The small savings scheme, which offers guaranteed returns along with tax benefit, is arguably one of the most popular investment avenues in Indian.
The government in December notified new rules for investing in public provident fund (PPF). As per the new rules, an account holder can make deposits in multiples of ₹50 any number of times in a financial year, with a maximum of a combined deposit of ₹1.5 lakh a year. Earlier, a maximum of 12 deposits were permitted in a period of 1 year.
The interest rate on loan against PPF has also been reduced to 1% from 2% earlier above the prevailing PPF interest rate. For instance, if the PPF interest rate is 8%, as per the old rules, you’d have to pay an interest rate of 10% on the loan. As per the new rules it will be 1% lower.
Also, The PPF Scheme, 2019 has introduced a new ground of premature closure - change in the residency status of account holder. In case of premature closure of PPF accounts, the account holder gets 1% lower interest than the rate at which interest has been credited to the account.
Investors wealth increased by over ₹10.2 trillion in 2019 as the benchmark indices touched new highs this year. The 30-share BSE Sensex rose over 5000 points from 36,161.80 points on 1st January to 41,461.26 points on 24 December 2019. Led by this, the market capitalisation (m-cap) of the BSE-listed companies touched ₹1,55,03,025.87 crore on 24 December as compared to ₹1,44,80,678.84 on 1 January.
Sebi’s margin norms
The Securities and Exchange Board of India (Sebi) in November, directed stock brokers to collect an initial margin of 15% to 25%, even for simple buying and selling of shares, in the cash segment. The new rules will kick in from January 2020. As of now, collecting money upfront as a margin from the investors is at broker’s discretion.
Currently, brokers themselves keep margins with the exchanges for transactions in the cash market but they cannot force clients to pay the margins. The margins deposited by brokers remain blocked till the settlement is completed.
Aadhaar based e-KYC
The Sebi in November revived the Aadhaar-based eKYC for mutual funds (MFs). The facility of carrying out eKYC using Aadhaar and OTP was introduced by the markets regulator in 2015 for MF investments up to ₹50,000, following which mutual fund penetration surged. However, it was brought to a halt after the Supreme Court’s judgement on Aadhaar in September 2018.
NEFT transfer available 24x7
In a bid to boost digital transactions, the Reserve Bank of India (RBI) in December allowed round-the-clock transactions under the National Electronic Funds Transfer (NEFT) system. NEFT transactions are settled in hourly batches.
Also, from July 1 this year, RBI had decided not to levy charges on transactions through NEFT and Real Time Gross Settlement (RTGS) system in order to promote digital transactions in the country, and asked banks to pass on the benefits to the customers.
External benchmark linked loans
The RBI in September decided in favour of external benchmark linked lending rates over the existing marginal cost of funds-based lending rate (MCLR) system. The regulator’s directive mandated that banks link all new floating rate loans to an external benchmark like repo (or repurchase) rate from 1 October 2019. The repo rate is the rate at which the RBI lends money to other banks. Hence, cuts in the repo rate are meant to lead to cuts in home loan and other lending rates as banks get to borrow money cheaply from the RBI.
Less taxing tax affairs
If your net taxable income doesn’t ₹5 lakh in current financial year (FY), your income tax liability will be zero. The rebate under section 87A of Income Tax (I-T) Act 1961, which was available since assessment year 2014-15 was raised to ₹12,500 from existing ₹2,500. The amount of rebate is 100% of income tax payable on the total taxable income of up to ₹5 lakh.
However, if your net taxable income exceeds ₹5 lakh, you’ll be liable to pay tax as per the existing I-T slabs.
Enhanced standard deduction
The government enhanced the standard deduction limit for the salaried tax payers to ₹50,000. A standard-deduction reduces your taxable income thereby reducing your tax liability. Standard deduction was re-introduced in Budget 2018 and the limit was set at ₹40,000 and was applicable in lieu of transport allowance and medical reimbursements that totaled up to ₹34,200 in a year.
Capital gains from selling property
Investing long-term capital gains (LTCG) not exceeding ₹2 crore accrued from sale of a house in two houses won’t attract any income tax. Earlier, in order to save LTCG tax on the gains made from selling a house, one had to reinvest the profit in a single property or other specified instruments.
Tax free NPS
In Union Budget 2019, the government had raised income tax exemption limit for lumpsum withdrawal on maturity from National Pension Scheme (NPS) to 60%, from 40% earlier, effectively making withdrawal from the pension scheme 100% tax-free.
PAN Aadhaar linking
Come January, all PAN cards which are not linked to Aadhaar will become invalid. The Income Tax department had made it mandatory to link the two documents with each other and the deadline for the same was extended from 30 September to 31 December.