A raft of changes in the financial landscape is set to come into effect from October 1.

The government has introduced new rules for national small savings (NSS) and public provident fund (PPF) accounts, effective from October 1.  Health insurance policyholders with policies, which were issued before new Insurance Regulatory and Development Authority of India (IRDAI) product regulations came into force in March, will get the benefit of reduced moratorium and waiting period.

The Reserve Bank of India (RBI) has directed banks to ensure transparency on loan interest rates by issuing key facts statement (KFS) that will spell out effective cost of the loan, eliminating the ambiguity due to hidden charges.

Rules revised for PPF accounts of NRIs, minors

There are specific guidelines for non-resident Indians’ (NRIs) holding PPF account. For NRIs who have been investing in PPF accounts without disclosing their status, it will cease to be business as usual. These accounts will earn the post office savings account interest rate between July 12 and September 30. From October 1 onwards, this account will earn zero interest. The government has also announced a host of changes pertaining to old NSS and Sukanya Samriddhi accounts.

HDFC Bank tightens rules on Infinia credit card reward point redemption

The HDFC Infinia credit card is a premium card for high-net-worth individuals (HNIs). HDFC Bank imposes new restrictions on rewards redemption from October 1 for its Infinia credit cardholders. Redemptions for Apple products and Tanishq vouchers via HDFC SmartBuy will be impacted.

From October 1, Infinia cardholders will be allowed to redeem points for only one Apple product per calendar quarter. The quarters are defined as January-March, April-June, July-September, and October-December. Currently, there is no limit on how many Apple products cardholders can redeem their reward points for. Similarly, HDFC Bank has imposed cap on the redemption of reward points for Tanishq vouchers at 50,000 points per calendar quarter.

Retail borrowers to get interest rate clarity with key facts statement

From October 1 onwards, retail loan borrowers will have greater clarity on how much their loan costs with the help of KFS to be issued by banks and non-banking financial companies (NBFCs). KFS is a simple, easy-to-understand summary covering all key terms of as also the fees and charges related to the loan. It should be written in a language understood by the borrowers, the RBI had said in a directive.

Insurers to revise older life, health insurance policies by September 30

The IRDAI had set a deadline of September 30 for companies to ensure that their older, existing products comply with the new product regulations, which were issued in March this year, followed by a master circular in May. New products  meet the new product regulations’ requirements.

As per IRDAI norms, all products will carry a maximum pre-existing disease waiting period of three years, as compared to four years earlier. More importantly, the moratorium period — after which claims cannot be contested except on grounds of proven misrepresentation and frauds — has been shortened from eight to five years.

If you are an existing policyholder, the new clauses will be incorporated in your policy when it comes up for renewal.

Endowment policyholders to receive higher early exit payouts

Through a master circular on life insurance products in June, the insurance regulator mandated that life insurers must pay out special surrender values even if policyholders exit after the first year. While new products conform to the rules, the IRDAI had set a deadline of September 30 for withdrawal or re-filing of existing, non-compliant policies.

As compared to the present scenario, the surrender values — payouts on premature exit — for policyholders making an early exit due to realisation of mis-selling or inability to pay premiums will go up.

Earlier, policyholders who exited after the first year had to forgo their entire premium. However, under the new rules, they will receive a partial refund of their premiums.

Tax burden eased: 20 per cent TDS waived on mutual fund unit repurchase

To rationalise tax deducted at source (TDS) rates, Finance Minister Nirmala Sitharaman in Budget 2024-25 had proposed to withdraw the 20 per cent TDS rate on the repurchase of units by mutual funds or unit trust of India (UTI). This amendment will also come into effect from October 1.

The Finance Act, 2024, omitted Section 194F of the IncomeTax Act relating to payments on account of the repurchase of units by mutual fund or UTI.

According to Section 194F of the Act, the person responsible for paying to any person any amount referred to in sub-section (2) of section-80CCB at the time of payment should deduct income tax at the rate of 20 per cent.

The withdrawal of the 20 per cent TDS rate on mutual fund unit repurchase marks a step towards easing the tax burden for investors.

CBDT launches Direct Tax Vivad Se Vishwas Scheme 2024

The Central Board of Direct Taxes (CBDT) has announced the launch of the Direct Tax Vivad Se Vishwas Scheme, 2024 that will come into effect from October 1. This scheme, introduced by Sitharaman during this year's Union Budget, aims to simplify and speed up the resolution of tax disputes, reduce litigation and associated costs.

This dispute resolution scheme offers lower settlement amounts for ‘new appellants’ compared to ‘old appellants’. Additionally, taxpayers who submit their declarations by December 31, will also benefit from reduced settlement amounts.

Government tweaks buyback tax structure

A new buyback tax structure will kicking in from October 1. The tax authorities have introduced significant changes to the buyback taxation regime. Previously, companies were taxed at 20 per cent on buybacks, while investors received tax-free income.

Under the new regulations, the tax liability shifts from companies to shareholders. Buyback proceeds will now be treated as dividend income, rather than capital gains and taxed as per the income tax slab of the investor.

This change affects shareholders, who have to bear the tax burden. Companies have commonly used buybacks to distribute excess funds to shareholders. Start-up employees may also see a significant increase in taxes on their Employee Stock Option (ESOP) exits through buybacks from October 1 onwards.

SEBI speeds up bonus-issue process for trading

All bonus issues announced on or after October 1 will be made available for trading two days from the record date.  As of now, the shares from such issues are available only after about two weeks from the record date. Record date is the cut-off date that the issuer company considers deciding which shareholders are eligible for a bonus issue.

The Securities and Exchange Board of India (Sebi) has enabled T+2 trading of bonus shares where T is the record date, through a circular issued on September 16.

Credit - Money Control