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personal finance: Five personal finance changes effective from July 1

Summary To provide relief to the common man from the financial burden of coronavirus-induced lockdown, the government in March 2020 has made relaxations. Some of these relaxations have ended today.

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With effect from July 1, 2020, buying of shares and mutual fund units will attract stamp duty.
The government has announced various measures to lighten the financial burden on the common man caused by the coronavirus-induced lockdown. These include relaxations in terms of waiver of ATM charges, non-maintenance of balances in savings bank accounts etc.

However, some of these relaxations ended today, i.e., July 1, 2020.

Here is a look at five money-related changes that have come into effect from today.
  • Restrictions on ATM withdrawals are back
The government, on March 24, announced that for three months debit cardholders could withdraw from any ATM for free without limits on the number of withdrawals. From today, however, this relaxation has ended, and the regular limits and charges will apply.

Here is a look at the number of free transactions an ATM-cum-debit cardholder can make, as per the Reserve Bank of India (RBI) guidelines:

Transactions at a bank's own ATM at any location: Minimum of five free financial transactions in a month, irrespective of the location of ATMs. Any number of non-cash withdrawal transactions will be provided for free.

Transactions at any other banks' ATM at metro locations: If the ATMs are located in any of the six metro locations, i.e., Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, and New Delhi, banks shall offer minimum of three free transactions (including financial and non-financial transactions) in a month to their savings bank account customers.

Transactions at any other banks' ATM at non-metro locations: At any location, other than the six metro mentioned above, banks must offer its savings bank account holders a minimum of five free transactions (including financial and non-financial transactions) at other bank ATMs in a month.

Charges for exceeding transactions limit: As per RBI guidelines, these charges cannot exceed a maximum of Rs 20 per transaction (plus applicable taxes, if any) by the bank.
  • Penalty for non-maintenance of bank account balance
Another relief provided by Finance Minister Nirmala Sitharaman in her March press conference was the waiver of penalty on non-maintenance of bank account balance. This was the announcement that was made: Waiver of minimum balance fee, reduced bank charges for digital trade transactions for all trade finance consumers for three months.

As the deadline of this relief has expired, non-maintenance of minimum balance will again attract a penalty. The penalty amount levied for non-maintenance of minimum balances will vary from bank to bank.

For instance, ICICI Bank has different minimum average balance requirements depending on the customer's location. The charges levied on non-maintenance of minimum balances in savings bank accounts vary between Rs 100 plus 5 per cent of the shortfall in required monthly average balances (MAB) and 5 per cent of the shortfall in required MAB, as per the bank's website.

However, a few banks have announced complete waiver on the requirement of holding average monthly balances, like the State Bank of India.
  • Stamp duty on buying of shares and mutual fund units
With effect from July 1, 2020, buying of shares and mutual fund units will attract stamp duty. As per the FAQs issued by the finance ministry, the earlier system of levying stamp duty on securities led to multiple rates for the same instrument, resulting in jurisdictional disputes and multiple incidences of duty, thereby raising the transaction costs in the securities market and hurting capital formation. Through the amendment, stamp duty on securities market instruments will now be levied at one place by one agency (through stock exchanges or clearing corporations authorised by the stock exchange or by depositories) on one instrument.

The FAQs issued has further clarified that redemption of mutual fund units is not liable to duty as it is neither a transfer nor an issue nor a sale. Stamp duty is imposed on the value of units excluding other charges like service charge, AMC fee, GST etc. If the units are issued for Rs1 crore, then Rs 500 would be the stamp duty to be remitted to States.

Stamp Duty Rates w.e.f. 1st July 2020
Instrument Rate
Issue of Debenture 0.005%
Transfer and Re-issue of debenture 0.0001%
Issue of security other than debenture 0.005%
Transfer of security other than debenture on delivery basis; 0.015%
Transfer of security other than debenture on non-delivery basis 0.003%
Government Securities 0%
Repo on Corporate Bonds 0.00001%
Derivatives
Instrument Rate
Futures (Equity and Commodity) 0.002%
Options (Equity and Commodity) 0.003%
Currency and Interest Rate Derivatives 0.0001%
Other Derivatives 0.002%
Source: finance ministry FAQs
  • Higher penal interest on delayed tax payments
In her March press conference, the finance minister announced a relaxation on the penal interest levied on the delayed payments of advanced tax, self-assessment tax, regular tax, TDS, TCS, equalization levy, STT, CTT made between March 20, 2020 and June 30, 2020. She stated that a reduced interest rate at 9 per cent instead of 12 per cent /18 per cent per annum (i.e., 0.75 per cent per month instead of 1/1.5 per cent per month) was to be charged during this period. No late fee/penalty shall be charged for delay relating to this period.

Any delayed tax payment made after June 30, 2020 will attract penal interest of 12 per cent /18 per cent as applicable instead of 9 per cent.
  • Auto-debit of Atal Pension Yojana
In April, the Pension Fund Regulatory and Development Authority (PFRDA) announced that auto-debits from bank accounts of Atal Pension Yojana (APY) subscribers would be halted till June 30, 2020. The decision was taken as majority of the subscribers belong to the lower strata of the society and were suffering from coronavirus induced lockdown. In an email communication to its subscribers, the pension fund body said that the auto-debit facility will start from July 1, 2020 onwards. Click here to read the full story.
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Summary | 5 Annotations
Five personal finance changes effective from July 1
2020/07/03 16:08
The government has announced various measures to lighten the financial burden on the common man caused by the coronavirus-induced lockdown.
2020/07/03 16:12
Restrictions on ATM withdrawals are back
2020/07/03 16:18
Transactions at a bank's own ATM at any location: Minimum of five free financial transactions in a month, irrespective of the location of ATMs. Any number of non-cash withdrawal transactions will be provided for free.
2020/07/03 16:19
Transactions at any other banks' ATM at metro locations:
2020/07/03 16:19