Things to Keep in Mind As You Handle Your Personal Finances in July

In the wake of this crisis, the government had announced several relief measures for the common man to lower the financial burden. The relaxed norms were announced for a period of three months from April to June. The measures included EMI moratorium, extension of deadline for paying insurance premium, relaxation of EPF withdrawal rules, extension of income-tax related deadlines, among others.

However, some of these reliefs have ceased to be in effect from July 1 and could pinch your pocket. Mentioned below are the financial changes effective from this month that you need to consider while handling your finances:

ATM transaction fee waiver ends

The uncertainty caused by the virus outbreak led to an increased hoarding of cash in order to deal with unexpected expenses arising due to job loss, pay cuts, medical emergencies, etc. Taking note of the importance of cash as a safety net during the time of crisis, in late March the government announced a waiver of ATM withdrawal charges for three months. The waiver period ended on June 30, meaning the regular fees and charges (on cash and non-cash transactions) will now be applicable.

Penalty on non-maintenance of minimum balance requirement

Along with the waiver of ATM charges, the government had announced suspension of the minimum balance requirement in savings bank account for a period of three months. This relaxation too has expired. If for any reason you are unable to maintain the minimum balance requirement, you may have to pay penalty charges. The minimum balance requirement varies from banks to bank depending on the location (urban, semi-urban, rural), type of account (regular, salary, senior citizen), etc.

Similarly, investors in Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY) and other small saving schemes were given an extension of three months, till June 30, to make the minimum annual deposit for FY 2019-20. The minimum deposit requirement for PPF is Rs 500 and Rs 250 in case of SSY in a financial year. Non-payment of the deposit amount will attract a penalty of Rs 50 for every year the account remains inactive.

[Read: Where Can Senior Citizens Invest to Earn Slightly Better Returns than Bank FDs]

No more relaxation on EPF withdrawal

To address cash-crunch issues that employees faced amid the pandemic, the Labour Ministry had allowed Employee Provident Fund (EPF) subscribers to make advance withdrawal from their accounts. The announcement enabled investors to withdraw up to 75% of their PF balances or 3 months' wages, whichever is lower. The three month period to avail this facility has ended.

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Interest on delayed advance tax

Individuals/business with a tax liability of Rs 10,000 or more in a financial year are required to pay advance tax in different instalments. The first instalment during which at least 15% of the tax due for the financial year is to be paid falls on June 15. The government had announced that if such tax is paid after June 15 but by June 30 this year, it will attract lower penal interest on delayed payment of 0.75% per month instead of the usual 1%. Since the government has not announced any extension of lower interest rate for advance tax payment post deadline, you will be charged 1% interest per month for delayed advance tax payment.

Stamp duty on mutual funds and other securities

From this month, issuance and transfer of mutual fund units will attract stamp duty charges. Issuance of units, i.e. purchase (including SIP/STP), switch-ins, and dividend reinvestment transactions will attract stamp duty of 0.005%. Whereas, a stamp duty of 0.015% will be levied on the transfer of mutual fund units from one holder to another.

Apart from mutual funds, equity, derivatives, and currency trades will attract stamp duty charges as follows:

• Equity (delivery) - 0.015% on buy-side

• Equity (intra-day) - 0.003%

• Futures (equity and commodity) - 0.002%

• Options (equity and commodity) - 0.003%

• Currency and Interest Rate Derivatives - 0.0001%

• Debentures - 0.005% on issuance (and 0.0001% in case of transfer and re-issue)

• Repo on corporate bonds - 0.00001%

If you frequently churn your portfolio, the imposition of stamp duty will add to the cost of investment, thus lowering your returns. In fact, if you have a shorter holding period, the cost impact on returns will be higher.

Auto-debit in Atal Pension Yojana to resume

Pension Fund Regulatory and Development Authority had stopped the auto-debit function of contribution towards Atal Pension Yojana (APY) between April and June. APY is a pension scheme launched in 2015 to provide old-age income security to workers in the unorganized sector. Auto-debit of contribution towards scheme has restarted from July onwards. Subscribers in the scheme have time till September 2020 to make contributions towards months when there was no auto-debit function. During this period, no penal interest for late contribution will be charged.

Notably, some of the relaxation measures have been extended beyond June 30, which can provide some relief in dealing with the pandemic crisis. These are as follows:

Loan Moratorium: RBI has announced extension of moratorium on term loan EMIs by another three months i.e. till August 2020. The moratorium extension comes as a major relief to the retail borrowers struggling with their finances due to the pandemic. However, remember that interest will continue to accrue on your outstanding loan during the moratorium period.

[Read: Should You Extend Your Loan Moratorium? Know here...]

Deadline Extension for taxpayers: Last date for investing in tax-saving instruments to avail exemption/deduction for FY 2019-20 has been extended to July 31; while deadline for tax filing has been extended to November 30. Belated, revised tax return filing for FY 2018-19 has been extended by a month and can now be done by July 31.

Increased validity on vehicle insurance: The government has advised all states and union territories to to extend validity of all vehicle related documents such as driving license, vehicle insurance, etc. These documents will now remain valid till July 31 provided the documents have expired or will expire between February 1 and July 31.

The pandemic has made it difficult for many individuals to manage their assets. However, a prudent budgeting exercise can help you cut down on unnecessary expenses and reduce the risk of falling into a debt trap. If you need help in managing your personal finances, consider consulting a financial adviser.

Warm Regards,
Divya Grover
Research Analyst

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