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PERSONAL FINANCE Investing in mutual funds a better choice than FDs |
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tax advice
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Preventing financial frauds due to vishing Vishal Salvi Vishing (also known as voice phishing) is a form of phishing attack in which the attacker (visher) dials a call to a potential victim and claims to be a representative of a large company, bank or public authority like the RBI, and lures him to provide sensitive information like customer ID, bank account number, password, credit card number, ATM PIN, OTP, CVV or other confidential information by creating sense of urgency in the user's mind. The phone call can be a recorded message enticing the user to respond. Modus operandi
Contact: Fraudsters pose as representatives of large companies, banks or public authorities like RBI on telephone or automated calls Data gathering: Fraudsters instigate the potential victim to divulge sensitive information like customer ID, bank account number, password, credit card number, ATM PIN, OTP, CVV, etc. Financial fraud: The compromised credentials gathered are then used to carry out financial frauds in customer's account. How does it impact the customers? This stolen information can be used by the fraudsters for conducting unauthorised activities on the user's banking account. What should a customer do if he realises that he's fallen prey to vishing?
Here are a few steps: * Immediately contact your branch/ phone banking on an authorised phone number appearing on a debit/credit card or bank/credit card statement; or published on the official website, and let the bank know the details of the suspected incidents. Request them to block your account immediately on a temporary basis. *
Immediately change sensitive information like password, ATM PIN, phone banking PIN, secret questions/answers that you may have shared over a fraudulent call Verify if any unauthorised transactions have taken place recently. An immediate and quick action is extremely important to mitigate risk of such frauds. *
Recollect and document as much information as you can, including what was said, the phone number of the caller and the information of the person or system requesting information so that you can report to your bank the precise details. *
In case of confirmation of any fraudulent activity on your account, file a police report providing them with complete details of the call. How banks ensure security against vishing
Given below are some of the steps taken to ensure security against vishing: *
The bank has a risk scoring and monitoring process in place which helps in identification of any suspicious transactions. This helps in detection of such fraud attempts. *
The bank has a two-factor authentication in place for accessing one's account which ensures additional security. *
The bank regularly keeps its customers informed about vishing and the guidelines to be followed by them to avoid falling prey to such fraud attempts. What should customers always keep in mind?
* Do not share sensitive information over phone with anybody, even if he/she claims to be from the bank. The bank will never ask for your password, customer id, credit/debit card PIN, CVV, DOB, bank account details, Net & mobile banking services or any other confidential information via phone call or in any other way. In case of any suspicion, please contact the bank immediately. *
Don't call back on any number left in a voice mail or sent via text message. Locate the phone number through the official bank website or on your bank card. *
Review your account statements on a regular basis to ensure that all the transactions were made by you. *
Ensure that your preferred email-id or mobile number is registered with the bank for receiving transaction alerts sent by the bank. If you find your registered mobile number inactive or are unable to make any calls, please contact your telecom service provider immediately to understand the reason. *
Immediately call up phone banking or check your account online through Netbanking for any unusual transactions or for any unauthorised beneficiaries added to your account. The author is Chief Information Security Officer, HDFC Bank. The views expressed in this article are his own |
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Investing in mutual funds a better choice than FDs The prime ask of any investor is always capital protection. This drives most savers in our economy to park their hard-earned money into bank deposits. But do bank deposits really keep your capital intact? And even if it does that, how many investors know and understand how inflation eats into their wealth?
Here is an example to demonstrate what you 'really' earn on a fixed deposit. For instance, Rs 10 could fetch 5 kg of rice in 1972. If one had saved the amount in a fixed deposit (FD) with State Bank of India (SBI), which has offered an average interest rate of 8.1%, it would have grown to Rs 94 today (after taxes at 33%). "Great", I hear you saying, "my capital is intact". But that's just one part of the story. The average consumer price inflation during these 41 fiscal years has been 7.7%. So, by that logic 5 kg of rice now costs Rs 225. This means that the Rs 94 you received from the bank FD can buy you only 2.4 kg of rice today as against the 5 kg that you could buy then. In other words, the depositor is now poorer by 52% on account of having deposited his savings in an FD. This is a small example of how inflation erodes the value of money deposited "safely" in FDs and we don't even realise it. This applies to most items purchased by an average consumer in our country. Less ‘taxing’ Those who invest in bank deposits think of them as a fill it, shut it, forget it kind of an instrument. Unfortunately, that's far from true, because most of us forget about the impact of taxes on our FD returns. Fixed income mutual funds are an investment option for those who are risk averse. These enable the investor to not just beat inflation but also save in terms of taxes. The highest tax rate on FD interest is 33%, while long-term capital gains tax for debt mutual funds is lower at 22.66%, if one uses the benefit of inflation index; without the indexation benefit, capital gains are taxed at 11.33%. So if a person had invested Rs 10,000 in an FD on April 1, 2012, she would take home Rs 10,586. If the same investor had invested in an accrual fund with a one-year maturity, with a current yield equal to the FD rate (current yield for accrual funds is in fact higher! but more about that later), she