Post on 16th Feb 2017 by Pradeep Jain, Director, Paperpink. 


This post is related to investment/Trading opportunity in Tata Motors Ordinary Shares and DVR as on 16th Feb 2017.

What is DVR?

DVR means shares having differential voting rights. These shares carry lower Voting rights and higher dividend rights e.g.  In Tata Motors DVR, every 10 shares has 1 voting right. This is compensated by additional 5% dividend to DVR holders as compared to ordinary shareholders.

DVR is normally issued to raise money while avoiding risk of hostile takeover.

Historical Corporate Action in Tata Motors DVR 

Following corporate action has been occurred in Tata Motors DVR since its listing.

Corporate Action

Historic Price Movement and Discount Trent

TM Shares

We have captured above the historical discount trend and price movement of Tata Motors DVR. This shows that discount moved in the range of 20% to 56% in last 3 years and as on today it is at highest level of last 18 months i.e. 39%. Green circles in the charts are impact of points mentioned in the general discussion below.

General Discussion

1     In 2008, when TM DVR was originally offered, the discount in DVR as compared to Ordinary was at a reasonable level of 10%. But over a period of time, this discount kept widening until it reached around 56% in August 2013.

2    This Huge discount seems to be against common sense. That is because both DVRs and ordinary shares are based on the same business. Only difference is of the voting rights and that anyways has been compensated for by a higher dividend promise to DVR holders. Ideally, this discount should not be so large.

3   Global average of discount in DVR is around 15%-20% and in   developed market like USA it is as low as 5%. Liquidity & involvement of traders in DVR also play a vital role in discount %.

4   In last week of June 2014, a UK based fund house Knight Assets came out with a recommendation for Tata Motors. It advised the company to list its (planned) new DVR shares on New York Stock Exchange but it asked Tata Motors to add the words ‘Jaguar Land Rover’ to the name of the DVR before listing. This according to fund would help it correct the big discount which DVR trades at and bring it in line with global averages of 10-15%. And since US markets are more familiar with JLR brands and with the dual-class shares, it would help listing the DVR in US markets. However, it did not happen. (Check the Impact of the same in discount trend as depicted in chart above)

5    TATA Motor DVR Included in MSCI Index on 13th Nov 2015. This        envisages the increase in liquidity and global exposure to the DVR which may reduce the discount heavily. It helped in reducing discount to a large extent but eventually its again widened. (Check Chart above to see the impact)

6   TATA Motor DVR Included in Nifty50 on 23th Feb2016. Traders involvement increased in the DVR after inclusion of the same in Nifty50. It also helped in reducing discount, (Check Chart above to see the impact)

7    Many market participants now believe that this discount will settle at levels of 10%-15%. But we must remember that this discount is highly volatile. However, if we are taking position or playing the discount part at higher discount %, we may earn decent profits.

8   The last traded price for TTM as on 15th Feb 2017 was Rs 437 and that for DVR was Rs 268. Now simple calculation tells that for gaining ‘a’ vote in Tata Motors’ voting, you will have to shell out Rs 169 extra (437-268). I personally don’t think this makes sense for small investors. It might make some sense, if you have substantial stake in Tata Motors and want to affect company’s decision making. But since you are reading this post on my blog as a trader, I assume you don’t have very big stake in Tata Motors.

9    I agree that it’s very important to exercise voting rights if the     company is not being managed properly or its taking certain decisions which are not in best interest of minority shareholders. But broadly speaking, Tata Motors is managed decently if not brilliantly. And hence a small investor should not worry too much about his voting rights and prefer DVRs as long term bets (if convinced about Tata Motors business) as compare to ordinary shares. At current market price of DVR, we are getting the same business at 40% discount with assured higher dividends as compared to Ordinary shares.



Sell same amount of Tata motor Future and buy same amount of  Tata motor DVR Future. This will involve margin for both Ordinary shares and DVR Shares.


