A Personal Finance Wishlist in 2016

Published: May 23, 2016 at 3:56 pm

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Here is a list of developments that I wish would come true in the personal finance space. The idea behind this post is to elicit your response to the list and also share your own. This is not a wishlist for me, but for all of us.

Heath insurance should be sold online sans commissions

Health insurance can be purchased online but the insurer pockets the commission like AMCs used to do before Jan 1st 2013. It would be great if health insurance can be purchased online and the cost does not include agent commissions. Practical? Yes! Unfair to customers otherwise.

2 IRDA should handle pure insurance products only

Insurance product with an investment component and the National Pension system should come under SEBI. A single body for regulating investments just like a single body for regulating banks. This is not impossible but unlikely. The reason for wishing this is because it would enable easier separation of advisors (who charge a fee for advice) from agents (who earn via commissions). Practical? Why not? Possible if the govt. wants to.

 

3 Banks should enable buying only ‘direct’ products (mfs, insurance etc.)

I wish banks would enter into a profit-sharing arrangement with insurers and AMCs and enable online buying of mutual funds and insurance without commissions. For the volumes that they can bring in, this is not unreasonable. The beneficiary would be the customer. Practical? A single investment regulator+RBI can make this possible. Banks will lose revenue in one way, but can also gain in another way.

4 Bank relationship managers should be eliminated or should be made available only for a fee, be regulated by SEBI with a uniform education and experience requirement.  The banks are more than capable of pushing this service to the ‘wealthy’ if they want to. Practical? Banks may protest but I think they can survive. Today many are repulsed by RMs. Can be good for PR?

 

5 Closed-ended funds should be banned They are primarily for AMCs to lock-in products and because of the upfront and guaranteed commissions provides an easy way to mis-sell. Practical? Yes!

6 ELSS dividends should not be declared in the last two quarters of the year. Amcs promote last-minute tax-saving in ELSS funds by declaring dividends. Got to stop. Practical? Yes!

7 One-time KYC the moment a guy becomes employed 

We are a young country. Millions will become salaried in the coming years. The moment they get a salary account, their KYC information is recorded and is valid across all AMCs, primary markets and secondary markets, NPS, EPF, PPF etc. One KYC to rule them all! Practical? Yes! Soon no more a wish!

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8 Real Estate prices should be linked to an index and all transactions should be recorded online with matching prices. Practical? Pigs might fly?!

9 Tax rules should depend on the underlying asset class and not the product

Capital gains from the 50% equity in the NPS should match the tax rules for stocks and equity mutual funds. Similarly, the gains from 25-30% bonds in equity-oriented balanced funds  should be the same as that of debt funds. So that would make EPF taxable! 🙂

Why? Because uniformity = simplicity. Practical? Yes! Protests? Loud!

10 Income tax filing should be eliminated All financial transactions should be recorded and tax deducted at source using relevant rules and reported to ITO with PAN no of the assessee. They send a report which can be ratified by us. Practical? Yes! Will require multi-agency co-operation.

11 Tax slabs to be linked to inflation and small saving scheme interest rates linked to GOI bond prices

If home loan rates can be linked to policy rates, why can’t tax slabs be linked to inflation or policy rates? We pay less  tax if inflation is more and vice versa. Same with small saving schemes.  Practical? Yes! believe it or not, we are getting there gradually.

12 All forms of subsidy should be removed for at least those above 10% tax slabs  Inflation will drop down or at least not fluctuate so violently. Painful initially, be we will live. Practical? Yes! Taken several steps towards that.

I got a lot wishes, but will stop here to receive the brickbacts 🙂

Do share your thoughts on these and share your own wishlist.

 

 

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8 Comments

  1. Very good wishlist. Many are practical and possible. May be, it will take time.

    A decade ago, we were paying 2.25% entry load and it took some time for us to move to Direct Plans. Even more time to make it really user friendly to invest in Direct Plans.

  2. The wish list is very much needed in these days. All the points are very good. Reg. ITax, I suggest that form 15G/H should be accepted till the end of the April month. Some banks are insisting that they should submit 15G/H in the first week itself, otherwise they will deduct tax on income on FDs.
    Nextly, banks and others should give interest income certificate latest by May15, so that ITax can be filled in appropriate time without tensions.

    On the whole the wish list is a good one. we will have wait and see who will fulfil our wishlist 2016. Please do inform when they are.

  3. TDS on interest should be eliminated. This is an outdated practice. It was necessary when everything was on paper and it was easy for individuals to avoid tax by not reporting earned interest. With PAN and computerized systems, it is hard to avoid tax legally. Banks & Companies can continue to report interest payments to the tax department. Submission of Form 15G/H is a hassle for individuals. Formats of the forms are changed frequently by the tax department with very little time to adhere to the new format at the beginning of the new FY. It is an added cost to the banks and companies to manage Form 15G/H and submission of the deducted tax to the tax department and sending TDS Certificates Form 16A to all depositors (including those whose tax has not been deducted).

    If Wishes Were Horses, Beggars Would Ride

  4. Stamp duty to be reduced to 5% or less across states to disincentivize under reporting.
    Long term capital gains (for individuals) to be added to income & taxed based on slabs or reduced to 10%
    All exemptions u/s 80 to be clubbed into one amount without bifurcations
    All surcharges, levies, cess over tax to be removed
    Penalty of 1% per month for delay of ITR submission to be brought down to Rs.500 per annum
    SB interest to be tax free without limit of Rs.10,000 as interest is so low
    Subsidy on power, diesel, fertilizer, seed to agriculture to be removed as income is tax free
    Subsidy to BPL to be adjusted against MNREGA disbursements

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