With 2017 now a slowly, fading memory, here are a bunch of financial lessons learned across the board during the year that should help you in 2018 and beyond.
As the sun sets on 2017, it becomes the perfect time to look back and evaluate the year that was. A number of strong changes were introduced and enforced on the financial front, and their impact was felt in our daily lives. One such move was the strong push to link Aadhaar to everything.
Other important changes were the implementation of GST, an ever so slight reshuffle in the income tax brackets, a steep decline in Savings Accounts and Fixed Deposit interest rates etc.
Let’s take a look at the important financial highlights of the year and see what we can learn from them for a better 2018.
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Income Tax Changes You Should Be Aware Of
The tax rate was decreased from 10% to 5% for incomes between Rs. 2,50,000 and Rs. 5,00,000. For taxpayers with an income of up to Rs. 3,50,000, the tax rebate was revised to Rs. 2,500 per year. Earlier, it was Rs. 5,000. This is good news for everyone with a taxable income of Rs. 3,50,000 since this has reduced the total tax payable from Rs. 5,150 to Rs. 2,575 from this year onwards.
However, if your taxable income is between Rs. 50 lakhs and Rs. 1 crore, you’ll now have to pay a surcharge of 10% on your Income Tax. There has been no change to the 15% surcharge levied on those earning more than Rs. 1 crore.
Other than these changes, the government also introduced a gamut of other changes regarding tax rules. Click here to access a comprehensive article on income tax rules for the financial year 2017-2018. Now that we are almost in the last leg of the financial year, it definitely is a good time to read up and refresh your memory about tax-related information.
Additional Reading: 5 Common Income Tax Mistakes To Avoid
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Penalty For Late Filing Of ITR
If you fail to file your tax returns or file them after the deadline, you will be charged a penalty. Although those with income less than Rs. 5,00,000 will be charged a meagre Rs. 1,000, taxpayers from higher income brackets will attract a higher penalty of Rs. 5,000 and Rs. 10,000 depending on how late they file their taxes
Delaying the income tax returns (ITR) can draw a scrutiny from the I-T department and you may also receive a notice asking for an explanation. Click here to know more about the impact of delayed IT filing on you.
We know that discipline is key to building wealth. So make sure that you not only file your taxes on time, but also make timely payments towards your investment portfolio and credit dues. All these penalty charges are not as meagre as they look. It’s better to invest Rs. 5,000 in a Mutual Fund for your future rather than using it to pay penalty.
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Introduction of GST
The Goods and Services Tax (GST) is imposed on the supply of products and/or services within the country. It subsumes multiple indirect taxes that are imposed by the State Governments or the Central Government, such as Service Tax, Purchase Tax, Central Excise Duty, Value Added Tax, Entry Tax, Luxury Tax, Local Body Taxes, etc.
The implementation of GST by Prime Minister Narendra Modi is considered a historical move, considering the fact that it significantly reformed indirect tax in India. The consolidation of several different taxes into one is forecast to help the country move forward by eliminating the cascading of taxes. The reform is also set to pave the way for a common national market, thereby making Indian commodities and services increasingly competitive in both local as well as global markets.
However, experts say that GST is likely to send your bills higher in the short term till the fluctuations level out. Though GST might not cause a major tectonic shift in your budget, its implementation tells you that you need to stay prepared for contingencies. Make sure that you start contributing to an emergency fund in 2018.
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Adieu Mutual Funds Mayhem
After several failed attempts at nudging Asset Management Companies (AMCs) to reduce the clutter of similar schemes under one category and to merge them under one product heap, SEBI introduced a slew of measures in September that stipulate the categorisation of Mutual Funds. Click here to know all about the categorisation.
SEBI’s move can be seen as an effort to reduce ambiguity and introduce more transparency for investors as often they have to choose from several similar schemes under one category that causes confusion.
With such good things happening on the Mutual Fund front, there is no reason for you not to invest. Make sure that you start investing come this New Year. You can begin investing in Mutual Funds with as little as Rs. 500.
Additional Reading: Choosing Between Various Categories Of Equity Mutual Funds
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A Decline In Savings Account Interest Rates
It all started with the State Bank of India (SBI) cutting its Savings Account interest rate from 4% to 3.5%. Following this move by SBI, the largest lender in India, Axis Bank also reduced the rates for its Savings Account. Soon the other banks followed suit.
Moreover, interest rates offered by banks on Savings Accounts used to be regulated but now they have been deregulated. This means banks can now decide on what interest rates they wish to offer for Savings Accounts.
Though this was gloomy news for almost everybody, it wasn’t exactly doomsday. Moreover, the situation urged people to explore other investment avenues that offer better returns.
The learning we can draw from here is that you must continually evaluate our investment portfolio and make changes to it as and when needed. This will ensure that your funds always stay parked in investment options that offer maximum returns.
If you are not sure where you can invest all that money kept in your Savings Account, then read this article. It has a host of options you can explore.
Additional Reading: 7 Reasons Why Fixed Deposits Are Better Than Savings Accounts
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Push To Link Aadhaar To Everything
Many aspects of our lives are now linked to Aadhaar. There’s no escaping it. The government has made it compulsory to link your Aadhaar with many financial services availed by you. Your PAN, bank accounts, investments, insurance policies, PPF, and even your NSC need to be linked. The idea behind compulsory linking of Aadhaar is to curb tax evasion, de-dupe PAN accounts, increase the taxpayer base, and authenticate financial transactions.
The government has set deadlines for linking Aadhaar with different services. Click here to get a quick overview.
You can debate the reach and security offered by Aadhaar as much as you like, but the fact remains that you need to link it with the services mentioned for undisrupted use of said services.
Additional Reading: Linking Your Bank Account with Aadhaar: What Happens if You Don’t?
There you have it! Our 6 financial takeaways from 2017. And to help you start 2018 on the right financial foot, we’ve got some great advice for you. There has been an increasing interest among people to know their Credit Score. After all, it’s crucial to avail a loan or Credit Card.
As a personal finance marketplace, we encourage people to check their Credit Score regularly. To this end, we have partnered with the Experian credit bureau so that we can bring the Credit Scores of our customers to them for free. You can check your Experian Credit Score at BankBazaar for free as often as you like.
Once you know your score, you can apply for a Credit Card or loan with a whole lot more confidence.