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Antibiotics – A Magic Bullet; But, Not For All!

The word Antibiotics comes from the Greek words ‘anti’, meaning ‘against’, and ‘biotikos’, meaning ‘concerning life’.  Antibiotics are mainly active against bacteria.  They do not cure infections caused by viruses or parasites or fungi, though some antibiotics may act against parasites.  Looking at the second part – “biotikos”, whose life is at concern?  It’s not just the life of bacteria, our lives too!  Antibiotic usage goes with the idiom ‘double edged sword’ – something that can be seen as a benefit and a liability.’ A diligent restrained use of antibiotics is a must for a secure tomorrow!

Antibiotics are one of the most commonly prescribed medicines only next to paracetamol!  There are several reasons for this (ab)use.  To list a few –

  • Parental anxiety/Parental pressure/Parental Misconception– A common scenario found in most of the outpatient clinics.  Any child with high fever, a runny nose, loose stools, vomiting etc., parents’ first remark would be, “Doctor, my child is having an infection, please give him some antibiotics to make him feel better as early as possible!”
  • Physician’s anxiety – Mostly seen with young or newly started physicians.  “What if I don’t write an antibiotic and this child doesn’t get better?  What if the child is taken elsewhere and doesn’t come back?  I may lose more patients because of this one parent who may say to others – ‘this doctor is not good.  He did not prescribe antibiotics and my child’s condition deteriorated’ and so on.”
  • Pharmaceutical companies – They pressurize the health care professionals to meet the target or to move the products in exchange for some incentives.
  • Luxury of insurance coverage This has been trending over the last few years.  It is commonly heard from parents – “Doctor we have insurance.  Please write the best possible antibiotic.”
  • Corporate or Private Health center’s pressure – A pharmacist or the supervisor walking into the doctors’ chambers saying “Doctor, look at this list of antibiotics, not moved at all…expiring in next few months!”
  • Weekend Syndrome – This syndrome owes its origins to the busy life schedules of the modern world. A busy parent may think, “Today is friday/saturday!  Doctor may not be available for the next 1-2 days.  What if my child doesn’t recover?  Better to take an antibiotic.”  A Doctor’s thought, “Let me give them antibiotics, just in case?”  Both these thought processes aid each other – with the end result being an antibiotic prescription.
Living weekend to weekend - causes tremendous pressure among working couple
Living weekend to weekend – causes tremendous pressure among working couple
  • Lengthy Line – Lack of Time Syndrome – This mostly happens with busy practitioners.  To evaluate any child with fever, it takes at least 10-15 minutes.  If there is a line of 60-80 children, the evaluation time can range anywhere between 10-12 hours nonstop.  Practically impossible for a human mind to focus on such extended periods of time.  The easiest option would be to prescribe anti-biotic – thereby saving time.
  • Play safe policy – “Why take chances?”
  • Let’s make others happy attitude!  Quick antibiotic – Parents are happy.  Pharmacists and pharmaceutical companies are happy. It all looks like a win-win situation.  
  •  Lack of forethought – Not thinking of what will happen if the antibiotic becomes useless tomorrow due to development of resistance, which by the way is not a farfetched idea. The devil is just around the corner.
  • “Quack – Quack” Found mostly in sub urban or rural areas.  In many rural areas where there is dearth of qualified doctors, unqualified practitioners prescribe anti-biotics as quick fix – without understanding the consequences. In many cases these “Doctors” acquire their knowledge through internet and through “Medical Representatives’ University”.
  • Working parents’ apprehension: More the number of days lost in taking care of a sick child, more to lose at the workplace.  They end up pestering the doctor for antibiotics.

Myth Busters –Clinical scenarios commonly we come across

  1. Myth: Fever = Bacterial infection.  Many parents believe that fevers are due to bacteria and don’t get cured without antibiotics. 

Buster:  Most of the fevers in pediatrics are viral and don’t need antibiotics.  Good nutrition and hydration, fever control and adequate rest are all that is required.

  1. Myth: Loose stools (diarrhea), vomiting, abdominal pain = Food poisoning due to bacteria and an antibiotic is a must.

Buster: Most of the gastrointestinal symptoms are either due to a virus or preformed toxins or self-limiting bacterial infection.  A good (re)hydration with ORS or tender coconut supported by proper nutrition, adequate rest, probiotics (benefit of doubt) – yoghurt or commercially available probiotics and other micronutrients like Zinc should suffice and/or anti-emetics.

  1. Myth: Runny nose, fever, throat pain = Throat infection due to bacteria.  Better to start antibiotics early!

Buster: Most of the upper respiratory infections are due to viral etiology, unless proved otherwise.  Supportive care should work most of the time.

  1. Myth: Injury/ Wound = Antibiotic is needed to prevent further infection.

Buster: Unless it is case of major or contaminated wounds – proper cleaning and local care should do the trick.

  1. Myth:  Too much cough = Severe bacterial infection.

Buster: Most kids cough either due to a viral infection or some allergy which should be taken care of without anti-biotics.

  1. Myth: Fever has disappeared after 2 days of antibiotic; So why take it for a prescribed number of days?  Let’s save it for the next fever/infection!

Buster: Properly diagnosed and treated bacterial infection usually responds to antibiotics in 48-72 hours.  That doesn’t mean the infection is totally cleared.  It is necessary to complete the prescribed course to eradicate the infection completely.  

  1. Myth: I have the same symptoms as last month – so I bought the same medicines from pharmacy – but it’s not working this time- what’s wrong?

Buster: There are several bacteria which can cause similar symptoms; Let the doctor do his assessment. A doctor is professionally trained to identify these subtle differences and prescribe suitable medicine. Do not try to be a doctor! 

