Tax Returns

The last week of any financial quarter, especially July, is normally spent filing Income Tax (I-T) returns by many. Filing returns is a statutory requirement by the government, for every salaried and self employed individual. Non compliance is dealt with strict measures. The roots of filing returns originates from the traditional set up, where government got the taxes collected at the end of the year. Such collections happened via manual ledger based systems with individuals required to submit their income sources along with tax exemption savings, if any. Over period of time, with inclusion of technology and better governance measures like PAN, the tax (collection and) reporting system has largely moved to electronic platform. This has not only streamlined the process, but also - more or less - obviated the need of filing returns, at least for salaried employees. That we still have to engage in this fruitless ritual, is a sad story.

In the context of salaried employees, where income is mostly derived from just one source, the redundancy is much more pronounced. The taxes of such employees are deducted at source (TDS) and deposited with the government on quarterly basis. In practise, the deduction and deposit happens on monthly basis. Every individual is mandated to get a PAN. The organisations are mandated to deposit the employee specific taxes, against the corresponding PAN. This facilitates seamless tracking of taxes paid by an individual, on as precise as monthly basis.

The employee gets the salary in a bank account. With wider acceptance of credit and debit cards at most of the merchant establishments, people prefer to keep the money in bank accounts and use the hassle free plastic cards. Online banking, though yet to catch up amongst all strata of bank customers, also helps replace cash transactions to minor extent. This helps in tracking high value transaction with ease, both, for the bank and the I-T department, if required. With PAN as mandatory requirement in opening a bank account, not only such transactions can be filtered but also the transactions involving dividend and interest credit. With banks, exchanges, brokerages and financial institutions all getting on to the electronic platform, codifying such transactions is not much of an problem. Such banks, which are still on manual ledger systems can be asked to upgrade within a stipulated time, by making requisite policy changes. In the meanwhile, the same can be asked to provide reports with special codes against such transactions.

The entire income, under all heads and from all banks can then be collated and arranged according to PAN. Unpaid balance tax liability on an individual, if any, can then be reported via preferred communication channels like postal mail, email or banks. The person can either deposit or claim refund, as applicable. The amount is question can be remitted to the I-T department by any of the bank of taxpayers choice. In case of default - and only then - the I-T department can be authorised to deduct due balance amount from any of taxpayer's bank account having sufficient money. So applies to the I-T department who is notoriously late is giving refunds even when ECS clearing option is specified. There can be concerns about intrusion of privacy with government becoming privy to almost all monetary transactions. Such concerns are mostly voiced by individuals or entities wishing to deliberately hide inappropriate assets. We have, anyway, well witnessed the outcome of lack of transperancy in the recent Wall Street crisis.

The moot point is to avoid wastage of millions of man hours in doing mundane job. A job, that can be efficiently done just be making subtle systemic changes. The same labour can be put to more productive purposes viz. evaluating the exception reports generated for these auto-filed returns, deploying men on foot to achieve better tax compliance and to deal with frauds, in case such a case floats up in exception reports. This, most certainly, is not an exhaustive list. Leveraging technology this way, the government can not only improve the compliance - and consequently collection - over and above its burgeoning tax collections but also reduce a lot of paperwork, avoid hassle to its staff and the citizens, and utilise its resources better. Life is precious. Why waste?

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Tailpiece

Money related affairs are mostly assumed to be rather dry and humourless. Not this IT department office. This one and similar pages were pasted in similar fashion throughout the different rooms of the office, ostensibly, to ease the taxpayers by segregating accoding to their income. The English is but legendary.




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Addendum
Now the ET editorial talks my language.

Rock On

I had first outrightly rejected Master's idea to watch Rock On. This habit of reading - everything that is available to eyes - has it's own side effects. The reviews were all praises. The hype was, as usual, excessive. A story of reunion (observing pattern, that's another habit) was a dampener; same things, different presentation style, essentially a pattern. On the top of it, the music was western. And of all types, rock. All this in one package is way too much to endure. But then, it was a Farhan Akhtar piece.

