearing Association of China and the China Banking Association, and the Payment issued a warning that consumers would have no protection if they faced any losses during crypto-trading.
June 2021: The People’s Bank of China completely ordered several banks and payment companies to not provide any services such as clearing, settlement, or trading environment for cryptocurrency transactions. The Agricultural Bank of China and China’s Postal Savings Bank also followed the suit.
China ban on crypto-trading platforms – Significance
Making crypto transactions illegal
Changpeng Zhao in China who had founded the world’s biggest cryptocurrency exchange Binance moved to Japan within months of the Chinese crackdown on crypto trading platforms. Smaller nations like El Salvador have recently adopted Bitcoin as legal tender to foster financial inclusion and economic growth while in May 2021, China’s State Council vowed to crack down on Bitcoin trading and mining and create its own digital currency Yuan which will not use the blockchain technology like the cryptocurrencies.
Create its own digital currency
Economy experts state China’s ban on cryptocurrency trading has come at a time when China’s central bank, the People’s Bank of China has been testing its own digital currency, the Chinese Yuan, since 2014. The digital Yuan aims at replacing and digitizing cash and coin. Chinese authorities banned initial coin offerings (ICOs) in 2017. The digital Yuan will be issued by the People’s Bank of China (PBOC) unlike Bitcoin which is not controlled by any central authority. This will allow the government to keep track of how money flows around China’s economy, detect any illegal flow of funds, and the internationalization of the Yuan currency.
What is the People’s Bank of China (PBOC)?
The People’s Bank of China is the central bank of the People’s Republic of China. The PBOC is located in Beijing.
The Indian media conglomerate Zee Entertainment Enterprises is going to merge with Sony Pictures Networks India Pvt Ltd., an Indian indirect wholly owned subsidiary of Sony Group Corporation.
The board of directors of Zee Entertainment Enterprises (ZEEL), announced on Wednesday i.e., 22nd September, 2021, that it has unanimously provided an in-principle approval for the merger with Sony Pictures Networks India (SPNI). It also said that the two companies have entered into a non-binding term sheet to combine both companies’ linear networks, digital assets, production operations and program libraries. As per the term sheet, the two companies will conduct mutual diligence and finalise definitive agreements. This procedure has to be completed within an exclusive period of 90 days.
According to the sources of the two companies, the merged entity will be a publicly listed company in India. The shareholders of Sony will also infuse $1.575 billion in the entity. This will make Sony’s stake at 52.93% in the merged entity. The rest of 47.07% will be the ZEEL’s stake.
Entities go for mergers and acquisitions for various benefits and synergies. Now, let us talk about the benefits to both the companies, one by one.
First of all, we will see what would be the benefits to ZEEL. It has 49 channels and it reaches nearly 600 million people globally. It has presence in 173 countries. In India, ZEEL has a larger network viewership share than Sony with nearly 18% of viewership. But it is stronger in regional general entertainment channels (GEC- like Zee Telugu, Zee Tamil, Zee Bangla etc.) and movies. On the other hand, Sony derives its strength from Hindi GEC (like Sony TV, Sony SAB, etc.) and sports. We want to remind our readers that in 2018, ZEEL had sold its sports portfolio under the Ten Sports brand to Sony Pictures Networks India. That deal also has a non-competing agreement with Sony which has been preventing ZEEL from entering into sports segment.
Now, let us discuss how Sony could benefit from this deal. Sony has 26 channels. Its viewership is around 700 million people across the globe. It is present in 167 countries. However, its viewership in India is limited to 8%. As a result, it has been searching for a local partner so that it can compete with the leaders of the content market, the Disney+Hotstar. Now that this deal has been happening, Sony could definitely benefit. Because ZEEL has its presence in various entertainment segments across the world. The combined entity will have 75 channels with 26% viewership in India.
This deal could help both the companies to gain a remarkable share in the over-the-top aka OTT market. At present, this market has been dominated by Netflix, Amazon, and Disney+Hotstar. The combined market share of Sony’s SonyLIV and ZEEL’s ZEE 5 could possibly offer a tough challenge to the Disney+Hotstar for the third place in the Indian OTT market. However, the full details of the deal are yet to be decided including the possible merger of SonyLIV and ZEE 5 into one OTT brand. Moreover, this merger is limited to ZEEL only. The ZEE Learn and the ZEE News are going to be continued as different listed entities.
As Sony will have majority stake in the combined entity, it will nominate majority of the board of directors. According to the sources, Mr. Puneet Goenka, the present CEO of ZEEL, will continue to be the Managing Director and CEO of the merged entity.
The stock market has received this news positively. The market share price of ZEE Limited has seen significant rise.
Tata Elxsi is among the world’s leading design and technology services providers across industries, including Automotive, Broadcast, Communications, Healthcare, and Transportation. We help customers reimagine their products and services through design thinking and the application of digital technologies such as IoT (Internet of Things), Cloud, Mobility, Virtual Reality, and Artificial Intelligence.
Tata Elxsi commenced its business on 5th May 1989 in Bangalore, the Silicon Valley of India, to develop and promote applications of electronics, embedded systems, and software. The Mission was to foster innovation in the fast-emerging IT market and accelerate the adoption of leading-edge technologies. Today, Tata Elxsi is recognized as a premium engineering service provider worldwide and amongst the leaders in the automotive, media, broadcast, communications, and healthcare industries.
Tata Elxsi brings together the best technology and user-centric design expertise to help customers deliver innovative solutions and great consumer experiences. Our integrated Design and Technology teams help enterprises reimagine their products and services – from strategy, consumer research and insights, to service and experience design, technology implementation, integration, launch, and beyond. Company’s Website: https://www.tataelxsi.com
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KPIT Technologies
KPIT is a leading independent software development and integration partner helping mobility leapfrog towards a clean, smart, and safe future. With 7000 employees across the globe specializing in embedded software, AI, and digital solutions, KPIT accelerates clients’ implementation of next-generation technologies for the future mobility roadmap. With engineering centers in Europe, the USA, Japan, China, Thailand, and India, KPIT works with leaders in automotive and mobility and is present where the ecosystem is transforming.