  1. Myth: “Doctor!  The antibiotic you gave worked like magic.  One dose and I’m alright.”

Buster: Effectively treated an infection responds quickly; if the response is so quick with one dose, it is most unlikely a bacterial one.

With an effort to supervise judicious prescription of antibiotics by clinicians and followed adequately by the patient/parents,Antibiotic Stewardship program was brought into existence.  Stewardship program would guide us to use antibiotics diligently, in a restrained manner for securing tomorrow’s concern while treating infections.

To Be Continued…

Disclaimer:  The above article is only to create awareness regarding antibiotic use.  The given information should not be used as a substitute for doctor’s consultation in case of any clinical symptoms mentioned above.

In my last article Selection of Correct ITR Form, I had covered the topic of selecting the correct ITR form. In this digital era tax platforms with their powerful software have helped tax-paying communities in a big way. But it is still not all that easy. Taxpayers generally tend to make many omissions and mistakes in filing income tax returns – which can lead to unnecessary notices from the department. I have compiled some of the most common mistakes.    

Mistakes in Filing Income Tax Returns:

  • Personal Information: Ensure that you have given the correct name, address, valid e-mail, and valid mobile number. These details are necessary for obvious reasons. Any wrong inputs might cost you with not receiving the communication from the income tax department. Taxpayers should be aware that communications from the tax department go to the e-mail and mobile number given in the profile section of the income tax portal, hence it is necessary to update e-mail and mobile number.     
  • Bank Details: It is mandated that all savings and current accounts held at any time during the relevant financial year are to be provided while filing IT returns including accounts closed during the financial year. It is important to note that all the bank accounts are mapped to either PAN or Aadhaar. Effective 1st April 2020 PAN and Aadhaar can be used interchangeably. Ensure that you have given the correct IFS Code and account number to receive a refund correctly. The Income tax department has initiated the process of pre-validation of bank accounts to receive refunds as well as EVC (Electronic Verification Code to Verify IT Return).
  • Aadhaar number: Resident individuals and citizens of India must furnish the Aadhaar number/Enrollment number in the IT return. It is also important that Aadhaar is to PAN. 
  • Residential status information: In the ITR, you have to give the correct information regarding residential status because taxation depends on the residential status of the taxpayer. (Also read Taxability of Dividends – NRIs, and Recent Changes to Residential Status under Income Tax Act). As per the Indian Income Tax Act, A taxpayer is categorized into a. Resident & Ordinarily Resident – Global income is taxable. b. Non-Resident – Income earned in India is taxable. c. Resident but not Ordinarily Resident – Along with Income earned in India income from business (controlled from India) and profession (set up in India) is also taxable.  

For the financial year 2019-20, due to the Covid-19 pandemic, the department has issued a circular regarding the calculation of the number of days stayed in India for the purpose of residential status. If anyone visited India on or before 22/03/2020 and unable to leave India, then the days to be ignored in the following manner:

DescriptionDays to be Ignored
Unable to leave India on or before 31/03/2020.From 22/03/2020 to 31/03/2020
Quarantined in India due to Covid -19 on or before 01/03/2020 and has departed on an evacuation flight on or before 31/03/2020 or unable to leave India on or before 31/03/2020.Period of stay from the beginning of quarantine to departure or 31/03/2020 as the case may be.
Has departed on an evacuation flight on or before 31/03/2020Period of stay in India from 22/03/2020 to date of departure.
Residency days” tweaked to help stranded NRIs, thanks to COVID-19
  • Asset and Liabilities Information: It is mandatory that if taxable income is more than Rs. 50 lakhs then the details of all assets and liabilities as on 31st March of the year to be provided in IT return. It is to be noted that the amount to be filled is the Cost of the Asset and not the Market value.
  • Foreign Assets and Liabilities: It is to be noted that an individual who is resident should give his/her foreign asset and labilities irrespective of his/her quantum of Income.
  • Directorship in a company: Generally, a taxpayer having income from salary and income from other sources tend to miss to quote directorship in a company as ITR form will not show any error even if it is not quoted. Point is to be noted here is while the company filing its tax return details of all the directors along with their DIN and PAN will be given. The CPC has designed its program to detect the error while processing the IT return of the individual. Non-furnishing of required details will attract notice from the department and also attract a penalty of Rs. 10,000/-
  • Partner in Partnership Firm/LLP: It is to be noted that details of investment in the partnership firm and Limited Liability Partnership (LLP) have to be given such as capital balance and percentage of share of profit and income received from Firm/LLP i.e remuneration and share of profit.
  • Investment in unlisted shares: The taxpayer has to provide the details of unlisted shares held during the financial year such as the name of the company, PAN of the company, shares acquired during the year, and shares transferred during the year.

It is to be noted that unlisted company does not mean the only private limited company. It also includes public companies that are not listed on NSE/BSE. Recently, few companies which were listed earlier have delisted voluntarily. If you are owning any shares of those companies the same shall be disclosed in the IT return.

2020 has been an extraordinary year. The onset of COVID-19, consequent lockdown, payroll cuts, retrenchments, and bankruptcy of companies like JC Penney, Hertz etc has been the new normal and guess what, the year is not over yet!

Financial markets have been on a roller coaster ride. A steep slide in March followed by fiscal stimulus / liquidity measures and the strong pull back in financial markets. Among all this mayhem, gold has become the new darling of investors outperforming all asset classes over the last three years delivering compounded return of over 16%.

Other than doomsayers, it has taken all the analysts by surprise.

