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Govt Must Improve Ease Of Living

By Harsh Roongta
February 15, 2022 09:24 IST
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Having a single point KYC that is automatically used across all financial and non-financial entities is a single piece of reform that should be an easy win to achieve, points out Harsh Roongta.

IMAGE: Finance Minister Nirmala Sitharaman addresses a post-Budget press conference, February 1, 2022. Photograph: Press Information Bureau

The reaction to this year's Budget reminded me of the annual off-sites hosted by corporations.

The management discusses the external environment, the exciting new products and strategy to succeed in an uncertain, challenging, and competitive environment.

They discuss separate responsibilities for the team, the coordination required as also the impact on salary costs.

Most people listen with half an ear to everything else, but perk up when the impact on immediate salaries (read tax breaks) is announced.

This Budget had no tax break announcements and hence the feeling of disappointment.

Let me make an attempt to highlight some of the announcements that I think may be important.


First, the changes on direct taxes -- it is clear that the government wishes to nudge people's retirement corpus towards the transparent NPS system.

Now state government employees will also be allowed to deduct the contribution made by their employer up to 14 per cent of salary.

Sadly, private sector employees are still allowed only up to 10 per cent but hopefully this anomaly will be corrected in the future.

NPS is the only scheme without any rupee value limit (the limit is a percentage of salary and not a specific rupee value) on the deduction.

It is a well-designed transparent scheme, and its superior design ensures that the money is locked in for the long term.

But it urgently needs a makeover to make it administratively more convenient and regulatorily more robust.

It can be a significant source of long-term growth capital.

The other major change was limiting surcharge to 15 per cent on long-term capital gains (LTCG) arising from any asset (not just listed securities and units as at present).

It effectively reduces the capital gains tax rate on sale of high-value assets such as shares in unlisted securities or immovable properties.

This impacts only people with large-value LTCG but it encourages the freeing up of locked up assets which can only be good for the economy.

Many changes have been introduced such as faceless assessments and appeals, avoiding repetitive appeals and allowing to pay back taxes by updating past returns.

If implemented correctly, these can change the relationship with the taxpayers.

But taxpayers can be forgiven for being justifiably cynical, given the arrogant and bungled implementation by the income-tax department so far.

The whole crypto currency issue has been managed very elegantly.

One of the issues of ordinary investors flocking to cryptos is that these legitimate investors provide cover to those who use crypto for illegal activities.

Introducing a fixed tax rate as well as having TDS provision requires the entities dealing in the asset to provide traceability and identity.

This will ensure that the transactions and holdings of the legitimate players are automatically segregated from others who may wish to remain anonymous.

Removing the cloak of anonymity and the high tax rate regime may also result in making sure that cryptos only attracts serious investors.

Using the GIFT City as a test bed for reforms such as permitting foreign education institutions to offer courses there without being hobbled by domestic regulation is a great idea.

It demonstrates the value of the reform without getting into semantics.

Just want to leave a thought -- the government has so far paid too much attention to ease of doing business rather than the ease of living.

Though announcements have been made in terms of digitalisation of land records, e-passports etc, benefits are still some time away.

One area where the ease of living can be made effective in a quick time is for ordinary investors.

Having a single point KYC that is automatically used across all financial and non-financial entities is a single piece of reform that should be an easy win to achieve.

Ease of succession through nominations can be another area that eases the lives of investors and relatively easy to achieve given political backing.

Easy transferability of bank accounts and loans can also considerably ease day-to-day lives.

None of these is controversial and most structural things are already in place.

The danger of making many procedural and systemic changes is that they initially lead to 'less ease of living' and unless there are quick wins thereafter, fatigue and cynicism set in.

The steps taken by the government have resulted in an ordinary citizen being able to get a home loan cheaper than the government is able to borrow money for the same tenure.

Surely the government will realise the benefits from such quick wins and take steps for achieving at least a few of them.

Harsh Roongta heads Fee-Only Investment Advisors LLP, a Sebi-registered investment advisor.

Feature Presentation: Aslam Hunani/

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