  1.    Sell Tata Motor Future worth INR 50 Lacs and Buy Tata Motor DVR worth INR 50 Lacs.
  2.    Brokerage and expenses at the rate of 0.04% to execute and close this transaction will be INR 8000  p.m. and if we assume that we have to carry this transaction for a year, then annual cost will be INR 96000/-.
  3.   If we assume margin of 15% than total margin or Investment on               above transaction will be INR 15 Lacs.
  4.  If we get 5%-10% reduction in discount at any time during the year            then we will earn INR 2.5 Lacs to INR 5Lacs. If we move towards global rate of discount from here due to inclusion of DVR in MSCI and Nifty 50, it could fetch a surprising rate of return.


  • We have position in the abovementioned strategy which may result in the biased view.
  • We are not valuing DVR here. We are just discussing the discount at which DVR shares are available. It is very much possible that ordinary shares are over-valued and consequently, DVR may themselves be overvalued.
  • Investors shall assess their own risk before executing any transaction as per the above strategy.
  • If discount gets further widened, loss may be incurred.

HUF can hold one self occupied property and claim benefit of Section 24(b)

Post on 16th Nov 2016 by Pradeep Jain,  Director, Paperpink


Under Income Tax Act, an individual can keep one residential premises as a self occupied property but if he purchases another residential premises then even though that premises is not rented and he is not receiving any rent from that, an amount equal to notional rent will be calculated and added in his income under the head income from other sources. For example if Mr.A possesses two houses in his own name and none of them is rented. Any one house at his choice can be treated self occupies and for other house a value equal to notional rent will be calculated and added in his total income.  Here Mr.A can plan his affairs in such a way that another house can be bought in the name of Mrs. A from her own income and in such case she can also posses one more self occupied property. So even through husband and wife both are living in same house, for income tax purpose they can posses two different houses as self occupied for income tax purpose and nothing will be taxed as notional rent . But one step ahead from this situation, if they want to possess third house then in that case notional rent will be calculated and added in the income of owner.

Now if in above case if Mr.A and Mrs.A plan their financial affairs in such a manner that they buy third house in the ownership of Mr.A (HUF), then in such case third property will also become self occupied property and notional rent will not be added in the income of Mr.A, Mrs.A or Mr.A (HUF) if it is actually not given on rent. In this case the third house is also considered self occupied even though it is vacant and family is not living in that house because HUF can also hold one self occupied property under the income tax act.

In above case HUF can also take a home loan for property and claim benefit of deduction of interest paid on home loan up to Rs. 2 Lakhs form income of HUF under section 24(b) of the income tax act.

Income Tax – A Brief

Post on 11th Nov 2016 by  
Pradeep Jain, Director,  Paperpink


Income tax is that percentage of your income that you pay to the government to fund infrastructural development, pay the salaries of those employed by the state or central governments, etc. All taxes are levied based on the passing of a law, and the law that governs the provisions for our income tax is the Income Tax Act, 1961.

Income tax is only of the direct means of taxation like capital gains tax, securities transaction tax, etc., and there are many other indirect taxes that we pay like sales tax, VAT, Octroi, service tax, etc.

The income tax you pay every month or upon every contractual earning is what forms a large part of the revenue for the Government of India. These revenue functions are managed by the Ministry of Finance, which has delegated the responsibility to managing direct taxes (like income tax, wealth tax, etc.) to the Central Board of Direct Taxes (CBDT).

Income Tax – In Detail:

Income tax has to be paid by every individual person, Hindu Undivided Family (HUF), Association of Persons (AOP), Body of Individuals (BOI), corporate firms, companies, local authorities and all other artificial juridical persons that generate income.

Taxes are calculated on the annual income of a person, and an annual cycle (year) in the eyes of the Income Tax law starts on the 1st of April and ends on the 31st of March of the next calendar year. The law recognizes and classifies the year as “Previous Year” and “Assessment Year”.

The year in which income is earned is called theprevious year and the year in which it is charged to tax is called the assessment year.

For example: Income earned between April 1st 2014 and March 31st 2015 is called the income of the previous year and will be charged to tax in the next year, or the assessment year that starts on April 1st2015.