It has innovative electrification technology ‘REVOLO’.
It has received a strategic large deal from BMW Group for the next generation charging electronics program.
Is also helping build PowerTrain Software Architecture for next-generation vehicles
APPSIL was formed following the Hitachi’s acquisition of 80.1% stake in the global power grids business of ABB Ltd in Dec, 2018 & the subsequent divestment and transfer of global power grids business unit of ABB into a new JV, Hitachi ABB Power Grids Ltd (Hitachi – 80.1% & ABB – 19.99%) which was incorporated in Feb, 2019.
ABB Power Products and Systems India Limited develops, engineers, manufactures, and sells products, systems, and projects for electricity transmission and related activities in India and internationally.
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ABB India
ABB is a leading global technology company that energizes the transformation of society and industry to achieve a more productive, sustainable future. By connecting software to its electrification, robotics, automation and motion portfolio, ABB pushes the boundaries of technology to drive performance to new levels. With a history of excellence stretching back more than 130 years, ABB’s success is driven by about 110,000 talented employees in over 100 countries.
It’s parent ABB is one of the leading EV Charger-maker globally. It is known for its Terra AC Wallbox. Audi has roped In ABB for its Premium Charging Infra in India. Newly launched Audi e-tron offered with ABB’s smart Terra AC Wall Box charger along with car.
ABB powers e-mobility with launch of first 350 kW high power car charger called ABB Terra.
Siemens
With a focus on electrification, automation and digitalization, Siemens India stands for engineering excellence, innovation, and reliability. As one of the world’s biggest producers of energy-efficient, resource-saving technologies, Siemens is a pioneer in infrastructure and energy solutions, automation and software for industry and is a leader in medical diagnosis. Siemens also provides business-to-business financial solutions, rail automation and wind power solutions.
VersiCharge – Its new wallbox for cost-optimized charging. It has tied up with Hinduja Group’s Switch Mobility. It has also signed MoU to play key role in electric commercial vehicles segment. Siemens would provide the charging infrastructure technology.
Tata Power, formerly a part of the three entities jointly known as Tata Electric Companies, is a pioneer in technology adoption, with many firsts to its credit, supporting the country’s energy independence.
Tata Power, together with its subsidiaries & joint entities, has a generation capacity of 13,061 MW of which 32% comes from clean energy sources. The company has the distinction of being among the top private players in each sector of the value chain including solar rooftop and value-added services.
Tata Power is a pioneer credited with steering the energy sector on technology, process and platform. Powering emerging technologies for the ‘smart’ customer, Tata Power’s latest business integrated solutions, focusing on mobility and lifestyle, is poised for multi-fold growth.
Since its inception in 1915, Tata Power now has over a century of expertise in technology leadership, project execution excellence, world-class safety processes, customer care and driving green initiatives, Tata Power is committed to ‘lighting up lives’ for generations to come.
Castrol India Limited is an automotive and industrial lubricant manufacturing company. Castrol India is the 2nd largest manufacturer of automotive and industrial lubricants in the Indian lubricant market. It is part of Castrol Limited UK (part of BP Group). It has 5 manufacturing plants that are networked with 270 distributors, serving over 70,000 retail outlets.
It has recently launched EV Fluid Range i.e., Castrol ON e-thermal fluid, an innovative dielectric fluid formulated specifically for direct cooling. This helps to keep the batteries cooler even in extreme conditions. Study shows this fluid allows for 41% faster charging. Company’s Website: https://www.castrol.com
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Sona BLW Precision Forgings Ltd.
SonaComstar is an Indian origin, global automotive systems & components manufacturer with 9 plants spread across India, China, Mexico, and the USA. thecompanyisoneofIndia’sleadingautomotivetechnologycompanies,designing,manufacturingandsupplyinghighlyengineered,missioncriticalautomotivesystemsandcomponentssuchasdifferentialassemblies,differentialgears,conventionalandmicro-hybridstartermotors,BSGsystems,EVtractionmotors(BLDCandPMSM)andmotorcontrolunitstoautomotiveOEMsacrossUS,Europe,IndiaandChina,acrossallvehiclecategoriessuchasconventionalpassengervehicles,commercialvehicles,off-highwayvehicles,electriccars,electriclightcommercialvehicles,andelectrictwo&threewheelers.
In a nut shell, it is a leading supplier to global EV markets. Approximately 14% Revenue is from pure battery-electric vehicles (BEVs) & around 27% Rev from Hybrid & Micro-Hybrid vehicles. It has been gaining market share competing with global peers. At present, most business comes from international market.
BSE vide notice no 20210915-2 dated 15th day of September, 2021 has issued a circular w.r.t. XBRL based Compliance filings for Debt Listed Issuers.
XBRL (eXtensible Business Reporting Language) is a standardized and structured way of communicating business and financial data in an electronic form. XBRL provides a language containing various definitions (tags) which uniquely represent the contents of each piece of financial statements or other kinds of compliance and business reports. Due to the structured elements of data, it enables reporting information move between organizations rapidly, accurately and digitally.
Compliance Required:
SEBI has introduced Circular SEBI/HO/DDHS/DDHS1/P/CIR/2021/572 dated June 04, 2021 (Click here), wherein the listed Debt issuers are required to submit Record Date, Credit Rating, Interest Payment, Redemption Payment and Default History Information disclosures as per the prescribed format. The Exchange has introduced facility of filing of the same in XBRL mode.
Key Highlights:
1. In order to provide ease of Compliance, Stock Exchanges have put in place a common XBRL taxonomy for this purpose.
2. All the Listed Debt issuers are requested to submit the following in XBRL mode only:
Credit Rating,
Interest Payment,
Redemption Payment
Default History
3. Further all the listed Debt issuers are requested to file Record date details in XBRL mode in addition to the filing in PDF mode, till further notification.
