Knowledge Hub

1. Avoid Penalty:

• Individuals and businesses can avoid significant fines by completing ITRs on time. If you file your ITR after the deadline, you may be charged a late fee of up to INR 5,000. It is in addition to any other penalties imposed by the Act. Plus, you may be required to pay the interest amount on the penalty.

2. Accidental Claim:

• If you keep filing ITRs for yourself or your spouse, it will help you in the future if you happen to meet with an accident. Insurance companies require proof of income to calculate the amount of the claim, and if any returns are missing, especially from the last three years, the claim amount may be reduced or even denied because the court accepts ITR as the only evidence.
• In addition, if a person who had been filing income tax returns on a regular basis for the previous three years dies in a car accident, the government is obligated to compensate the deceased person's family. This compensation can be as high as three times the dead person's average income.

3. Proof of Net Worth:

• ITR is the most credible proof of your net worth or income. The salaried class benefits from Form 16, which is issued by their company and serves as verification of income. Self-employed people, on the other hand, can use the ITR filing form as proof of income. It provides a full breakdown of these persons' revenue and expenses for each given fiscal year.
  It can be used for various purposes, like sourcing loans, getting insurance cover, purchasing properties and other valuable assets etc. If you are required to furnish a document of your income or net worth, ITR solely can be your resort.

4. Getting Refund:

• If your refund of TDS deducted earlier is due, you must file tax returns; otherwise, you will have to forgo your refund. Some taxpayers may prefer to invest primarily in fixed deposits. Tax is deducted at source (TDS) which is almost 10% on such investments.
• If you submit an ITR, you can save money on taxes on income from savings vehicles like term deposits. By submitting an ITR, you can also save money on your dividend income. While these instruments are taxed, ITR refunds can be used to offset the tax liability.
• Even if your total gross income from various sources exceeds Rs 250,000/Rs 3,00,000/ Rs 5,00,000 and you have invested in such a way that your net income is less than Rs 250,000/Rs 3,00,000/ Rs 5,00,000 in a year, you can benefit from tax refunds and reclaim the money that was deducted at the source.

5. Eligibility in Loan Application:

• Regular ITR filing demonstrates consistent income and demonstrates that the individual has been paying taxes on time. To approve loans and other credit lines including overdrafts, bank credit cards, cash credits, and bill discounting options, financial institutions look for the previous year ITR’s of the applicant. Your home loan application may be refused if you are unable to present any documentation including ITR that the lender/ bank deems necessary.

6. Carry Forward Losses:

• To claim specified losses that might occur as a result of capital gains, a business, losses under Income from house property head, taxpayers must file a tax return on the due date. For instance, if you've made a profit on the sale of mutual funds or stock, you can offset it with losses from previous years by filing tax returns on time.
• The bottom line is that unadjusted losses (with some exclusions) cannot be carried over to subsequent years if tax returns are not filed on time. As a result, a tax return will be required in order to ensure that the losses are carried forward and adjusted in the future.

7. Protection against Black Money:

• In recent years, the government has taken a number of steps to combat black money and limit money outflows from India. With this goal in mind, the government made the disclosure of foreign assets owned by taxpayers in their annual income tax returns in the fiscal year 2011-12 compulsory. Additionally, even if you don’t own foreign assets and you file your income tax return on time, your savings will never be considered black money by the IT department, as any income not reported to the department is considered black money.

8. For Start-Up Funding:

• Before funding your startup, financial institutions may demand to see your returns over the previous several years. These financial institutions and investors would want to study your business scalability, profitability and other cost parameters from your business income tax return to ensure that the investment they are making is going in the right hands. It also serves as verification that a person is a tax-paying citizen of the country.

9. Obtaining Government Tenders:

• Contractors can have a strong track record of procuring large projects in their field of business, whether it's a service or works contract, but if they don’t submit tax returns on time, or the returns aren't filed at all, they may face serious consequences and it can be detrimental for their business.
• For contractors, these returns must not only be filed on time but also be extremely accurate and audited (if necessary). This is especially essential when you are trying to obtain a government tender. The tender scrutiny committee may inspect this work on occasion, and it is a common practice to check the ITR of the last five to seven years.

