G-Secs Not Attractive For Retail Investors

Updated: Oct 12 2003, 05:30am hrs
1) What are Government Securities Can you please give the names of these instruments and from where these can be purchased

2) NRIs can invest in National Saving Certificates (NSCs). Does money invested by an NRI in NSCs from NRE a/c repatriable Is there a tax rebate u/s 88 on such investment Interest rate on NSC and POMIS is same, then why investment in latter is not allowed for NRIs
Mahendra P Shukla, [email protected]

Government securities are basically borrowings made by the Government through RBI. These are securities such as G-Secs issued by the central and state governments for various maturities, typically of very long-term. The interest rate is understandably low and does not attract a retail investor.

The minimum deal size is quite high and generally it is the institutions that deal with such securities. These are normally not available to the retail investor. However, an attempt has been made by the authorities by making these available for screen-based trading, but the success is not much. A retail investor can take exposure to Government Securities by way of investing in Gilt Mutual Fund schemes.

Both NSC and POMIS being post office instruments are not available to NRIs.


1) I have recently got a sanction of home loan from ICICI Home Finance for Rs 10 lakh. They stipulate to release the loan amount in 2 to 3 installments depending on the progress of building construction work. Say, they release the amounts of Rs 3 lakh, Rs 3 lakh and Rs 4 lakh in three instalments over a 11-month period first after three months from the date of loan sanction and latter two instalments at equal intervals of four months each.

They have indicated that a flat Pre-EMI interest will be levied for the amounts released from the date of the partial disbursal of the loan amounts. In this interim period of a year, can I claim IT-rebate for the pre-EMI interest that I pay ICICIFC have stipulated that they shall give receipt for the pre-EMI interest paid.

How do I claim this rebate at the end of FY 03-04 when you state that the deduction is eligible only after completion of construction Can the rebate be claimed later in the next financial year (FY 04-05) on accrual basis after the house is ready for occupation

2) The FY 02-03 mentions that the above rebate u/s24 (loss of income from house property) can be availed if the construction / acquisition of the house property started on or after the first day of April 1999 and was completed on or before the first day of April 2003.

What about my case Am I left out of this only concession available for the salaried class My company circular states the fact as above while informing us of the guidelines for TDS and related savings to be declared now to the company for income tax. G Rajagopal, [email protected]

1. Both the concessions, rebate on repayment of capital and deduction of interest are allowed only when the income from house property becomes chargeable to tax. In other words, the construction should be complete, the flat should be ready for occupation and the municipal annual value is known. The interest for the years prior to the year in which the property was completed, shall be deducted in equal installments for the year during which it was completed and each of the four immediately succeeding years. It is obvious that this privilege of the spread is available only on loans taken for acquiring or constructing a house property. Unfortunately, there is no corresponding provision for the tax rebate.

If the construction or acquisition is completed anytime in a FY, the interest paid during the entire FY is deemed to be the normal interest though a part of the FY is pre-construction period.

2. FA02 has dropped the stipulation of 1.4.03. Now, the acquisition or construction should be completed within three years from the end of the year in which the capital was borrowed. There is no stipulation regarding the date of commencement of construction. Consequently, the construction of the residential house could have commenced before 1.4.99; it should be completed within three years, from the end of the financial year in which capital was borrowed.


Kindly advise me on whether the capital loss incurred during the FY 03-04 due to redemption of US-64 units consequent upon the abolition of the scheme from June 2003, can be set off against the capital gains made on sale of shares, as I understand that the Finance Bill 2003, has provided for exemption of capital gain on the transfer/sale of units which will be a rare phenomenon what with sustained erosion of NAV of units over a period of time with retrospective effect from April 2002.

Whether this will, by implication, also preclude capital loss being claimed as set off against capital gains made during the year, as it will deprive thousands of unfortunate investors and will in effect penalise them for their loyalty to remain with the fund till the end of the scheme
Ghanshyamdas Bhuneja, [email protected]

Yes, I share your exasperations. FA03 has exempted from tax any income arising from the transfer of units of US64 referred to in Schedule-I of the UTI (Transfer of Undertaking and Repeal) Act, 2002 (= UTI-I) and where the transfer takes place on or after 1.4.02. There is a hidden bomb in this proposal. This proposal is related with UTI-I where units of US-64 and all the assured income schemes are transferred.

Income i.e., capital gains, long-term as well as short-term are proposed to be exempt from tax. How many unit holders are there who have earned capital gains in this scheme

Almost everyone has incurred a loss. If the gains are exempt, the loss is also exempt. In other words, this loss cannot be setoff against any other short or long gain. If this proposal is passed by Parliament, the unitholders will face a further loss.

The author may be contacted at [email protected]