[sbinews] SBI offer to dodge taxman -(SBI Capgains Plus) - Business Standard
- From: rspai@xxxxxxxx
- To: sbinews@xxxxxxxxxxxxx
- Date: Fri, 31 Oct 2003 20:04:47 +0500
SBI offer to dodge taxman
Pilakkot Vinu
Published : October 28, 2003
The country’s biggest bank, the State Bank of India (SBI), offers to keep your
hard earned money away from the reach of the taxman legally — until you
reinvest it.
SBI Capgains Plus, the bank’s re-packaged capital gain tax exemption plan,
comes with lures such as the absence of any lock-in period, a slightly higher
interest rate compared to the capital gain tax saving bonds and SBI Life’s
‘Super Suraksha’ life cover at a lower premium.
The bank first launched the scheme in the late 80s when the tax and investor
awareness was at a low, said a senior official of the SBI.
Subsequently, the scheme went largely unnoticed. With the economic scenario
undergoing a sea change and the taxmen scrutinising transactions involving
residential properties, industrial land, plants and machinery, harried
customers now want to protect their capital gains until they decide on a new
investment.
“Popular demand prompted us to relaunch the revamped scheme this September. We
are primarily targeting owners of residential and industrial properties who
want to sell existing premises in search of new ones,” a senior bank official
said.
“You are selling a two-room house at a premium and want to buy a bigger house.
But you haven’t decided the location and know that it would take some time
before zeroing in on a new property. But the I-T official comes knocking on
your door because if you haven’t re-invested your money within a year, your
capital gain is liable to be taxed,” the official said.
The government taxes long-term capital gains at 20 per cent for individuals and
foreign firms and 30 per cent for domestic companies. “Section 54EC of the I-T
Act, 1961, provides relief from capital gains tax.
Under this, gains on transfer of a long-term capital asset can be exempted from
tax if the money is invested in bonds of institutions such as Nabard, the Rural
Electrification Corporation, Sidbi or the National Highway Authority India.
“These bonds are redeemable after three years and for this, one has to invest
in these bonds within six months from the date of transfer of the original
asset,” the officials said.
“This (investing in bonds) will mean your money is locked in for three years.
If you want to buy a new property one or two years after transferring the
original asset, you will have to either wait or look for alternative funds,” he
said.
It is here that the SBI plan comes handy. The proceeds of the sale of the
capital asset can be parked in the fixed deposit scheme under the Capgains Plus
plan at an interest rate marginally higher than what bonds under Section 54 EC
would fetch. The interest rate under the plan is up to 6 per cent. However, it
will be taxed at prevailing rates.
“Once you take a final decision on the property you want to reinvest in, you
can opt for an exit from the plan at any stage, but you need to get a
certificate of consent from the assessment officer,” he said.
However, unlike the bonds under 54 EC, the depositor cannot put the money in a
different kind of asset. The plan stipulates that re-investment should be made
on the specified asset only.
Nabard chief general manger Madan Mohan said “This is quite different from our
bonds which offer exemption under Section 54 EC. After the lock-in period or on
the maturity of the bonds, the investor is free to put in his money in any kind
of asset, which is a bigger advantage. However, the interest on the bond is
taxable.”
Says SBI assistant general manager Sarang Rajan, “We are offering the plan to
park the funds until an investor makes up his mind on a new investment.”
This is particularly useful for residential property owners who have to look
into various aspects such as the location, children’s education and job demands
before taking a final decision on buying a new house.”
“We realised that there is a good market for instruments offering capital gain
tax shield. Though we launched the scheme much earlier, the customers as well
as most of the bank staff were not fully aware of it. Now, we have made the
application form simple and revamped the scheme. Now the scheme is available at
all computerised branches, except those in the rural areas,” Rajan said.
***************************************************************************
Mailing list (sbinews@xxxxxxxxxxxxx) related information:
News/articles about SBI and Banking related matters published in the print
media, Internet etc will be circulated through this Mailing List.
The messages in this list will help in improving awareness of SBI and its
activities vis-a-vis the happenings in the Banking industry. This should be of
help to all staff members of SBI, particularly those who are preparing for
promotional written tests/interviews/group discussions. Subscription to this
Mailing List is simple and FREE. Please check the procedure below. Please share
this information with other colleagues/branches that could be interested in
subscribing to this Mailing List.
The messages circulated here should not be deemed to have the official
endorsement of the SBI or any of its employees. The correct factual position
may be ascertained from official sources.
To join this mailing list, just send an email to sbinews-request@xxxxxxxxxxxxx
with 'subscribe' without the quotes in the subject field.
To leave this mailing list, just send an email to sbinews-request@xxxxxxxxxxxxx
with 'unsubscribe' without the quotes in the subject field.
This is an announcements/newsletter type mailing list i.e. only the Moderator
can post messages to the list.
This mailing list is maintained by Sri. R.S.Pai, currently working as Chief
Manager(IT-Internet Banking), SBI, Corporate Centre, Mumbai.
Visit http://rspai.tripod.com for some useful Banking, Reference and Utilities
Links
Other related posts:
- » [sbinews] SBI offer to dodge taxman -(SBI Capgains Plus) - Business Standard
