India taxes individuals based on a system of income slabs. Different tax rates are assigned to different ranges of income.&nbsp;

Understanding tax slabs is crucial for several reasons.

As a person earns more, the tax liability also increases, creating a fair and progressive tax system in the country. To achieve this, the government regularly updates and announces changes to tax slabs in the Union Budget.

The income tax slabs differ between the old and new tax regimes. Let's explore the specific slab rates applicable to Individuals for FY 2022-23 (AY 2023-24) and FY 2023-24 (AY 2024-25).

Income Tax Slab Rates For FY 2023-24 (AY 2024-25)&nbsp;

Rates of the old tax regime slabs are categorized into three groups:

The new tax regime applies uniform tax rates to all individuals, eliminating the age-based distinctions in the old system. The new tax regime slabs 2023-24 are outlined below.

Applicability of Surcharge for FY 2023-24 (AY 2024-25)

The income tax <a href="https://incometaxindia.gov.in/charts%20%20tables/tax%20rates.htm">surcharge</a> is an extra fee imposed on top of the <a href="https://www.skydo.com/blog/how-to-file-taxes-under-44ada?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">regular income tax</a>. An additional tax is applied to individuals with higher income earnings in a specific financial year. Let’s look at the applicable surcharge rate under the Old and New tax regime.

However, 25% or 37% surcharge rates will not apply to income under the following sections.

Consequently, the highest surcharge rate on the tax payable for such incomes will be 15%.

Starting from the Assessment Year 2023-24, the maximum surcharge rate on tax payable for dividend income or capital gain specified in Section 112 will be capped at 15%.&nbsp;

A 4% Health and Education cess will be applied to all cases’ total income tax liability and surcharges.

Comparison of tax rates under the New tax regime and the Old tax regime for FY 2022-23 (AY 2023-24)

How do you calculate the income tax from the income tax slabs?

Let’s understand the calculation with an example.

Sanjana, aged 35, has a total taxable income of Rs. 8,50,000. She has opted for the old tax regime. Her income includes income from salary, interest and rental income. Deductions under section 80 have been reduced. Now, Sanjana wants to know her <a href="https://www.skydo.com/blog/gst-requirements-international-service-sales?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">tax liability</a> for FY 2022-23 (AY 2023-24).

*Sanjana, an individual taxpayer under the age of 60, enjoys an income exemption limit of up to Rs 2,50,000. Other taxpayers, i.e., senior and super senior citizens, have higher income tax exemption thresholds of Rs 3,00,000 and Rs 5,00,000, respectively.

Please be aware that the tax rates in the New Tax Regime are uniform for all categories of individuals, including regular individuals, senior citizens, and super senior citizens.&nbsp;

Individuals with a net taxable income of up to Rs 5 lakh qualify for a tax rebate under section 87A, resulting in zero tax liability in both the New and Old tax regimes. It's important to note that in Budget 2023, the rebate under the new regime has been extended, making income up to Rs 7 lakh tax-free from the FY 2023-24 onward.

Let's delve into effective strategies to maximize your investments while minimizing the associated tax burdens.

ELSS mutual funds provide a dual benefit of potential capital appreciation and tax savings under Section 80C of the Income Tax Act. Investing in ELSS reduces taxable income and offers a path for long-term wealth growth.

2. Explore tax-efficient investment avenues

Health insurance qualifies for tax benefits under Section 80D. You can claim tax benefits on premiums paid - up to Rs 20,000 for senior citizens and Rs 15,000 for others. For example, if you pay Rs 15,000 for your policy and Rs 20,000 for your senior citizen parent, you can claim a total tax benefit of Rs 35,000.&nbsp;

Maturity value is tax-free for sums received under critical illness insurance policies.

This strategy entails selling loss-making assets to realize the capital loss and using it to offset the gains earned by profit-making assets.

For instance, if you have a loss of Rs. 20,000 in Stock A and a gain of Rs. 30,000 from Stock B, you can sell Stock A during a market downturn to offset the gains. This way, you can reduce your taxable income. The saved amount can be reinvested for portfolio growth.