4. Submission of Credit Rating, Interest Payment, Redemption Payment and Default History Information shall be submitted in XBRL mode only and any other mode of submission shall be treated as non-submission.
5. Suggested path to submit Record date details and xml file under Regulation 60:
Listing Compliance – Corporate Announcement – Security Type (Debt/CP/MF) – Scrip Code – Category / Sub-Category (Compliance) – Record Date/Book Closure as per Regulation (60)
7. The Excel Utility for filing the respective modules in the prescribed Format in the XBRL mode has been made available in XBRL section of the Listing Centre as per following:
Disclaimer: Every effort has been made to avoid errors or omissions in this material. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. In no event the author shall be liable for any direct, indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information.
The price of bitcoin has crossed the $50,000 mark for the first time in three months. The world’s largest and most popular cryptocurrency, Bitcoin, is currently valued at $50,297.19. According to CoinDesk, bitcoin has given a total return of 72.3 percent so far this year.
Investing in crypto gives good returns. The most popular cryptocurrencies are bitcoin, ethereum and some other coins like dodgecoin. Investing in crypto can be a bit complicated process. In this, there are many important things like mining, trading on crypto exchange, then maintaining crypto wallet, which is important to be aware of.
If you are starting to invest in crypto then you should start with crypto exchange first. A crypto exchange is a platform where investors buy and sell crypto currency like a stock market.
To start trading you need to find the best trading platform. There are a number of exchanges currently operating in India, including CoinSwitch, Kuber, WazirX, BuyUCoin, among many others.
To open a trading account on a crypto exchange, you will also need documents like ID proof, address proof, PAN card etc.
After depositing the documents and money with the exchange, it is not necessary that you will be able to start trading immediately. After this the exchange will verify your details, it may take some time. When the KYC process is completed, the exchange notifies its user about it.
If you have bought a cryptocurrency, then you can either store it in a digital wallet or you can withdraw it by converting it into a flat currency.
Invest in a single crypto at the beginning of the investment. And choose a cryptocoin or token that you are absolutely sure of investing in.
Cryptocurrency is digital money or we can say that it is a digital asset. That means there’s no physical coin. It’s all online. You can transfer cryptocurrency to someone online without going to a bank. People might use cryptocurrencies for quick payments and to avoid transaction fees. In Current era bank charge fee or lump-sum amount for transferring money from one country to another but here you can transfer cryptocurrency to anywhere in world. Some might get cryptocurrencies as an investment, hoping the value goes up. It is also called digital gold.
So, you are thinking from where all this came from? And who has made this cryptocurrency?
This all started 12 years ago a person name stantoshi nakamoto has published an article on internet and the purpose was clearly seen in that article. The wordings of the article are “The version on electronic cash that would allow payment to be sent directly to one party to another party without going to the financial institution”
In terms of Government of India Notification No.4(5)-B (W&M)/2021 dated May 12, 2021, Sovereign Gold Bonds 2021-22 (Series V) will be opened for the period August 9-13, 2021 with Settlement date August 17, 2021. The issue price of the Bond during the subscription period shall be Rs 4,790 (Rupees Four thousand Seven hundred ninety only) – per gram, as also published by RBI in their Press Release dated August 06, 2021.
The Government of India in consultation with the Reserve Bank of India has decided to allow discount of Rs 50 (Rupees Fifty only) per gram from the issue price to those investors who apply online and the payment is made through digital mode. For such investors the issue price of Gold Bond will be Rs 4,740 (Rupees Four thousand seven hundred forty only) per gram of gold.
Amazon is one of the largest e-commerce platforms in India. Like every year, this year also Amazon is bringing its Great Freedom Festival sale, which has started today on 5th August. This sale will run for five days till August 9.
In this sale, Amazon is offering attractive offers and discounts to woo the customers. There is enthusiasm for this sale among the customers too. In this sale, you will get good discounts on all the items of different categories. Customers can take advantage of all these exciting offers and discounts for which they are excited.
Welcome more happiness with big savings during the #AmazonGreatFreedomFestival, starting from 5th – 9th August. Enjoy great deals with up to 40% off on latest smartphones!
Glenmark Life Sciences and Rolex Rings’ IPO is going to open this week. The IPO of Glenmark Life Sciences, an active pharma ingredients company, will open on July 27 and close on July 29. The price band of Glenmark Life Science is Rs 695-720.
Glenmark Life Science will issue a fresh issue of Rs 1060 crore and 63 lakh shares will be sold in the offer for sale. According to the higher price band, the company will raise Rs 1513.6 crore through this IPO.
Whereas a day later on August 28, the IPO of Rolex Rings will open. Investors will be able to invest in the IPO of this company till July 30. The price band of this IPO has been fixed at Rs 880-900.
Rolex Rings plans to raise Rs 731 crore through this IPO. Rolex Rings Limited said that bids for anchor investors will open on July 27. The IPO of Rolex Rings will see issue of fresh shares worth Rs 56 crore, while it includes an offer for sale of 7.5 million equity shares by existing investors.
The SEBI Board met in Mumbai. The Part-Time Members joined the meeting through video conferencing. The Board, inter-alia, took the following decisions:
I. Review and Merger of SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and SEBI (Non-Convertible Redeemable Preference Shares) Regulations, 2013 into a single Regulation – SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021
The Board considered and approved the proposals relating to the review and merger of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and SEBI (Non-Convertible Redeemable Preference Shares) Regulations, 2013 into a single Regulation to be called– SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
The major provisions of the new Regulations are as under:
Issuers other than unlisted REITs and InvITs who are in existence for less than 3 years, have been facilitated to tap the bond market, provided:
Issuance of their debt securities is made only on a private placement basis;
The issue is made on the EBP platform irrespective of the issue size; and;
The issue is open for subscription only to QIBs.
