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Money Dec 26, 2012

Five changes your money went through in 2012

By Bindisha Sarang

The only thing which is constant is change. And, your money life went through a few changes in 2012, thanks to regulators like the RBI, Sebi, IRDA and the income tax department.

While there a few things to cheer for, there were a few others that added pain. Here's a quick list of the few changes that happened this year in your money life.

Home loan borrowers who took their loan on a floating rate of interest had some reason to celebrate in 2012. AFP

One Scheme One Plan: While there were a few changes that happened in the MF space this year, here are two that were noteworthy. First was the one-scheme-one-plan initiative by Sebi.

Prior of this norm, an institutional investor putting and a retail investor parking funds in the same fund had to bear different expense structures.

But, under the one-scheme-one-plan scheme, the retail investor will get the benefit of a lower expense structure (like that of institutional investors), and also enable you to invest in schemes which previously had a higher minimum investment amount. Read more here.

KYC: 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. Read about this here. This norm surely brought some heart burn, after all, the processing of KYC is painful.

Pre-Payment Penalty: Home loan borrowers who took their loan on a floating rate of interest had some reason to celebrate in 2012. The Reserve Bank of India (RBI) asked banks 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.

Keep in mind that those on fixed rate home loans will, however, continue to pay the foreclosure charges/ prepayment fees. As far as those who have a fixed-cum-floating rate loan goes, 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.

PPF and SCSS: As far as small savings schemes goes, this year surely makes your pocket a bit bulkier. The Government revised interest rates in two small savings schemes, Public Provident Funds and Senior Citizens Savings Scheme. That's from 8.6 percent per annum to 8.8 percent and 9 percent to 9.3 percent.

Section 80TTA: This year a new section was introduced in the Indian Income Tax Act, Section 80TTA. This section now enables you to keep small amounts of interest earned on your savings account out of the tax scope. You will get a deduction of up to Rs 10,000 on interest earned from your savings accounts. You now get a deduction in respect of interest on savings bank accounts earned by you from either a bank or a credit cooperative society or from a post office savings account.

Other changes included those in the space of basic savings bank accounts, intra bank portability, Rajiv Gandhi Equity Savings Scheme (RGESS). Service tax net was tightened on various insurance plans in 2012. And, there is no advance tax for senior citizens if they do not have business income. Sebi introduced the Basic Service Demat Account and also revised expense ratios of mutual funds. This is a list of changes from our side, do let us know others that happened to your money life this year on 2012.

by Bindisha Sarang

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