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NRI Biz Matters: India starts a platform for small consumers to avail of short-term credit

E-commerce companies providing groceries, food, and home appliances are live on Open Network for Digital Commerce network

Question: With retail businesses increasing in India by leaps and bounds, are facilities available for small consumers to avail of short-term credit for purchasing consumer goods and merchandise?

Answer: The Government of India has started a platform called Open Network for Digital Commerce (ONDC). Many banks and finance companies are getting integrated with this network. Currently, e-commerce companies providing groceries, food, and home appliances are live on the ONDC network. Once the loan service providers including banks and NBFCs are linked to the network, ONDC will facilitate unsecured personal loans for consumers and GST based invoice loans for businessmen. As soon as this is done, a customer can apply on any ONDC supported App and secure offers from multiple lenders within six to eight minutes and thereafter the loan is sanctioned. Eventually, working capital loans for merchants will also be available. The advantage of this platform is that retailers and consumers who do not have banking facilities will be able to secure credit disbursal and short term loans based on data of consumer credit. Small ticket and short tenure loans based on data are the first priority. Thereafter, purchase finance and B2B credit protocol will go live. This will ensure that credit disbursement to small businessmen is institutionalised.

Question: I have been advised that trading in Future and Options (F&O) derivatives can be profitable. As I have funds in India, I am tempted to go by this advice. Are any risks involved and what would be the tax implications of making profit in this segment?

Answer: F&O trading is gaining popularity in India in the past few months as witnessed by a huge monthly turnover in the F&O segment. F&O trading involves contracts that derive their value from underlying assets such as stocks, securities or commodities. A futures contract makes it obligatory for the buyer and seller to transact on a predetermined future date at a specific price. On the other hand, options give the holder the right to buy or sell at a set price within a specified period. However, this right is optional and there is no obligation to do so. Hence, many persons are tempted to trade on the F&O segment. According to a study made by the Securities & Exchange Board of India, 89% of individual traders in the F&O segment have suffered losses. Therefore, SEBI has advised retail investors not to participate in F&O trading but invest in equities using the mutual fund route. According to experts, trading in derivatives should only be done by those who fully understand the risks involved and have the capacity to manage the same. It may be noted that if profits are made on such trading, tax would have to be paid on such profits at the normal rates of income-tax applicable to individuals. However, if losses are made, these can be set off only against profits made in subsequent financial years from such transactions as the tax authorities generally consider trading to be speculative in nature.

Question: My brother and I are AI engineers. After getting seven years experience in the Gulf, I am planning to return to India as there are job offers. My brother suggests that it is better to be a freelance consultant in India instead of taking up a job. Are there prospects for self employment?

Answer: Professional workforce is in great demand in India from multinational and domestic enterprises to bridge the demand-supply gap which is widening. Prompt engineering specialists and senior AI engineers earn anywhere between $50 and $500 per hour depending on the complexity of the work to be undertaken. Currently, IT-related professionals constitute almost 30 per cent of the total market, the remaining 70 per cent being full time employees. Software development, data analytics, cloud computing, digital marketing, content management and UI/UX design and data science are the most sought after skills. The demand for tech professionals is increasing at a compounded rate of 10 per cent every year. Pharma companies, oil and gas firms, and Global Capability Centres are seeking professional workers as it helps them to control costs in the long run. From the tax perspective, a self-employed person has the advantage of claiming all expenses incurred in the course of carrying on the profession as well as availing of depreciation on professional assets used for the purpose. On the other hand, a salaried employee has to pay tax on the gross salary earned and gets a standard deduction of just Rs50,000 per annum.

H. P. Ranina is a practising lawyer, specialising in corporate and tax laws of India.