Ensure that tax loss harvesting aligns with your overall financial goals and plan by considering a discussion with a financial professional or tax advisor.

<a href="https://www.skydo.com/blog/how-can-the-right-chartered-accountant-help-your-tech-export-business?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Consult financial professionals or tax advisors</a> for effective tax planning and strategic advice. Their expertise can provide tailored insights aligned with your financial goals and ensure a well-informed approach to optimize your tax situation.

If you need help deciding what is right for you, we will connect you with our panel of Indian and US-based CA / CPAs. Feel free to reach out to us.

Q1. How is a taxpayer's income categorized?

Ans: A taxpayer's income falls into five categories outlined in Section 14 of the Income Tax Act. These include Income from salary, Profits from a business or profession, Income from House Property, Capital Gains, and Income from Other Sources.

Q2. Is it possible to avail of 80C deductions while choosing the new tax slabs 2023-24?

Ans: No, under the new tax regime, several deductions and exemptions, including those under section 80C, are not permitted. Opting for the new tax regime means foregoing the ability to claim deductions under section 80C.

Q3. What do "Previous Year" and "Assessment Year" mean?

Ans: We have two important terms in income tax provisions: (i) Previous Year and (ii) Assessment Year. Previous Year is when you earn income, typically from April 1st to March 31st. The year right after the Previous Year, from April 1st to March 31st, is called the 'Assessment Year.'

For example, the Previous Year is from April 1, 2023, to March 31, 2024 (FY 2023-24). The corresponding Assessment Year is from April 1, 2024, to March 31, 2025 (AY 2024-25).

Q4. What is the tax exemption limit for calculating income tax rebate under section 87A?

Ans: For FY 2023-24 (AY 2024-25), the rebate limit has been increased to Rs. 7,00,000 under the new tax regime. This means a resident individual with taxable income up to Rs 7,00,000 will receive Rs 25,000 or the amount of tax payable (whichever is lower) as tax relief. However, the old tax regime's threshold limit will remain the same, i.e., Rs 12,500 if taxable income is up to Rs 5,00,000.

Q5. How much is the standard deduction for FY 2023-24?

Ans: You can claim a standard deduction of ₹50,000 to the income taxable under the head ‘Salaries.’ The standard deduction is a tax benefit that can be claimed irrespective of the amount spent on Transport or Medical Allowance. It applies to individuals earning a salary or pension income.

Prepare for the upcoming year's tax season by understanding the tax slabs for 2023-24 and optimizing your tax savings. 

Tax Slabs in 2023-24: Plan Ahead for Next Year Tax Savings

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Rohit Khuranna

As global trade continues to flourish, businesses increasingly engage in cross-border transactions. The advent of international payments has been long-standing in the financial world, facilitating commerce and trade. Furthermore, the advancements in fintech today empower many businesses and individuals to make instant payments. Businesses can experience stress-free invoicing, tax handling, and recurring billing in a few clicks.

However, without a centralised payment management system, the entire process can become inefficient, expensive, risky, and very well run into compliance issues. Managing cash flow and making strategic decisions are crucial to running a successful business effectively.&nbsp;

Such a need calls for a platform that helps you <a href="https://www.skydo.com/blog/how-skydo-increased-success-rate-on-international-payments?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">manage international payments</a> efficiently, which can be trusted and transparent.

Why Do You Need an International Payment Gateway Offering More Services Than Payments?&nbsp;

A centralised payment management system streamlines and consolidates all financial transactions, offering real-time visibility and control. It enhances efficiency, reduces errors, and mitigates the risk of fraud.&nbsp;

Furthermore, it seamlessly enables businesses to adapt to evolving payment methods and regulatory requirements. In a world where financial agility is paramount, centralised payment management is not just a convenience but one place that offers numerous benefits, including increased efficiencies, cost-effectiveness, risk reduction, and improved financial management.&nbsp;

Here are some reasons to have an international payment gateway.

