Tuesday, 11 August 2015

Why should you declare interest from bank deposits while filing returns

Filing of IT returns can be quite a task especially if you are not salaried, in which case your employer gives you a form 16 which you could use for reference. While most of us may declare our holdings in shares, ELSS, etc., we tend to omit a section under Income from other sources – Interest from bank deposits.
Interest from Bank deposits can be categorized as follows
1. Interest on Savings Bank Account
The interest earned is tax free up to Rs10000 i.e. there is no TDS deducted for income up to Rs10, 000 and any amount above that would be taxed at a marginal rate.

2. Interest on Fixed Deposits
The interest earned is taxed according one’s tax slab. However most banks deduct TDS for interest above Rs10, 000.

3. Interest on Recurring Deposits
Banks do not deduct TDS for interest income from recurring deposits, but the interest earned is taxable under the applicable income tax slab.

If the total income from interest earned from all your bank deposits do fall within the taxable limits then you need to inform the bank the same(by form 15G/H) so they do not deduct TDS.

It isimportant to make the declaration for the above incomes earned. There is more than one reason why this declaration is a must when filing your returns

  • The IT Dept. conducts random checks on taxpayers and if they find any undisclosed income then the dreaded income IT notice would find its way to your doorstep.
  • However small or insignificant the amount earned may be but if the declaration is not made then the penalties are quite high.
  • The penalties could go up to 300% of the tax applicable on the undisclosed income depending on the decision of the assessing officer
  • There is interest charged on the tax not paid for the days till you finally make the payment.
  • Another important reason is that the tax slab could change if you wait to get the interest income in hand and you may have to pay a higher amount of tax.

Declaration of interest income, which otherwise may seem insignificant, is in our interest literally as the Government gets the data on the interest paid out by banks. And with technology driving these functions there is not much you can actually hide from the authorities.

Thursday, 25 June 2015

What happens if you accidentally transfer money to wrong account ?

In today’s day and age, everyone has an internet banking account. Gone are the days that you meticulously wrote cheques or deposited cash. Everyone has internet banking with multiple payees. There are high chances therefore that you sometimes can transfer money to wrong account. There are thousands of cases where the money is transferred to someone’s account and then realised that one digit in the account number has changed by mistake.

Banks these days are happy to help online banking customers to reclaim the money they have transferred to the wrong account accidentally. Banks have codes which will give customers protection if their money goes astray. Even so the responsibility lies with the one who transfers and not the beneficiary.

As per RBI guidelines, the final and sole responsibility of verifying the account number, name of the holder and amount likes with the person who is sending the money and not the one receiving it. There are numerous checks that take place in an online transaction before you click the final transfer button – after which no one else is responsible for your loss.

As a customer you can’t blame the bank for not checking details at their end. If the account number doesn’t exist the money will come back to you automatically. If the account number is active, the transaction will go through.

What do you do if you have accidentally transferred money to the wrong account?
If you have made this mistake then here are the steps to follow:
  • Inform the bank that you have made an unintended money transfer
  • The bank then contacts the beneficiary account holder and explain the situation
  • The beneficiary will be asked permission to reverse the bank transaction
In most cases the beneficiary agrees for the bank to reverse the money to the remitter. In some cases when the amounts are big there are chances that the other party doesn’t want to part with the money or might not revert to the bank’s repeated attempts to reach out to them for permission of reversal. This makes it impossible to get your money back.
It is then advisable to meet the branch manager of your bank, who can intervene and talk to destination bank and seek their help in on this. The bank cannot however reverse the transaction from the beneficiary’s account without express approval from the customer. It they do so it could be a breach of agreement.

What do you do to prevent such a situation?
Here are precautions you can take while transferring money online:
  • Use Ctrl-F to verify your account number: We usually type an account number which we have got in our email, jumping windows all the type. Banks usually don’t allow you to copy paste account numbers. Type CTRL-F and paste the number there and you can visually see if it matches with what you just typed
  • Transfer a small amount first to test the transaction: You can first transfer Rs 1 first confirm with the beneficiary if they got it and then on confirmation transfer the rest of the money
  • Verify the account number from right to left: We generally verify numbers from left to right. It is better to cross check right to left as well. Add a beneficiary account with precaution; check the number 2-3 times.
People are still advised to exercise utmost caution and ‘check before you click’ when using net banking to transfer cash. Spending the extra minute goes a long way to save you of big trouble in the future. You can also get advise from Finance Planner in India.

Please do have a secure banking transactions