Be careful credit card holders! Now credit card payments have become expensive. | Is Tax Saving FD best for your tax planning?

 

Now credit card payments have become expensive:

 

If you have a credit card and you use it a lot, then this news is for you. Often people make various types of payments through credit cards during travel. Sometimes it is also used for foreign trips. Now the government has changed some rules regarding such transactions. Let us try to understand the whole news in detail. 

Credit card payments have become expensive when traveling abroad. Credit card payments made while traveling abroad will now attract tax. Now know the name of this tax as well. The name of this tax is TCS on card payment i.e. Tax collection at source on credit card payment. Now, where had this announcement to impose that tax? We also tell you this. 

The Finance Bill 2023 was introduced by Finance Minister Nirmala Sitharaman in the Lok Sabha last Friday. While presenting the Finance Bill, Nirmala Sitharaman talked about imposing a tax on credit card payments made during foreign visits. It is also being considered to bring this payment under the Liberalized Remittance Scheme i.e. LRS. 

For this, the Finance Minister has also asked the country's central bank RBI to consider. Now the question must be arising in your mind what is this LRS? So now let us understand LRS in detail. LRS was first implemented in India in 2004 i.e. 20 years ago LRS came to India. Then sending payments up to $ 25,000 under this was out of the tax net. 

But later because of the then economic conditions, its limit was changed from time to time. In this budget, TCS was increased from 5% to 20% on sending money outside the country. Currently, sending less than ₹ 7 lakhs amount abroad does not attract TCS. But from July 1, even this exemption will not be available and tax will be deducted at the rate of 20% on top of that as well. 

However, the money sent abroad for treatment, and studies have been kept out of the tax net. Now also know why the government had to take this decision. People who make credit card payments in foreign countries are tax evasion, that is, the payment made by credit card remains out of the income tax department's character. 

That's why the government has thought of this new trick. Now with the coming of the new step, credit card payments made during foreign trips will come under the ambit of LRS. This means that now you will not be able to escape from tax collection at source and the revenue of the country will increase.

 

Is Tax Saving FD best for your tax planning?

 

Now only a few days are left to save tax and everybody thinking about is where to invest money for tax savings. Many people find the tax-saving FD of banks to be fine in this case. One of the major reasons for this is that most people find it easy to get FD in banks. Where there is an account, the same tax saving should also be done. 

It's a simple process, You can also get this FD done sitting at home. One of the major advantages of tax saving FD is that in this you get your money completely safe and with a fixed return. In comparison, investing money in ELSS is risky because its money is invested in Equity. But despite these benefits, should you invest in tax-saving FDs? What is best for you in tax planning?

You can look at National Savings Certificate i.e. NSC, Post Office Time Deposit, or Public Provident Fund i.e. PPF Account as compared to Tax Saving FD, but why we are saying there are some reasons which need to be understood. So let's talk about the interest rate. Let us see the interest rates available on a five-year tax-saving FD. 

For the last year, the Reserve Bank has been increasing interest rates. In the current financial year, RBI has increased the repo rate by 2.5%. Now with the increase in the repo rate to 6.50%, the rates of fixed deposits have also started increasing. Although the rate of tax savings has not increased much. The higher interest rates have increased in FDs with short-term maturity. 

The tenure of tax saving bank FD is five years. In such a situation, their rates are lower than other FDs. SBI gives the highest rate of 7% on FDs of 2 to 3 years. Secondly, 6.5% interest is being received on its tax-saving FD. HDFC Bank's 15-month FD is getting 7.10% interest, while the five-year tax rate is 7%. 

Talking about ICICI Bank, the bank is getting 7.10% interest between 15 months and 18 months. The interest is the same for a period of 18 months to two years. The bank is giving 7% interest on tax saving FD. Bank of Baroda is offering 6.25% on tax saving FD. While the bank gives interest at the rate of 6.75% for a period of one year to three years.

 

The picture becomes clear in front of us that tax-saving FD is getting less profit as compared to bank FD. Banks are paying more interest on short-term FDs because banks are feeling that there will be a change in the interest rate cycle in the coming times and the interest rates will come down. 

That is, if you are thinking to save tax, then it must be seen whether you will get any benefit in tax saving FD or not. How did you like the information? Do tell by commenting on our site www.tradeipohub.co.in.