A masterpiece, rather. The musical flick opens with a high 

decibel song, sure enough a hint of what's more in the offing. The following two and half hours certainly offer a gratifying experience. The story, as already mentioned, is throughly simple and straight forward. College friends live the passion of music with their rock band. The friendship is beyond perfection. A concert. A deserving win. Then suddenly, an ego clash and so ensues the nightmare. Everything falls apart. This, followed by a reunion, through the machinations of a beautiful - but unsure of her husband's happiness - wife. What perks up this rather dull sounding storyline are the performances. A film get much better, devoid of the stars. The characters, all of them, did their respective parts with finesse. While toned bodies and thoughtful contemporary apparels did there bit of magic, it was the sheer excellence in which the emotions - or the apparent lack of it, as demanded by Farhan's character - were expressed. What amazed me personally was the ease with which Farhan faced camera. Being on the other side of camera, and be perceptibly good, does call for an applause. The innocence on Luke Kenny's face and mischievous Purab Kohli were quite natural. And that tranquil Arjun Rampal! The dude has finally got something really working for him. He is one of the best looking talented fella in the tinsel town, though mostly wasted on silly formula flicks. The panache with which he delivers his dialogues and twitches the strings, both, is worth watching. The ladies party was nice. No hyper acting. No needless crying. No melodrama. Plain simple sentences and straight talk. Good!

Though I have a conservative view towards music, mostly favouring Classical and Light, this rock on experience was no bad. In fact, it's quite an injustice to say so. The 'Socha Hai...' and 'Tum Ho To...' were well enough to make me sway my head. And that last performance in the flick was simply fantastic. I discovered myself tapping the boots, big time. Kudos to the Shankar, Ehsaan & Loy trio. Percussion instruments are anyway my favourite. But then, the guitar play evoked pure ecstasy. All the songs were sung from with soul. The rhythm, the beats, the vocals, the composition were all sounded in sync. The lyrics were grotesque, nevertheless. 'Jag Mein Saanp Baste Hai' and all such crap! Master, though, helped me get enlightened by unravelling that this was an archetypal punk rock piece.

The post production work must also get special mention. The editing was immaculate. Such tight and diligent work made the flashbacks and the present scenes blend well. The pace was also good. No dull moment, even when the upcoming situation was expected (darn this pattern recognition habit). The sets, locations and cinematography were class.

The best part of the movie is that it targets the youth and serves good entertainment. No big talk. No hypocrisy. Yet, touching the sensitive issues of human relationships. As in Dil Chahta Hai, Farhan again dwells upon the lives of a group of friends, over a period of time. How each fares in the walk of life. How one adapts or breaks down. How priorities change. How people change. How things change. And even then, how the passion to rock on remains unchanged.

It's magikal. Certainly.

Abiding Laws

Following traffic rules is not one of the habits of the citizens, in this part of the country. Everyone is in a terribly hurry to reach the destination. Presumably, they hardly get time to schedule the commuting part of the journey. Over generations, it seems, the gene causing panic has also become predominant enough to subdue the genes of patience, diligence and rectitude. The indomitable insistence on honking illustrates this mutation. The most amazing part is, the poor vehicle is always in the wrong lane. The slowest moving varieties, including bullock carts, bicycles, cycle-rickshaws, tractors et al, always discover themselves in the rightmost lane of the highway. Then there is the humble traffic signal, to which the locals fondly refer as 'red-light'. Whether the origin of the term is topical or a metaphorical reference to the pristine business is debatable. People, nevertheless, find it irresistible to cross the stop line.

Last evening on my way back home, I halted on the traffic signal, as it turned red. A SUV flanked on my right and a wagon on the left, just behind my two-wheeler. A few seconds later, a gentleman landed in between the two four-wheelers, on his bike. As expected, he was in a terrible hurry and wanted to take the road leading to the right, of course, after jumping the signal. With yours truly in the way, he urged to give way. I apologised for the obvious absence of space on the sides and the improbability of exhibiting levitation, especially, with my vehicle in tow. He reminded me of the vacant road just ahead of me. I tried - all but in vain - explaining that a red signal necessitates one to stay within the stop line, lest being fined. The gentleman, however, took offence of this polite submission. Demonstrating his commendable spatial skills, he successfully managed to manoeuvre his bike in parallel to mine, alongside the two four-wheelers!

