How to navigate cross-border asset distribution, taxation?
Delhi-based businessman Bharat Ranga has had it with Axis Bank. The 45-year-old’s displeasure comes from the lender’s recent devaluations on a suite of its credit cards. Ranga is particularly upset about the offerings taken away from Axis Magnus—the once most soughtafter credit card.
Ranga is angry because he had upgraded to Burgundy membership, the premium banking programme of Axis Bank, in August last year to continue getting air miles and hotel loyalty transfer rewards benefit on Magnus cards that was offered exclusively to Burgundy members.
“When Axis Bank announced the devaluation of Magnus last year in August, my wife and I had more than 800,000 Edge Rewards (Axis Bank’s reward points). We both upgraded to Burgundy accounts by opening fixed deposits (FDS) with the bank as we wanted to use our points efficiently. The bank also promised other additional benefits to Burgundy members, but most of those have been taken away just six months later,” said Ranga.
“The last two devaluations have not only reduced the value of our points, we also feel cheated, and that too by one of the large banks,” he adds.
As a result, Ranga has decided to move his FDS upon maturity to another bank . “I will move the majority of my business from Axis Bank. If they can pull this off with one product, they can do so with other products too,” he said.
Ranga echoes the sentiment of many users of Axis Bank credit cards after the lender announced a host of devaluations on all its credit cards this week.
To be sure, devaluations of cards are legal and normal; all banks downgrade features on credit cards over time. So, why is it hurting Axis Bank cardholders? Experts say the manner in which Axis Bank has downgraded the cards over the past six months has left users disgruntled.
“The bank promoted Burgundy with superlative rewards and must have managed to get good business as Burgundy banking needs users to have a ₹30 lakh in total relationship value or ₹10 lakh as average quarterly balance in their accounts. But to treat the Burgundy clients at par with non-burgundy ones and to remove a lot of the benefits within three to four months is absurd,” said Tejas Ghongadi, co-founder, The Points Code, a platform that advises credit card users on how to optimize reward points.
Starting 20 April, Magnus Burgundy users will no longer get ‘buy-one-get-one tickets’ on bookmyshow—a movie ticket bookingapp,whileconciergeservicesare discontinued and spend categories of insurance, fuel and gold will neither earn rewards nor be counted for the annual spending threshold.
Magnus card will be treated on a par with other non premium cards of Axis Bank. Besides, its airport ‘meet and greet’ services have been reduced to four from the current eight.
Sumanta Mandal, founder, Technofino, a digital platform that reviews credit cards and other banking products, said the bank’s fickleness is damaging for both the customers as well as the bank. “The rewards Axis bank was doling out on its premium cards were
Bharat Ranga,
Uses Axis Magnus Burgundy.
Upgraded to in Sep 2023 by locking FD with Axis bank.
With insurance, fuel removed, not much avenues left to spend on.
Can't get best value for rewards with redemption partner classified in 2 groups
Cancel Magnus.
Move FDS to other bank after maturity.
1.2-6%
1.5%
2X
500,000
₹14,750
500,000
₹59,000 unsustainable to begin with so the devaluations were due. But, the bank keeps downgrading its cards once every two months and this has made Magnus and Reserve cards absolutely worthless. It’s unfair for the users as they have paid fees for certain rewards and benefits, most of which are gone in a very short span,” he said.
Abbas Zaidi, 28, is another victim of this devaluation. He paid a fee of ₹59,000 (including 18% goods and service tax) to renew his Axis Reserve credit card just three weeks before the recent downgrades were announced. He even had a plan to recover the fee on the ultra premium card: The 50,000 Edge Rewards given as annual benefit would have translated into about ₹22,000 worth of hotel loyalty points, four airport transfers would have saved him about ₹8,000 and the rest was be recovered through the rewards on regular spends. But, the plan has now fallen flat. “I won’t take any airport transfers in the coming month, so those will go to waste.
MONTHLY
₹50,000
Further, with the transfer partners grouped and caps introduced on them, I’m not eager to spend through the card to accumulate reward points,” said the Delhi-based entrepreneur.
One Magnus card user, who did not want to be identified, said he had renewed the card just three days before the bank announced the devaluations. “I did not want to renew it but the bank’s salesperson persuaded me to renew it as it offered lounge access, airport meet and greet services and free movie tickets every month. Just three days later, all three benefits were revoked. To make a customer pay ₹11,000 fee on the pretext of certain features and discontinue them a few days later constitutes fraud, as far as I am concerned,” the cardholder said. He could not get the fee reimbursed as he had used the card to make a payment soon after its renewal.
Sanjeev Moghe, president and head, cards and payments, Axis Bank, said “We decided on the changes consciously, after much deliberation. While some benefits are removed, we have not changed the core value proposition of the cards, i.e. reward rate and transfer ratio on redemption partners.”
On being asked whether the bank’s sales teams are not informed of such changes in advance so that the cards are stopped from being sold immediately before any downgrades, Moghe said it was key to keep this confidential, hence it was not done days in advance. However, the entire team was trained just before the communication to customers was sent out, he claimed.
Why Axis did what it did
It’s the credit card issuer’s prerogative to make changes to a card’s offerings as it deems fit. In the case of Axis Bank, until seven months back, the lender was offering as much as ₹50,000 worth of monthly milestone benefits on every ₹1 lakh spent using Magnus.
The common thread among devaluations across most credit card issuers is restrictions on airport lounge access. They can access domestic airport lounges only if they spend ₹50,000 over the previous three months.
(For an extended version of this story, go to livemint.com)
Considering the global mobility of individuals and families, how can one navigate the complexities of cross-border asset distribution and taxation?
—Name withheld on request
Key legal considerations include understanding inheritance laws, tax regulations, and estate planning structures in both home and host countries.
Expatriates should ensure their estate plans comply with local laws regarding asset distribution and taxation to avoid legal complications and maximize the preservation of wealth for beneficiaries.
One of the primary legal considerations for expatriates is the recognition and understanding of diverse inheritance laws prevalent in different countries. For instance, in some countries like France, a portion of the estate is reserved for specific heirs, such as children, regardless of the decedent’s wishes. Expatriates from common law countries may be accustomed to a more flexible approach to inheritance, where they have greater freedom to distribute assets as they see fit. Undermize standing these differences is crucial for expatriates to ensure their estate plans align with their intended beneficiaries and distribution preferences.
Moreover, expatriates must navigate complex tax systems in both their home and host countries, considering aspects such as estate taxes, gift taxes, and inheritance taxes. For example, the US imposes estate tax on worldwide assets for its citizens and residents, while other countries may have estate tax provisions. Failure to account for tax implications can lead to substantial financial burdens for beneficiaries. Therefore, expatriates should seek professional tax advice to opti
tax efficiency and minimize the tax liabilities associated with cross-border asset transfers.
Estate planning structures also warrant careful consideration for expatriates seeking to develop robust international estate plans. Establishing trusts can be particularly advantageous, as they offer flexibility and protection in managing and distributing assets across borders. For instance, a revocable living trust allows expatriates to retain control over their assets during their lifetime while ensuring seamless transfer to beneficiaries upon death, avoiding probate delays and providing privacy benefits. Similarly, drafting a comprehensive will that complies with the legal requirements of both home and host countries is essential for ensuring the orderly distribution of assets and minimizing the risk of disputes among beneficiaries.
Mukul Chopra is senior partner & Aditya Chopra is managing partner at Victoriam Legalis, Advocates & Solicitors.
It’s the credit card
issuer’s prerogative to make changes to a card’s offerings
as it deems fit