Landmark changes in 2018

Announced in Budget 2018, the LTCG (Long Term Capital Gains) arising from transfer of equity shares and equity mutual funds exceeding ₹1 lakh a year is now taxed at 10 per cent plus cess. However, thanks to the ‘grandfathering’ clause, all the long-term gains until January 31, 2018 are protected. Short-term gains continue to be taxed at 15 per cent if sold within 12 months. The Budget also imposed dividend distribution tax of 10 per cent (plus surcharge and cess) on dividends declared by the equity MFs.

In late 2017, SEBI had asked all Indian funds to rejig their open-end schemes to meet its new categorisation and truth-in-labelling norms.

Following this, the 40-odd AMCs reviewed their entire list of schemes to change their names, categories, portfolios, strategies and mandates, wherever needed, to comply with these norms.

The regulator allowed the fund houses to offer only 10 types of equity schemes, 16 types of debt schemes, six hybrid funds and two solution-based funds.

SEBI made many changes to cost and commission structure of MFs in 2018 including introduction of a new slab structure for scheme expenses, banning upfront commissions, asking AMCs to be more transparent on costs, and tweaking the B30 allowance for assets sourced from smaller cities. This rationalised the expense ratio of the schemes significantly. The regulator also asked AMCs to meet all their expenses from their respective schemes, ensuring that direct plan fees do not reflect any hidden distributor commission.

In late 2018, the Cabinet approved the EEE tax status for the NPS. The NPS investors are allowed to withdraw 60 per cent of their accumulated corpus as a lump sum when they turn 60. Now, this entire 60 per cent will be tax-free, providing a big relief to investors. Earlier, only 40 per cent of the corpus was tax-free, while 20 per cent was taxable at the investor’s slab. The Cabinet also approved increasing the Centre’s contribution to government employees’ pensions and tax deduction benefits under Section 80C for NPS tier-II scheme.

Effective September 1, 2018, buyers of new two-wheelers and cars had to shell out upfront the cost of third-party insurance for a term of five years and three years respectively.

Earlier, the third-party insurance was bought for one year at the time of purchase of the vehicle and renewed subsequently at the end of every year.

The insurance regulator has also increased the personal accident cover in motor insurance policies for two-wheelers and cars from ₹1 lakh and ₹2 lakh respectively, to ₹15 lakh.

The NSE and the BSE launched commodity derivative trading in 2018. Listed companies now have to disclose their commodity risks and the risk management policy in the ‘Corporate Governance Report’ section of the annual report. This is a positive from the exchanges’ perspective. In October 2018, the regulator opened the space to foreign entities with exposure to the Indian physical market. Earlier in the year, MCX launched brass futures contract, eyeing physical market participants in the metal parts industry.

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