By this time, the signal was about to switch-over to green. Having offended already, the gentleman's mutated genes were getting all the adrenaline instead of the brain. He challenged me to attempt crossing his bike, when the signal - and the clear road - had given me the very right to do so! As the SUV had moved, I slid through the right, leaving the gentleman ponder over his challenge in solicitude.

Circa 300 meters straight down the road, I started decelerating to obey the next traffic signal in the offing. To my surprise, the same gentleman - who was to take right turn at the last signal itself - was there to give me company! A thorough gentleman as he was, he greeted me detailing the privates of his feminine pedigree. While I looked at him startled, both for the reason to stalk me and offering the details never sought, the signal turned green. Without halting, I took my usual turn and slipped to the service road. Interestingly, the gentleman was still desperate to communicate, this time giving even finer details of the privates! I would have waited to fathom the reasoning, but my uninitiated preparations for supper forced me not to. Guess, the gentleman then suddenly realised of coming wrong way. He vanished somewhere. Later, when I narrated the incident to a friend, he chided me for being so reckless!

Strange, isn't it? Abiding laws, it seems, ain't so haute couture nowadays. Perhaps, I need to update myself. Much water has flown down the Noida-Nala since I did so. Are there any coaching institute for this, pray?

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Add On (20.08.2008)

The same friend got ticketed last weekend, for jumping the signal. Taking cue from this, presumably, he had started abiding laws. Yesterday, he confessed to have underwent similar predicament, when a bike ridden milkman forced him to get ticketed at the very signal. Uncanny, I said. Phoonk, said a Delhiite.

SPC dialectic

This week began with tabling of SPC report in the Parliament. Speculations were rife about the salary hike recommended in the report. As expected, the hike came in the range of 40-60% of the current take home. The percentage varied for different scales of entire central government cadre. Media - print, electronic or Internet based - is abuzz with the expert discussions about the feasibility, impact, worth and ilk of the SPC award. It's sorry to note that the word 'experts' has, sort of, lost its meaning.

Talking of feasibility of the SPC award, the monetary size is trifle looking at country's GDP (circa 0.5%). Government has buoyant revenue collection in last few fiscals, thanks to the booming market conditions. Based on this premise, government has formulated umpteen social schemes, NREG being the prominent. The annual outlay of NREG (2007-08: 12k cr) itself well exceeds the annual SPC award amount (8k cr).

The impact of SPC award, nevertheless, has been met with all but negative sentiments. Everyone is suddenly talking of spiralling fiscal deficit; the SPC worsening it furthermore. Interestingly, the award amount is visualised only as fiscal deficit! It's sounds more like the amount being poured straight into the drain. Arithmetic total of the political largess like farm loan waiver (50k cr) and failed schemes like NREG, and the oil and fertiliser bonds (54k cr and 7k cr, resp.) is many times higher than the SPC award amount. How fair and valid are farm loan waivers, from the view of economics, is a separate issue. Bailing out oil companies by issuing oil bonds is, certainly, regressive economics. Not only it keeps the oil companies artificially out of the red, it fails to dissuade people from cutting oil consumption. Moreover, such naively imprudent fiscal policies and measures, done mostly for immediate benefit, hamper the economy in the long run. Given the high percentage of anti incumbency voting trend in the country, if the current government gets voted out, the following one gets an overhead of such bonds, totally uncalled for. The SPC award (and arrears) would come with TDS, meaning almost a third of the amount never leaves the government coffers. The lump sum amount received would go into purchases ranging from car to house, providing additional taxes. Rudimentary estimates assure that the government would get back around 40% of the SPC award amount. Any of this won't happen in the aforementioned politically motivated actions.

