Government rightly rules out postponement of tax filing dates
Contrary to expectations, the deadline for filing of the income tax returns will not be extended beyond 31st July. This can create problems, but it is a step in the right direction of going by the book.
Burden of expectations
In the previous two financial years, the last dates for filing tax returns were put off by 3-6 months to accommodate for the COVID disruptions. Logically, there was an expectation that FY22 may also see a similar postponement of the filing date. However, the Ministry of Finance has now announced that they will stick to the original deadline of 31st July for the filing of returns. This could create some teething issues for the tax filers but it is a step in the right direction.
Things are back to normal
The general tendency among people is to treat flexibility as a norm. The last 2 years were exceptional years and the taxes were filed under tough conditions. Hence flexibility was warranted. FY22 has not been abnormal in any way, and while there have been complaints about the Infosys tax software, that is more of an exception than a rule. One more argument for postponement is that too many people have still not filed returns. But that is more of a vicious cycle. You can’t demand a postponement because you anticipated one. There are still 9 days left and the Income Tax website can handle up to one crore filings a day.
It can still sail through
Infosys has already confirmed that the bugs in the software have already been located and rectified. Going ahead, any bugs will not impact the regular filers in any significant way. In fact, the best thing is for filers to start the return filing process well before the last day rather than getting caught up in last minute hassles. Today, there are 7-8 crore annual tax filers and less than 20% have filed till date. The government is of the view that while it may create server pressures, the back end is equipped to handle such exigencies. Hence there is very little justification to demand the postponement of filing dates beyond the 31st of July. It cannot become a norm.
Some food for thought
There are few things that government can think up for the coming years to cut down the pressure in the last few days. For example, one way is to exempt all those earning less than Rs5 lakhs from filing returns. That increase in limit will substantially reduce the pressure on the tax filing infrastructure and make the process smoother. The other option is to allocate dates and slots when a person with a certain PAN number can file. This will distribute the pressure over the last few days of tax filing and ensure that the entire process becomes smooth and seamless. The infrastructure is robust and a little bit of planning can ensure a timely process in the years to come!
Ashish Chauhan may be up against his biggest career challenge
The candidature of Ashish Chauhan for the post of MD & CEO at NSE has been cleared by SEBI. Shareholder approval for the same is still pending, but that is more of a formality. For Chauhan, the NSE stint could present a big challenge.
Hardly new to NSE ecosystem
To be fair, Ashish Chauhan is not new to the NSE. He was part of the core team that moved from IDBI to set up the NSE under the leadership of Dr. RH Patil. He was also part of the online trading and the setting up of the F&O business in 2001. Of course, Chauhan eventually branched out on his own and then was the MD & CEO of BSE for 10 years. But he brings a strong grounding at NSE and that will stand him in good stead.
Getting the sheen back at NSE
It may sound bizarre to talk about getting the sheen back since the NSE continues to dominate stock exchanges in India in terms of volumes. In the five years under the leadership of Limaye, the NSE only reinforced its position as the premier stock exchange in the world for trading in derivative products. The issue is about exorcising the ghosts of the algo scam, which continues to rock the exchange even after 6 years. Some of the casualties in the process were big names like Ravi Narain and Chitra, and Chauhan will have to ensure that these are taken to their logical conclusion. NSE has to quickly get beyond the past .
The candidature of Ashish Chauhan for the post of MD & CEO at NSE has been cleared by SEBI. Shareholder approval for the same is still pending, but that is more of a formality. For Chauhan, the NSE stint could present a big challenge.
Hardly new to NSE ecosystem
To be fair, Ashish Chauhan is not new to the NSE. He was part of the core team that moved from IDBI to set up the NSE under the leadership of Dr. RH Patil. He was also part of the online trading and the setting up of the F&O business in 2001. Of course, Chauhan eventually branched out on his own and then was the MD & CEO of BSE for 10 years. But he brings a strong grounding at NSE and that will stand him in good stead.
Getting the sheen back at NSE
It may sound bizarre to talk about getting the sheen back since the NSE continues to dominate stock exchanges in India in terms of volumes. In the five years under the leadership of Limaye, the NSE only reinforced its position as the premier stock exchange in the world for trading in derivative products. The issue is about exorcising the ghosts of the algo scam, which continues to rock the exchange even after 6 years. Some of the casualties in the process were big names like Ravi Narain and Chitra, and Chauhan will have to ensure that these are taken to their logical conclusion. NSE has to quickly get beyond the past .
Which way does the rupee move from current levels?
Predicting the rupee movement is a bit like tossing a coin. There appears to be a 50% probability of both outcomes. RBI has done its best to defend the INR around the psychological 80/$ levels but that may not be possible for too long. The question is, which way INR will go?
Why 80/$ is an important level
For several reasons, the psychological level of 80/$ is critical. Firstly, look back from 2007 and the rupee has cracked from 40/$ to 80/$. That is an annualized rupee depreciation of around 4.5%, and that reasonably reflects the differential in inflation between India and the US over the years. Also, most borrowers in dollars are hedged till around 80/$ and any rate beyond that creates problem. In a sense, 80/$ is like a tipping point.
Also, the stock markets have maintained a dollar adjusted depreciation of around 20%. With the Nifty down around 13% and the dollar depreciation around 7% since the start of 2022, the overall value loss in dollar adjusted terms is around 20%. That is reasonable and any sharp rise beyond the 80/$ levels would mean that the Indian markets officially tip into a bear market syndrome. Also, the FPIs have been in the sidelines in the last few days due the RBI support to the INR at around the 80/$ levels. This is after FPIs have sold around $35 billion in equities since October 2021. INR beyond 80/$ would only mean a sharp sell-off by foreign portfolio investors.
How long can RBI intervene?
It is official that the RBI has been selling dollars in the spot market to defend the Indian rupee. It did that around 78/$ and is now aggressively doing it around the 80/$ levels. RBI sources have now indicated that the central bank would be willing to commit about one-sixth of its forex reserves to defend the rupee, if the need arose. The RBI has already seen its reserves deplete by $60 billion, so another $40 billion is what the RBI can afford to use up to sell dollars. But, today, the RBI also defends the rupee through the NDF market, dollar forward market and also the exchange traded USDINR futures and options market. So, there are several options beyond spot.
Time to action Plan-B One of the key lessons that we learnt from previous rupee runs is that mere spot market defending is not enough. In 2013, the RBI went out of the way to attract dollars into India, which set the tone for a sharp recovery in the INR. The onus is on the RBI to work out the modalities. Whether they want to make the flow of FPI equity, FPI debt or NRI deposits easier, does not really matter. What matters is the policy is pursued aggressively till the dollar flows and the rupee value normalize. There is a limit to intervention and today there is also a lot of technical pressure on the rupee. The sooner the RBI comes in to soothe frayed nerves, the better it will be!
