There are quite a few important items mentioned by the Finance Minister in her impressively detailed speech which may not get the attention that they deserve. My picks would be:
First — She has finally promised a simplification of the KYC process coupled with a one stop solution for identity and address updating. This coupled with increased data that can be shared by an individual (as well as a business entity) through the Digilocker will enable all individuals (and business entities) to end the “KYC Raj” that has replaced the earlier “Inspector Raj”. The dream of being able to transact freely in all sections of the financial system across all regulators once you open a bank account, finally appears to be within grasp. Second – An integrated portal will assist people in discovering whether they have any unclaimed shares or dividends in the IEPF (approx Rs 48,000 crores) and ease the tortuous process of getting it back will be of great relief to millions of individuals in the country. This should be extended to the Senior Citizen welfare fund (unclaimed Insurance amounts, small savings, EPF, etc) and Depositors Education welfare fund (unclaimed bank deposits) where large sums are lying unclaimed.
Third – A small step has been taken to amend the inheritance laws with a legal heirship certificate issued by a local revenue official being recognised as a valid document for transmission of amounts lying in the savings schemes like PPF, NSC etc that are governed by the Government Savings Promotion Act. The attention to this neglected issue is welcome. But the entire succession system, across all sectors (banking, securities sector, EPF, NPS, real estate, etc.) needs a comprehensive overhaul to obviate the difficulties that are faced by the common people in getting quick, simple and economical access to these assets. The landmark white Paper — “Reimagining Nominations — making succession smoother and simpler” can serve as a guidepost for this purpose. It has been written by Mr Pramod Rao (in his personal capacity) with inputs from ARIA (https://bit.ly/3ZzCNI8).
Fourth — The conversion of physical gold into Electronic Gold Receipt (and vice versa) has been made tax neutral. This should be one more step in the much awaited move to financialise the massive hoard of physical gold held by Indians and religious bodies.
On the Income tax front there is a clear strategy at work:
First is to nudge everyone towards a new tax regime (low tax rate with no exemption/deduction) by making it attractive. Standard deduction is now allowed under the new regime and the slabs have been hiked. Enough that most middle class tax payers will shift to the new regime. Even super HNI clients with taxable income above Rs 5 crore may opt for the new regime with the abolishment of the 37 per cent surcharge. For businesspersons however this is a one-way street. Once they opt for the new regime, they are allowed to change their mind only once. Once widely adopted, the new regime likely to make the exemptions/deductions regime redundant over time.
Second – The government clearly wants everyone (even the nil tax payers) to file income tax returns and provide detailed information so that the people with unaccounted wealth do not use the low income individual as a shield for their unaccounted wealth. That’s the reason why provisions will always require filing of income tax returns even if the tax payable is nil.Third – chip away at the loopholes used by the HNIs. Loopholes such as capital gain exemption on investing in high value residential real estate or Life Insurance policies or fancy instruments like Market linked debentures have been limited or plugged. This coupled with disincentive measures such as 20 per cent TCS on booking of foreign tours or foreign investments made through LRS as well as many other TDS provisions is a dampener for HNI individuals.
The attention to minute detail on fixing the nuts and bolts of the state machinery accessed by an individual gives me great hope that this budget will be a milestone in substantially improving the “ease of living” index.
The writer heads Fee-Only Investment Advisors LLP, a Sebi-registered investment advisor