This will enable Special Purpose Vehicles created for specific infrastructure purposes/ NBFCs/ listed REITs/ listed InvITs and other companies who propose to list debt securities purely on private placement basis but who do not have a three-year existence history, to list their debt securities issued on private placement basis, while, all other requirements under the proposed NCS Regulations and operating stipulations of the EBP mechanism shall continue to apply to such issuers.
Parameters for identification of risk factors have been introduced to assist issuers in disclosing pertinent risk factors on risks intrinsic to the issuer as well as the instrument, other risk factors which may have an impact on the issue etc.
The requirement to have a minimum rating of AA- for a public issuance of NCRPS has been done away with in requirement as is the case for a public issue of debt securities.
The requirement of a minimum tenure of three years for a public issuance of NCRPS has been removed thus providing flexibility to the issuers to structure their issuance as per their resource requirement and raise funds through an issue of NCRPS. This is also in line with the present requirement pertaining to debt securities.
To enable issuers to raise funds quickly without filing a separate prospectus each time, the restriction of not more than four issuances of debt securities in a year through a single shelf prospectus has been done away with.
The option for call and put has been introduced in case of debt securities issued on private placement basis. This will provide greater flexibility to the issuers and investors of debt securities and NCRPS as well. Further, the period for exercise of call and put option has been brought down to 12 months from 24 months in order to provide increased flexibility, both to issuers and investors.
Issuers who have cured the default in payment of interest / dividend / redemption amount to raise funds through non-convertible securities, have been permitted to file shelf prospectus post such curing of default provided they have cured the default atleast 30 days prior to filing the draft shelf prospectus.
In order to encourage public issuances of debt securities, the present stipulation that the minimum size of Rs. 100 crore has been done away with.
The Electronic Book Provider (EBP) platform has been made mandatory for issuance of eligible securities on private placement basis proposed to be listed amounting to INR 100 crore or above in a financial year which will improve price discovery and transparency.
The provision of creation of charge on the assets and properties of the issuer has been harmonized with the Companies Act thus allowing issuer to have an option to create charge over its properties or assets (movable, immovable, tangible, intangible), shares or any interest thereon, of the issuer or its subsidiaries or its holding companies or its associate companies. This will provide greater flexibility to the issuers for creation of charge.
The requirement of abridged prospectus has been streamlined to around 10 pages from over 50 pages, in order to enhance readability for the investor.
In case an issuer wishes to roll over the debt securities the provision of e- voting has been introduced in addition to postal ballot to facilitate issuers to seamlessly obtain voting for passing the resolution. This will also encourage wider investor participation in the voting.
II. Introduction of Framework for Accredited Investors in securities market
The Board after deliberation approved the proposal to introduce a framework for ‘Accredited Investors’ in the Indian securities market, a class of investors who may be considered to be well informed or well advised about investment products.
The salient features of the proposed framework include:
Eligibility criteria for Accredited Investors who may be Individuals, HUFs, Family Trusts, Sole Proprietorships, Partnership Firms, Trusts and Body Corporates based on financial parameters and information as may be specified by SEBI.
Eligible subsidiaries of depositories and specified stock exchanges, and any other specified institutions to be recognized as Accreditation Agencies. Accreditation Agencies to grant accreditation status and issue Accreditation Certificate to Accredited Investor.
Modalities of accreditation and procedure to avail benefits linked to accreditation.
The benefits linked to accreditation include:
Accredited Investors shall have flexibility to participate in investment products with an investment amount lesser than the minimum amount mandated in the Alternative Investment Funds (AIF) Regulations and Portfolio Managers (PMS) Regulations.
AIF for Accredited Investors where each investor invests minimum investment amount of Rs. 70 Crores may avail relaxation from regulatory requirements such as portfolio diversification norms, conditions for launch of schemes and extension of tenure of the AIF.
Accredited Investors with minimum investment of Rs. 10 Crores with registered PMS provider, may avail relaxation from regulatory requirement with respect to investment in unlisted securities and can enter into bilaterally negotiated agreements with the PMS provider.
Accredited Investors who are clients of Investment Advisers will have the flexibility to determine the limits and modes of fees payable to the Investment Adviser through bilaterally negotiated contractual terms.
III. Review of Regulatory provisions related to Independent Directors
The Board approved amendments to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) pertaining to regulatory provisions related to Independent Directors (IDs), which include the following:
Appointment/Re-appointment and Removal of IDs
Appointment/Re-appointment and Removal of IDs shall be through a special resolution of shareholders for all listed entities.
The process to be followed by Nomination and Remuneration Committee (NRC), while selecting candidates for appointment as IDs, has been elaborated and made more transparent including enhanced disclosures regarding the skills required for appointment as an ID and how the proposed candidate fits into that skillset.
The composition of NRC has been modified to include 2/3rd IDs instead of existing requirement of majority of IDs.
Shareholder approval for appointment of all directors including IDs shall be taken at the next general meeting, or within three months of the appointment on the Board, whichever is earlier.
Eligibility requirement
A cooling off period of three years has been introduced for Key Managerial Personnel (and their relatives) or employees of the promoter group companies, for appointment as an ID.
Relatives of employees of the company, its holding, subsidiary or associate company have been permitted to become IDs, without the requirement of a cooling off period, in line with Companies Act, 2013.
Resignation of IDs
The entire resignation letter of an ID shall be disclosed along with a list of her/his present directorships and membership in board committees.
A cooling-off period of one year has been introduced for an ID transitioning to a whole-time director in the same company/ holding/ subsidiary/ associate company or any company belonging to the promoter group.
Audit Committee – At least 2/3rd of the members of the audit committee shall be independent directors and all related party transactions shall be approved by only Independent Directors on the Audit Committee.
Directors and Officers insurance – The requirement of undertaking Directors and Officers insurance has been extended to the top 1000 companies (by market capitalization).