12 Things to Consider When Choosing an International Payment Gateway

When selecting a platform for your international financial operations, it's crucial to ensure that it offers a comprehensive suite of services that goes beyond mere payment processing. Look for features like multi-currency support, payment tracking, and automated reporting to streamline your global financial management.

One noteworthy solution that excels in these areas is Skydo. They offer multi-currency support and take it one step further by setting up virtual foreign accounts for you.&nbsp;

This means you can effortlessly conduct international transactions without the hassle and compliance issues typically associated with setting up accounts abroad and obtaining FIRA, saving both time and costs.

Skydo simplifies your financial management with automated reporting. Receive updates on payments due, pending amounts, and more, allowing you to stay on top of your international financial affairs with ease.

Ensure the international payment gateway aligns with your business needs and the Reserve Bank of India's (RBI) guidelines on cross-border transactions. RBI's <a href="https://www.skydo.com/blog/online-payment-gateway-service-provider-opgsp?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Operational Guidelines for Payment Gateways and Payment Aggregators (OPGSP)</a> may stipulate a transaction limit of USD 10,000 for a single transaction.&nbsp;

Verify that the payment gateway adheres to these limits, providing flexibility for your business's financial requirements. Compliance with regulatory standards ensures smooth cross-border transactions within prescribed limits, preventing potential disruptions.

Evaluate the platform's invoicing capabilities. It should enable you to create professional, multi-currency invoices that comply with international invoicing standards. Automation features expedite the billing process.

Heads up: Skydo allows you to create invoices in multiple currencies for free, all within the platform. Discover how <a href="https://www.skydo.com/blog/transforming-your-invoicing-experience-with-skydo?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Skydo can transform your invoicing experience</a>.

When you're hunting for the right international payment gateway, pay close attention to the onboarding timeline. Traditional vendors might drag you through a 4-7 day process, pausing your expansion plans.&nbsp;

Skydo cracked the code with a breezy onboarding journey that gets you rolling in just 5 minutes. Imagine the time saved! The streamlined onboarding ensures that your business can promptly access the international market, emphasising the significance of time in the competitive landscape of expanding enterprises.

When selecting an international payment gateway, the settlement period is a crucial factor to consider. Skydo boasts a 24-hour settlement period for cross-border payments. This means that within a day, funds are credited to the designated bank account, offering swift and efficient transaction processing.&nbsp;

This rapid settlement period ensures timely and reliable cross-border fund transfers, enhancing the overall efficiency of international transactions. When evaluating payment gateways, the speed and transparency of settlement periods are paramount considerations for seamless global financial operations.

Confirm that the platform is up-to-date with global regulatory requirements. It should automatically adapt to changes in international financial regulations, reducing compliance risks.

For any business, cash flow is king. Accurate financial visibility and control are important for making strategic financial decisions. A good international payments platform will allow you to track the status in real time to know when you will receive the money at any given point. Banks do not provide this facility, making it difficult for a business to operate well.

Skydo provides a transparent view of your transactions from the moment they hit the Skydo platform to the final destination in your bank account. You'll have access to live foreign exchange rates and a clear breakdown of Skydo's fees, ensuring full transparency throughout the process.

Encountering payment failures in international transactions can be a frustrating and anxiety-inducing experience. The uncertainty surrounding financial transactions can lead to disruptions in business operations, customer dissatisfaction, and a loss of trust. The pain of payment failure is not just monetary; it extends to the credibility and reliability of the entire payment process, impacting both businesses and consumers.

In this landscape, Skydo emerges as a beacon of assurance. With an unwavering commitment to reliability, Skydo boasts an impressively low payment failure ratio.

Once funds are securely deposited into your Skydo account, the spectre of payment failures significantly diminishes. Skydo's dedication to seamless international transactions alleviates the pain associated with payment uncertainties and fosters a sense of confidence and trust.

Assess the accessibility and responsiveness of the platform's customer support. Multichannel support (phone, email, chat) with 24/7 availability ensures you can receive assistance whenever you need it, regardless of your location or time zone.

Look for the ability to track client-level monthly revenue within the platform. This feature can help you monitor your financial health for a specific client, identify growth opportunities, and tailor your services accordingly.

