(MENAFN- Khaleej Times)I read in the Press that the Reserve Bank has granted licences to a few parties to set up payments banks.Will they act as ordinary banks and how safe will they be from the depositor's perspective?
- P.R. Munshi Dubai Payments banks will promote the government's objective of widening the scope of financial inclusion.The banks which have been given licences have a good track record of sound management.The banks will be required to have a minimum paid-up equity capital of Rs1 billion.This capital requirement will have to be adhered to in case losses are incurred during the initial years.Hence the banks have to fund the losses by infusion of fresh capital where necessary.Therefore these banks will be fairly safe from a depositor's point of view. These banks are permitted to accept deposits in current account and savings bank account from individuals small businesses and other entities upto a limit of Rs100000 per customer.Account holders can receive and send remittances and the banks are permitted to pay utility bills and distribute mutual fund insurance and pension products.However these banks are not allowed to lend to customers or issue credit cards.These banks can only invest their money in government securities and deposits with commercial banks. I sold a property last month. I had inherited it from my grandfather who had purchased it in the 1950s.Since I do not know the price at which my grandfather had purchased it I am wondering whether I have to pay capital gains tax? Can you please guide me whether I have to pay tax and if yes the manner of computing the capital gains on which tax is payable? - K.S. Swamy Abu Dhabi Though you have inherited the property you still have to pay capital gains tax.For this purpose the cost to the previous owner has to be taken into account.If the previous owner had purchased the asset before April 1 1981 as in the case of your grandfather you should have the property valued as on that date.A recognised valuer will be able to do so and give you a certificate. The amount so determined by the valuer should be indexed by the fraction 1081/100 the first figure being the cost inflation index for the current financial year 2015-16 and 100 being the CII for the base year 1981-82. To illustrate assuming that the fair market value of the property determined by the valuer on April 1 1981 was Rs500000 the indexed cost will be Rs5405000.This amount will be reduced from the sale price of the property to determine the taxable capital gains.Tax at the rate of 20.6 per cent (including education cess) will be payable.However if the taxable income exceeds Rs10 million the tax payable would be 22.66 per cent as surcharge of 10 per cent has to be paid on the tax rate. Many foreign firms are facing difficulties in respect of transfer pricing issues.Has the government done anything in the past one year to reduce the risk of litigation in respect of tax disputes? - R.A. Chatterjee Dubai Tax disputes pertaining to transfer pricing and other issues affecting foreign tax payers has to be dealt with by a dispute resolution panel (DRP) if the foreign company objects to the draft assessment order passed in its case.The DRP's order is binding on the assessing officer who has to frame his assessment order on such basis. The foreign company can then appeal directly to the income tax appellate tribunal.However this process is cumbersome and time consuming. In order to avoid all litigation on transfer pricing issues the Central Board of Direct Taxes is empowered to enter into an advance pricing agreement with a foreign company.Under this arrangement a certain basis for arriving at the taxable profit is determined. The agreement would be valid for five years prospectively and in some cases it applies for the preceding four years as well. Therefore foreign companies in India will now have some certainty regarding taxability of profits for a nine-year period in respect of transfer pricing issues.This is bound to result in a better investment climate as there will be certainty in respect of the tax regime and reduce compliance costs and eliminate litigation. The writer is a practising lawyer specialising in tax and exchange management laws of India.
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