10. Buying Insurance with High Cover:

• Purchasing a life insurance policy for Rs 50 lakh or Rs 1 crore has become the norm. These days, if you acquire a term policy with a total insured of Rs 50 lakh or more, life insurance companies, especially LIC, ask for ITR receipts. This is because the amount insured by a term policy is determined by several criteria, one of which is the income of the insurer.

11. Growth f Nation:

• Filing tax returns can have a significant impact on a nation’s development. More money flowing into the country means more revenue for the government, which means more money to spend on improving the country's infrastructure. For instance, the government of India collected 9.45 lakh crore in direct taxes in Financial Year 2019. This money helped develop infrastructure and aided in several nations.

12. Visa Application:

• Most nations require ITR as one of the documents for issuing a Visa to an applicant. This gives the Visa processing officials information about your present financial situation and income. The embassy will verify the applicant's income and confirm that they are financially capable of covering the expenditures. Many foreign consulates want the last three years' income tax returns or the current year's income tax return. The absence of any kind of return can decrease your chances of acquiring a visa, especially if you're applying for a visiting, investor, or work permit. This is mandatory if you plan to travel to the United States, the United Kingdom, Canada, or Europe; South East Asia.

• If your GST returns are not filed on time, you will be charged interest and a late fee.
• The annual interest rate is 18%. The time period will run from the day after filing to the day of payment.
• One can claim Input Tax Credit and also generate e-way bills only after filing GST Returns. Learn more at – GST Return filing defaulters cannot raise e-way bill
• The Government of India has planned to launch a compliance assessment system in which each GST registrant’s scorecard would be recorded. In reality, timely GST return submission is one of the primary variables used to generate such a grade.
• Obviously, timely and proper GST Return filing benefits a taxpayer much when seeking loans from a bank or financial institution. Banks evaluate a taxpayer’s credibility based on his GST returns.
• In some cases, GST Registration can be canceled if GST Returns are not filed.

However, GST Return Filing is a complex process, and therefore you can opt to hire CA to file GST Returns. Let’s understand the benefits of GST Return Filing by CA.

1. Your Habit Can Make Good CIBIL Score For You:

• CIBIL or Credit Information Bureau (India) Limited was established in August 2000 and is known to be the first credit information company in India. When someone applies for any form of credit, be it a home loan, personal loan, car loan or a credit card, the banks get the applicant’s credit rating from CIBIL to decide on whether or not the person qualifies for a loan or not.
• How it works is that all the credit information is sent to CIBIL by the banks. This information is mainly about repayment of loans and credit cards. This information is then taken by CIBIL and computed into a number between 300 and 900. If scores are close to 300 then the credit rating is considered to be bad and in all likelihood loans and cards will be rejected. If the rating is 600 or more, it is considered good and the likelihood of getting the loan or a credit card is high.
• CIBIL also keeps a history of payment behaviors, which means that when there is a default on a payment, it is recorded in the history and when banks request for someone’s history that defaulted payment is also mentioned in it.
• This is not a service that has been created to ensure rejection of credit. It is a service that aims at reducing bad credit and, as a fringe benefit, allow borrowers to instill in them certain habits that not only lead to good credit scores but also teach sound financial planning.

2. How to Keep the CIBIL Score Good:

• Even if someone meets all the criteria of age and monthly income for a loan or a credit card, applications could still get rejected if the CIBIL score is not good. The best way to avoid this situation is to inculcate certain habits that will help ensure that CIBIL scores never suffer.

3. Pay on Time:

• There is no doubt that on-time payments are the most preferred payments. If payments are made on time it indicates a responsible behavior towards credit, which in turn means that the credit score is not affected negatively. If credit card or loan payments are not made on time then it indicates lack of proper financial planning and can bring down the credit scores.

4. Full payments for credit cards:

• There are two options every credit card holder has when the bill comes. The first option is to make the entire payment in one go and the other is make the minimum payment indicated by the bank. While going for the second option may get banks off your back about the amount due, for CIBIL the amount not paid back is considered as an overdue amount which means that the customer’s financial management is not good. To avoid this, always make sure you go in for option 1; pay all credit card bills in full.