In this regard, Skydo goes the extra mile by providing a comprehensive overview of your client-level monthly revenue. The platform generates this overview based on the invoices you create, offering you a detailed and up-to-date account of your financial interactions with each client.&nbsp;

This feature empowers you to make informed decisions, optimise your revenue streams, and ensure that your financial relationships with clients remain on a solid footing. With Skydo, you're not just tracking numbers; you're gaining actionable insights to fuel your financial success.

Ensure seamless business operations by prioritising an international payment gateway that offers robust integration with various platforms.&nbsp; Opting for a gateway like Skydo, which integrates effortlessly with platforms like Tropal, Feel, Upwork, Freelancer.com, and many more, ensures a streamlined and efficient payment process.

Skydo: The Best International Payments Platform for Growing Businesses

Skydo is a trusted and efficient solution that simplifies the complex world of global payments for Indian exporters. With a comprehensive platform that checks all the boxes on your checklist, Skydo empowers businesses to scale internationally with ease.

Here is a real transformation story: Code Matrix, a blockchain and AI/ML company in India, struggled with international payments until they discovered Skydo. With flat transaction fees of $29 per $10,000 and $19 for up to $2,000, zero FOREX fees, and a virtual bank account in each country of business, Skydo made the payment process seamless. With Skydo, Code Matrix experienced accelerated growth and complete customer satisfaction.

Streamline Your Global Payment Management

Skydo's commitment to efficiency is exemplified through its automated invoicing and payment system. It takes care of generating invoices, ensuring global regulatory compliance, and providing real-time payment tracking.&nbsp;

This gives businesses more time to focus on growth strategies, secure in the knowledge that their international payments are handled seamlessly.&nbsp;

<a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Sign up for a demo now</a> to witness how you can simplify your international payments with Skydo, the best payment gateway for international transactions!

Q1: Which is the best payment gateway for international transactions?

Ans: Skydo is an optimal choice for international transactions among the options. Unlike other platforms charging variable conversion fees, Skydo ensures cost-effectiveness with a fixed transaction fee. Its FX Calculator provides transparency, helping businesses estimate earnings accurately and making Skydo a reliable payment management system for cross-border transactions.

Q2: How can you get an international payment gateway in India?

Ans: To acquire an international payment gateway in India, businesses can consider platforms like Skydo. It is an efficient international payment processor, offering features such as the FX Calculator for transparent cost estimation. Integration is seamless, enhancing the overall payment management system and making it an ideal choice for businesses and freelancers in India.

Q3: What security measures does Skydo have in place to ensure the safety of my international transactions?

Ans: Skydo, as a trusted international payment platform, prioritises security in its payment management system. It employs robust encryption and compliance measures to safeguard international online payments. Users benefit from a secure environment, ensuring the confidentiality and integrity of their transactions with this reliable international payment provider.

Q4: How does Skydo ensure compliance with international payment regulations?

Ans: Skydo ensures compliance with international payment regulations through its innovative feature of automatically generating Foreign Inward Remittance Advice (FIRA). This streamlined process and a one-click download option eliminate manual document creation, ensuring swift and precise handling of all FIRAs.&nbsp;

By seamlessly integrating with Indian tax regulations and adhering to guidelines set by the Reserve Bank of India and other authorities, Skydo enhances credibility and eases the burden of regulatory compliance for users.

Q5: Can I integrate Skydo with my existing financial systems?

Ans: Yes, Skydo offers seamless integration with existing financial systems, enhancing overall payment management. As a versatile international payment platform, it caters to the needs of businesses and freelancers, providing compatibility with various international payment methods online. The flexibility of Skydo's integration makes it a valuable addition to streamlining financial processes for cross-border transactions.

How to Choose an International Payment Gateway in 2024

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It’s no mystery that payment systems are pivotal in your business's success. From ease of collection to scale to gross margins, your payment systems influence how much you sell. If the last few years are any indication, fintech will completely transform payments in the coming decade.

