Six key financial changes this February you need to consider

Effective from February 1, customers will likely be able to transfer up to Rs 5 lakh between bank accounts without adding beneficiary details using the Immediate Payment Service (IMPS).

February begins with a big bang of the Union Budget, this time it being the interim one before the country heads for general elections. This time, February has a few more money tasks for you to look at. Let’s look at some of the most important money changes that’ll impact you during the month.

Evaluate the impact of interim Budget 2024 on your finances

Although Finance Minister Nirmala Sitharaman has indicated that there will be “no spectacular announcements” in the interim Budget, some tweaks cannot be ruled out. For instance, while the government raised the tax rebate limit from Rs 5 lakh to Rs 7 lakh under the new tax regime last year, there is a case for increasing the basic exemption limit under both tax regimes, experts said.

Then there is an expectation of more deductions on medical expenses. With rising medical costs, taxpayers are hoping for a hike in deductions for health insurance premium payments and medical expenses that are more in line with ground realities.

Currently, taxpayers can claim deductions of up to Rs 25,000 per year each for health insurance premiums paid for self and family and for parents under Section 80D. The deduction limit is Rs 50,000 in the case of senior citizens.

The Pension Fund Regulatory and Development Authority wants the tax-free cap on employers’ contribution to the National Pension System to be increased to 12 percent of basic salary and dearness allowance, if any, from 10 percent for private sector employees.

Investors want relaxed taxation rules on debt mutual funds and have demanded a separate tax deduction bucket for life insurance premiums as the Section 80C basket is overcrowded with other tax-saver avenues. Tax-free status for annuity income is another long standing demand.

Start your tax planning if haven’t started

Tax optimisation should always be a part of your financial planning exercise and not a task to be completed towards the end of the financial year. If you haven’t started with your tax planning, then do it now as we are just two months away from March 31, the end of the financial year. Invest wisely, considering your financial goals. You can achieve your tax planning goals by investing in existing commitments, which might include your Public Provident Fund (PPF), National Pension Scheme (NPS), Sukanya Samriddhi Yojana (SSY), monthly SIPs in equity linked savings schemes (ELSS), Employees Provident Fund (EPF) or life insurance premiums.

Buy health insurance to get additional tax benefits under Section 80D of the Income-Tax Act, up to Rs 25,000 each for self, spouse and children. The same limit of Rs 25,000 is applicable for your parents as well if they aren’t senior citizens yet.

Will RBI maintain the status quo on the repo rate?

In a relief to home loan borrowers, the Reserve Bank of India (RBI) did not raise the repo rate in its April, June, August, October and December monetary policy announcements, holding it at 6.5 percent.

It remains to be seen whether the RBI will maintain the status quo on the policy repo rate or hike it in February to control inflation. If the RBI hikes interest rates, banks will once again increase interest rates on home loans and other loans linked to the repo rate as an external benchmark, as per the terms of loan agreements.

Sovereign Gold Bond's new tranche opens for subscription

The new series of SGB, called SGB 2023-24 Series IV, opens for subscription on February 12 and closes on February 16. This will be the last SGB tranche in the 2023-24 series.

The tenure of SGBs is eight years with an option of premature redemption after the fifth year to be exercised on the date on which interest is payable.

SGB offers a 2.5 percent interest per year, payable half-yearly on the nominal value of the bond. These bonds can be held in a demat account. At the time of redemption, the investor is paid the then prevailing price of gold.

According to financial advisors, SGBs are the best way to invest in gold if an individual is ready to hold the investment till maturity, which is eight years. Invest in gold (SGBs) according to your portfolio allocation. Having around 5-10 percent of one portfolio in the yellow metal acts as a cushion in times of economic crisis in comparison to equity.

New IMPS rules for fund transfer

Effective from February 1, customers will likely be able to transfer up to Rs 5 lakh between bank accounts without adding beneficiary details using the Immediate Payment Service (IMPS). According to the National Payments Corporation of India (NPCI) circular, dated October 31, 2023, all the banks are required to comply with the directive for initiating and accepting fund transfers via mobile number and bank name on all IMPS channels by January 31.

Earlier, recipient details such as mobile numbers, bank account names, account numbers and IFSC codes were required for IMPS transfers. This new process will eliminate the need for users to input cumbersome beneficiary details during transactions. Users will be able to execute fund transfers with a simplified process that only requires the recipient's mobile number and bank name.

For multiple bank accounts linked against a mobile number, the beneficiary bank shall credit to the primary account. The primary account shall be identified using the customer’s consent. In case customer consent is not provided, the bank shall decline the transaction.

ICICI Bank introduces dynamic currency conversion fee on credit cards

Effective from February 1, a dynamic currency conversion (DCC) fee of 1 percent plus taxes will be applicable on each international transaction carried out in Indian currency at an international location or transactions carried out in Indian currency with merchants located in India but registered in a foreign nation. These charges will apply to all ICICI Bank credit cards.

DCC is the currency conversion service on a real-time basis. It allows cardholders to make credit card payments in Indian currency at international locations or to merchants located in India but registered in a foreign nation. Although DCC simplifies the understanding of prices in Indian currency, it involves additional mark-ups/charges levied by merchants that may be unfavourable for you.

Further, ICICI Bank will refuse reward points on rent payments and e-wallet loading using credit cards. This change will apply to all ICICI bank credit cards, except for Amazon Pay ICICI Bank credit cards.