Taxes, if its something we think about at all, it's at the end of the financial year. If you earn a salary, you grab your Form-16 and call your CA or you go online and file your returns (A business-owner will go through a more complicated process). The problem with this whole setup is that it is impersonal and tax inefficient.
Here’s what I mean by ‘tax-inefficient’; say its tax season and you realise that your tax obligations are huge, so you drop a lump-sum into your PPF or an ELSS. This is not really the best way to go about things. Even worse, what if you didn't have that lump sum ready? Then there is the issue of improper filings (it boggles my mind that so many people don't know that the interest from their savings account is taxable, just the way interest from a fixed deposit is). The Income Tax department is getting more efficient and automating more processes every year, meaning more and more people are getting notices for non-compliance and trust me, you do not want to get an IT notice.
A better way to manage your taxes would be to structure it as an ongoing service; where your CA gets regular updates on your finances and investments and then works to reduce your taxes and maximise profits. Investors, in particular, stand to benefit a lot from such services since advanced techniques such as tax-loss harvesting then come in to play. Making taxes an ongoing service also reduces the chance of mistakes in filings since the CA now has far more time for each account.
The challenge companies would face is in making such as system seamless and easy for the client because let's be honest, no one wants to spend time on taxes; you want someone else to do it. One solution I have been thinking of is to create an online vault of sorts when you can upload and update your finances (perhaps your family’s as well). Your CA can then access this information and plan accordingly. We have been testing such a system at Minance and have found our partners to be extremely pleased with the service as it takes much of the hassle out tax filing. Internally, we find the process to be more efficient for our tax planners and accountants.
We live in a world where customers are smarter and more demanding than ever before. Good service is paramount and the Indian consumer is willing to pay a premium. It is now up to companies to build products that will cater to such demand or be left by the wayside.
The author is the CEO and Head of Investments, Minance.