The beginning of the new financial year has seen a number of small changes that, even though seem disparate, sort of hang together in terms marking a turning point for the ordinary Indian. Or at least, as four separate turning points. Some, or perhaps all of these may not seem like such a big deal to you but I believe that each of these things will make a difference.
Firstly, from April 1 onwards, the government will begin making a starting contribution to small depositors' accounts in the New Pension System. Despite having the potential to revolutionise old-age security for a huge number of Indians, the NPS has proven to be difficult to promote. In the absence of commission-earning agents, there's no one to sell the NPS. However, as the FM said in the budget, for the next three years, the government will contribute Rs 1,000 per year to the NPS account of those who deposit less than Rs 12,000 per year and start their account in 2010-11. This scheme could well be the promotional impetus that the NPS needs to do generate awareness among a larger audience.
Second, savings bank accounts will now pay interest daily. By itself, the difference in compounding is not much-for a constant amount in a savings account. Even for Rs 1 lakh, daily compounding will fetch an extra Rs 5 or so over a year. However, the real difference will be made by the fact that every day's balance will play its part in earning interest. Up till now, banks would pay interest only on the minimum balance between the 10th of a month and its end, which was a rule designed to generate income for banks without having to pay customers for use of their money. The earlier rule was so blatantly anti-customer that it's a scandal that it has taken so long for the RBI to amend it.
Third, very small businesses will now have a much easier time with their tax and accounting because of the new presumptive taxation rules. Businesses with annual revenue of less than Rs 60 lakh can now just pay tax assuming an income of 8 per cent of turnover, without even having to maintain books of accounts. While business analysts would hardly stop to bother about micro-enterprises of this size, I believe that this scheme is a serious boost to entrepreneurship. The grind of books and audits is a major drag on starting entrepreneurs. Under this scheme, they may not even need an accountant.
Four, there's the right to education. Oh, I know that has nothing to do with business or savings or investments, but eventually, it should affect everything. At least I hope so.
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