These amendments shall be made applicable with effect from Jan 01, 2022. The Board also agreed to make a reference to the Ministry of Corporate Affairs (MCA), for giving greater flexibility to companies while deciding the remuneration for all directors (including IDs), which may include profit linked commissions, sitting fees, ESOPs, etc., within the overall prescribed limit specified under Companies Act, 2013.
IV. Amendments to SEBI (Infrastructure Investment Trusts) Regulations, 2014
The Board considered and approved the amendments to SEBI (Infrastructure Investment Trusts) Regulations, 2014, for introduction of minimum unit holders requirement for unlisted InvITs. The minimum number of unit holders, other than sponsor, its related parties and its associates shall be five together holding not less than 25% of the total unit capital of the InvIT.
V. Amendments to SEBI (Infrastructure Investment Trusts) Regulations, 2014 and SEBI (Real Estate Investment Trusts) Regulations, 2014
The Board considered and approved the amendments to SEBI (Real Estate Investment Trusts) Regulations, 2014 and SEBI (Infrastructure Investment Trusts) Regulations, 2014, for revision in minimum subscription and trading lot for publicly issued REITs and InvITs. The revised minimum application value shall be within the range of INR 10,000-15,000 and the revised trading lot shall be of one unit.
VI. Permitting Resident Indian fund managers to be constituents of FPIs
The Board approved the proposal to amend the SEBI (Foreign Portfolio Investors) Regulations, 2019 to permit eligible Resident Indian Fund Managers (other than individuals) to be constituents of Foreign Portfolio Investors (FPIs). Such FPIs shall be investment funds approved by Central Board of Direct Taxes (CBDT) under Section 9A of the Income-Tax (IT) Act, 1961, read with the IT Rules, 1962. These amendments shall bring the SEBI (FPI) Regulations, 2019 in line with the recent amendments in Section 9A of the IT Act, thereby facilitating Indian fund managers in managing investment funds incorporated/established/ registered outside India.
VII. Amendment to SEBI (Mutual Funds) Regulations, 1996
The Board approved amendment to SEBI (Mutual Funds) Regulations, 1996, to provide for investment of a minimum amount as skin in the game in the Mutual Fund (MF) schemes by Asset Management Companies (AMCs) based on the risk associated with the scheme, instead of the current requirement of one percent of the amount raised in New Fund Offer or an amount of INR fifty lacs, whichever is less.
VIII. Amendment to SEBI (Credit Rating Agencies) Regulations, 1999
SEBI (Credit Rating Agencies) Regulations were amended to define a Credit Rating Agency (CRA) in terms of rating of securities that are listed or proposed to be listed on a recognized stock exchange, and to provide for an explanation in clause (f) of Regulation 9 specifying that ratings undertaken by a CRA under the respective guidelines of a financial sector regulator or authority shall be under the purview of the concerned financial sector regulator or authority.
IX. Amendment to SEBI (Bankers to an Issue) Regulations, 1994
To provide easy access to investors to participate in Public/Rights issues by using various payment avenues, the Board approved the proposal of amending the SEBI (Bankers to an Issue) Regulations, 1994 by way of permitting such other banks, other than scheduled banks, as may be specified by SEBI from time to time, to register as a Banker to an Issue.
X. Amendments to the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015
With a view to streamlining the process of reward payment and to enhance the quantum of reward under the informant mechanism, the Board considered and approved certain amendments to SEBI (Prohibition of Insider Trading) Regulations, 2015.
The amendments, inter alia, include the following:
The maximum amount of reward has been increased from Rupees One Crore, at present, to Rupees Ten Crore.
If the total reward payable to the informant is less than or equal to Rupees One Crore, then the reward may be granted by SEBI, after the final order is issued.
If the total reward payable to the informant is more than Rupees One Crore, then an interim reward not exceeding Rupees One Crore may be granted by SEBI, after the final order is issued. The remaining reward amount will be granted only upon receipt of the monetary sanctions amounting to at least twice the balance of the reward amount payable by SEBI.
XI. Annual Report : 2020-21
The Board considered and approved the SEBI Annual Report: 2020-21. In compliance with Section 18(2) of SEBI Act, 1992, the Annual Report would be submitted to the Central Government.
NSE vide Circular dated June 28, 2021, has provided the clarification i.e. FAQ’s on due dates by which the listed entities are required to comply with listing regulations amendments dated May 05, 2021.
The country’s largest digital payments company Paytm is going to bring the country’s biggest IPO ever. Under this, it plans to sell new shares worth $ 1.6 billion (Rs 120 billion). The company will seek approval from the shareholders for this.
Paytm also plans to remove its founder Vijay Shekhar Sharma from the role of promoter to make it easier for him to comply with the compliance requirements and conditions. Sharma holds less than 15 per cent stake in the company. The company has hired four banks to manage the IPO.
The country’s biggest IPO in which the company plans to raise Rs 21,800 crore ($ 3 billion). Paytm plans to launch an IPO around Diwali in November. Through the IPO, its valuation is to reach $ 25 billion to $ 30 billion.
Today, the share of Shree Renuka Sugars Limited in the sugar sector has an upper circuit of 5 percent. The stock has reached a new 52-week high of Rs 22.80 on the BSE. The stock has given more than 50 per cent returns in a week. The shares of this sugar company have mixed sweetness in the lives of investors.
The trend of upsurge in the domestic stock market continues. Smallcap stocks have given great returns in this boom.
Why is the stock rising
Recently, Prime Minister Narendra Modi has reduced the deadline by five years to 2025 to achieve the target of 20 per cent ethanol blending in petrol to cut carbon emissions and reduce dependence on imports. After this news, there is a bullish trend in sugar stocks.
The share price of Yogguru Baba Ramdev’s company Ruchi Soya has gone up by 5 percent to the level of Rs 1316. The same market capital is close to Rs.39 thousand crores.
For the past few days, the stock market has reached record levels. In the meantime, Baba Ramdev’s company Ruchi Soya has also seen a tremendous jump in the stock.
