TAXATION ON DERIVATIVES TRANSACTIONS.

The definition of “Speculative Transaction” in Section 43(5) of Income Tax Act, 1961 has been amended by Finance Act, 2005 with effect from AY 2006-2007 to exclude transaction in derivates from the purview of speculative transaction.
Income from Derivates Transaction will be treated as Business Income and taxed at normal rates as applicable to Individual / HUF. An Individual / HUF should file Return of income in Form ITR-4 if he does derivate transaction along with any other sources of Income.
Further its pertinent to mention that an individual / HUF may be liable to Tax Audit U/s 44AB of Income Tax Act, 1961 if “Assessee carry’s on business where Total Sales / Turnover / Gross Receipts exceeds Rs.40 Lakhs. Therefore if the transaction under derivates transaction exceeds Rs.40 Lakhs then Tax Audit provisions will be applicable.
The above view is given only in respect to Individual / HUF.

LAKSHMI VILAS BANK LTD

Lakshmi Vilas Bank (LVB) is a 83 year old karur based bank with 251 branches spread over 13 states. Investor can consider this bank with a Long & Short term point of view. Currently the bank has announced Right issue 1:1 at 54/- per share which is discount to current market price.
Investor can approach this stock with stable fair value of 90/- per share. This can also be considered target for Short to Medium term target and Long term 125/-. Currently the weakness in the price is due to rights issue.
The banks book value for FY 2008-09 was 91/- and post rights issue it will be in range of around 75-80/- per share with EPS of around 9/- values this share very cheaply in the market compare to other South Based Banks trading at price to book value of 1.25 – 1.50.
The financial performance for the first half is excellent and this bank has consistent track record of dividend and has always rewarded its shareholder with Bonus & Rights issue.

HIMATSINGKA SEDI

Long Term Investors can consider this stock with price target of 100/- and short target of 60/-. This company has consistent track record of dividend except last 2 years due to losses on account of forex transaction but now things have change and company has come out with excellent results showing good profits. The company has paid up capital of 50 Cr. ad reserves of 505 cr. That is book value of 55/- for current first half it has shown EPS of 1.67 which translates to EPS of 3.5-4/- per share. Further its pertinent to mention that with captive power plant it save huge cost also so going forward it will show EPS of 7/- in FY2010-11 considering these factors Long term view is 100+.