So, what is fueling the rally in gold? I have tried to enumerate some of the key drivers of the rally which should provide some color to the future outlook of the asset class as an investment proposition –     

  • Gold is traditionally considered as a hedge against inflation and a safe haven for investors in times of uncertainty. Gold has a negative correlation with REAL interest rates in US. REAL Interest rate refers to the difference between US Treasury yields and inflation. Gold as an asset class gains when interest income does not compensate for the loss of purchasing power due to inflation. When the REAL interest rates fall, gold goes up in value and vice versa. Below is a chart of REAL interest rates and gold prices over the last 40 years.
Gowth Graph of Gold Price Rate
Graph showing inverse relationship between Real interest rates (red line) and Gold prices (yellow line)

Central banks have been on a spree of money printing in the aftermath of COVID-19 to provide liquidity to businesses to survive the downturn. Fed Bank alone has printed 3 trillion US Dollars in the aftermath of Corona. Interest rates have been maintained near zero to provide relief to businesses to enable them to raise money to tide over shrinking cash flows / service existing loans. Low interest rates also provide relief to Central banks to service sovereign debt which has ballooned due to fiscal stimulus.

Injection of money in the economy coupled with supply chain disruptions due to lockdown have raised inflationary expectations. US Treasury yields are at historic lows pushing REAL Interest rates below zero sparking a rally in gold.

  • Goldman Sachs in its report released in July ‘20 has warned that the U.S. dollar may lose its status as the world’s reserve currency. To quote from the report of Goldman Sachs “The resulting expanded balance sheets and vast money creation spurs debasement fears. a greater likelihood that at some time in the future, after economic activity has normalized, there will be incentives for central banks and governments to allow inflation to drift higher to reduce the accumulated debt burden.”  With US Treasury yields falling to all-time lows, fear of loss of faith in Greenback, Central banks may look at gold as the favoured asset class to diversify their holdings.
  • Monetary and fiscal stimulus by Central banks helped in avoiding another Lehman brothers and a repeat of 2008. It implies that there is more money chasing financial assets than ever before. With world economy shrinking in the aftermath of lockdown, debt yields falling to all-time lows, there exists incentive to shift allocation in favour of gold. Geo-political challenges, pandemic and intensifying trade war strengthens the choice of gold as an asset class.

Future outlook in the rally in gold

While the above arguments sound convincing than ever before, we need to closely look at some more data points to see whether rally in gold is sustainable.

Gold does not generate cash flows and has minimal utility as an asset class except towards jewellery. Therefore, traditional models of estimating the fair value of the asset by estimating / discounting cash flows do not work in case of gold.

There is a traditional belief that gold does not fall in value. If we go back into history, gold made a high of $1800 in 2011 only to fall below $1100 levels in 2015. So, gold DOES fall in value and the fall could be steeper than we might think.

Gold Pieces
Investing in gold without understanding other economic indicators could be gamble

There does exist a distinct risk that dollar may lose its status as the world’s reserve currency. Money printing by US Fed, debt at 107% of GDP and the world’s largest trade deficit at USD 616 billion, could be the harbinger of a fresh world order. While the collapse of US dollar and the rise of alternative currencies may be inevitable, there is nothing to indicate that we are about to breach the tipping point for it to be imminent. There goes a saying that markets may remain irrational much longer than we can remain solvent. For all we know, US dollar may continue to hold fort as the reserve currency in the absence of alternatives for few more cycles of rise and fall in gold prices. 

Let us look at some data points on the real demand for gold in Q2, 2020. Consumer demand for gold jewellery fell by 53% in Q2, 2020 due to lockdown and buying by Central banks fell by 50%. So, what is driving the spike in gold prices? Investment demand for gold increased by 98%. Rally in gold prices is therefore due to Investment demand which is feeding upon itself and is reminiscent of the tech bubble of 2000 before its collapse. 

Most investment houses & analysts are bullish on gold today. But were they bullish on the yellow metal when it began its upward trajectory in the last quarter of 2015? Unfortunately, the answer to this question is NO. These voices tend to follow not predate the rally in an asset class and become louder when the asset class gets nearer to peak ( highest point in prices) than trough (lowest point). And then they pick another asset class citing it to be the next wealth creator and then another.

Today skepticism runs high over investment in equities while there is herd buying happening for gold. It normally pays to play contrarian in markets and resisting doing what is common sense.

Ramesh aged 35 Years, an IT professional, has an annual income of around Rs.15 lakhs. He lives with his spouse, a homemaker, and a daughter of 4 years age. One of his close friends, Suresh, met with an accident. The hospital bill came to Rs. 3 lakhs and unfortunately Suresh did not have any insurance. To foot the bill, he had to close his bank FD. This FD was earmarked to fund his child’s educational needs, which is not a possibility now. His child’s educational needs remain underfunded.

Suresh was the sole bread winner of his family and was asked to take complete rest for four months. This is a double whammy for people like Suresh – one being uncovered medical expense and another being loss of income. Suresh was rightfully worried as to how he would manage his family expenses for the next four months without any income. Looking at the situation of Suresh, Ramesh felt its high time, he takes up insurance cover. But he was not sure what kind of risk he is exposed to and how does he go about estimating and managing his risk?

So, let us analyse the above situation and understand how to “Cover Your Risk

Step 1 – Cover Your Risk – Life Insurance

Ramesh is a very energetic and positive person; he takes good care of his health and strongly believes he will live longer. But let’s be realistic, death is certain and only the timing is uncertain. Ramesh has another 25 years of work life. Assuming he will earn the current income for the next 25 years (without taking any growth), he has the potential to earn Rs 3.75 Crore (Rs 15 lakhs/year X 25 years). Ramesh should take coverage of Rs 3.75 Crore to protect the income loss for the family in case of his demise either natural or accident. So, let’s see the different kinds of products available in life insurance for Ramesh to safeguard his family’s financial position in case of his demise.