El Salvador Congress on June 9 approved a bill to make bitcoin, the world’s largest cryptocurrency, the legal currency of the country. This Central American country has become the first country in the world to declare bitcoin a legal currency.
El Salvador President Nayib Bukele further said that the US dollar will continue to be the legal currency in the country as before and the use of bitcoin will be optional.
SIDBI-backed private equity fund India SME Investments has invested Rs 60 crore in its portfolio company KreditBee. With this it has expanded its portfolio in the Banking, Financial Services and Insurance (BFSI) segment.
This is the tranche of investment from the fund, which had invested Rs 28.4 crore in Krazybee Services in September 2019, in the online personal loan lending platform.
Series – 1. Introduction, Residential Status & Long Term Capital Gain
Investment in stock market has increased manifold in recent times. India’s total active demat accounts stood at 56.9 million as of 30 April, up from 40.8 million at the end of 31 March 2020 and 35.9 million in 31 March 2019. A strong rally in the equity markets in the past year and new investment opportunities in the form of initial public offerings (IPOs) lured retail investors. The market share of individual investors increased sharply by 12 percentage points to 45% in FY21 from 33% in FY16, offsetting the decline in the share of FIIs and public and private corporates during the same period. Retail investors are now Big Bulls of Indian equity markets.
Statistics related to number of tax payers – The number of taxpayers in India is reportedly 1.46 crore, as confirmed by the Central Board of Direct Taxes. This is a small number when you take the total population of 130 crore into perspective. CBDT further clarified that one crore taxpayer reported income between the range of Rs 5-10 lakh, while only 46 lakh reported over Rs 10 lakh.
“If you look at the above active retail participation numbers, the yearly active customers are just ~1% of India’s population. This if you would compare to developed markets, is ~ 20%.People who can invest or trade in the markets need to have money to trade or invest. There were only 5.78 crore people who filed income tax returns last year. Out of that, 75% earned less than ₹5L/year. While there still exists a substantial parallel economy where income isn’t declared, it is difficult for such money to flow into capital markets. With this data in mind, if you looked at the target market size, it would seem like it has to be a subset of 5.78 crores. At 1.3 crores active investors, that is an almost ~20% penetration of the realistically addressable market and not ~1%.”- Nithin Kamath,CEO,Zerodha
By such an increase in Retail Individuals in Indian Markets, we felt the need for TAX LITERACY.
An investment in knowledge pays the best interest.” — Benjamin Franklin
Taxation plays a major role in your Investment journey. In order to increase return on investment, one cannot ignore the tax aspect in every Investment decision. So we tried to simplify tax for you by explaining the provisions in layman’s terms. We have only confined to taxation of stock market transactions by Resident Individual.
Income tax in India is levied vide Income tax Act, 1961. Levy of income tax is based on the type of income you earn. Heads of income under Income tax are broadly classified as –
Income from Salary
Income from House Property
Profits and gains from business or profession
Capital Gains
Income from other Sources
In this post we will be discussing taxation of Stock market gains from both Investor and trader’s perspective. We have started this initiative as we observed that people ignore tax aspects while taking their financial decisions. Out of them –Some regret at the year-end while filing return by paying more taxes and some are non-compliant. If you are either of them, this series is for you.
You can go through this series and learn taxation aspects while taking financial decisions (Significance of such consideration is explained by an example – If you sell a share holding it for 364 days then such gain is taxable at 15% and if you sell the same after 365 days you are not required to pay tax up to gain of 1 lakh). One may argue that they have their financial or tax consultant for this, but you have to be aware of the basics of taxation as you are going to submit your statement of transactions to your consultant at the year end but by then all the transactions are done and they cannot be modified.
For Non Complier’s – It’s high time you have to disclose your earnings and pay tax dues genuinely. In this digital era, everything is being tracked on real-time basis and it is highly impossible to escape from paying taxes and day by day the regulations are being more stringent. You can consider many recent improvements such as SFT Filing, Mandatory return for Individual paying electric bill above 1lakh etc. Government has access to all your stock market holdings and transactions, so rather than receiving notices from Department, it is better to you file your returns voluntarily.
In this series, rather than using jargons, we will keep it simple and understandable by describing in such a way that a layman can understand.
In order to determine the amount of tax liability on your stock markets transactions, you have to go through some basic concepts of Income tax.
We will explain these in four parts –
Determine your residential status
Determine your Tax Liability
Check whether you are liable to Audit under Income Tax Act (Audit means confirmation of tax amount you have to pay, by a Chartered Accountant)
File your ITR form
1. Residential Status –
Residential status of an individual determines the amount of tax that an individual is liable to pay. If an individual is a Resident of India as per Income-tax rules, then he is liable to pay income tax on Global Income. So, if you are a resident of India, you will be liable to pay income tax on your income derived from Indian holdings and foreign holdings (Ex – Dividend from Google Inc). If you are a Non-Resident of India, you will only be liable to pay tax on Indian Holdings.
We will confine this article assuming that the tax payer to be resident. If tax payer is a Non-resident, he is eligible to certain exemptions. We will discuss Non-Resident taxation in our future articles.
To make it simple assume that if your stay in India is for more than 183 days in the previous year (April to March) that you considered to be a resident.
Tax Slabs –
Individual Age – less than Or equal to 60 years
Income
Tax Rate
0 to 2.5 Lakh*
0
2.5 to 5 Lakh
5%
5 to 10 Lakh
20%
Above 10 Lakh
30%
Individual age above 60 years
Income
Tax Rate
0 to 3 Lakh
0
3 to 5 lakh
5%
5 to 10 lakh
20%
Above 10 lakh
30%
Individual age above 80 years –
Income
Tax Rate
0 to 5 Lakh
0
5 to 10 lakh
20%
Above 10 lakh
30%
Above tax rates are normal rates of tax chargeable to Individual. However capital gains are chargeable at a concessional rate in order to encourage Investing in Financial Markets.
