Covid-19 pandemic may eat into bonuses of domestic investment bankers

Increments, on the other hand, are likely be shelved altogether considering the bleak outlook for fundraising in FY21.

The coronovirus pandemic is likely to put a cloud on the bonuses to be received by domestic investment bankers this year.

Based on the deal activity, experts reckon that the bonuses could have ranged between 30-60 per cent of annual salaries for 2019-20 (FY20). The actual payouts --- to be doled out by the end of this month or the next --- may be a lot lower as banks look to conserve cash in an uncertain environment. Increments, on the other hand, are likely be shelved altogether considering the bleak outlook for fundraising in FY21.

Bonuses for foreign bankers, however, have not been impacted by the current pandemic. That’s because these banks typically follow a calendar year cycle and were handed out their variable pay in January or February, much before the impact of the pandemic became clear.

“The overall bonus pool for domestic banks may shrink this year as investment banks would want to conserve capital in the backdrop of the coronavirus pandemic,” said Pranav Haldea, managing director, PRIME Database.

Last year, bankers took home 30-50 per cent of annual pay as bonuses, far lower than the 100-200 per cent they pocketed in the year before. The sky-high bonuses for FY18 correlated with the record fundraising by way of IPOs and QIPs that year.

Bonuses are typically commensurate with deal activity in any given year and the fees earned. The kind of deals the bankers were a part of and the role they played are also a deciding factor. Banks, on average, pocket 2-3 per cent as fees for managing IPOs and 1.5-2 per cent for handling QIPs. Buybacks fetch Rs 1-2 crore per deal. Fees vary depending on the issue size and the number of bankers managing a deal.

Slowdown effect? Salary increase in 2020 may be lowest in a decade at 9.1%

However, 39% of companies still plan to offer increases of 10% or more: Aon survey.

The economic slowdown is beginning to reflect in the salary hikes of India Inc. The average salary increase in 2020 is projected to be 9.1 per cent, the lowest in a decade, according to the 24th edition of Aon Plc’s annual salary increase survey. In 2018 and 2019, companies increased average salary by 9.5 per cent and 9.3 per cent, respectively. After the financial crisis of 2008, the average hike had slumped to 6.6 per cent.

The projected increase for 2020 is lower than the average salary hike that graduates of top Business schools have managed at around 12 per cent.

The good news, however, is that despite gross domestic product (GDP) growth estimates getting revised downward, the average salary increase for 2020 will be only 20 basis points lower than that of the previous year.

Moreover, double-digit salary increments have not vanished entirely. While the average for the country has come down, 39 per cent of the companies are still willing to give double-digit salary increases in 2020.

This year’s number is in keeping with the long-term trend. “The trend over the years has been downward. Up to 2011, the average salary increment was in high double digits. Between 2012 and 2016, it was at 10 per cent plus, and in recent years, it has come down to the 9 per cent plus mark,” said Tzeitel Fernandes, partner and head of rewards solutions, India, Aon. She added they witnessed a mood of caution among firms this year.

The survey by Aon, a global professional services firm, covered more than 1,000 companies, across more than 20 industries. The firms were split equally between manufacturing and service sectors.

The mood within India Inc, though a little jaded than last year, is not completely downbeat. One question posed in the survey was whether respondents saw their businesses improving, stabilising, or declining.

In 2020, 92 per cent of the firms still said they saw their businesses improving or stabilising (the figure was 97 per cent for 2019). “Despite the economy softening and certain amount of caution coming in, an overwhelming majority of firms still say they are likely to do as well, if not better, in 2020 compared to 2019,” said Fernandes.

Another trend that is evident is that the range in salary increases across sectors has narrowed. In 2020, e-commerce, early-stage, and professional-services organisations plan to offer an average 10 per cent increase, while the logistics/transportation sector intends to offer the lowest increase of 7.6 per cent.

Here's all you need to know about ITR 1, 2 and 3 for FY 2018-19

A taxpayer who is an individual and is resident in India and earning income up to Rs 50 Lakh can use ITR-1 to file the return.

The income tax return forms have been notified for the tax filings due for AY 2019-20. The due date for filing the income tax returns for FY 2018-19 is 31 July 2019. The returns require some additional and detailed disclosures in comparison to the income tax returns of earlier years.

Taxpayers need to be aware of the key changes that would impact their tax filings.

Keep Reading : Business Standard

Form ITR-1:

A taxpayer who is an individual and is resident in India and earning income up to Rs 50 Lakh can use ITR-1 to file the return. The form ITR-1 can be filed for reporting income from salary, one house property, income from other sources and agricultural income up to Rs 5,000.

Taxpayers have to report the gross salary under income from salary i.e., salary, perquisites and profits in lieu of salary. The exempt allowances have to be disclosed allowance-wise and deducted from gross salary e.g., if a portion of the HRA has been claimed as exempt, it’s amount should be separately reported. For income earned from other sources, a taxpayer has to also provide detailed break-up of incomes e.g, Interest income from savings or fixed deposits etc.

Form ITR-2:

ITR-2 can be used by taxpayers who are individuals and Hindu Undivided Families (HUFs) to report all types of income other than income from business or profession.

Resident individuals who have total income above Rs 50 Lakh have to use ITR-2. Also, a taxpayer who is a non-resident or a Director in any company or has invested in unlisted equities at any time during the financial year has to file the returns in ITR-2 even if their income is less than Rs 50 Lakh. Such taxpayers have to disclose information on their Directorships in various companies and details of their investment in unlisted equity shares.

In ITR-2, in reporting the income from salary, taxpayers need to provide a complete break-up of the details of various components of salary. The specifications of the amounts falling under salary, perquisites and profits in lieu of salary have to be mentioned therein. Taxpayers would be able to draw this information from the annexure to Form 16 provided by the employer.

Also, an employee earning income from more than one employer during a financial year has to provide the complete salary details (as above) for each employer.

In making the disclosure under ‘residential status’, taxpayer has to furnish the details of days of stay in India in the previous year, during the preceding four years etc.