Last Updated: Dec 29, 2021, 02:48 PM IST
 

Like every year, 2021 saw a wide range of trends and changes that had an impact on the common man’s finances. These include changes and announcements made by the government and Reserve Bank of India (RBI) and trends related to investments and spending brought out by year two of the coronavirus pandemic.
 

Here is a look at major trends and changes that impacted our personal finances in 2021.
 

1. BUY NOW, PAY LATER SCHEMES GAINED POPULARITY
Buy Now, Pay Later (BNPL) schemes have gained currency among online shoppers, especially among young consumers during the pandemic.

News reports also state that the BNPL market in India is to rise exponentially in the coming years. According to Redseer, a consultancy firm, the BNPL market in India would grow to $45-50 billion by 2026, up from $3-3.5 billion presently. According to the research agency, the number of BNPL clients in the country might increase to 80-100 million by then, up from the current 10-15 million.
 

To cater to this rising demand many banks, e-commerce platforms and other lenders have launched BNPL offers for the upcoming festive season. A large number of borrowers can now enjoy the short-term credit offered through BNPL even without a credit history.
 

2. LAUNCH OF RBI RETAIL DIRECT SCHEME
Prime Minister Narendra Modi launched the RBI Retail Direct scheme in November of 2021. Through this scheme, retail investors can now buy and sell government bonds. The scheme was introduced by the Reserve Bank of India (RBI) in its February 2021 monetary policy.

Small investors can now invest in G-Secs by opening a gilt securities account, called Retail Direct Gilt (RDG) Account, with the RBI.
 

As per the notification issued by the RBI on July 12, 2021, a retail investor can open the RDG account if they have the following:
 

• Rupee savings bank account maintained in India;
• PAN issued by the Income Tax Department;
• Any official valid document such as Aadhaar, Voter ID for KYC purpose;
• Valid email ID; and
• Registered mobile number

3. NEW AUTO DEBIT RULES

From October 1 onwards, as mandated by RBI, banks and other financial institutions will have to ask customers to provide additional factor authentication if the auto-debit mandate for the payment is above Rs 5,000.
 

A bank or financial institution must provide a message to the customer at least 24 hours before the auto-debit payment is to be debited, and only authorise the debit once the customer confirms it. Pre-transaction notifications will be given via SMS, email, and other electronic means.

Additional factor authentication will be required for recurring transactions and not for 'once-only' payments.
This new rule impacts users who have given auto-debit mandates for recurring payments from their debit/credit cards and/or mobile wallets for payments such as a subscription to OTT platforms such as Netflix, Amazon Prime, music apps like Spotify, Apple Music, payment of mobile bills, insurance premium, utility bills etc.
 

4. SBI HIKES BASE RATE
The largest public sector bank in India, State Bank of India (SBI), increased the base rate by 0.10 per cent or 10 basis points (bps), according to its website. The new rate, that is, 7.55% per annum, will be effective from December 15, 2021. This might actually be a signal to the start to the end of the regime of low-interest rates.

That is because besides being a reference rate for borrowers, the base rate also works as an indicator of the direction of the overall interest rate in the economy. A rise in the base rate indicates that the falling interest rate trend is finally reversing and going forward we may see a few more hikes in interest rates.
 

5. EPF RELATED CHANGES
Taxation of EPF contributions: In the Union Budget 2021, it was announced that the interest earned by the Provident Fund contributions above Rs 2.5 lakh a year will now be added to the taxable income and taxed at the normal rates. This will only apply to the employee’s contribution and not that of the employer.
 

Linking of Aadhaar and UAN: Linking of Aadhaar and Universal Account Number or UAN was made mandatory. EPF linking was made mandatory this year. The last date for this was November 30, 2021.

It is important for Employees’ Provident Fund (EPF) account holders to link their UAN with their Aadhaar number to ensure that their employer is able to deposit the EPF contributions to the account. From December 1, 2021, if the UAN is not linked with Aadhaar, then your employer will not be able to deposit monthly EPF contributions to your EPF account. Further, withdrawals from EPF account will not be allowed till the time your UAN is verified and linked with Aadhaar.

EDLI limit hiked to Rs 7 lakh: The labour ministry has implemented a decision of retirement fund body EPFO's trustees to hike the maximum sum assured payable under the Employees' Deposit Linked Insurance Scheme, 1976 to Rs 7 lakh from the existing Rs 6 lakh. The CBT had also decided to continue payment of minimum sum assured of Rs 2.5 lakh under the scheme beyond February 14, 2020.
 

EPF Covid advance: EPFO has now made a second non-refundable COVID-19 advance available to its members in order to assist them during the second wave of the COVID-19 pandemic. This provision allows for non-refundable withdrawals up to 75% of the amount remaining to the member's credit in the EPF account or the basic salary and dearness allowances for three months, whichever is less. However, EPF members can also apply for a smaller sum.

6. LAUNCH OF TAX DEPARTMENT’S NEW E-FILING TAX PORTAL

On June 7, 2021, the Income Tax Department unveiled its new e-filing system, www.incometax.gov.in. The previous link www.incometaxindiaefiling.gov.in will be replaced with the new portal. According to the press release, the new e-filing system is designed to provide taxpayers with simplicity and a modern, seamless experience. The tax department's new portal can be considered as an attempt to compete with private income tax filing websites while also making it easier for people to file their income tax return (ITR), verify TDS, and so on.