  • Term Insurance — Term insurance is a pure risk cover and a very good product. The premium would depend on age, health condition, and other factors. This product gives very good coverage for a very small premium amount, for example, it would cost approximately Rs 35,000 per annum for Rs 1 crore coverage, and if he pays a premium of around Rs 1.30 lakhs he will get a coverage of Rs 3.75 crores.
  • Insurance cover + Savings (Conventional product/Non-market linked) — These products specify the returns for the investors which can be either fixed or variable. The coverage varies between 10 to 15 times the premium. Here Ramesh shall pay a premium of Rs 1 lakh per year, to get a coverage of Rs 10 to 15 lakhs. In the case of his demise, the family will get an amount between Rs 10 to 15 lakhs. It is equivalent to Ramesh’s one-year earnings. How can his family survive on this amount for the rest of their life? It is not possible. So always treat this product more like a savings product and less as an insurance product.
  • Insurance + Investment (Market Linked or ULIP) – ULIP products are the flavour of the day, it is an investment product that invests in Equity & Bond market. The investment return depends on the market performance and the re-balancing strategy you deploy to move funds between bond and equity markets. In terms of coverage, it’s like a savings product where the coverage varies between 10 to 15 times the premium. If Ramesh pays Rs. 1 lakh premium, the coverage would be between Rs. 10 to 15 lakhs. So, again this is more of an investment product and less of an insurance product.

Step 2 – Cover Your Risk – Health Insurance (Disability Cover) – Income loss due to sickness or accident

Ramesh, realized life insurance will only cover for death; but what if Ramesh falls sick or meets with an accident which might reduce his earning ability?

Accidents could be the reason for loss of income
  • Critical Illness Cover—Health Insurance companies offer critical illness cover policy. Critical illness products cover pre-specified critical illnesses. In case the policyholder is diagnosed with any pre-specified critical illness under the policy, then the policyholder will get the sum assured or pre-specified amount. This can be used towards the hospitalization expenses or can be invested to create a regular source of income.
  • Personal Accident Cover (PAC)—Personal Accident Cover can offer financial support in case of loss of income due to accident. Ramesh can get a PAC for Rs 1 crore at an approximate annual premium of Rs 8,000. In case Ramesh meets with an accident and it leads to either disability or death, based on the extent of disability he will get compensation. This can be invested and that can offset the income loss due to disability either fully or partially.

Step 3 – Cover Your Risk – Health Insurance – Hospitalization Expenses due to sickness and accident

Health cost in India is on the rise. A report by Mercer Marsh Benefits said the forecasted Medical trend rate will be 10% in India, higher than the general inflation. Ramesh, when he heard Suresh had to close his bank FD to make the payment towards hospital expenses – he could see that happening to him too if he fails to take adequate cover. If he opts for a family cover (himself, spouse & child) of Rs. 10 lakhs for hospitalization expenses, it would cost him close to Rs 20,000-25,000 per annum. But he can have peace of mind, that in case of medical emergency he does not have to sell his investments, assets or borrow money.

Conclusion

Insurance is one of the most important financial products which mostly gets lower priority compared to other products. Buy an insurance product with the primary objective of covering risk and not for returns or tax benefits. If you can pen down five friends or relatives, who will financially support you and your family for the rest of the life, in case of your income loss due to disability or death, then you don’t have to consider insurance. If you cannot pen down the names, then insurance is a product you should look at seriously and Cover Your Risk.

India has been seeing double digit growth in its taxpayers’ base for the past few years. For the financial year 2018-19 number of returns filed was around 6 crores. It is estimated this year it should be upwards of 6.5 crores. Many of them will be filing their returns for the first time. Technology has made newcomers’ and old timers’ life easy in terms of filing the returns. Gone are the days when the taxpayer had to stand in the queue for hours to file returns. With the advent of online Income Tax Platforms filing of income tax returns is much easier. However, one must be careful while filing returns online. For example, as simple as selection of correct ITR Form – however trivial it may sound, is one of the important aspects of filing the returns. This will help you avoid unnecessary notices from the income tax department. Convenience of online filing could be lost in long chain of communications with the department.

The following table depicts the Form to be selected while filing IT Returns in the case of Individuals.

Form ITRWho can use itWho Can’t
ITR -1a. Resident individuals  
b. Having total income up to Rs. 50 lakhs  
c. Having income from salary & one house property.
d. Income from other sources like bank interest, dividend, family pension etc.  
a. Non-Residents. 
b. Having income from more than one house property.  
c. Director in a company.  
d. Investment in unlisted equity shares.
e. Taxable income above Rs. 50 lakhs. 
f. Agricultural income more than Rs. 5,000/-
ITR – 2a. Both Resident and Non-Resident.
b. Total income above Rs. 50 lakhs.
c. Agricultural income more than Rs. 5,000/-.
d. Investment in unlisted equity shares.
e. Director in a company.
f. Having income from more than one house property
a. Having income from business or profession.
b. Partner in a Partnership Firm/Limited Liability Partnership (LLP)
ITR – 3a. Both Resident and Non-Resident.
b. Having income from business or profession.  
c. Partner in a Partnership Firm/Limited Liability Partnership (LLP)
 
ITR – 4a. Residents.  
b. Having total income up to Rs. 50 lakhs. 
c. Having income from business or profession who opt for presumptive taxation (44AD,44ADA).
a. Director in a company.  
b. Investment in unlisted equity shares.    
Selection of correct ITR Form can sometimes be tricky

By selecting the wrong ITR form, your return will be treated as defective return by the income tax department. The department will send a notice asking to rectify the same within 15 days from the date of receipt of the notice. If you do not respond to the notice within the specified time, the filed return will be treated as Invalid, which effectively means that you have not filed your tax returns. And that will open a big can of worms.

