The new financial rules reflect the government’s broader aim to simplify financial processes and offer more transparent, investor-friendly mechanisms.
As the calendar turns to October, a wave of financial reforms is poised to reshape the landscape for investors, borrowers, and policyholders. These updates range from changes in small savings schemes, loan transparency measures, and health insurance regulations to new tax structures on mutual funds and share buybacks.
1. New Rules for Post Office Small Savings Schemes
The government has revised regulations for Post Office Savings Schemes, including the Public Provident Fund (PPF) and Sukanya Samriddhi Yojana. One notable change affects minors’ PPF accounts. Going forward, only one PPF account can be opened for a minor, curbing the practice of having multiple accounts. If you have opened more than one account for a minor, the additional accounts will be classified as “irregular,” and will earn a reduced interest rate of 4%, instead of the standard 7.1%, until the child turns 18.
“Non-Resident Indians (NRIs) who were unaware or failed to disclose their residency status while maintaining a PPF account will also face a shift in how their accounts are handled. From October 1, these accounts will no longer earn interest, reflecting a stricter stance on PPF account eligibility,” informs Sanjiv Bajaj, Jt. CHairman & MD, BajajCapital Ltd.
2. Greater Loan Transparency for Borrowers
Starting October 1, the Reserve Bank of India (RBI) will require banks and NBFCs to issue a Key Facts Statement (KFS) for all retail loans. This document will provide borrowers with a clear and comprehensive breakdown of loan terms, fees, and charges. By eliminating hidden costs and fine-print confusion, the KFS aims to empower borrowers with better financial clarity.
3. Health Insurance: Shorter Waiting Periods and Easier Claims
If you hold a health insurance policy issued before March 2024, you’ll see significant changes during your policy renewal. The Insurance Regulatory and Development Authority of India (IRDAI) has reduced the moratorium period—the period during which claims cannot be contested except on the grounds of fraud—from eight years to five years. Additionally, the waiting period for pre-existing conditions has been reduced from four years to three years, making it easier for policyholders to claim benefits.
4. Endowment Policies to Offer Higher Early Exit Payouts
Policyholders of endowment life insurance will benefit from improved surrender values if they choose to exit their policies early. “Previously, those who surrendered their policies within the first year received no return on their premiums. The new rule mandates that a partial premium refund be given to those exiting prematurely, offering a better financial cushion for policyholders who might find themselves unable to continue paying premiums or who realize they were mis-sold a policy,” says Bajaj.
5. No More 20% TDS on Mutual Fund Repurchases
In a move to ease the tax burden on investors, the government has eliminated the 20% tax deduction at source (TDS) on mutual fund unit repurchases. Announced as part of the 2024-25 Union Budget, this amendment is designed to provide relief to investors by rationalizing the taxation of mutual fund withdrawals. Starting October 1, this will reduce the immediate tax hit when redeeming mutual fund units.
6. Direct Tax Vivad Se Vishwas Scheme for Tax Disputes
October 1 also marks the beginning of the Direct Tax Vivad Se Vishwas Scheme 2024. Designed to reduce the burden of tax litigation, this initiative offers taxpayers a streamlined mechanism for settling disputes with the tax department. The scheme provides lower settlement amounts for new appellants and offers additional benefits for those who declare disputes before December 31.
7. Changes in Buyback Taxation
Previously, when a company bought back its shares, the company bore the tax burden while shareholders received tax-free proceeds. However, beginning October 1, buyback proceeds will be treated as dividend income and taxed according to the shareholder’s personal income tax slab. This shift could significantly impact investors, especially startup employees using Employee Stock Option (ESOP) buybacks.
8. SEBI Streamlines Bonus Issue Trading
For investors keen on bonus issues, the Securities and Exchange Board of India (SEBI) has sped up the process. Beginning this month, shares from bonus issues will be available for trading just two days after the record date, compared to the previous waiting period of up to two weeks. This change will provide greater liquidity and quicker access to bonus shares for investors.
“As these reforms take effect, individuals and businesses alike will need to reassess their financial strategies. Whether it’s revisiting insurance policies, adjusting investment portfolios, or taking note of changes in taxation, October’s financial shifts call for careful attention. Being proactive about understanding these updates can help you navigate the evolving financial landscape and make informed decisions,” says Bajaj.
These changes reflect the government’s broader aim to simplify financial processes and offer more transparent, investor-friendly mechanisms. Stay informed, stay prepared, and make the most of these updates to safeguard your financial interests.
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This blog is purely for educational purposes. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.