2. Determine your tax liability –
Individual earns three types of Income from Stock market –
Capital Appreciation (Capital Gain)
Short Term Capital Gain (Holding Period – Less than 12 Months)
Long Term Capital Gain (Holding Period – More than 12 Months)
Business Income
Speculative Income (Intraday Equity)
Non-Speculative Income (Futures, Options, Shares)
Dividend (Income)
Every classification above has different treatment for their taxation. We will discuss each head separately.
As discussed above capital gains are taxed at low rates when compared to Business Income (Normal Slab rates). So, every Individual wants to classify his income as Capital Gain to earn the benefit of being taxed at low rates. However, it’s not that simple. This is always a matter of contention between the department and tax payer regarding the classification of earnings from stock market. In order to clarify on the above issue, government has given two-point criteria.
If the tax payer claims his trading activity as business income (tax @ normal rates), then irrespective of the period of holding, department has to accept that.
If the tax payer holds a stock for more than 12 months and classified such trade as capital gains, then department has to accept that.
However, this is still an open issue which is a matter of disagreement between tax payer and the department. The various judicial pronouncements have given conflicting judgements. the
It is further clarified that FIFO method is to be considered while determining the Cost of Acquisition. (Assume that you bought 1 Yes Bank share at 155 on 05 Feb 2016 and one at 323 on 14 Sep 2018. Your average cost is 239.You sold one share at 268 on 12th April 2019. What is your capital gain? It is not 29 (Rs268-Rs239), it is Rs 113 (268-155).)
Taxation of Capital Gains –
Long Term Capital Gains –
Capital Gain = Sale Value – Purchase Value (Expense such as brokerage, GST etc., on purchase and sale are also allowed as deduction).
However, STT is not allowed as deduction.
Capital gain above 1 lakh is chargeable at a rate of 10%. So, if you have a capital gain of 2 lakh in a year then 1 lakh is not chargeable to tax and 1 lakh is chargeable at the rate of 10%. This exemption is only available for listed shares. As this article is confined to taxation on listed shares and derivatives, we have not discussed the other rates of tax for unlisted shares, debentures etc.
Capital gains are exempt (not chargeable) from tax irrespective of amount of gain till FY 2017-18. However, in Budget 2018 the limit of 1 lakh was imposed (Post this amendment market has fallen 3000 points between the period Feb-March2018). It would be unfair to bring such a sudden change, hence Government decided to provide relief to tax payers who are holding stocks as on 31.01.2018 to consider market price [Highest Price (Imagine an upper circuit on that day and you would be benefited) on such date as their cost of acquisition. If your cost is more than the market price as on 31.01.2018 then you can continue to consider your actual cost as your cost of acquisition (For example ITC is trading around 275 on 31.01.2018, if you have purchased ITC during June 2017 your Cost of acquisition would be 310+. In such cases you can consider your original cost as Cost of acquisition].
Govt has issued FAQ’s regarding the amendment(change). Extract of the same (modified for clear understating) is given below –
Q 4. What is the method for calculation of long-term capital gains?
Ans 4. The long-term capital gains will be computed by deducting the cost of acquisition from the full value of consideration on transfer of the long-term capital asset.
Q 5. How do we determine the cost of acquisition for assets acquired on or before 31st January, 2018?
Ans 5. The cost of acquisition for the long-term capital asset acquired on or before 31st of January, 2018 will be the actual cost. However, if the actual cost is less than the market value of such asset as on 31st of January, 2018, the market value will be deemed to be the cost of acquisition. Further, if the full value of consideration on transfer is less than the fair market value, then such full value of consideration or the actual cost, whichever is higher, will be deemed to be the cost of acquisition.
Q 6. How will the market value be determined?
Ans 6. In case of a listed equity share,
Market value means the highest price of such share or unit quoted on a recognized stock exchange on 31st of January, 2018.
However, if there is no trading on 31st January, 2018, the fair market value will be the highest price quoted on a date immediately preceding 31st of January, 2018, on which it has been traded.
Q 7. Please provide illustrations for computing long-term capital gains in different scenarios, in the light of answers to questions 5 and 6.
Ans 7. The computation of long-term capital gains in different scenarios is illustrated as under – Scenario 1 – An equity share is acquired on 1st of January, 2017 at Rs. 100, its fair market value is Rs. 200 on 31st of January, 2018 and it is sold on 1st of April, 2018 at Rs. 250. As the actual cost of acquisition is less than the fair market value as on 31st of January, 2018, the fair market value of Rs. 200 will be taken as the cost of acquisition and the long-term capital gain will be Rs. 50 (Rs. 250 – Rs. 200).
Scenario 2 – An equity share is acquired on 1st of January, 2017 at Rs. 100, its fair market value is Rs. 200 on 31st of January, 2018 and it is sold on 1st of April, 2018 at Rs. 150. In this case, the actual cost of acquisition is less than the fair market value as on 31st of January, 2018. However, the sale value is also less than the fair market value as on 31st of January, 2018. Accordingly, the sale value of Rs. 150 will be taken as the cost of acquisition and the long-term capital gain will be NIL (Rs. 150 – Rs. 150).
Scenario 3 – An equity share is acquired on 1st of January, 2017 at Rs. 100, its fair market value is Rs. 50 on 31st of January, 2018 and it is sold on 1st of April, 2018 at Rs. 150. In this case, the fair market value as on 31st of January, 2018 is less than the actual cost of acquisition, and therefore, the actual cost of Rs. 100 will be taken as actual cost of acquisition and the long-term capital gain will be Rs. 50 (Rs. 150 – Rs. 100).
Scenario 4 – An equity share is acquired on 1st of January, 2017 at Rs. 100, its fair market value is Rs. 200 on 31st of January, 2018 and it is sold on 1st of April, 2018 at Rs. 50. In this case, the actual cost of acquisition is less than the fair market value as on 31st January, 2018. The sale value is less than the fair market value as on 31st of January, 2018 and also the actual cost of acquisition. Therefore, the actual cost of Rs. 100 will be taken as the cost of acquisition in this case. Hence, the long-term capital loss will be Rs. 50 (Rs. 50 – Rs. 100) in this case.
