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Six Key Financial Changes This February You Need to Consider

The Interim Budget 2024 has ushered in significant changes, from the withdrawal of direct tax demands to alterations in IMPS rules and adopting a T+2 redemption payment cycle for equity mutual funds.

  • 1,871 Views | Updated on: Mar 11, 2024

Financial changes in February include the withdrawal of direct tax demands, modified IMPS rules, redemption payment cycle for equity mutual funds, recent monetary policy announcement from RBI. The launch of a new tranche of Sovereign Gold Bonds and efforts for tax parity between NPS and EPF is also making headlines. Staying up-to-date on financial developments is essential for making informed decisions that can shape your economic well-being.

As February unfolded the Interim budget 2024, individuals and businesses alike must proactively engage with the changes, seeking professional advice when necessary to optimize their financial strategies and capitalize on emerging opportunities. Staying active about financial changes will position you for financial success this year and beyond.

What are the Six Key Financial Changes to Look Out for?

The announcement of the Interim budget 2024 led to the onset of other important financial changes. These modifications will impact the economic field in the coming years, and you should know what to expect from these changes. Let us understand these changes in detail:

1. Withdrawal of Direct Tax Demand

This refers to the recent announcement in India’s Interim Budget 2024 to withdraw outstanding direct tax demands up to ₹25,000 for the period up to FY 2009-10 and up to ₹10,000 for FY 2010-11 to 2014-15. If you have any outstanding tax demands within these limits and periods, they will be automatically withdrawn, potentially freeing up some funds for you. This move is estimated to benefit approximately one crore taxpayers. These could be individuals, businesses, or any entity with outstanding tax demands within the specified limits and periods.

2. Changed IMPS Rules

The National Payments Corporation of India (NPCI) increased the transaction limit for its Immediate Payment Service (IMPS) from ₹1 lakh to ₹5 lakh, effective February 1st, 2024. This change, outlined in an NPCI circular dated October 31st, 2023, aims to facilitate larger and faster digital payments. If you frequently use IMPS for high-value transactions, it is best to consult your bank or the RBI website for details about the specific changes and potential impact on you.

3. Equity Mutual Funds Adopt the T+2 Redemption Payment Cycle

This refers to the new rule that equity mutual funds in India will have a T+2 (trade date + 2 days) settlement cycle for redemption payments, effective February 1, 2024. Previously, it took 3 days (T+3) to receive your money after redeeming equity mutual funds. But thanks to the switch to a T+1 settlement cycle in the stock market, all Asset Management Companies (AMCs) are now implementing a T+2 redemption payment cycle for their equity schemes. It means you will get your redemption proceeds one day faster from February 1st onwards.

4. RBI’s Monetary Policy Announcement

As per the latest Reserve Bank of India monetary policy announcement on February 8, 2024, The RBI maintained the repo rate unchanged at 6.5%. This marks the sixth consecutive meeting without a change in rates. The Central Bank is expecting a real GDP growth of 7% for FY 2024-25. Acknowledging inflationary risks and growth concerns, the MPC voted to continue its monetary tightening process with a gradual and measured approach.

5. Sovereign Gold Bond’s New Tranche for Subscription

In December 2023, the Indian government issued Series III of these popular bonds, and now, a new tranche (Series IV) is opening for subscription on February 12th, 2024. The subscription period for the new tranche starts on February 12th, 2024. You can invest in multiples of 1 gram of gold. The minimum investment is 1 gram; the maximum is 4 kg for individuals and 20 kg for certain institutions.

SGBs issued in February 2016 (SGB 2016-I) also matured on February 8, 2024, offering attractive returns to investors. For those who invested in SGB 2016-17 Series I (issued August 5, 2016), the premature redemption window opened on February 5, 2024.

6. Proposal for Tax Parity Between NPS and EPF on Employer Contributions

Currently, employer contributions up to 12% of an employee’s basic salary are exempt from income tax for both employer and employee. Only 10% of employer contributions are tax-exempt for the employer. PFRDA (Pension Fund Regulatory and Development Authority) wants to incentivize companies to contribute more to their employees’ pension corpus. This will level the playing field between NPS and EPF, making NPS more competitive. This could potentially benefit employees, increase competition, and impact retirement savings in India. However, the final decision and its implications are yet to be determined.

Wrapping it Up

Going through the financial field requires vigilance and adaptability, especially in the face of significant changes outlined in the Interim Budget 2024. By aligning your strategies with these pivotal changes, you position yourselves for financial success not just in 2024 but also in the years that follow. Embracing these modifications ensures that you navigate the current financial scenario effectively and capitalize on emerging opportunities, fostering a robust and prosperous financial future.

Key Takeaways

  • Withdrawal of outstanding direct tax demands up to ₹25,000 for the period up to FY 2009-10 and up to ₹10,000 for FY 2010-11 to 2014-15.
  • The Reserve Bank of India modifies Immediate Payment Service rules, impacting bulk & high-value transactions, effective February 1, 2024.
  • Effective February 1, 2024, equity mutual funds in India adopted a T+2 (trade date + 2 days) settlement cycle for redemption payments, providing investors with their proceeds one day faster than the previous T+3 cycle.
  • The Reserve Bank of India maintained the repo rate remains at 6.5%, marking the sixth consecutive meeting without change.
  • Series IV of Sovereign Gold Bonds (SGB) opened for subscription on February 12, 2024, allowing investors to subscribe in multiples of 1 gram of gold.
  • The Pension Fund Regulatory and Development Authority (PFRDA) pushes for equal tax treatment on employer contributions with EPF.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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