Simply Save | How 2021 affected your personal finances

For people across the world, 2021 has been a year to forget as COVID-19 continued to wreak havoc in many countries. India was amongst the worst-hit as the deadly second wave ravaged the country between March and May 2021. 

However, for stock and mutual fund investors, it was an exciting year with the stock market indices scaling new peaks, except towards the end of the year. The market benchmark indices S&P BSE Sensex and CNX NSE Nifty have yielded returns of 20 percent in year to date. The broader market indices - mid- and small-cap - have yielded returns of 35 percent and 60 percent respectively. The run-up in stock markets over the last one and a half years has got reflected in the performance of the equity schemes.  While euphoria reigned supreme at the bourses in 2021, experts caution against expecting the kind of returns that investors saw in 2021. 

It was also an eventful year for the retirement funds space, with both Employees’ Provident Fund (EPF) and National Pension System (NPS) witnessing several changes. Budget 2021 introduced a tax on interest earned on EPF contributions of over Rs 2.5 lakh, taking many employees – particularly those who contribute large amount to their voluntary provident fund (VPF) – by surprise. NPS saw its investment management fee go up, though it remains one of the cheapest retirement planning tool available today. The liberalised investment guidelines are expected to provide more options to invest for pension fund managers, though risks, too, could be higher. 

Taxation was in the news constantly with the income tax department extending timelines for filing returns and also launching a new tax return-filing portal. This new e-filing portal was beset with glitches since the launch, prompting tax consultants to demand another extension to compensate for the time lost due to teething troubles.

What should investors keep in mind as we enter into the New Year, with worries over Omicron cases leading to some volatility in stock markets? Should employees who voluntarily contribute more than the statutory requirement to their VPF look at National Pension System (NPS) instead? Will the December 31 deadline for filing tax returns be extended once again?

Tune into Simply Save to understand the impact that 2021 had on your finances.