Personal Finance

Personal finance 2019: What’s changed for investors and taxpayers

Parvatha Vardhini C | Updated on December 29, 2019 Published on December 29, 2019

Small incentives made life a little easier for the average taxpayer

With two Budgets, taxpayer-friendly moves, legislations for investor and consumer protection, and several steps to make debt mutual funds safer, 2019 was eventful for personal finance. Here’s a recap of the most prominent moves of the year.

Tax relief

2019 was an election year and there were expectations of big incentives on the personal tax front. There was, however, no big-bang measures for the average taxpayer, either in the interim or the full Budget of 2019-20. While a hike in the surcharge (selectively rolled back later) affected the super-rich, small taxpayers saw measures that made life a little easier for them. For one, the standard deduction for salaried assessees was moved up by ₹10,000 to ₹50,000.

For assessees other than senior citizens, the income limit for deduction of TDS on bank deposits and post office deposits was moved to ₹40,000 from ₹10,000. Home owners, buyers and sellers, too, had reason to cheer.

Exemption from long-term capital gains tax was extended to investment of the gains in two houses, based on certain conditions.

Earlier, if the profit was large and you bought two low-priced houses, the benefit of exemption was available for only one purchase. Similarly, two houses can now be claimed as self-occupied instead of one. Earlier, the second house — even if it was locked or was being occupied by a family member — was deemed to be let out and tax had to be paid on the notional rental income.

The entire 60 per cent of the withdrawable NPS (National Pension Sysytem) corpus was officially made tax-free only in the July 2019 Budget, although it was announced orally by the then Finance Minister in 2018. Earlier, only 40 per cent was tax-free, while 20 per cent was taxable at the investor’s slab rates.

Investment in CPSE (central public sector enterprises)-related exchange-traded funds (ETFs) was made eligible for Section 80C benefits on the lines of equity-linked savings scheme (ELSS).

The introduction of faceless or e-assessment for scrutiny assessment of taxpayers from October 2019 was another taxpayer-friendly move. E-assessment helps in bring in greater transparency and accountability to the scrutiny process, avoiding opportunities for harassment of assessees.

Mending debt MFs

While taxpayers certainly did not have a bad year, fixed- income investors did. Bank FD interest rates were nothing to write home about and options that offered higher rates became fraught with risks.

The NBFC liquidity crisis did not inspire confidence to invest in those non-banking financial companies offering high interest rates on their FDs, while the PMC Bank fiasco reminded investors that cooperative bank FDs were a risky proposition.

Investor confidence in market–linked options such as debt mutual funds, which took a knock after the IL&FS and DHFL episodes, was further hit due to repayment delays/defaults by more companies, and credit rating downgrades of instruments. Market regulator SEBI responded by taking several steps to make amends. It brought out rules for side-pocketing of the affected instruments and tweaked valuation norms for certain instruments held by debt mutual funds to ensure that the value of the underlying securities held by a fund reflects the market value.

Liquid funds were mandated to hold at least 20 per cent in liquid assets such as cash and government securities, from the earlier 5-10 per cent, and to cut down sectoral exposure limit by 5 percentage points. The regulator further mandated that mutual funds should invest in those bonds which provide adequate security cover of at least four times the collateral and placed some restrictions on mutual funds’ investment in unlisted debt instruments.

The year though ended with good tidings for debt investors with the introduction of Bharat Bond ETF a, fund tracking the index comprising the highest-rated debt securities of PSUs.

More legal teeth

Finally, 2019 ushered in greater protection for investors and consumers, through the passing of the Banning of Unregulated Deposit Schemes Bill and the Consumer Protection Bill by both Houses of Parliament. The former is an omnibus legislation, banning all deposit schemes which typically fall in no man’s land (unregulated deposits).

Soliciting or wrongfully inducing, accepting and /or defaulting on such deposits attract a fine and/or imprisonment. The Bill sets up a mechanism for restitution of dues to investors by providing provisional attachment of properties/assets of deposit-takers by a competent authority to be appointed by the government, confirmation of provisional attachment by a designated court and subsequent realisation of assets for repayment to depositors.

To not make it a never-ending wait for investors, strict timelines have been provided for attachment of property and restitution to depositors.

To suit the new-age consumer, the new Consumer Protection Act brings within its fold online sales, teleshopping, direct selling and multi-level marketing, in addition to the traditional channels of sale. It legally binds manufacturers, sellers and service providers to compensate consumers for defects or deficiency. It envisages a regulatory authority known as the Central Consumer Protection Authority (CCPA) with powers of enforcement, unlike the existing Consumer Protection Councils which are only advisory bodies.

The CCPA will have powers to initiate class action, including enforcing recall, refund and return of products. There is now room for an alternative dispute-resolution mechanism, too, since the Bill sets up mediation cells attached to district forums, State and national commissions.

Published on December 29, 2019
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