5. Earn More Spend Less:

• Earn more and spend less does not mean that salaries have anything to do with CIBIL scores. It just means that don’t spend more than your earn. When the spending exceeds the earnings the need for credit arises, which in turn may lead to more spending and collection of debt. Creating an emergency fund is a good way to avoid credit for small things.

6. Never Default:

• If you have taken a loan or own credit cards, make sure you make all the payments. If you miss a payment or default, it gets noted in the credit history and brings the score down or creates problems when the time comes to take a loan in the future.

7. Don't be Credit Hungry:

• Credit hungry behaviour could be continuously applying for loans. Every time a loan is applied for, the bank checks the credit report, for every check the CIBIL score comes down a bit. This will lead to a lowering of the overall score. The best thing to do is to not apply for a loan till you absolutely need one. Another thing to do is to check CIBIL scores yourself as that will not have a negative impact on the score.

8. Keep the Borrowing Balanced:

• Keeping a balance in the borrowing means that a healthy mix in loans. Instead of just taking one type of loan all the time, take a home loan then a personal loan and then maybe a car loan, etc. The idea is to create a mix of both secured and unsecured loans. If there is too much unsecured credit, personal loans or credit card debt, it makes future lenders cautious about granting loans.

9. Don't Close Credit Cards:

• It may seem counterintuitive to not close avenues that could get you into trouble with credit histories but the simple fact is that if you close all your credit cards then you won’t have a source to actually build a history when you need to take a loan. The ideal thing to do would be to take the card and use it very wisely.
• Just like a car that fails to work if not maintained, credit history too can fail to work if it is not maintained. The idea behind inculcating these habits is that, if successfully inculcated, these habits will ensure that you never have to worry about your credit history. At no point will you have to worry about getting rejected for a loan or credit card.

• Cash flow planning is not a budget, it is pure discipline.
• More than 75% of us experience ‘some stress’ every two weeks and almost half of stressed-out people will cite money / finances as the cause. When you consider the massive negative impact that financial stress can have on our health, relationships, and general enjoyment of life – doesn’t it make sense to learn just a little bit about cashflow planning now, so you can avoid the unnecessary stress that comes from a lack of financial planning? A small amount of effort now will pay big dividends later.
• Cash flow planning is the first thing that should be done prior to starting an investment exercise, because only then will you be in a position to know how your finances look like, and what is it that you can invest without causing a strain on yourself. It will also enable you to understand if a particular investment matches with your flow requirement.
• So does it involve looking at future cash flows only? Not really. You should always do a cash flow for yourself as on date, and you will realize that you could have a potential savings amount within each month of your working life. This is the amount that you should look at saving for meeting your financial goals. The best way of doing this is to have a personal budget.

IMPORTANCE OF CASH FLOW PLANNING:

• When planning the short-term or long-term funding requirements of a business, it is more important to forecast the likely cash requirements than to project profitability etc. Whilst profit, the difference between sales and costs within a specified period, is a vital indicator of the performance of a business, the generation of a profit does not necessarily guarantee its development, or even the survival.

Payment fraud is any type of false or illegal transaction completed by a cybercriminal. The perpetrator deprives the victim of funds, personal property, interest or sensitive information via the Internet.

Payment fraud is characterized in three ways:

• Fraudulent or unauthorized transactions.
• Lost or stolen merchandise.
• False requests for a refund, return or bounced checks.

Ecommerce businesses rely on electronic transactions to charge customers for products and services. The increased volume of electronic transactions has also resulted in an increase in fraudulent activities.