Consequences of choosing a wrong ITR can be illustrated as follows:

Ms. Sravani had income from salary of Rs. 40 lakhs and was eligible for a refund of Rs. 2 lakhs. She inadvertently chose ITR-4, while filing, which is applicable to a taxpayer having income from business or profession and who opts to pay taxes under presumptive taxation.

CPC processed the tax return as defective, as no income was declared under the head income from business or profession and gave her an opportunity to rectify the defect within 15 days of receipt of notice.

 In case if she had failed to comply with notice, apart from return being considered as invalid she also would have lost her refund amount of Rs.2 lakhs

If Ms. Sravani had selected ITR-1, which is applicable to her, she would have not received the notice from the department and, she would have received the refund amount early.

Let us see some more illustrations for a better understanding:

Selection of Correct ITR Form – More Illustrations

  • Mr. Raju is a resident taxpayer having an income from salary of Rs. 52 lakhs and income from savings bank interest of Rs. 8,500/-. Which ITR Form he should choose?

Ans:  Form ITR -2. Since his total Income is more than Rs. 50 lakhs, Form ITR-1 cannot be used.   

  • M/s. Ramu Enterprises is a proprietary concern of Mr. Ramu. His turnover during the financial year is Rs. 90 lakhs and he is also a Director in M/s. Ram Solutions Private Limited. He wishes to declare his income under presumptive taxation (44AD- 6%/8% of Turnover). Which form he should choose?

Ans: Form ITR -3. Since he is a director in a company, Form ITR – 4 cannot be used.

  • Dr. Abhishek earned an income of Rs. 26 lakhs from his clinic during the financial year and he does not have any other income during the year and wishes to offer income under normal provisions. Which ITR form he should choose?

Ans: Form ITR -3. As Mr. Abhi is a Doctor and his income from clinic falls under income from specified profession, the applicable Form is ITR 3. Also, he is not offering his income under presumptive taxation.

  • Mr. Mahesh is a salaried employee earned Rs. 12 lakhs during the year.  He is also having rental income from three house properties. Which ITR form he should choose?

Ans: Form ITR-2. Since he is deriving income from more than one house property so Form ITR-1 cannot be used.

  • Ms. Shanti is a partner in S&A Associates. During the year, she is having income from salary of Rs. 40 lakhs and income from two house properties amounting to Rs. 4 lakhs. Which ITR form she should choose?

Ans: Form ITR -3. Since she is a partner in partnership firm, Form ITR- 2 cannot be used.

  • Mr. Anand is a Non-resident having rental income of Rs. 8 lakhs from one house property. Which ITR Form he should choose?

Ans: Form ITR-2. Since he is a Non-Resident, form ITR-1 cannot be used.

The write-up is for general understanding. We suggest the readers to discuss with their CAs before deciding on tax implications.

An eight year old was brought to the emergency room of a hospital in a stage of shock. She had a short duration illness with fever, skin rash, red eyes with vomiting and diarrhea. The child was given intravenous fluids and oxygen and rushed to the pediatric intensive care unit. She was started on antibiotics and supportive treatment. When the history was reviewed, it was noted that she had come in contact with a relative with COVID-19 infection three to four weeks before. She was diagnosed to have Pediatric inflammatory multisystem syndrome (PIMS) – temporally related to COVID-19 (PIMS-TS) or Multisystem inflammatory syndrome in children (MIS-C) – temporally related to COVID-19.

Pediatric inflammatory multisystem syndrome– temporally related to COVID-19 (PIMS-TS) is a newly described condition with the first reports in the journals about a few months ago.

Year 2020 has had this dubious distinction of being a year of turmoil. The COVID-19 pandemic has been an event which happens once in a century. Last such event which affected the world as we know it, was way back in 1918 when the Spanish flu wreaked havoc across the whole world.  Children have been reported to be affected very mildly as compared to adults and elderly. 

Initial Reports

In the month of April 2020, there started emanating reports in medical literature of children who were previously well presenting with illness, fever, red eyes and swelling of glands in the neck. This description resembled a condition known as Kawasaki disease. But what made it worse was that these children presented with hypotension (low blood pressure). 60-100% of children had features of vomiting, abdominal pain, and diarrhea. About 60% of children had features of brain fever.  They were managed in the emergency room because the blood pressure had fallen significantly. Some of these children also had decreased heart function and swelling of coronary arteries which supply the muscles of the heart with oxygen rich blood which could have led to a circulatory shock. These reports from the United Kingdom were followed by reports from Italy, USA and recently from India too. 

The unique phenomenon which was noticed by epidemiologists was that the areas from which these patients were being reported were from those geographic areas which had witnessed a surge of COVID-19 infections three to four weeks prior. This has led to some experts suggesting a temporal association of COVID-19 infection with this multisystem inflammatory syndrome.

Symptoms & Treatment

The usual age of children being affected by this condition is about 8 to 10 years. These children present with fever for 3 to 4 days associated with redness of eyes, mouth and lips with skin rashes and presence of tender nodes in the neck. They have a sudden deterioration in the form of low blood pressure, cold clammy extremities and feeling faint with decreased urine output. These children need admission to the intensive care unit most of the times. The children need to be resuscitated with fluids and drugs to improve their blood pressure. Supportive treatment is very important. Drugs like intravenous immunoglobulin and steroids can be used to control the inflammation in the various organs of their body.

High fever in children, in contact with Covid-19 patients, could be due to PIMS-TS
High fever in children, in contact with Covid-19 patients, could be due to PIMS-TS

Many of these children according to the literature when evaluated for COVID-19 antibodies were found to be positive. This would substantiate the claims of temporal association of this condition with COVID-19 infection. The knowledge about this condition is still in a stage of evolution as more and more cases across the globe are being reported. There have already been reports of this condition from the cities hit by the COVID-19 infection like Delhi, Mumbai, Chennai and Pune. This condition has been reported in those geographic areas which have had a surge of COVID-19 cases about 4 to 6 weeks prior. The most important aspect is recognition of this condition early and early initiation of treatment. However the condition thankfully is associated with low mortality.  