How can you overcome <a href="https://www.skydo.com/blog/5-major-payment-challenges-for-global-service-businesses?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">payment challenges</a> and ensure that your business reaches its absolute potential?

Understanding the Payment Platform Challenges and How to Navigate Them

In today's fintech landscape, four challenges demand your attention.&nbsp;

1. Regulatory Changes and Compliance Requirements

Every new technology will create unique risks, and regulators will construct rules to mitigate those risks. It will impact settlement days, modes, rates, and value-added services like BNPL.&nbsp;

“Adoption of any new such platform will come with uncertainties of regulatory changes and new compliances,” says Rohit, a seasoned Chartered Accountant well-versed in the financial seas.

<a href="https://www.skydo.com/blog/ensuring-financial-compliance-5-tips-to-safeguard-your-businesss-finances?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Ensuring compliance</a> is more than meeting the minimum requirements—it is your compass to safe waters. Non-compliance can lead to costly penalties and reputation damage. To avoid such pitfalls, here’s a helpful checklist to stay aligned with the latest regulations.

2. Security Concerns and Evolving Fraud Risks

The most common security concerns include the following.

Therefore, safeguarding your payment platform should be a top priority.&nbsp;

Learning from peers’ experiences in the payments space, you can <a href="https://www.skydo.com/blog/the-pros-and-cons-of-cross-border-payment-solutions/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">choose a platform</a> that implements the following proactive strategies.

3. Changing Customer Expectations and Demands

Satisfied customers are more likely to become repeat users and advocates for a quick, intuitive, and accessible platform. Choose a <a href="https://www.skydo.com/blog/the-pros-and-cons-of-cross-border-payment-solutions?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">payment gateway</a> platform for your cross-border transactions that offers the following features/perks and exceeds customer expectations.

Delivering a seamless payment experience fosters trust, customer satisfaction, and long-term loyalty, positioning the platform for sustained success in the competitive fintech landscape.

From OTP-less logins to emerging technologies like blockchain and digital currencies, you must unlock new opportunities for your business. Yet, there are challenges to navigate in this uncharted territory.

Considering these hurdles, choose a payment gateway partner that offers–

Future Forecast: Emerging Trends in Payment Platforms

"The future of payments will be about interoperability between different payment systems, instant payments, and multi-currency systems (where the invoice can be raised in one currency, payment made in a different currency seamlessly). The future of payments will also be about embedded systems - where payments will be provided by technology providers who will embed payments into the workflows of various systems.” — - Srivatsan Sridhar, CEO, Skydo

Some emerging trends in payment platforms that may be important in the future include the following.

The horizon reveals promising trends that will shape the future of payment platforms. Embrace interoperability, instant payments, and <a href="https://www.skydo.com/blog/benefits-of-multi-currency-accounts?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">multi-currency systems</a> to stay ahead.&nbsp;

Here are the actionable steps that help you navigate payment platform challenges.

Q1. What are the major challenges faced by businesses in the fintech landscape?

Ans: Fintech businesses encounter challenges like regulatory compliance, cybersecurity, and customer trust. Adapting to rapidly changing technologies and maintaining seamless user experiences pose additional hurdles.

Q2. What are the common security concerns and fraud risks associated with payment platforms?

Ans: Payment platforms face security concerns such as data breaches, identity theft, and transaction fraud. Risks include phishing attacks, malware, and system vulnerabilities.

Q3.How can businesses safeguard their payment platforms against security threats?

Ans: Implementing robust encryption, multi-factor authentication, regular security audits, and staying updated on cybersecurity best practices can help businesses protect payment platforms.

Q4. What features should businesses look for in a payment gateway to meet customer expectations?

Ans: Businesses should prioritise features like secure encryption, fraud detection, seamless integration, and user-friendly interfaces in payment gateways to meet customer expectations.

Q5. What are the actionable steps to navigate payment platform challenges?

Ans: To navigate payment platform challenges, businesses must prioritise cybersecurity, comply with regulations, invest in advanced technologies, and foster customer education and trust.

Q6. What are the emerging trends in payment platforms for the future?

