The average width of a kiosk selling stuff on the road is as wide as an arm span. That is what it needs to take your khokha (shanty shop) and run when the municipal corporation comes on its “inspection” to remove the illegal entrepreneurs off the pavements and roads. They dive into the nearby residential areas with their khokhas, leave them in friendly homes and then put them right back where they were, after the usual bribes have been paid to the police and the municipal corporation.
The Indian state has crushed enterprise for decades by its rent seeking on account of a labyrinth of rules that nobody really understands. The story of the Indian IT industry that boomed in the 1990s was just this—the babus simply did not “get” technology and by the time they got to know the industry was a well-established tax-paying success.
The government wants banks, insurance firms, jewellers and others to report 11 transactions to the income tax department. In a move to catch tax evaders, the government wants disclosure of certain transactions, not by the tax payer but by the firms they deal with. Will this nudge the unwilling to pay their taxes? In this special series of Money with Monika, personal finance expert Monika Halan explains how the new notification works. Watch the full episode for Monika Halan’s advice. Monika Halan is consulting editor, Mint, and author of the book ‘Let’s Talk Money’.
A tweet from a government handle, now deleted, was the cause of much upset with social media going a little nuts on the increasing compliance burden on the Indian taxpayer and the increasing intrusion of big government into citizens’ lives. The tweet lists 11 categories of financial transactions that, if made, will trigger reporting by the receiver of the money to the income tax department. Already banks and mutual funds report transactions above a certain threshold. The scope of this reporting is set to expand.
The shops, banks, mutual funds, hotels and so on will make the disclosure to the tax department, and not the taxpayer. The government hopes to find a discrepancy between the income disclosed during the tax filing process and the spends made. As we file our tax returns for financial year 2019-20 (last year), we will see a box that only some people need to tick. These are people who claim that their gross taxable income (before applying any deductions) is ₹2.5 lakh or less, but have made transactions of ₹1 crore or more in a current account, have paid ₹1 lakh or more in electricity bills and have spent ₹2 lakh or more on foreign travel. We see these people around us, they are the ones pulling out wads of cash to pay for high-value gadgets, jewellery, hotel bills and more. They are the ones paying 50-70% of property purchases in cash.
The Reserve Bank of India (RBI) can put restrictions on who can open current accounts with which bank. Is the move part of a larger plan to stop banking frauds? In this special series of Money with Monika, personal finance expert Monika Halan explains how the move will prevent the siphoning off of money. Watch the full episode for Monika Halan’s advice. Monika Halan is consulting editor, Mint, and author of the book ‘Let’s Talk Money’
Indian private sector and foreign banks are miffed with the Reserve Bank of India (RBI) for taking away the lucrative current account business from them. In the policy statement on 6 August 2020 , a five-page document titled Opening of Current Accounts by Banks—Need for Discipline (read here) became the focus of dark mutterings in the plush boardrooms of private and foreign banks. Very simply put, RBI has put restrictions on who can open a current account with which bank. A company that has borrowed from a bank cannot open a current account with another bank. It can open a current account with its lending banks under some circumstances, otherwise it is encouraged to use the cash credit and overdraft facilities under which it has borrowed (read here). A current account is like a savings bank account, but with many facilities for swift and multiple transactions, overdraft facilities and it carries no interest. Banks like to sell these accounts as they enjoy huge floats, or money that just sits with the bank waiting to be used by the depositing firms.
The Securities and Exchange Board of India has become the first financial regulator to settle the debate regarding the classification of advisors and agents when it comes to financial instruments. Personal finance expert Monika Halan explains Sebi’s solution, comparing advisors to doctors, and agents to chemists. Agents are only supposed to sell products which customers seek, while advisors will make recommendations after assessing various factors related to the buyer. Meanwhile, other regulators like the Insurance Regulatory and Development Authority, and the Reserve Bank of India are still lagging behind. Is it time for the government to intervene? Monika Halan is consulting editor, Mint, and author of the book ‘Let’s Talk Money’.
The crucial lines between an adviser and an agent have finally been clearly drawn in the Indian capital market. This is as crucial as drawing a distinction between a doctor and a chemist. The process that the capital market regulator began in 2013 ended in July 2020 with the Securities and Exchange Board of India (Sebi) notifying the registered investment adviser (RIA) amendments that have gone through years of debate, consultation papers and introspection. Sebi began by asking a question to the mutual fund intermediary: who are you? Are you an agent of the mutual fund or are you an adviser to the investor? The answer to this will determine in whose interest you work. The agent gets his compensation from the mutual fund in the form of a trail commission (Sebi banned front commissions in 2009) and the adviser is compensated by the investor through a fee. You can read the way the debate moved over the years here.