1. What types of Fraud are there?

- There are multiple methods of payment fraud:

• Phishing: Any emails or websites that require personal or private information such as credit card, bank account or login credentials are prone to phishing. If the source is trusted, such as a partner with a bank, the website is trustworthy. However, if the source is unfamiliar, it could indicate an attempt at stealing information.
• Identity theft: Identity theft exists outside of the digital realm as well, but it's a common type of fraud online. A cybercriminal who steals personal information and uses it under false pretense is engaging in identity theft. Hackers penetrate firewalls through old security systems or by hijacking login credentials via public Wi-Fi.
• Pagejacking: Hackers can reroute traffic from your ecommerce site by hijacking part of it and directing visitors to a different website. The unwanted site may contain potentially malicious material that hackers use to infiltrate a network security system. Ecommerce business owners must be aware of any suspicious online activity in this capacity.
• Advanced fee and wire transfer scams: Hackers target credit card users and ecommerce store owners by asking for money in advance in return for a credit card or money at a later date.
• Merchant identity fraud: This method involves criminals setting up a merchant account on behalf of a seemingly legitimate business and charging stolen credit cards. The hackers then vanish before the cardholders discover the fraudulent payments and reverse the transactions. When this happens, the payment facilitator is liable for the loss and any additional fees associated with credit card chargebacks.

2. How does fraud happen?

• Phishing: Any emails or websites that require personal or private information such as credit card, bank account or login credentials are prone to phishing. If the source is trusted, such as a partner with a bank, the website is trustworthy. However, if the source is unfamiliar, it could indicate an attempt at stealing information.
• Identity theft: Identity theft exists outside of the digital realm as well, but it's a common type of fraud online. A cybercriminal who steals personal information and uses it under false pretense is engaging in identity theft. Hackers penetrate firewalls through old security systems or by hijacking login credentials via public Wi-Fi.
• Pagejacking: Hackers can reroute traffic from your ecommerce site by hijacking part of it and directing visitors to a different website. The unwanted site may contain potentially malicious material that hackers use to infiltrate a network security system. Ecommerce business owners must be aware of any suspicious online activity in this capacity.
• Advanced fee and wire transfer scams: Hackers target credit card users and ecommerce store owners by asking for money in advance in return for a credit card or money at a later date.
• Merchant identity fraud: This method involves criminals setting up a merchant account on behalf of a seemingly legitimate business and charging stolen credit cards. The hackers then vanish before the cardholders discover the fraudulent payments and reverse the transactions. When this happens, the payment facilitator is liable for the loss and any additional fees associated with credit card chargebacks.

• Email
• Texting malware to smartphones
• Instant messaging
• Rerouting traffic to fraudulent websites
• Phone calls
• Online auctions

Cyberthieves also work in teams to penetrate network security systems by looking for glitches or patches that haven't been updated in a while. These gaps give hackers access around a firewall and make it easy to illegally obtain sensitive information.

3. How can e-commerce business mitigate fraud?

While it's challenging to entirely eliminate the threat of fraud for ecommerce stores, you can help protect against it by continually updating your network security systems. Firewalls and antivirus software are designed to act as a shield against hackers' attempts to penetrate a secure network. Constantly updating software helps ensure that your sensitive business information is safe.

There are a number of other ways to protect your business against fraudulent payments:

• Maintain awareness of the latest fraud trends.
• Partner with a verified payment processor.
• Encrypt transactions and emails containing confidential information.
• Ensure that tokens and login credentials are regularly changed.
• Establish a policy regarding access to confidential information.
• Constantly run security checks with antivirus software.
• Require customers to log in to an individual account prior to making a purchase.

Payment fraud can hurt both you and your customers. By aggressively protecting your ecommerce store against fraud, you can improve your reputation and your bottom line.

Diversion of Funds means (mis)utilization of Funds for a purpose for which loan was not sanctioned. Most common example is buying immovable property out of the Cash Credit Limit, which is being sanctioned for working capital purposes.

• Utilization of short-term working capital funds for long-term purposes not in conformity with the terms of sanction.
• Deploying borrowed funds for purposes / activities or creation of assets other than those for which the loan was sanctioned.
• Transferring borrowed funds to the subsidiaries / Group companies or other corporates by whatever modalities.
• Routing of funds through any bank other than the lender bank or members of consortium without prior permission of the lender.
• Investment in other companies by way of acquiring equities / debt instruments without approval of lenders.
• Shortfall in deployment of funds vis-à-vis the amounts disbursed / drawn and the difference not being accounted for.