Ans: Emerging trends in payment platforms include blockchain technology, contactless payments, biometric authentication, and Decentralised Finance (DeFi), offering innovative and secure transaction methods.

Q7. How can businesses navigate technological advancements in the payment landscape?

Ans: Businesses can navigate technological advancements by staying agile, investing in R&amp;D, fostering partnerships with technology providers, and regularly updating their payment systems to align with industry standards and customer preferences.

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Meet Mr Anshul Mehta, an IT service exporter, currently facing a cash crunch due to delayed payments from his international clients. These delayed payments have affected his liquidity, making it challenging for him to pay salaries to his staff and fulfil his tax obligations on time. In this difficult situation, Mr Mehta uses his bank's overdraft facility to address his short-term capital requirements effectively.

The bank overdraft facility is a valuable tool for Mr Mehta to manage his short-term capital requirements during this period of cash crunch. It allows him to bridge the gap between delayed payments and essential financial obligations without disrupting his business operations.

In times of financial difficulty, a bank overdraft facility can be a lifesaver for businesses like Mr Mehta's. It provides a flexible and approved line of credit to address short-term capital requirements, allowing <a href="https://www.skydo.com/blog/the-entrepreneurs-guide-to-product-market-fit?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">entrepreneurs</a> to manage their financial obligations efficiently.&nbsp;

By judiciously utilising such facilities, businesses can navigate challenging times and ensure continuity and growth.&nbsp;

The Overdraft Facility allows you to withdraw money over the amount available in your bank account within the specified limit. This means you can use an overdraft facility even if your account has zero balance. It is a short-term credit agreement to help you meet more immediate or direct capital requirements.&nbsp;

The scope of the overdraft facility depends on the credit limit pre-sanctioned by the bank based on its relationship with the customer. You can withdraw small amounts of money or the entire credit limit together. An overdraft facility differs from a business loan as you are charged interest only on the amount you withdraw, not the total sanctioned credit limit.&nbsp;

Overdraft interest rates may vary from one bank to another. Banks also levy OD charges for non-maintenance of the account. While there are no prepayment penalties, banks may charge you increased interest rates if you default on <a href="https://www.skydo.com/blog/how-you-can-streamline-international-transactions-for-your-business?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">your payments</a>.&nbsp;

The repayment duration is 12 months, compared to a business loan, which can extend to 10 years. You can repay in a lump sum amount or instalments, unlike loans with regular EMIs to be paid over a fixed tenure.&nbsp;

Mostly, all financial institutions in India provide an overdraft facility to their customers. However, the amount and rate of interest depends upon several factors, such as–

An Overdraft Facility includes several key features tailored to provide flexibility and financial convenience, such as–

An overdraft facility can be secured or unsecured.

A secured overdraft can help you access additional funds if you have specific assets, such as property, fixed deposit, insurance policies, and equity investments, to offer as collateral against the overdraft. Unsecured overdrafts allow you to access your bank's sanctioned line of credit without collateral.&nbsp;

The interest rates on unsecured overdraft facilities are higher than secured overdrafts.&nbsp;

If the bank does not offer a pre-approved overdraft limit, you can apply for it with the bank by filling out the official form and furnishing the required documents. You can initiate the application process via internet or mobile banking or by visiting your bank branch. 

Types of Collateral Accepted by Banks Against Overdraft Loans

Banks typically accept various types of collateral against overdraft loans, providing security for the extended funds. The types of collateral may vary, and the acceptance depends on the bank's policies and the borrower's financial profile.&nbsp;

Here are common types of collateral accepted by banks against overdraft loans.

While an Overdraft (OD) Facility offers financial flexibility, it has some inherent disadvantages.&nbsp;

Careful consideration and financial planning are essential to mitigate these disadvantages and maximise the benefits of an OD Facility.

