Local exemption for overseas buy

Sell a piece of land in Ahmedabad and enjoy tax exemption via investment of an apartment in London, suggests Mukesh M. Patel in Save Tax the Smart Way ( www.taxmann.com ). It may seem too good to believe, but it is true, he affirms. “With the Foreign Exchange Management Act having liberalised remittances by resident Indians for their annual overseas investments up to $2,00,000 and with the Income-Tax Act enabling tax exemption of long-term capital gains (LTCG) in case of an investment made in either the purchase or construction of a residential house, you can now plan to sell your land in Ahmedabad and invest funds even in a London apartment so as to enjoy tax holiday,” reads the explanation.

Patel underlines that neither Section 54 nor 54F of the Income-Tax Act prescribes any restriction in regard to the location where the investment in the residential house is required to be made. He cites the decision of the Mumbai ITAT (Income-tax Appellate Tribunal) in the case of Ms Prema P. Shah vs ITOTo those who are keen to invest more than $2,00,000 in their ‘dream home overseas,' the author guides that, since the Reserve Bank of India limit is applicable per financial year, one can plan to invest before March 31, and then again in April.

Worth buying and, perhaps, trying!

Quest for horizontal equity

Food subsidies per capita are roughly uniform across the poor and the rich States, if we assume that all the subsidies are spent in subsidising sales of food by the Food Corporation of India, notes one of the essays in ‘ The Poor Half Billion in South Asia' edited by Ejaz Ghani ( www.oup.com ). The authors of the essay, however, add that if the food subsidies are allocated on the assumption that all the subsidies are spent in food procurement through above-market procurement prices, then the highest levels of subsidies are given to the leading States of Punjab, Haryana, and Maharashtra.

On the other major subsidy item, namely fertilisers, the authors find that the richer regions benefit more than the poorer ones because the richer regions tend to consume more fertilisers. The essay recommends, therefore, that if the subsidies are meant to improve investment levels in the lagging regions, they need to be targeted to those regions, rather than to a specific good or service that may turn out to be consumed more in the richer States.

The authors caution that the quest for horizontal equity through inter-State fiscal transfers can build up resentments from the leading regions. “As the finance minister of Punjab once asked, ‘Why should I pay for Uttar Pradesh's problems?' At an extreme, the quest for regional autonomy can lead to demands for a separate State, as happened in Punjab in the 1980s…”

Research of value.

Strengthen community at grassroots

In Creating Vibrant Public-Private-Panchayat Partnership for Inclusive Growth through Inclusive Governance ( www.academicfoundation.com ), Harsh Singh calls for the strengthening of community capacity, with a focus on issues such as property rights for the poor, both for the assets held individually and for community resources. Without clear property rights, local actors will not be able to partner with the organised sector nor can they muster resources such as credit to join new ventures, reasons Singh.

In a section on PPPP and the role of the business sector, the author observes that currently a lot of reliance is being placed on voluntary corporate social responsibility-type approach. “This needs to change to a more formal legal and institutional framework-based approach which carries both carrots and sticks.” Another point highlighted in the book is that the transaction costs of PPP remain enormously high because of weak physical infrastructure and cumbersome efforts. Among the concluding insights in the book is the lament that the current developmental framework entails a monopoly by government agencies in the public development efforts and in the use of public resources and assets. Useful study.

Promote productivity, protect people

The mantra for creating a fairer and more prosperous world is to promote productivity and protect people, rather than protect jobs, urges Pankaj Ghemawat in ‘ World 3.0: Global prosperity and how to achieve it ' ( www.hbr.org ). As for protecting people, his suggestions are to start with investment in education so as to make workers more flexible, and to cushion the blow when job losses come.

“In terms of innovation, experiments with ‘wage insurance' show some promise. Such programmes supplement workers' income when they move into new jobs that pay lower wages, reversing the incentive to wait longer for a higher-paying job, which can be associated with long-term unemployment.”

Importantly, the author warns that raising tariffs can serve as a particularly regressive form of tax. He points out that in the US staple consumer products, especially the low-priced ones, draw among the country's highest tariffs, thus putting the cost of protectionism squarely on the lower-income people in the US, as well as on people in poorer countries where most of these goods are produced.

“Tariffs on raw material inputs and intermediate goods can be even worse.” An example mentioned in the book is about how the high US sugar tariffs drove the production of Life Savers candy to Canada, costing the US six hundred jobs.

Imperative read.

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