Summary Pediatric Inflammatory Multisystem Syndrome – temporally related to COVID-19:

  • Predominantly seen in older children rather than infants or toddlers.
  • Suspect if child is febrile with skin rashes, red eyes and gland swelling in the neck.
  • Loose stools, vomiting and abdominal pain can be the presenting symptoms.
  • If the child is acutely ill with disorientation and cold hands and feet, he needs to be seen by a health care provider as soon as possible.
  • Treatment is available and mortality is very low when treated adequately on time.

Taxability of Dividends in case of NRIs

Further to the article on NRI residential status, there were a couple of queries raised by the readers on the taxability of dividends.  Here are some of those queries and answers for the benefit of the readers.

  • Are dividends received by NRIs from Indian shares/mutual funds taxable in India?

Till 31 Mar 2020, dividend income from an Indian source was completely exempt in the hands of NRIs. However, from 01 April 2020, such dividends would be taxable in India and NRIs would need to pay tax at applicable rates. If there is a Double Taxation Avoidance Agreement (DTAA/tax treaty) between India and the country of residence, a beneficial rate as per the treaty could be applied. Taking the UK as an example, most dividends are taxed at 10% as per India-UK DTAA. This is subject to the availability of TRC from the country of residence.

  • What is TRC? Is it mandatory to avail treaty relief?

TRC stands for Tax Residency Certificate. This will be issued by the tax authorities of the respective country certifying that the individual NRI is a resident of such country. Most countries have a specific form prescribed for this purpose and an NRI who wishes to avail the treaty benefit would need to apply for the same to the respective country’s tax authorities. As per the Indian tax laws, TRC is a mandatory document required to avail any treaty relief by a non-resident.

  • Is withholding tax/Tax Deduction at Source (TDS) applicable in case of dividends paid to NRIs?

Yes, the dividends paid to NRIs would generally be subject to 20% withholding tax in India. However, the actual tax on dividends may vary depending on the total income of an individual and applicable slab rates. So, the differential taxes would get adjusted at the time of filing the tax return.

  • Can an NRI avail the beneficial rate as per the treaty at the time of tax withholding itself?

Yes. An NRI can avail of the beneficial rate on dividends at the time of tax withholding. In order to avail this, the individual needs to submit the TRC and other prescribed documents to the company. Some companies are contacting individual shareholders to confirm their residential status and other documentation to avail of the treaty benefit. Please ensure that this information is submitted to the companies so that the beneficial rate is availed at the time of withholding itself. In this way, refunds on the tax return could be avoided as well.

  • Can an NRI avail Foreign Tax Credit in his home country on taxes paid on dividends in India?

Generally, yes. However, this may also depend on any specific conditions/documentation requirement specified in the tax treaty or domestic tax laws of such resident country. It is advisable to go through the same and ensure that those requirements are met before availing the credit.

The write-up is for general understanding. We suggest the readers to discuss with their CAs before deciding on tax implications.

“We can be blind to the obvious, and we are also blind to our blindness.”
– Daniel Kahneman

Let us begin with a story of a small retail stock trader and insurance broker, Mr. Shanti, aged 48 years. One day when the Indian stock markets opened at 9:15a.m, he was perplexed to see that one of his small cap infrastructure stock which a day before was at INR 120, had dropped by 18% within half an hour of trading. He had invested INR 29,160 in this stock in June 2019; when he saw an article about the stock in the daily newspaper and also saw a few analysts talking about the stock in the business news channels on the same day. He then did his basic research on the stock and when satisfied, placed an order for buying the stock at a price of INR 108.

Now, on the day when the stock fell more than 18% during the day and closed down 15%; there was a news that 27% of the company’s shares were pledged by the promoter. He however was quite confident that this is not a major problem and fundamentals are intact. The next day the stock again fell by 10% and over the week the stock halved in value. Mr. Shanti thought that this phase would pass and that as soon as the stock recovered or bounced back to his original cost of INR 108, he would exit the company. This story ends with the same climax that many retail investors faced while investing in small or mid cap companies (cap stands for market capitalization; meaning total market value of the company). As you would have guessed, the climax was that the stock in 6 months’ time went to INR 10 (as during those six months it came out that the promoters were fraudulent). Our Mr. Shanti still has 270 stocks lying in his DP worth only INR 2,700. This is quite a common story for a small investor. Did Mr. Shanti act rationally or was driven by some biases? We shall answer these questions in a while, in fact you shall be able to answer them after reading this article. First let’s learn about some emotional and cognitive biases that affect our decision making consciously or subconsciously. Here, let me pause and share with you that I am not an expert in this field and am just a novice learner of behavioral finance; I also would want to confess that even I have fallen prey (and still am subject) to several of these emotional and cognitive biases.