Tips for Using an OD Facility Responsibly&nbsp;

Borrowing through an overdraft is similar to borrowing a loan from a bank without the formalities and paperwork. Bank accounts may come with pre-entitled credit limits, or you can avail of the facility by applying with your bank or lender.&nbsp;

An overdraft facility provides businesses with immediate liquidity and cash flow management to meet short-term expenses cost-effectively. However, you should use ODs responsibly to ensure you remain in <a href="https://www.skydo.com/blog/ensuring-financial-compliance-5-tips-to-safeguard-your-businesss-finances?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">good financial standing</a> with an appropriate credit rating.&nbsp;

Frequently Asked Questions about OD Facilities

Q1. When is a loan better than an OD facility?

Ans: A loan is better than an overdraft when you require an extensive credit amount over a longer period. Often, companies require huge funds to finance long-term business needs, such as buying land or updating technology. In that case, business loans are a better choice than ODs.&nbsp;

Q2. Which bank provides an overdraft facility?

Ans: The availability of an overdraft facility depends on the policies of individual banks. Most commercial banks offer overdraft facilities, and the specific terms and conditions can vary among different financial institutions.

Q3. Are overdraft facilities good or bad?

Ans: The perception of overdraft facilities as good or bad depends on individual financial situations. While they offer flexibility, misuse can lead to high interest costs. Prudent management is essential for their adequate use.

Q4. Can I use the OD Facility for personal expenses?

Ans: You can use an overdraft facility to meet your expenses if you have a savings or salaried account. The bank will sanction the OD limit based on your account.&nbsp;

Q5. What happens if I cannot repay the Overdraft?

Ans: If you cannot pay your OD dues, banks report the credit bureaus, negatively impacting your credit ratings. Getting credit may be further challenging as banks put you in the high-risk borrower bracket. It can also result in increased interest rates on future loans and credits.&nbsp;&nbsp;

Q6. How is the interest calculated on an OD Facility?

Ans: Banks calculate the interest on your OD Facility by the average daily balance method on the amount you withdraw from your account.

Q7. Can I increase the limit of my OD Facility?

Ans: You can apply with your lender or bank to increase or decrease your OD limit using the internet or mobile banking or by directly visiting your bank branch.&nbsp;

Ans: An overdraft allows account holders to withdraw money up to the approved limit, even if the account balance is insufficient. Interest is charged on the overdrawn amount.

Q9. How long can a bank account be overdrawn?

Ans: The duration a bank account can be overdrawn depends on the terms set by the bank and the account holder's creditworthiness. It is typically subject to the agreed-upon overdraft limit.

Q10. What is the treatment of a bank overdraft on a balance sheet?

Ans: A bank overdraft is recorded as a liability on the balance sheet, reflecting the amount owed to the bank by the account holder. It appears in the current liabilities section.

Q11. What is the difference between a Term Loan and an Overdraft Facility?

Ans: A term loan provides a lump sum amount with fixed repayment terms, while an overdraft facility offers a flexible credit line with interest charged only on the amount used, allowing for intermittent repayments.

Q12: Can the Overdraft facility be availed through Internet Banking?

Ans: Many banks allow account holders to manage and avail of overdraft facilities through Internet banking, providing convenience and accessibility.

Q13. How many salary credits are required in my existing account to qualify for Overdraft?

Ans: The criteria for qualifying for an overdraft vary among banks. Typically, a regular salary credit history and a good financial profile enhance eligibility.

Q14. Overdraft facility is available on which type of account?

Ans: Overdraft facilities are commonly available on savings accounts, current accounts, and sometimes on specific business accounts, depending on the bank's policies.

Q15. What is the overdraft facility on FD?

Ans: Overdraft against Fixed Deposit allows account holders to borrow against the value of their fixed deposit, offering a secured credit facility with the FD as collateral.

Q16. What is the difference between cash credit and an overdraft facility?

Ans: While both involve borrowing against a credit limit, cash credit is usually linked to specific business purposes, and interest is paid on the entire credit limit. Overdraft charges interest only on the amount used.

Q17. What are the disadvantages of an overdraft?

Ans: Disadvantages of overdrafts include high interest rates, potential undisciplined financial practices, dependence masking financial issues, and limited accessibility for those with poor credit.

Q18. What are the foreclosure charges on the overdraft facility?