Taxes are collected by the government in three primary ways:
  1. Voluntary payment by taxpayers into designated banks, like advance tax and self-assessment tax.
  2. Taxes Deducted at Source (TDS) which is deducted from your monthly salary, before you receive it.
  3. Taxes Collected (TCS).

Income Tax Slab Rates:

Income tax slab rates are for different categories of taxpayers, who are taxed progressively higher based on their earning. The income tax slab rates can be broadly classified into the following categories:

  1. Individuals and Hindu Undivided Families (HUF):These are the slab rates as of financial year 2014-2015, i.e. assessment year 2015-2016 and FY 2015-2016 and assessment year 2016-2017.

    On all the tables listed below, Education Cess of 2% and SHEC of 1% will be levied on the tax computed using the rates given below.

    Under Section 87(A), an Income Tax Rebate of Rs.2,000 is provided for all individuals earning an income that’s less than Rs.5,00,000 per annum.

  • For male individuals below the age of 60 and HUF:
Income Tax Slabs Income Tax Rates
Total income less than Rs.2,50,000. -NIL-
Total income greater than Rs.2,50,000 but less than Rs.5,00,000. 10% of the amount by which it exceeds Rs.2,50,000.
Total income greater than Rs.5,00,000 but less than Rs.10,00,000. 20% of the amount by which it exceeds Rs.5,00,000.
Total income greater than Rs.10,00,000. 30% of the amount by which it exceeds Rs.10,00,000.
  • For female individuals below the age of 60:
Income Tax Slabs Income Tax Rates
Total income less than Rs.2,50,000. -NIL-
Total income greater than Rs.2,50,000 but less than Rs.5,00,000. 10% of the amount by which it exceeds Rs.2,50,000.
Total income greater than Rs.5,00,000 but less than Rs.10,00,000. 20% of the amount by which it exceeds Rs.5,00,000.
Total income greater than Rs.10,00,000. 30% of the amount by which it exceeds Rs.10,00,000.
  • For all individuals above the age of 60 – Senior Citizens:
Income Tax Slabs Income Tax Rates
Total income less than Rs.3,00,000. -NIL-
Total income greater than Rs.3,00,000 but less than Rs.5,00,000. 10% of the amount by which it exceeds Rs.3,00,000.
Total income greater than Rs.5,00,000 but less than Rs.10,00,000. 20% of the amount by which it exceeds Rs.5,00,000.
Total income greater than Rs.10,00,000. 30% of the amount by which it exceeds Rs.10,00,000.
  • For all individuals above the age of 80 – Super Senior Citizens:
Income Tax Slabs Income Tax Rates
Total income less than Rs.5,00,000. -NIL-
Total income greater than Rs.5,00,000 but less than Rs.10,00,000. 20% of the amount by which it exceeds Rs.5,00,000.
Total income greater than Rs.10,00,000. 30% of the amount by which it exceeds Rs.10,00,000.
  1. Businesses:

The following tables indicate the tax slabs for businesses.

  • Co-operative societies:
Income Tax Slabs Income Tax Rates
Total income less than Rs.10,000. 10% of the income.
Total income greater than Rs.10,000 but less than Rs.20,000. 20% of the amount by which it exceeds Rs.10,000.
Total income greater than Rs.20,000. 30% of the amount by which it exceeds Rs.20,000.
  • Firms, Local Authorities, Corporates and Domestic Companies:Income tax slab rates do not apply for these, as they are taxed at a flat rate of 30% on the total income declared.A surcharge of 5% is levied on the total income tax of domestic companies if their income exceeds Rs.1 crore. This surcharge does not apply to firms and local authorities.

Income Tax Return (ITR):

There is a prescribed form through which the particulars of income earned by a person, and the taxes paid thereon, are communicated to the Income Tax Department. There are different forms for the filing of returns based on different status and heads of income. This is called the return of income.

It’s basically just you telling the government how much you’ve earned, from where you’ve earned it, and how much tax you’ve paid on it.