would take home Rs 10,870, a clear saving of 2.84% on account of tax. Not just capital gains, dividend received from the fund would also be taxed at a lower rate, against the 33% that FD interest income gets taxed at. Higher ‘yield’ The current yield on mutual funds is higher than FD rate. Here's how. Banks try to maximise their gross spread by offering the lowest possible rates on their deposits. The gross spread - the difference between the rate at which banks give loans to borrowers and the rate at which they raise deposits - is usually 4-5%. This helps bank shareholders maximise wealth. On the other hand, accrual funds charge lower fee of 1-1.5%, with the aim of maximising returns for investors. Moreover, the Securities and Exchange Board of India (SEBI) strictly regulates mutual funds to ensure that they charge only nominal fee. Tax-free is not risk-free A penchant among some investors is to buy 10-year or 20-year tax-free bonds on the basis of their post-tax rate of interest being high. For bonds that pay an 8.5% tax-free coupon, the post-tax rate of interest works out to 12.6%, which appears extremely attractive. However, the investment is based on certain presumptions. Firstly, it presumes that the current inflation scenario shall continue for next 10 or 20 years, which is unlikely in developing economies. Emerging economies are prone to sudden changes in money supply as well as output, which cause bouts of hyper-inflation. An investor who has locked his money into long-term tax-free bonds could find the interest insufficient to cover inflation in such times. Also, if the investor's holding period is not as long as the bond's, he faces the risk of having to sell the bonds at a capital loss. Accrual funds with short durations of 1-2 years are a better choice as they are able to reset the yield at which investors come in so that inflation risk is minimised and also the duration risk. Thus, accrual funds are a tax efficient and safe alternative to FDs for those investors who want to preserve capital, and generate moderate returns at the same time. The author is co-Chief Investment Officer, Birla Sun Life Asset Management Company. The views expressed in this article are his own
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Service charge up to Rs 10 lakh tax-free SC Casudeva I am a retired engineer of 65 years. Now I am retained by a private organisation for services of design functions like consultant, at a lump sum amount. Does my service come under service tax. Also clarify, whether in addition to service tax, is income tax also applicable? I understand that service tax up to Rs 10 lakh is exempted per annum. My remuneration is less than Rs 10 lakh? Also clarify whether my employer can deduct TDS from my remuneration? — Radha Kishan Design services provided in relation to designing of furniture, consumer products, industrial products, packages, logos, graphics, websites and corporate identity designing and production of three dimensional models are covered under the purview of service tax. Apart from the specific items mentioned hereinabove, if you are undertaking any of the services referred to hereinabove, you would be liable to pay service tax. a) Your understanding that the service tax is not payable in case the billing in respect of service charge does not exceed Rs 10 lakh is correct. However, in case your billing exceeds Rs 9 lakh, you will have to get yourself registered with the service tax authorities. b) You are liable to pay income tax if your net income i.e. gross professional charges less expenditure incurred to earn such income exceeds Rs 2,50,000 for the financial year 2013-14. I am a salaried person. In the FY 2012-13 (AY 2013-14), my total taxable income was Rs 3,15,870, but out of this, Rs 3,000 could not be drawn due to Treasury objection. I paid Rs 309 tax on that amount. This amount was paid to me in May 2013 (FY-2013-14), AY 2014-15. Now my DDO insists that this amount (Rs 3,000) has been drawn in this FY and it must be clubbed in this FY and tax be paid on the said amount. I have already paid income tax on this amount in FY 2012-13. He says that you can file a revised return for FY 2012-13. What steps should be taken to avoid double taxation. — Lalit Kumar Yadav I presume the amount of Rs 3,000 payable to you is part of your salary. The income under the head 'salaries' is taxable on due basis and therefore, you have rightly paid the amount of tax on Rs 3,000 by including the same in your taxable income for the AY 2013-14. An income on which tax has been paid cannot be taxed again. You may explain to your DDO that in accordance with the provisions of Section 15 of the Income-tax Act 1961 (The Act), the income under the head 'salaries' is to be computed by taking into account "any salary due from the employer or from a former employer to an assessee in the previous year whether paid or not". Therefore, the insistence of the DDO to include Rs 3,000 in your taxable income for the financial year 2013-14 i.e. the year of receipt and pay tax thereon is not warranted in accordance with the provisions of the Act. I am a senior citizen having no pension. To make both ends meet, I got myself registered as a valuer by the I-T Department, Institution of Valuers and some banks. Please clarify whether a valuer is responsible for any fraud in the title/sale deed. I feel a valuer is responsible for correct value of the property on the date of valuation and his interest must be to protect the bank so far as value of the property is concerned on that date. I am asking this as in some cases due to frauds, land prices may come down. Can a valuer be taken to task if banks can't recover loans. — Rajender Nath Valuation of property is a detailed exercise which requires considerable expertise. I am sure that there would be prescribed minimum guidelines which you would need to adhere before you issue your report. In my view, if you have conducted a due diligence at your end for the authenticity of documents, then you should not be held responsible for any fraud in the title/sale deed. You may also consult a lawyer in this regard.
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Vishing is basically a three step process primarily aimed at stealing money from the user's bank or credit card account using social engineering over phone. The modus operandi is explained as below:
Not only that, in many cases, taxes and the risk of fluctuating inflation and therefore, interest rates in the long term is a real and serious disadvantage for fixed deposits (FDs). That is why, it is important to look more carefully and closely at what do FDs really return.