1. What is Siphoning of Funds?

• If any funds borrowed from banks are utilised for purposes unrelated to the operations of the borrower, to the detriment of the financial health of the entity or of the lender. The decision as to whether a particular instance amounts to siphoning of funds would have to be a judgment of the lenders based on objective facts and circumstances of the case.

2. How to monitor/ verify of End-Use of Funds:

• Diversion of funds or siphoning of funds can be detected if end use of funds is being monitored/ verified periodically. Following are some of the illustrative measures that could be taken by the lenders for monitoring and ensuring end-use of funds.
• Meaningful scrutiny of quarterly progress reports / operating statements / balance sheets of the borrowers.
• Regular inspection of borrowers’ assets charged to the lenders as security.
• Periodical scrutiny of borrowers’ books of accounts and the ‘no-lien’ accounts maintained with other banks.
• Periodical visits to the assisted units.
• System of periodical stock audit, in case of working capital finance.
• Periodical comprehensive management audit of the ‘credit’ function of the lenders, so as to identify the systemic-weaknesses in their credit administration.

This list of measures is only illustrative and not exhaustive. The same depends on the nature of finance, nature of business and other internal and external factors.

RBI has suggested that banks should not depend entirely on the certificates issued by the Chartered Accountants but strengthen their internal controls and the credit risk management system to enhance the quality of their loan portfolio.

1. Formula of Savings:

• India is a country of saver and we save almost 30% of our income. This saving is one of the highest in the world. Savings is nothing but a function of “income minus Expenditure”. Mostly we have income which we receive on monthly basis, may it be salary, rent, interest, and even in case of business, we look at monthly revenue. At the same time, expenses are also monthly nature it to be Rent paid, phone, petrol, grocery, etc. all our budgeting is done on monthly basis.

2. How do we Invest?

But when it comes to investments, are they monthly in nature? No, they are not. For most investors, investment is either a Financial Year-end exercise or some lump sum investment made on an irrational basis. It is a very sad fact that most investors are not disciplined in their investment approach. The best way to make an investment is to the moment you have saved your money. This solves two purposes,

• One that your investments get the maximum time and hence the power of compounding working best for you.
• The other purpose regular investment solves is that it makes sure that you don’t over-spend. You must of observed that when you go to the mall, many times you buy what is not planned or something which attracts there and we become an impulsive buyers. This happens only when there is an excess balance lying in a bank account and then it becomes very easy for anyone of us to swipe the card and buy. Many times, we buy items which are not necessary for us but just become there is Saved money with us, we tend to over-spend.

3. Power of Compounding:

We shall not be speaking anything and let the picture speak THOUSAND words.

Wait a minute, did I say THOUSAND……

So let’s see what Rs.1000/- per month of investing at 12% rate of return p.a. can do to you at a different point in time of your life.

4. New Formula of Savings:

• So change your formula of saving & adopt a new rule “pay yourself first”, pay for your retirement first, pay for future goals first even before paying for current expenses. So now onwards its.
• Now if you were to start regular investing, you will make such that there is what differentiates between a good investor and a bad investor.

5. Where to Invest:

• Now the point is that where should you invest regularly. you may save regularly in traditional investment options like Bank or post office Recurring deposits but if you have term goals like education funding for your kid or saving for your retirement, the best is to invest regularly in Equity Mutual Funds. This is commonly known as a Systematic Investment Plan (SIP). Equities give the best return in long term and beat inflation comfortably. Traditional investments fail to beat inflation and hence are not recommended for your long-term financial goals.

6. Learning from Past:

• To talk specifically, if someone would have invested Rs.10000/- in SENSEX on the first working day of the month from the last 10 years i.e., starting from July 1, 2000, Till June 1st12010, his investment of Rs.12 lacs would have given him Rs.34,53,917, a return of 20.34%p.a.
• But if you would have invested the same amount in post office/Bank Recurring Deposit(RD), the same would have given you an Rs. 17,97,161 at 8% p.a.