List of ten emotional & cognitive biases

  • Loss Aversion and Disposition Effect – In this bias we have a stronger tendency to avoid losses relative to realizing gains. We react more negatively to a given amount of loss than positively to the same amount of profit. Disposition effect leads to holding of investments that are at losses for a much longer period of time and selling profit making investments too quickly. This is exactly what a rational investor should avoid doing.  
  •  Self-Control bias – This is one of the emotional and cognitive biases when we are tempted to give up our self-control or self-discipline for some short term pleasure. For example – a retail investor who is not well informed, is letting go of self-discipline while speculating in penny stocks or small caps. This we do to satisfy our desire to become rich from stock markets overnight; which leads to letting go of risk aversion (which is the tendency to choose capital preservation over higher returns)
  •  Overconfidence bias – By nature, majority of human beings are confident of their own abilities. I believe we should be confident. But the problem begins when we become overconfident; specially in stock selection or understanding the market. Overconfidence bias leads us to overestimate our knowledge of the stock and our ability to understand its business fundamentals and consequently evaluate the impact of good or adverse news on the stock price.
  • Self-attribution bias – For example, you suggested an IT stock to Mr. Sheetal and an NBFC stock to Mr. Vimal; IT stock appreciated significantly and the NBFC stock corrected (fell) significantly. When you meet Sheetal; you say “see my analysis; what a superb return the stock gave” but when you meet Mr. Vimal you say “the market corrected that’s why the stock fell”. This is self-attribution bias.
  • Availability Bias –  We tend to focus on information that is easily available to us. If we get a stock idea easily; we start believing on the viability of that idea. For example – acting immediately on an investment advice that you read early morning in the  newspaper is availability bias.  
  • Status quo bias – It is the tendency to avoid taking any action. Once an action is taken, we prefer remaining status quo than changing our actions. Because of status quo bias we tend to hold on to our stocks even though they are proved to be incorrect decisions.
  • Endowment bias – It is an inclination to value an asset more when you own it or possess it relative to when you do not own or possess it. We have the tendency to quote higher prices when we want to sell something than if we were to buy the same thing. This leads to an illusion that what we own is valued more, irrespective of its fair market price; hence we tend to hold them for a longer period of time than required.              
 Amos Tversky and Daniel Kahneman - Pioneers in Decision Sciences

Amos Tversky and Daniel Kahneman – Pioneers in Decision Sciences
  • Regret Aversion Bias – It is a tendency to not take any decision because of the fear that what if, the decision we take turns out to be bad. Holding onto a stock for a much longer period of time than required; in order to avoid the regret caused from the chances of price rallying (increasing) after we sell is due to regret aversion.  
  • Anchoring Bias – We have a tendency to get anchored to certain numbers or aspects while taking decisions. For example, keeping a target in mind for selling a stock or buying a stock and not acting till it reaches that price is some sort of anchoring.
  • Belief Perseverance Bias – It occurs when we ignore new information that contradicts our earlier held belief based on which we have already acted upon. Here we do not modify our belief. For example, if we have bought a stock then we stress upon only the positive information and ignore or underestimate the effects of all the negative information.

By now, I guess, you would have identified which emotional and cognitive biases Mr. Shanti was acting upon in our story. Please feel free to comment the name of the biases (amongst these 10) that you believe Mr. Shanti had.   

Remembering the name of the biases is secondary; but acknowledging that we human beings show these biases and several other emotional and cognitive biases during decision making; is the key here. Some of these we can overcome; while some of the biases are so inherent that they cannot be overcome. The ways to overcome, may be, might cover in some other article; provided this finds your interest. The first and the most important step to overcome the biases is to acknowledge that we are biased beings.      

One quote I came across while attending my certification from Duke University is quite impressive; “The human understanding, when it has once adopted an opinion, draws all things else to support and agree with it”  – by English philosopher Francis Bacon.  

Let’s end this with a quiz – In each of the below case you are showing a bias (there can be more than one biases playing at a time). A challenge for you! If you can identify the emotional and cognitive biases, then feel free to drop a line in the comments section mentioning which ones can you identify (also a rationale would be welcome):

Case 1. You bought a Banking stock, as soon as an analyst recommended it on a business news channel?

Case 2. You want to sell one of your Utility stock bought at INR 630 at not below its acquisition cost; it is currently trading at 450.  You like the stock and feel its value should be more than your cost.

Case 3. You sold a Pharma stock that was doing pretty good; it came out with market beating results as well? You bought it for long term but sold within 6 months.   

Trivia:  

  1. Loss aversion bias was identified by Daniel Kahneman and Amos Tversky (1979)
  2. In 1985, Shefrin & Statman coined the Disposition effect
  3. Status quo bias was coined by Samuelson and Zeckhauser (1988)    

Sources & References: The CFA Institute, USA Refresher Reading for members “The Behavioral Biases of Individuals” and Duke University

The COVID-19 pandemic cases are increasing globally, and the number of confirmed cases in India has crossed more than 1.5 million. COVID-19, which started as a health concern, with continued lock-downs and social distancing, normal business activity has taken a back seat leading to economic slowdown. The International Monetary Fund (“IMF”) in its latest report projects the global and Indian economy to contract by 4.9% and 4.5% respectively in 2020.

The pandemic has made a difference in each and every one’s life. Positive changes include – individuals becoming more health conscious, more quality time with family and children, slowing down from their busy life schedule and taking life easy, becoming more technology oriented. Negative changes include heightened fear on health, job safety, and financial stability.

Now let’s look at real life cases of how the pandemic has affected the financial position of individuals

  • Mr Kumar is a website designer and digital marketing professional in Mysore. His monthly income more than doubled over the last three months.
  • Mr Bharath, an IT professional in Bangalore – had to take a pay cut of 20%
  • Mr Ram, who owns a fast food restaurant in Bangalore, had closed his business for three months. But he still managed to pay the rent and staff expenses from his personal savings
  • Mr Chandan, who was working as a travel consultant, has lost his job and is searching for new job.

Loan moratorium is helping individuals manage their cash flows; however the financial situation could worsen after the moratorium period ends. Many have lost their jobs or taken a pay cut in this on-going pandemic, exposing the financial vulnerability. Individuals who had a financial plan in place, would be in a better position to weather the storm, while those who did not have a right financial plan would be under financial stress.

