Mutual funds in India are a good investment avenue. Dividends are tax free as are long term capital gains on equity funds, and if one is a long term investor one probably built a good corpus thanks to the robust Indian equity market. But for US NRIs, Uncle Sam is going to want a bite of your biscuit, because the US tax code collects tax on the global income of its residents an citizens. Foreign mutual funds in particular are targeted.

To fully understand the machinery one must look at tax rules that apply for US mutual funds in which annual gains from sales must be distributed to unit holders and taxed as 'capital gains distributions that are taxed at par with long term capital gains.

Foreign mutual funds however fall under the category of Passive Foreign Investment Company (PIFC), whose rules were introduced to discourage US residents and citizens of parking money in offshore tax havens and deferring US tax liability.

Forms must be filled including Form 8621 that gives one several options including declaring the income as notional gains. that are not only complicated for a lay person but intricately involve one's other holdings.

One is best advised to consult one's chartered account in order to understand what one's liability actually is and what loop holes, if any, are available.

[ Back to Top ]

Sakthi Automotive, a global leader in the automotive supply chain has received a $1.5 million incentive from the Michigan Economic Development Corp (MEDC) to set up shop in America's motor city Detroit, Michigan. The manufacturing facility there is expected to generate up to $18.6 million in private investment and create up to 183 jobs.

The MEDC President and CEO Michael Finney stated that Sakthi Automotive's decision to locate its first North American facility in Detroit demonstrates Michigan's strong advantages as a great place to do business. Investment on the project will begin this year and job creation will ramp up beginning in 2013.

Sakthi Automotive is a division of the Sakthi Group and is a supplier of automotive components. It plans to buy and upgrade an existing vacant building in Detroit for which the city has offered a 12-year tax abatement worth $903,000 for the project.

[ Back to Top ]

Ratings agency Standard & Poor's has lowered the outlook on India's sovereign rating to negative, giving rise to fears of a possible downgrade if growth is hit due to the absence of fiscal and policy reforms.

For the moment the agency retained the sovereign rating at BBB-, which is just about investment grade. A downgrade is likely if India's economic growth prospects dim, its external position deteriorates, its political climate worsens, or fiscal reforms slow down.

India's finance minister Pranab Mukherjee said there is no cause or need for panic as the government will surely be able to overcome the situation.

The stock, money and forex markets reacted immediately with the sensex dropping 100 points while the rupee fell to 52.64 against the US$.

Moody's has a Baa3 rating on India, while Fitch rates India BBB-. Both are also minimum investment grade ratings.

[ Back to Top ]

The central bank has cut interest rates by 50 basis points to boost the sagging economy, but this may be the last cut for a long while.

The Reserve Bank of India lowered its policy repo rate to 8.00 percent, compared with expectations for a 25 basis point cut. It is indicating that there is a limit for further rate cut expectations and are done with further rates cuts this year. It also warned that India's current account deficit is unsustainable and makes it difficult to finance given projections of lower capital flows to emerging markets in 2012.

Investors and businesses cheered the rate cut, even as some RBI watchers said the move is risky given the potential for resurgent inflation.

[ Back to Top ]

During a trip to attend the 8th round of the India-UK Joint Economic Trade Committee meeting in London, commerce and industry minister Anand Sharma met with the UK secretary of state for business, innovation and skills Vince Cable, and the chancellor of the exchequer George Osborne, and raised the issue that India's IT majors may relocate their businesses to other European countries, if the British government insists on tough visa rules that affect Indian IT professionals.

The minister also raised the issue of restrictions imposed on non-EU immigration into Britain, and specifically referred to the UK border agency treating intra-company transfers of IT professionals and highly skilled workers as prospective immigrants, which has badly affected the performance of Indian companies operating in the UK. He also expressed concern over the issue that Indian companies who wish to acquire UK firms have been facing undue delays and lengthy legal hassles.

Minister Sharma raised other immigration-related issues including the concerns of Indian companies wishing to visit the UK for business meetings and delays in obtaining visas.

Chancellor Osborne assured Sharma that the British government has decided not to make any change in the 'intra-company transfer' rule for the next two years.

[ Back to Top ]