KINGFISHER Crisis

It all started with cancellation of around 200 flights past week and reported second quarter loss of 469Cr.Cause of concern - high mounting debts and rising aviation fuel price.
The question which rises is How it is possible for other airlines to operate profitability when Kingfisher could not maintain it? Vijay Mallya on Nov 15th answered it saying that Kingfisher as a private operating concern cannot afford to fly on unviable routes whereas other carrier like Air India has a national responsibility and with Government's stake can continue to provide service. In addition to that Kingfisher also has wider connectivity.
KFA has also plans for stabilizing various measures to lower down the fuel cost. The other options are
1. Convert loans to shares
2. Infuse fresh promoter's equity
3. Scrap more flights
At the end of his speech, He made the point blank that KFA is not going to shut down.
The best airline as KFA is ever known as would take considerable time in re-configuring and managing the debt crisis

Debentures-Basic Meaning

What is Debenture?

A debenture is a document which either creates a debt or acknowledges it

It is a debt security issued by a company (called the Issuer), which offers to pay interest in lieu of the money borrowed for a certain period. In essence it represents a loan taken by the issuer who pays an agreed rate of interest during the lifetime of the instrument and repays the principal normally, unless otherwise agreed, on maturity.

Debentures enable investors to reap the dual benefits of adequate security and good returns
Debentures holders have no right to vote at the meetings of the companies.

Convertible Debentures:
If an option is given to convert debentures into equity shares at the stated rate of exchange after a specified period, they are called convertible debentures. Convertible Debentures have become very popular in India. On conversion the holders cease to be lenders and become owners.

SEBI ordered to refund money to investors

Securities and Exchange Board of India ordered two Sahara Entities (Sahara Commodity Services Corp) and (Sahara Housing Investment Corporation) to refund the money collected from investors through Optionally Fully Convertible Debentures(OFCD) as they violated SEBI Norms.
1. The two Companies have failed to appoint a monitoring agency (a public financial institution or a scheduled commercial bank) when their issue size exceeded Rs. 500 crore, for the purposes of monitoring the use of proceeds of the issue.
2. The two companies have failed to apply for and obtain listing permission from recognised stock exchanges.
The regulator has also denied the two entities from accessing the securities market till the money is refunded. 

No Income Tax Return for income below 5 Lakh from FY 2010-11

The benefit of non filing of return will be available only to the tax payers whose whole income has been come under TDS (Tax Deducted at Source) and the whole tax should be deducted at source for the year.

So this is applicable only for salaried tax payers, whose tax will be deducted at source. But if this salaried tax payer has any other income including bank interest, he or she should declare it to the employer and allowed him to deduct the tax accordingly. Then only, the taxpayer gets the benefit of non filing of income tax return. The Form No. 16 (TDS Certificate) will be considered as Income Tax return in such cases.

Loans to/by Companies

Lets see what are the restrictions to a Company in borrowing or lending loans to individuals or to other companies. The reason behind taking this topic is off late there are so many companies which does not comply with the regulations and legal compliance. We could have come across these lines in all our daily's

"CBI investigations have revealed that the DB group took a loan of Rs 242 crore from a financial service company on December 23, 2008. And Rs 200 crore out of this loan was routed on the same day to Cineyug and Kusegaon Fruits and Vegetables, who in turn transferred the money on the same date to Kalignar.CBI believes this money was the bribe for Raja and Kanimozhi, even though Kalignar claims this was an unsecured loan."

This article is not anything about political views. But it was on this background which stirred my curiosity to see what are the limitations a Company has in receiving or lending loan

Inter-corporate Loans and investments

• A company cannot lend loans to another company beyond certain limits.Any lending of loan should be done by passing resolution in the meeting.However, if a Company lends loan to its subsidiary company, then there are no restrictions.
• The rate at which a Company lends loan to another company should not be less than the bank rate prescribed by RBI at any time.
• If the lending Company has defaulted in the repayment of loans and interest, then it will not be allowed to extend any loans.

Buying Gold? Do you know this?

Whenever we buy gold, we hear terms like making charges and wastage charges. Thus we end up in paying something more than the actual gold rate on that particular day.

So what all these rates are about?

Making charges:

Whenever ornament is made, the goldsmith puts in lots of effort to give exceptional designs which attracts the buyer.Even though , machines have reduced the manual effort, still the craftsman artistic skill is indeed required.So, this ends up in jewellery shops fixing certain charges as making charges.This depends on the type of the ornament and complexity involved in it.The rate varies between 3%-12%. 10% is most common. However the same can be negotiated.There are few occasions where offer comes out with zero making charges.

Wastage charges:

Do gold gets wasted in making? If we buy,say 2 gram chain, we need to pay for 2 grams and labour cost.Gold does not disappear. Then why this wastage charges?

Craftsman wastes some gold while  manufacturing which depends on the jewellery item. For the pure gold items the wastage is around 6-8%, whereas for a diamond jewellery it goes upto 15% of pure gold. A complete finished gold ornament shines brilliantly. But during the process of making  some amount of gold will be wasted or go as loss while cutting, soldering,melting etc.Thus jewellers collects this as wastage charges.However, this can be negotiated.

This leads to price difference of what needs to actually paid and what we pay for. Making Charges and wastage charges are what a consumer pays above the price of gold(on a certain day) for crafting the gold into jewellery. This variation depends on the ornaments we buy.

All about PAN

Permanent Account Number (PAN) is a national identification number, issued to any person who has applied for or to whom department allots the number without application

I am not a tax payer. Do I need to have PAN?

Yes. Your income may not be coming in taxable limit or you may be senior citizen and your children may give money to you. In such case, you may have to make some transactions for which PAN is mandatory. For example:

1. Sale or purchase of any immovable property valued at five lakh rupees or more; 
2. A time deposit, exceeding Rs.50,000, with a banking company ; 
3. A deposit, exceeding Rs.50,000, in any account with Post Office Savings Bank; 
4. Opening a bank account; 
5. Making an application for installation of a telephone connection (including a cellular telephone connection); 
6. Payment in cash for purchase of bank drafts or pay orders or banker’s cheques for an amount aggregating     
7. Rs.50,000 or more during any one day; 
8. Deposit in cash aggregating Rs.50,000 or more with a bank during any one day; 

Why do i need to quote PAN for all the above mentioned transactions?

PAN is used by the department to trace all the transactions made by the individual.It acts as identifier of the person with the department.So department has made it mandatory to quote PAN. 

I have PAN card. But I have not filed Income Tax return.

As long as your income does not move beyond the taxable limit and its for genuine reasons, you need not file IT return even if you have PAN card.But in case , you have income exceeding the limit and you have not filed IT return, there are possibility of getting caught when you do any of the above transactions

How do i identify a PAN number?

The structure of a PAN number is as follows:

AAAPK9999A

The first 3 digits i.e. “AAA” in the above PAN are alphabetic series running from AAA to ZZZ 

Fourth character of PAN i.e. “P” in the above PAN represents the status of the PAN holder. “P” stands for Individual, “F” stands for Firm, “C” stands for Company, “H” stands for HUF, “A” stands for AOP, “T” stands for TRUST etc. 

Fifth character i.e. “K” in the above PAN represents first character of the PAN holder’s last name/surname. 

Next four characters i.e. “9999” in the above PAN are sequential number running from 0001 to 9999. 

Last character i.e. “A” in the above PAN is an alphabetic check digit.