The issue of worth of SPC award, however, has got the most banging. All and sundry have come out unanimously stating that the award is worthless - unjust, in view of some - for it manures the perfunctory government machinery. Another case of extremism. No so longer, the very same government job was considered coveted, given its security and associated 'luxurious' life. The present generation scathing the government machinery may first ponder over the fact that it's the immediate two generations - of their fathers and grandfathers - they are calling defunct, as government was - and is - the biggest employer in the organised sector. It's not about disrespecting. It's more of being careful while uttering such generalisation. It isn't a great situation being into, if one has to swallow ones words back. Accusations of bribery, pilferage and tax evasion are being slammed with vengeance. It's amusing to note the innocent take of the common masses in this regard; bureaucracy as the dark side, private enterprise as spotless charactered heroes. One can be amazed to note the novel ways devised by the private enterprises to evade taxes, just to spill the truth.

The point is not to defend the award or the awarded. It's to highlight such points which never see light of the day. Does government need to sell grains at discounted price and recover the deficit by taxation? Even better, does government need to buy the grains, store them and sell it, in the first place? Should government be into the business of producing fabric and sitcoms, both, and at the same time? Should government ply buses and run railroads? Does government need to continue sending postal mails in the age of mobiles, SMS, emails and IMs? Does government need to conjure up textbooks? Government is supposed to govern; frame and enforce laws, regulate - not run - the businesses, fostering competitiveness, while ascertaining fair play for all players - startups or otherwise - and, ensure law and order. That surely require manpower. As much as the present? Unlikely.

Nano

Few days back, Tata Sons revealed there ultra low cost B segment car Nano. The name, perhaps, signifies more of it's cost than it's dimensions. Indian roads have been infested with much ugly Maruti 800 which comes for full one lakh more, since quarter of century. Nano comes as a welcome change. It's not only affordable but also quite an asset.

At inception of the idea of the ultra low cost car, the entrepreneur and his enterprise was ridiculed of offering customers with a ramshackle. With Nano standing clear with Euro IV and Bharat III emission norms along with Indian frontal collision norms, all such persecutors are seen hiding faces. On design parameters, the vehicle offers more space vis-a-vis any of its counterpart and is much lighter. Regarding looks, it's quite hip. Yes, the engine is little less powerful. However, one must acknowledge that the enterprise was committed to stick to the one lakh tag. In the luxe model, we can expect even higher capacity engine, while the standards and rest of the fitments retained. Extrapolating from vehicles current ex-showroom price, the luxe model should still cost cheaper to it's ugly rival. Nevertheless, the engine still needs special mention for it has been crafted specially for the car suiting it's design and expected to offer mileage of 20 KMPL in city conditions.

With all these goodies offered, troubles are expected. It's rather disappointing to note the inability to appreciate the feat of an enterprise that delivers a quality product. Chiefs of rival enterprises were heard offering suspicions on on-road performance of the vehicle. A bunch of hypocrites calling themselves as environmentalist declared this miracle of technological wizardry as a nightmare for already deprecating health of environment. Some other silly 'activists' equated the establishment of Nano manufacturing plant to Capitalist imperialism. A few of these ever driveled that the car is being made for rich on the blood of the poor!

Tats Sons have offered yet another indigenous product from its stable. Something, perhaps, none of the auto industry rivals have done or dared to. Moreover, the Bajajs should better have a closer look at their stable before commenting on (the quality of) Nano. The group has always offered third rate machines let it be famed scooters (that assured bumpy ride) or the all-weather-trouble three-wheelers. Maruti can also do a reality check whether their Omni clears the latest frontal crash norms.

Blabbering about environment has become a fad. While applauding the noble prize for Global Warming, hardly anyone realize that per capita energy consumption has shot up exponentially in last two centuries. It has given so many comforts of life, including mobility. Objective should be to compensate for the environment by crusading for scrapping old inefficient and polluting vehicles and not against newer high-tech ones a la Nano, that clear latest - and supposedly, more stringent - norms. Protests should rather be made to remove diesel engines - cars, trucks and railways - which pollute more and much toxic.

The 'activists' are, incidentally, an irate lot that start capering around any proposed developmental site in the name of protection of incumbents' rights. Rehabilitation is undoubtedly an important step in any of economic activity. But perpetrating misinformation to the innocuous uninformed incumbents and hence halt the entire activity is uncalled for. Delays in project doesn't only mean delay in receiving the fruits of the investment but also a plain increase in the total cost of the project. Both, delay and higher cost ultimately affect the poorest the most for whom, ostensibly, the entire farce is enacted by the 'activists'. One should better check up with the resettled and rehabilitated people, over last couple of decades, to witness how well they have been compensated. The problem, as it turns out to be, is not the compensation but the incurable ailment of demanding more than deserved.

