When the first draft of the Direct Taxes Code was released in August last year, it promised to make laws more rule-based than exception-based, bringing some stability to tax rates. For the average taxpayer, this would have obviated the need for a consultant every year. However, in the second draft released on 15 June, many of the exemptions are back. As interest groups ready themselves with representations for more changes, one should not be surprised if the final version is completely different from the original proposal. This is not the only instance of policy flip-flops. Within days of announcing an increase in public shareholding for listed companies, the Finance Ministry is thinking of exceptions. The final word on the base rate for loans is yet to be heard though the RBI has announced a date for its implementation. Within months of the market regulator banning entry loads on mutual funds, AMCs were asking for remedial action as they faced a drop in net inflow. The insurance regulator has suddenly woken up to make Ulips more investor-friendly.
These regulatory and policy fluctuations have flummoxed even the experts. As individual investors, we hardly have a say. What we can do, though, is to try and make our financial decisions more stable. We end up losing the most because of our own vacillations-chasing or dumping a stock on someone's advice or buying an insurance policy on the agent's suggestion, only to dump it the next year. In fact, life insurance is almost always bought for the wrong reason. Instead of 'insurance', it's the guaranteed returns that lure investors. This, even though there are other options that generate better returns at a lower cost. Our cover story looks at life insurance keeping these aspects in mind. Read it for clarity on the policy best suited to you, understand whether Ulips, in their new avatar, are any better, or question the need for a life cover.
Rakesh Rai, Deputy Editor
