12 Changes in 2012 that impacts your Investment

Today is the last day of 2012 and thanks to SEBI, RBI, and Finance Ministry among others which made some significant changes in your personal finance and investment. I have listed 12 of them.

1. One Scheme One Plan for Mutual Funds:

Mutual Funds till now had multiple version of the same scheme – one for institutional investors and the other for retail. Usually the institutional plan had higher returns due to its low expense ratio. But with new rule from SEBI, all mutual fund schemes will have to follow “One Scheme One Plan” i.e. no separate plans for retail and institutional investors. This would positively impact retail investors.

2. New KYC for Mutual Funds:

Second major change was in the know your customer (KYC) norms. If you are someone who had done their KYC before January 2012, you will need to redo KYC norms again if you want to make fresh investments in MFs. Unless you do the revised KYC again, thanks to a few changes in the old KYC form, forget about investing in a new scheme. This simply means, you need to be ‘VERIFIED BY CVLKRA’ compliant and not CVLMF. This norm surely brought some heart burn, after all, the processing of KYC is painful.

3. Pre-Payment Penalty Wavier on Home Loan:

RBI and NHB have asked banks and NBFCs to remove all foreclosure charges/ prepayment penalty on home loans on the floating rate home loans. This step was taken to reduce the discrimination between existing and new borrowers. However customers with fixed rate home loan have to still pay pre payment penalty. In case of fixed-cum-floating rate loan, they will bear a fee during the fixed rate period, but as soon as their loan moves to the floating rate period, they won’t need to pay such a fee.

4. New Versions of Home Loan:

Axis bank and ICICI bank launched newer version of Home Loans. Axis Bank’s Happy Ending Home Loan offers waiver of last 12 EMIs while ICICI Bank offered 1% cash back on all EMIs of Home Loan.

5. IPO Allotment:

Non-allotment of shares in popular public issues is a common crib of retail investors. To address the issue, SEBI decided to modify the allotment system in such a way that a large number of retail applicants, subject to availability of shares, will get the minimum bid lot. For example, in an issue that is oversubscribed, the system will first allot the minimum bid lot to all retail investors. However, the new system will not be of use in case the issue is not oversubscribed and in cases where the issue is highly oversubscribed and shares on offer are not sufficient to fulfil even the minimum lot criteria.

6. E-filing of Tax Return compulsory for Income above 10 Lakhs:

It is now mandatory for individuals or Hindu Undivided Family (HUF) with income of over Rs 10 lakhs to file their tax returns for 2011-12 electronically. Read Details here.

7. Gold Loan Norms Tightened:

With increasing popularity of Gold Loan and fluctuating gold proices RBI tightened the norms for Gold Loan for NBFCs. The LTV for the loan cannot exceed 60% of the gold value. Also Gold NBFCs can only lend against gold jewellery. They can no longer consider against bullion, primary gold and gold coins for gold loans. Read Details here.

8. Increased Interest on Small Savings Scheme like PPF, NSC, etc:

The government has increased interest rates on post office deposits like PPF, NSC, Fixed Deposit, Recurring Deposit, and Senior citizen Scheme in the range of 0.2% – 0.5%. Read Details here.

9. Section 80TTA for savings account:

In the Budget 2012 a new section was introduced in the Indian Income Tax Act. According to this the interest income up to Rs. 10,000 from savings bank account would not be taxed under the new section, 80TTA. Read Details here.

10. RGESS – Rajiv Gandhi Equity Savings Scheme:

Budget 2012 brought in a new equity scheme, which could help save on taxes, especially if you are new to the world of stocks. Christened the Rajiv Gandhi Equity Savings Scheme, an investment of up to Rs 50,000 by eligible investors would get a tax break of 50 per cent, outside the Rs 1 lakh under Sec 80C. The investments can be in equity shares forming part of BSE-100 or CNX-100 index or equity shares of public sector enterprises that are categorised as maharatna, navaratna or miniratna. Also, units of exchange-traded funds or mutual fund schemes with RGESS-eligible securities as underlying were made eligible.

11. Security Transaction Tax (STT) reduced:

Budget 2012 has reduced STT from 0.125% to 0.1% for cash delivery transaction. This would mean slightly lower transaction cost for equity investors.

12. No Tax Exemption for investment in Infrastructure Bonds:

Budget 2012 has done away with Rs. 20,000 tax exemption that was available by investing in infrastructure bonds u/s 80CCF. This means the tax outgo would increase for everyone from Rs. 2,060 to Rs. 6,180 depending on the tax bracket. Read Details here.