On the debate of personal versus public transport, it's surprising to note why government is ultimately looked upon. Government's job, for that matter, is to frame laws and not ply buses. There is no such law that there can't be privately owned public transport for cities, metros or otherwise! Private transport is more of comfort, if not luxury. Public transport, however, can be comfortable too, provided cost is borne by the commuters. Commuting on subsidized fares will eventually result into substandard infrastructure. Besides, privately owners won't run loss making enterprise (for long). What is required, is subsiding the attitude of persecuting achievers to veil self incompetency, and bringing in that of paying rightful credit (and price) to the owner. That's demanding a Mega for a Nano, perhaps.

A Fix

Last two weeks have been quite troublesome for the stock market investors (and traders). A plethora of reasons are being supplied to support equal number of theories explaining the crash. One of them is the lack of liquidity. Interesting as the it is - liquidity - it has, sort of, liquidated the joyous sentiments of the buoyant market. With the FIIs short selling their stake in the bullish emerging markets to cover up the gargantuan losses incurred in West (particularly US), courtesy the mess perpetrated by geniuses of Harvard and Stanford alumni, the market was low on funds. To complicate the matter even further, there was a big ticket IPO from Reliance and a heavily subscribed IPO from the Future Group. These two public offers, along with other smaller, low-visibility ones, had raked in crores of rupees (and dollars too). With the countrywide panic spread post market crash, so much was the credit crunch that many people withdrew their applications for Reliance or ordered stop payments for the cheques, calling for cancellation of the bid cum application form.

Now, one major cause of this bottleneck of funds - liquidity crunch, as it is known - was that the money was stuck in the middle of nowhere. It takes over 2 weeks for the refunds to reach the retail customer from the date of application. Interestingly, this applies to those customers also who opt for electronic payment by subscribing to the offer using online trading sites. To my understanding, the latter bear the brunt of apparent lock-in of funds so as to be kept at par with the former, who apply using the slower channel, viz. cheques.

A better alternative to this process could be to overhaul the payment process. It would call for payment only in the case when the allotment has occurred. This would save the time in processing the cheques of the applicants in the first place and reprocessing of the balance amount to be credited back. The interest loss on the amount can also be saved. Moreover, it can even help to put a check on not-so-encouraged practice of picking loans to apply for IPOs. This process can, however, breed speculation and over subscription, as the applicant is to pay the sum only after allocation. The menace of over subscription is much more visible in the QIB section, where only 10% of the bid amount is required to deposited. This can be prevented by mandating the applicant - retail ones, at least - to keep a stipulated fraction of the applied money available in the account, till the time the allotment process is on. This also calls for a overhaul in the book building process. In fact, market regulator SEBI is planning to put in norms to cut down the book building process time, to circa one week. Now, requiring the applicant to spare a fraction of application money in the account for one week isn't outrageously unreasonable. The purported proposal assumes that the applicant has account in a bank, that has incorporated latest technologies like Core Banking Solution, ECS remittance or RTGS payments. Also, that the bank either itself is a Depositary Participant (DP) or has syndication with an existing DP. This is required to connect the Demat account of the applicant with the funds account.

With two of the topmost banks in the country facilitating its customers with world class online access to their banking accounts, it looks feasible. If not now, then in near future. For Internet savvy public, cheques are already passe, and quite right so. Not only cheques are outdated, slow and tedious but also, unfriendly to the environment. Nowadays, anyway, the Environment is ostensibly perceived to be hotter than the stock markets!

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Addendum 2: Now, SEBI formalises a method under the name of Application Supported by Blocked Amount. The BSE puts it in an even simpler way.

Addendum: RBI came up with a fiat similar to the fix suggested above (http://www.livemint.com/2008/04/07004211/Sebi-will-reduce-IPO-listing-t.html). Also see- http://news.bbc.co.uk/2/hi/business/7417303.stm