Major Financial Rule Changes From October 1: What You Need To Know

A host of financial regulations and reforms are set to take effect from October 1, 2024, impacting various sectors, including small savings, health insurance, mutual funds, credit cards, and tax policies. These updates aim to improve transparency, ease the tax burden, and streamline procedures. Here’s a detailed breakdown of the most significant changes.

New Rules for Post Office Small Savings Schemes and PPF Accounts

The government has introduced new regulations for National Small Savings (NSS) and Public Provident Fund (PPF) accounts. Notably, non-resident Indians (NRIs) who have been investing in PPF accounts without declaring their status will no longer earn the usual interest. From October 1, NRI-held PPF accounts will earn zero interest, a drastic shift from the previous post office savings interest rates they enjoyed between July and September.

Additionally, the changes will also impact other small savings schemes, including Sukanya Samriddhi accounts.

HDFC Infinia Credit Card Reward Points Limited for Redemptions

HDFC Bank is tightening its rules regarding the redemption of reward points for its premium Infinia credit cardholders. Starting October 1, cardholders will be limited to redeeming reward points for only one Apple product per quarter. Moreover, redemption of points for Tanishq vouchers will also be capped at 50,000 points per calendar quarter.

Previously, there were no such limits, allowing cardholders to redeem their points freely.

RBI Introduces Key Facts Statement (KFS) for Loan Borrowers

From October 1, banks and non-banking financial companies (NBFCs) will be required to issue a Key Facts Statement (KFS) to all retail loan borrowers. This document will clearly outline the effective cost of the loan, including fees and hidden charges, ensuring transparency and aiding borrowers in understanding their financial obligations. The move is aimed at eliminating confusion caused by unclear interest rates and hidden fees.

Health Insurance to Offer Shorter Waiting Periods and Better Claims

Health insurance policyholders will benefit from new regulations set by the Insurance Regulatory and Development Authority of India (IRDAI). Policies issued before March 2024 must comply with the new product guidelines by September 30, offering reduced waiting periods for pre-existing conditions (from four to three years) and shorter moratorium periods (reduced from eight to five years). These changes will also be incorporated into existing policies upon renewal.

Special Surrender Values for Endowment Policyholders

Policyholders of endowment plans will now receive special surrender values when exiting their policies early, starting October 1. This change ensures that even those who exit after just one year will receive a partial refund of their premiums, a stark contrast to the previous system where early exits often resulted in losing all premiums paid.

Mutual Fund Unit Repurchases Exempted from 20% TDS

The 20% tax deducted at source (TDS) on mutual fund unit repurchases will be waived from October 1. This tax change, announced in the 2024-25 Union Budget, aims to ease the tax burden on investors, making mutual fund investments more attractive.

Direct Tax Vivad Se Vishwas Scheme Launched

The Direct Tax Vivad Se Vishwas Scheme, 2024, will come into force on October 1, offering taxpayers a simplified way to resolve tax disputes. The scheme, introduced in the Union Budget, allows for lower settlement amounts for new appellants and reduces litigation costs. Those filing declarations by December 31, 2024, will benefit from even lower settlement amounts.

Share Buyback Tax Structure Revised

A major change in the buyback tax structure will shift the tax liability from companies to shareholders. Previously, companies were taxed at 20% on buybacks, but starting in October, buyback proceeds will be taxed as dividend income for shareholders, affecting their personal income tax calculations.

This change could significantly increase tax obligations for shareholders, especially employees benefiting from Employee Stock Option Plans (ESOPs) who plan to exit through buybacks.

SEBI Streamlines Bonus Issue Trading Process

The Securities and Exchange Board of India (SEBI) has accelerated the trading process for bonus issues. Starting October 1, bonus shares will be available for trading just two days after the record date, down from the current two-week waiting period. This streamlining move is designed to improve market efficiency and speed up shareholder access to bonus shares.

These financial reforms, which take effect from October 1, aim to enhance transparency, provide relief to borrowers and policyholders, and streamline processes in various sectors. With the evolving financial landscape, investors, borrowers, and policyholders should stay informed to make the most of these changes.