Boost your Financial immunity at COVID Times

Key principles of personal finance are simple and effective, but many don’t follow the same as it requires a lot of discipline. Here are some of the key principles which can help boost financial immunity during current times.

  • Boost Your Income—COVID has changed the way businesses operate. We might witness a structural shift in certain sectors and industries. Individuals who have lost their job or who have got a pay cut should be cautious as the demand for their skill set is reduced or has become obsolete. So they should hone new skills which can make them more employable.
COVID Times: Boost Your Financial Immunity
Best time to develop a new skill
  • Never depend on single income —Make investment income your second source of income.  During good times, you need to save for your rainy days. Have a target saving every month, so that you will be well prepared for the future
  • Keep your expenses under control—COVID has brought in forced discipline. Many used to spend Rs 4,000-5,000 on a weekend pre-COVID, so their total spending was close to Rs.20,000-25,000 over weekends in a given month. Now all this unnecessary weekend expenses have drastically reduced. It would be better, as we get back to normal—to cut down unnecessary expenses.
  • Have a health insurance—COVID being a medical crisis, an individual is exposed to health risks. In an unforeseen event of hospitalisation, the financial burden can be significant. It’s better to take a decent health insurance cover, so that the financial risk would be reduced to great extent. You can even think of topping up your current health insurance limits. Most of the insurance companies have come up with top-up policies specifically for COVID times.
  • Avoid getting into new debts – During uncertain times, loan or debt can hurt very badly. It’s better not to take any new loan or debt. Also be wise in using credit cards. In this environment, it is easy to come across a lot of offers and discounts which might entice us to use our credit cards or get into debt. It would be better to postpone purchase, instead of getting into a debt trap.
  • Build an emergency fund – Three to four months of expenses as emergency fund which will come in as handy during tough times.

Conclusion :

An economic slowdown can significantly affect the financial position of an individual. The basic principles of personal finance though simple, need lot of discipline to be on track. Please remember the current economic slowdown, is just one of the slowdowns; We might have to see more in the coming years. If you were not well prepared for the on-going slowdown, you can start building your financial immunity with the above-mentioned key pointers.

Covid-19 and Entertainment:

COVID-19 has made a mess of 2020 and has been cruel to a lot of them. However, for a select few this has come as a blessing in disguise. I am not talking about Mukesh Ambani or Aditya Puri, but the producers of some inferior Cinema that have gone on to make good profits at the cost of unaware OTTs and the ‘Work from Home’ poor souls, who switched on their respective gadgets for a break to catch on these movies.

Direct release on the small screen is not new to Indian Cinema, a quarter century ago Mahesh Bhatt started the trend with ‘Phir Teri Kahani Yaad Aayee’ which was directly released on Zee TV, after it struggled to get a theatrical release.

Phir Teri Kahani Yaad Aaye
First Indian movie marketed as made for small screen

In 2013, Kamal Haasan tried a different strategy, he wanted a simultaneous theatrical as well as Direct to Home release for Vishwaroopam. Theatre owners subsequently threatened to drop the film from the theatres altogether fearing reduced foot falls and this plan was shelved, thus releasing only in the theatres not before it went through a different struggle with a few protest groups.

Cut to 2020, with the advent of COVID-19, the avenues of entertainment slowly started dwindling with malls, theatres, airports shut and with travel curbs confining people between the four walls of their dwelling places.

A few of them saw an opportunity here to get rid of their stock on which there was an Investment, thus beginning the trend of direct OTT releases due to the impact of Covid-19 which bought them sizeable profits. There was no noise from March until mid-April, when producers were hopeful of a return to normal life soon. Lockdown after lockdown only made matters worse and the pandemic only grew stronger with time spreading across major cities, thus making return to normal life a long-drawn process.

Amazon was quick to act with 2D Studios (owned by Actor Surya), for a release of their venture ‘Ponmagal Vandhal’ starring Jyotika. Presumably made on a budget of 4.5 Crores (one look at the movie and one needs to search for every penny spent beyond 2.5 crores), this was picked up by Amazon for a whopping 9 crores.

In the days that followed, a slew of movies started hitting the OTT space, with bigger productions like Gulabo Sitabo, which was made on a budget of 45 crores and sold at a profit of around 20 crores to Amazon again. With Disney+Hotstar coming into this space with a splash, breaching the 100-crore barrier and having picked up some huge productions, the game is getting even bigger.

Who were the losers in this gamble? Theatres (Food & Beverage sales rather than ticket sales for obvious reasons) and the Government which is losing on the revenue from GST on the ticket sales. So far going by the quality of the movies that have come on air, OTTs are the new distributors in distress.

There could be much better movies from smaller production houses and rookie directors, that find it hard to get a theatrical release. What could have been a blessing in disguise for such movies, looks like a blank here too considering even OTT’s are looking out for bigger productions and bigger names. A small movie like ‘Choked’ is a very good example.

With stakes this high, we can soon see the ‘pay-per-view’ model becoming more prevalent. This model which mostly started off for professional Boxing, soon branched out to Wrestling and other sports. Soon even movies followed this path with a similar model known as ‘Video on demand’. However, keeping the prices competitive is the key here to ward off any kind of piracy.

Currently, India has 22 OTTs catering to different viewers, right from movies, web series, soap operas, and some specifically for adult and regional content. If you think this space is getting saturated, remember in 1990 all we had was one channel and today we have close to a thousand. This was probably the biggest positive outcome of the 1990 Gulf War.

There is no dearth of excitement online – a fan celebrating FDFS

Let’s see how this game evolves in the days to come, with the theatres all set to open doors with 50% capacity.

Trivia: Streaming media became practical only because

of data compression. A breakthrough in this technology was first proposed in 1972 by Bangalore born Nasir Ahmed along with Chennai born K.R. Rao and T. Natarajan.