This financial year has come with some changes which would affect our personal financial in some way or the other. In this article we would like to highlight changes that are made in the interest that you get in your savings bank account, PPF account and also about PAN card regulation as far as your deposits are concerned. Let’s discuss these changes one by one:
Saving Account would earn more interest
Not many of us would be aware that prior to this financial year, we were getting less interest on balance in savings bank account as against what was publicized 3.5 % per annum. The bank used to pay us interest on the minimum balance kept in our account between 11th and last day of the month. Thanks to the method of calculation, it was truly unfair on us and cost us huge amount of interest loss. Assuming, you have deposited Rs. 2 lacs on 12th day of any month and from 1st to 11th the balance was only Rs. 5000/-. Banker would take Rs. 5000 as the lowest balance during that month and credit your account with Rs. 14.58. But starting this financial year, the banker would pay you same 3.5 % but this would be calculated based on daily closing balance.Taking the above example, if your 2 lacs continues to remain in bank till the end of the month, you would be getting Rs. 378.76/-. Quite a substantial gain, but do remember, the savings bank rate of interest is much below the inflation rate, so you should keep only that much amount in savings bank account, which you would require for your immediate needs only.
The impact would be that the banks cost of funds shall go up. Each bank has to pay more there by bringing the NII (Net Interest Income) of the bank a bit low. Worst hit would be the banks with more number of salary accounts in there deposits. But over all the investor are the winner of this regulation.
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Non quoting of PAN would, would attract TDS at higher rate
From April 1, 2010 if PAN (Permanent Account Number) is not quoted at the time of transaction the deductor shall deduct TDS at the rate of 20 percent as against the normal TDS rates of 2 percent to 10 percent.
This means that if you not have a PAN or fail to produce the PAN number the TDS rate would be higher. This is as per section 206AA introduction in Financial Act (No 2)2009. This would particularly impact people having low income and who do not fill income tax return. Also senior citizens with low income need to obtain a PAN number as banks would cut TDS at higher rate than the prescribed on their fixed deposits. Remember that this shall be done even if a senior citizen provides from 15 G or 15H. Also NRIs(Non Residential Indians) need to take care that in case they are expecting an income, they need to obtain the PAN number and provide it to the deductor and also this would be required for claiming the TDS from the IT department.
Considering the fact only 8 crore PAN cards have been issued till date, the tax base is just 3.3 crore, on account of massive under reporting and claiming of exemptions. the income tax department wants to check the tax evasion. Over all there are two ways to increase tax collection. One is to impose more tax and other is to widen the base or number of people who would pay tax. The exchequer is working on the second method.
Changes in PPF account
Earlier your date of deposit of cheque was treated as Deposit in PPF but now of realization of cheque shall be treated as deposit date. So just make sure that your cheque is cleared before 5th date of the month, so that you will get the full month’s interest and do not wait for 31st march depositing your cheque.
Also you can now open a PPF account in the name of minor child also, which was earlier not allowed by some agency banks.
The Indian financial systems are one of the best in the world and there are case studies taught in international MBA institute on our financial and banking system. Just one more reason which makes us proud to be an Indian!
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