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5 Things to Consider When Choosing a Tax-Saving Instrument

Professor of Financial Economics and Part-time Value Investor, Transfin.
Mar 21, 2020 3:52 AM 6 min read

Five things to consider when choosing a tax-saving instrument. Government notifies rules and forms under the Vivad se Vishwas scheme - a little too late? Fitch Ratings cuts India's growth forecast to 5.1% for FY21. Saudi Arabia and Russia scale up oil price war. Conferencing apps Slack and Teams report surge in number of users.




Saudi Arabia and Russia scale up oil price war.

Oil’s Not Well

Here’s something you may have missed amidst the deluge of coronavirus-related updates around the world: An oil price war is on the tables.


Earlier this month, OPEC fell into disarray after a Saudi-backed plan to cut crude output was rejected by Russia. Following this, oil prices lost a fifth of their value. Since then, prices have plummeted to their lowest level since the 1991 Gulf War.


Riyadh has since then said it would boost production to 12.3m barrels per day (bpd), which is c. 300,000 bpd over previous maximum sustained capacity. Moscow has said it would rapidly open its own taps. The resulting oil glut, coupled with the fall in demand from China, has cause oil prices to freefall even more.


How Will This End?

The Saudi-Russian standoff might end up hurting Saudi Arabia more than Russia. Consider this: Russia’s budget breakeven price is $40 per barrel; Saudi’s is $84. Russia’s capacity is 11m bpd while Saudi’s is 8m bpd.


An oil price war between the two petrostates would drive prices down and Saudi, with its oil-reliant economy, might be greatly disadvantaged by this. If oil hits $25, Russia could sustain from a budget and foreign asset reserves perspective for up to 10 years while Saudi might be able to manage two years at most. []


US hints that it might intervene to stabilise prices. 

Enter Uncle Sam

The US, whose shale revolution enabled it to become the world’s largest oil producer at 13m bpd, has now said it could intervene in the price war. Government officials are reportedly mulling a diplomatic push to get Saudi Arabia to cut oil production and at the same time threaten sanctions on Russia in order to stabilise prices.


Meanwhile, the Texas Railroad Commission, an oil industry regulator, is considering curtailing crude production for the first time in decades so as to not flood the oil markets.


In a Fix

Admittedly, President Donald Trump is unsure about the way forward. Oil prices are down 60% year to date in the US, and this is invariably hurting oil companies. But Trump says consumers are benefiting from low gasoline prices. Thus, he is “a little torn” over plans to intervene, saying such actions would be taken, if at all, at an “appropriate time”.


Nonetheless, news of Washington’s possible intervention calmed oil markets slightly, and oil prices recovered today. They were also helped by the US government’s plan to buy up to 30m bpd for its emergency stockpile by the end of June. [Reuters]



Bank of England cancels stress test of banks.

Keep Calm, Don't Stress

The Bank of England has cancelled this year’s stress test for eight major UK banks and building societies in the wake of the coronavirus outbreak, aiding them to focus on lending instead.


Last week the British central bank announced that banks could release all the capital they hold in a special “counter cyclical” buffer to support loans worth up to £190bn ($219bn).


"These measures will provide flexibility to help firms and [financial market infrastructures] maintain their safety and soundness and deliver the critical functions they provide to the economy," the central bank said. [Reuters]


Trump to negotiate Senate Republicans’ $1trn economic relief plan.

Got a Plan?

Senate Republican Leader Mitch McConnell on Thursday released the proposal for a third coronavirus relief package worth $1trn. 


The offer includes pumping $1,200 direct checks to taxpayers, $300bn for small businesses to keep idled workers on payroll and $208bn in loans to airlines and other industries.


Discussions on the proposed relief package are ongoing. Meanwhile, a joint statement from House Speaker Nancy Pelosi and Senate Democratic Leader Chuck Schumer said, “We are beginning to review Senator McConnell’s proposal and on first reading, it is not at all pro-worker and instead puts corporations way ahead of workers.” [AP]


Fitch Ratings cuts India's growth forecast to 5.1% for FY21. 

Following Suit

After Moody's and S&P, Fitch Ratings cut India's growth forecast to 5.1% from 5.6% for FY 2020-21, saying the coronavirus outbreak is likely to hit business investment and exports. [Moneycontrol]


Extra Crunch

Ashish Gupta in his 2012 'House of Debt' report for Credit Suisse Group AG gave investors an early warning about the dangerous levels of delinquent borrowing by many of India’s top business groups. This time, he warns of new peril. Read excerpts from his interview here. [Livemint]




 Five things to consider when choosing a tax-saving instrument.

Taxing Times

“Death, taxes and childbirth! There's never any convenient time for any of them.” So said Margaret Mitchell in Gone with the Wind.


In about 10 days or so, the current fiscal year will come to an end. Many of us are looking for tax-saving methods, including investments.


Here are five things to consider when choosing a tax-saving instrument, so that you identify an efficient one while being in line with your financial goals. [Financial Express]


Government notifies rules and forms under the Vivad se Vishwas scheme - a little too late? 

Vivad se Vishwas

The Government yesterday notified rules and forms under the Vivad se Vishwas scheme. Find details of the process of declaration here.


However, with merely 10 days left for the deadline and the coronavirus scare keeping people away from offices, the success of the dispute resolution scheme may be dampened. [BS]




Conferencing apps Slack and Teams report surge in number of users.

Silver Lining

Team chat and conferencing app Slack has gained over 12m daily users in one week as increasing numbers of companies take to working from home amidst the coronavirus outbreak. 


Meanwhile, Microsoft-owned Teams, Slack's competitor, had a reported 44m users as of March 18th, Microsoft said, more than double the 20m daily active users that the software maker reported in November. Teams users grew from 32m to 44m in the period between March 11th and March 18th alone, as many more US companies asked employees to work from home. [TechCrunch]


SoftBank looking to raise $10bn to support Vision Fund companies.

Charity Begins at Home

As per reports, Japanese technology conglomerate SoftBank Group is looking to raise an additional $10bn to support its first Vision Fund portfolio companies hit by the coronavirus pandemic. 


It has reportedly reached out to outside investors for $5bn in funds, which will be matched by another $5bn injection by SoftBank. [ET Tech]



Tata Sons CEO buys shares worth ₹6cr ($0.7m) of Tata Group companies.

Trust in Yourself

Tata Sons CEO N Chandrasekaran has bought shares worth ₹6cr ($0.7m) of Tata Group companies, including Tata Communications, Tata Chemicals and Tata Investment Corporation.


According to announcements by the respective companies, the Tata Sons chief has purchased 1L shares of Tata Communications and Tata Chemicals each and 10,000 shares of Tata Investment Corp. [ET Markets]


Tata Power announces expansion of rooftop solar services. 

The Sun is Shining Bright

Tata Power has announced the expansion of its rooftop solar services to 90 cities across the country in an attempt to diversify its revenue sources. [Financial Express]


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