Q 10. What will be the tax treatment of accrued gains up to 31st January 2018?
Ans 10. As the fair market value on 31st January, 2018 will be taken as cost of acquisition (except in some typical situations explained in Ans 7.), the gains accrued up to 31st January, 2018 will continue to be exempt.
Q 12. What will be the tax treatment of transfer made on or after 1st April 2018? Ans 12. The long-term capital gains exceeding Rs. 1 Lakh arising from transfer of these asset made on after 1st April, 2018 will be taxed at 10 per cent. However, there will be no tax on gains accrued up to 31st January, 2018 as explained in Ans 10.
Q13. What is the date from which the holding period will be counted?
Ans 13. The holding period will be counted from the date of acquisition. (Holding period is relevant to determine whether gain is chargeable as long term (10%) or short term (15%) –will be discussed subsequently)
Q21. What will be the cost of acquisition in the case of bonus shares acquired before 1 st February 2018?
Ans 21. Market value of the bonus shares as on 31st January, 2018 will be taken as cost of acquisition (except in some typical situations explained in Ans 7), and hence, the gains upto 31st January, 2018 will continue to be exempt.
Cost of acquisition of bonus shares is NIL. As you have not paid any consideration for such shares there is no cost of acquisition.
Q 22. What will be the cost of acquisition in the case of right share acquired before 1st February 2018?
Ans 22. Market value of right share as on 31st January, 2018 will be taken as cost of acquisition (except in some typical situations explained in Ans 7), and hence, the gains accrued upto 31st January, 2018 will continue to be exempt.
Q 24. What will be the treatment of long-term capital loss arising from transfer made on or after 1st April, 2018?
Ans 24. Long-term capital loss arising from transfer made on or after 1st April, 2018 will be allowed to be set-off and carried forward in accordance with existing provisions of the Act. Therefore, it can be set-off against any other long-term capital gains and unabsorbed loss can be carried forward to subsequent eight years for set-off against long-term capital gains.
When you are paying taxes on your gains, then what about the cases in which you incur losses. Will the government refund your tax which you have paid in the previous year! Unfortunately, No. However, you have an option to carry forward such loss to future years so that if you have profit in future years, you can pay less tax by adjusting your losses pertaining to the previous years. – we will discuss rules regarding these subsequently.
So, the key takeaways are –
Long term capital gain is exempt up to 1 lakh.
Above 1 lakh, it is chargeable at the rate of 10 percent
Amendment with effect from 31.01.2018 is to be considered (Refer Q.No. 4)
Cost of acquisition of bonus shares is NIL
Holding period for a stock to be considered as Long term is 12 months
In case of Stock split holding period is from date of purchase of original shares
Basic Exemption Limit of Rupees 2,50,000/3,00,000/5,00,000 can be used against capital gain (For example If you have a capital gain of 5,00,000, after considering 1 lakh exemption and 2.5 Lakh basic exemption limit, you are only liable to pay tax on 1.5 lakh at the rate of 10% plus 4% (on such tax of 10%) as Health and education cess (form of tax collected along with normal tax for providing health facilities)). The effective tax rate will come as 10.4%.Basic exemption limit cannot be utilised by Non Resident.
No benefit of Rebate (Rebate is available to Individual having income less than 5 lakh. This is a relief provided to Individual with low income to reduce their burden of tax. The relief provided is lower of amount of tax payable or 12500). However, such relief is not available in case of Long-term capital gain. The only exception for Rebate is Long term capital gain.
No deductions such as LIC Premium, Medical Insurance, Payment of Principal amount of housing loan etc. will be allowed against LTCG.
Loss from house property subject to a limit of 2 lakh can be claimed as deduction. Loss from house property is possible if interest paid by you is more than the rent received or in case of self-occupied, total interest paid by you is considered as loss as there will be no rent received. This loss can be adjusted against LTCG, subject to a limit of 2 lakh.
To be continued…..
This post is published in association with Stox N Tax (Personal Investment & Taxation Blog).
Glenmark Pharmaceuticals wholly-owned arm Glenmark Life Sciences has filed a Draft Red Herring Prospectus (DRHP) for an initial public offer with market regulator Sebi. The offer comprises a fresh issue of up to Rs 1,160 crore and an offer for sale of up to 73,05,245 equity shares of Rs 2 each of Glenmark Life Sciences Ltd, by Glenmark Pharmaceuticals Ltd. The board of directors of Glenmark Pharmaceuticals Ltd during its meeting on April 16 approved the offer for sale of up to 73,05,245 equity shares of Rs 2 apiece as part of the IPO.
As per the data released by The Commerce and Industry Ministry the wholesale price-based inflation rose to 4.17 percent to hit 27 month high in February this year. The WPI rose mainly due to rise in food, fuel and manufactured goods prices. As compared to January this year, provisional food prices were up by 3.31 percent and manufactured products rose 5.81 percent in the reported month.
WPI stood at 2.03 percent in January this year while rose to 2.26 percent in the same month last year. Retail inflation also climbed to a three-month high of 5.03 in February this year.
Capital market regulator Sebi has formed a group of experts to examine the feasibility of introducing Special Purpose Acquisition Companies (SPACs) like structures in India. The group, formed under Sebi’s Primary Market Advisory Committee (PMAC), has been asked to submit its report at the earliest.
SPACs are formed to raise capital in an initial public offering (IPO) with the purpose of using the proceeds to identify and merge with a target company. SPACs are popular in the US. They are usually formed by private equity funds or financial institutions, with expertise in a particular industry or business sector, with investment for initial working capital and issue related expenses.
Gold prices today gained at Multi Commodity Exchange for April contracts. Gold futures was trading Rs. 350 up at Rs. 46,590 per 10 gram. On the other side, silver prices declined Rs. 890 to Rs. 68,390 per kilogram for March contracts.