Tax Forms:

The different forms which have been prescribed for different classes of taxpayers are as follows:

ITR Form Name Description of Taxpayer
ITR – 1 This is applicable to all individuals having salary or pension income or income from one house property, or income from other sources (which aren’t income from lottery winnings and income from race horses). This is also known SAHAJ.
ITR – 2 This is for Hindu Undivided Families that have income from sources other than “Profits and Gains of Business or Profession”.
ITR – 3 This is for Hindu Undivided Families or individuals who are partnered in a firm. The income here is either by the way of interest, salary, bonus, commission or remuneration that’s due or received from the partnered firm. The head of income should be “Profits and Gains of Business or Profession”.
ITS – 4S This is for individuals and Hindu Undivided Families who’ve opted for the presumptive taxation scheme of Section 44AD / 44AE. This is also called SUGAM.
ITR – 4 This is for individuals or Hindu Undivided Families who carry on a proprietary business or profession.
ITR – 5 This is for firms, LLPs, AOPs, BOIs, artificial judiciary persons, co-operative societies and local authorities. This does not apply to trusts, political parties, colleges, etc. who are required to instead file return of income under Sections 139(4A), 139(4B), 139(4C) and 139(4D) and do not use this form.
ITR – 6 This for companies that don’t claim exemptions under Section 11. Charitable and religious trusts can claim exemptions under Section 11.
ITR – 7

This is for persons and companies who are required to furnish returns under Sections 139(4A), 139(4B), 139(4C) and 139(4D).

ITR – V This is the acknowledgement of filing of return of income.

One can acquire these forms from

You can also file your return electronically through a free software that the Income Tax Department has provided on

Income Types or Taxable Heads of Income:

Income from different sources is taxed differently. These sources are called heads of income and are as follows:

  1. Income From Salaries:All income received from an employer by an employee is taxed under this heading. Employers are bound to withhold tax compulsorily under Section 192 if the income of their employees falls under a taxable bracket. Employers must also provide a Form 16, which contains details of tax deductions and net paid income.
  2. Income from House Property:Income here is taxable if the assesse is the owner of a property that’s been given out on rent. The property should not be used for business or professional purposes. Individuals and HUFs can claim one property as “self-occupied”, which means you and your family live there, and do not have to pay taxes on this. (Learn more about calculating income from house property)Income from house property is calculated as under:

    Gross Annual Value (GAV) = x

    Less: Municipal Taxes Paid = (y)

    Net Annual Value = x-y

    Less: Deductions under Section 24 = z

    Income from House Property = (x-y) – z

  3. Profits and Gains Of Business or Profession:These are the taxes that will be applicable for income from business or professional services rendered. The provisions for computing the tax on this type of income is in accordance with Sections 30 to 43D.
  4. Income from Capital Gains:This is for the taxes applicable on income that arises when capital assets are transferred. Capital assets are property of any value that’s held by the assesse like land, buildings, equity shares, bonds, debentures, jewellery, art, assets, etc. (Learn more about calculating capital gains)
  5. Income from Other Sources:Basically, any source of income that cannot be classified under the above heads of income falls under this heading. There are also some specific and pre-determined incomes which fall under this heading, like:
    • Income by way of dividends.
    • Winnings from horse races / lotteries.
    • Employee’s contribution towards staff welfare schemes, any fund set up under the ESIC Act that’s received by the employer from the employees.
    • Interest on securities like debentures, government securities and bonds.
    • Gifts.
    • Interest on compensation.
    • Rental income other than house property.
    • Family pension received after the death of the pensioner.
    • Interest income that is earned other than by way of securities.

(Learn more about calculating income tax on income from other sources)

Income Tax E-Filing:

You can e-file your Income Tax Return, TDS return, AIR return and Wealth Tax Return online through this link E-filing your return has obvious advantages like the fact that you won’t have to deal with the hassle of paperwork and waste time sorting through it all. You can simply log on to the secure website and e-file your return. (Learn more about e-file your IT returns in Online)

This government website also has provisions for you to submit returns, view forms 26AS, outstanding tax demand, CPC refund status, rectification status, ITR – V receipt status, online application tools for PAN and TAN, e-pay your tax and even has a tax calculator.