However, the new tax portal which was supposed to make the lives of tax filers easy has in fact done the opposite. Ever since the launch, it has been marred with numerous glitches due to which tax filers have been finding it difficult to file their ITR. The government even extended the deadline to file ITR for F.Y. 2020-21 to December 31, 2021 due to this. One of the big issues faced by taxpayers is this: the new income tax portal has not considered/taken into account the full tax credit available in Form 26AS for these tax return filers.
 

7. RBI SAYS VIDEO KYC TO BE COUNTED AS FULL KYC FOR NEW ACCOUNTS
The Reserve Bank of India (RBI) updated its master instruction in May on know-your-customer (KYC) standards to make better use of the video-based customer identification procedure (V-CIP) and to make the process of updating KYC for bank clients easier. The video-based customer identification procedure can be used to open new accounts and to update the KYC of current bank customers on a regular basis.
 

“Video based Customer Identification Process (V-CIP) is an alternate method of customer identification with facial recognition and customer due diligence by an authorised official of the RE by undertaking seamless, secure, live, informed-consent based audio-visual interaction with the customer to obtain identification information required for CDD purpose and to ascertain the veracity of the information furnished by the customer through independent verification and maintaining an audit trail of the process. Such processes complying with prescribed standards and procedures shall be treated on par with face-to-face CIP for the purpose of this Master Direction,” according to an RBI notification issued on May 10, 2021.
 

8. LAUNCH OF ANNUAL INFORMATION STATEMENT BY TAX DEPARTMENT
The newly launched Annual Information Statement (AIS) is a tool that tells taxpayers what the tax department knows about them. AIS is a comprehensive statement containing details of all the financial transactions undertaken by you in a financial year (FY), i.e. it contains the information that is specified under the Income-tax Act, 1961.
 

AIS contains information related to income earned from various sources such as salary, dividend, interest from the savings account, recurring deposits, sale and purchase of equity shares, bonds, mutual funds etc. The statement also contains information related to TDS, TCS and any tax demand or refund.
 

9. NPS CHANGES
NPS exit rules: The Pension Fund Regulatory and Development Authority (PFRDA) has amended the requirements for those who join the National Pension Scheme (NPS) after the age of 65. PFRDA has eased the exit restrictions and allowed them to allocate up to 50% of the capital in equity under a new set of guidelines.

In addition to the existing physical mode of withdrawal, PFRDA has introduced the online and paperless procedure of exit to Government Sector customers as an option.

For new subscribers joining NPS after 65 years, there is now a three-year lock-in period. Subscribers can withdraw 60% of the corpus as a tax-free lump amount, and the remaining 40% must be used to purchase an annuity. The age limit for leaving is 75. The subscriber, however, can withdraw the entire money if the corpus is less than Rs 5 lakh.

Asset allocation norms: Subscribers who join NPS after the age of 65 can choose between PF and Asset Allocation, with a maximum equity exposure of 15% and 50% under the Auto and Active Choice options, respectively, according to PFRDA. The Pension Fund can be modified only once a year, whereas the asset allocation can be altered twice a year.

NPS age limit: The pension fund has increased the age limit for joining the NPS to 70 years. Previously, the admission age was 65 years old. The NPS entry age has been changed from 18-65 years to 18-70 years. According to a PFRDA circular on the new guidelines, any Indian citizen or Overseas Citizen of India (OCI) in the age category of 65-70 years can join NPS and continue up to the age of 75 years.

Premature withdrawal rules: If you plan to quit the National Pension System (NPS) early, you would receive only 20% of your accumulated wealth as a lump sum payment. You must purchase an Annuity with the remaining funds.
“If the corpus is higher than 2.5 lakh, at least 80% of the accumulated pension wealth has to be utilized for purchase of an Annuity providing for monthly pension to the Subscriber. The balance 20% is payable as a lump sum to the Subscriber,” according to PFRDA.

10. GOLD HALLMARKING MADE MANDATORY
The Ministry of Consumer Affairs, Food & Public Distribution announced that gold hallmarking will be compulsory starting June 16, 2021. Jewellers having an annual turnover of up to Rs 40 lakh will be free from statutory hallmarking, according to the press release.

It also specified that additional carats of gold (20, 23, and 24) will be permitted for hallmarking. If you buy 23-carat gold bangles, for example, your jeweller is required to sell you hallmarked gold jewellery.
The mandatory hallmarking of gold provides surety of purity of the yellow metal.
 

11. RETAIL INVESTORS FLOCK TO THE STOCK MARKET; UNENTHUSED BY FIXED INCOME PRODUCTS
India was one of the worst hit countries by Covid-19 earlier on in the year, many lost loved ones, livelihoods, household income and much more. In a year like this, the stock market seemed unperturbed. It touched all-time highs and seemed to ignore much of the devastation caused by the second wave.

And due to the meteoric rise in the stock market in 2021, more retail investors are turning towards equities. According to a news report in Times of India (ToI) on December 14, 2021, between April and October 2021, a little less than 1.9 crore demat accounts were opened, averaging 26.7 lakh per month.

However, at the same time, the growth of small savings accounts had slowed down over the last three years.
 

This included almost every scheme, barring Sukanya Samriddhi for the girl child. Between April and November 2021, 2.3 crore new small savings accounts were added, translating into a monthly average of around 29 lakh. According to a PTI news report, as many as 4.66 crores new accounts were opened under the small saving schemes in 2018-19 which came down to 4.12 crore in 2019-20, Minister of State for Finance Pankaj Chaudhary said. It further came down to 4.11 crore in 2020-21, he said.