Deductions for your taxable amount are available under various sections of the Income Tax Act , 1961.

  1. Section 80C:Deductions under this section are only available to individuals and HUF. This section allows for certain investments like NSC, etc. and expenditures to be exempt from taxation up to the amount of Rs. 1,50,000.
  2. Section 80CCC:Deductions under this section are on payments made to LIC or any other approved insurance company under an approved pension plan. The pension policy must be up to Rs.1,50,000 and be taken for the individual himself out of the taxable income.
  3. Section 80CCD:Deductions under this section are for contributions to the New Pension Scheme by the assesse and the employer. The deduction is equal to the contribution, not exceeding 10% of his salary.The total deduction available under Section 80C , 80CCC and 80CCD is Rs.1,50,000. However, contributions to the Notified Pension Scheme under Section 80CCD are not considered in the Rs.1,50,000 limit.
  4. Section 80D:This is the section that deals with income tax deductions on health insurance premiums paid. In the case of individuals, the insurance policy can be taken to cover himself, spouse, dependent children – for up to Rs.15,000 and parents (whether dependent or not) – for up to Rs.15,000. An additional deduction of Rs.5,000 is applicable if the insured is a senior citizen. In the case of HUF, any member can be insured and the general deduction will be for up to Rs.15,000 and an additional deduction of Rs.5,000.A total of Rs.2,00,000 can be claimed as deductions whether the assesse is an individual or a HUF.
  5. Section 80DDB:This section is for deductions on medical expenses that arise for treatment of a disease or ailment as specified in the rules (11DD) for the assesse, a family member or any member of a HUF.
  6. Section 80E:This section deals with the deductions that are applicable on the interest paid on education loans for an education in India.
  7. Section 80EE:This section deals with tax savings applicable to first time home-owners. Applies for individuals whose first home purchased has a value less than Rs.40 lakh and the loan taken for which is Rs.25 lakh or less.
  8. Section 80RRB:Deductions with respect to income by way of royalties or patents can be claimed under this section. Income tax can be saved on an amount up to Rs.3,00,000 for patents registered under the Patents Act, 1970.
  9. Section 80TTA:This section deals with the tax savings that are applicable on interest earned in savings bank accounts, post office or co-operative societies. Individuals and HUFs can claim a deduction on an interest income of up to Rs.10,000.
  10. Section 80U:This section deals with the flat deduction on income tax that applies to disabled people, when they produce their disability certificate. Up to Rs.1,00,000 can be non-taxed, depending on the severity of the disability.
  11. Section 24:This section deals with the interest paid on housing loans that is exempt from taxation. An amount of up to Rs.2,00,000 can be claimed as deductions per year, and is in addition to the deductions under Sections 80C, 80CCF and 80D. This is only for self occupied properties. Properties that have been rented out, 30% of rent received and municipal taxes paid are eligible for tax exemption.Learn more about Income Tax deductions from under Section 80C to 80U.


TDS or Taxes Deducted at Source – is a system incorporated by the Income Tax Law to deduct taxes before the income has been disbursed to the person earning it. It is charged depending on your income tax slab, at its point of origin. You do not get a full amount from which to deduct an income tax amount and pay it back, but get charged even before you’ve earned your income.

The income tax here is deducted by the payer and remitted to the government on your behalf.

TDS on income will not apply if your net taxable income is below Rs.2,50,000 for individuals, Rs.3,00,000 for senior citizens and Rs.5,00,000 for super senior citizens.

It’s important to know which tax bracket one falls under and the investments that can be made to exempt a portion of the income from taxation. A lot of money can be saved through investments, and this helps the flow of funds through investible channels in the economy, thus helping the country develop. Health insurance policies, investments and other deductions can be used to your benefit, if you balance them out well.

Making relevant investments can help save a lot on tax, and earn a lot in eventual interest income. Most tax-saving investments have lock-in periods where the funds cannot be accessed, and in this time compound interest at a rate higher than most savings bank accounts.