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November 2020

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Digital payments have taken over our lives in a manner that could not have been fathomed just two years back. It has eliminated the need for plastic currency and physical currency to such an extent that even the tiniest amounts are now being made online. Though this has helped many of us to make payments effortlessly and seamlessly, it has proven to be a double-edged sword that has brought along with it many risks. Here are the top five ways to ensure that you are not scammed of your hard-earned money in the new digital world.

Beware of Phishing

Phishing is a term that is generally used in the domain of cyber space. A gentlemen X, while browsing a popular social media site, came across an offer that he found interesting. He immediately clicked on the link that directed him to another E-shopping portal (Also Read AI technology driven e-commerce platforms) that was a household name. He browsed through the goods, selected the products and proceeded to the payments section. Satisfied that he had made a good deal, he was now waiting patiently for the order to arrive. Alas, to his utter shock, the very next day that he got up in the morning, he found that his whole bank account had been drained. X had unfortunately fallen victim to the most common cyber fraud; Phishing. He was made to believe that he was on a legitimate site whereas in reality, that site as nothing but a replica of the original one. He had entered all his banking details that led to the perpetrators gain access of his accounts and withdraw all the funds.

Solution: Never click on eternal links to a website. Ensure that the address is typed in manually in the address bar of the browser.

OTP Scams

It is one the most common methods of scamming wherein a significant chunk of the population has fallen victim to. The common modus operandi involves calling the victim up and creating a make-believe story that their cards or accounts have been blocked and in order for them to start using them again, they would need to provide a simple OTP that they would be getting on their mobile phone. The victim innocently gives their OTP and within a matter of seconds, the funds are transferred to the criminal’s account leaving no trace.

Solution:

  • NEVER EVER give your OTP or bank card details to anyone on the phone or in person.
  • If you ever happen to receive such calls, make a note of the number and lodge a complaint with the nearest Cyber Cell Police Station

Identity Scams

A novel and unique approach wherein the perpetrator gains access to your identity details including photos and social media handles. Your identity is then set up which is then used to inadvertently cause nuisance in your social circle by spamming their inboxes with obscene material. Not only that, they also might very well have gained access, through social engineering, to all your accounts thereby having control of your bank accounts which is then used to siphon off money.

Solution: Beware of entering your credentials on any app or website that is found suspicious. Do not use an outdated anti-virus software.

SIM cloning scams

Another approach that involves making a duplicate yet functional SIM card. The process is fairly simple. The criminals target a particular segment of people who are highly active on social media flaunting their wealth and assets. They will have special hardware that will enable them to use the phone number provided there on such websites. Once the SIM is cloned, all OTPs shall then be sent to the clone SIM through which all the bank accounts are then drained.

Solution: Always ensure that your banking phone numbers are never ever disclosed on social media. Also, once the SIM is cloned, the original SIM becomes defunct. Keep an eye on your network. If it is down for more than half an hour, then immediately contact the service provider and ensure that your cards are all blocked to avoid further damage. Avoid all digital payments in the due course till the issue is resolved.

Card Skimming Scams

One of the most prevalent scams present both online and offline. A person X went to the ATM to withdraw amount. He was able to make the transaction but to his shock found out the very next day that his whole bank balance was emptied off. This happened because the scamsters used a skimmer that could make a copy of the card and its PIN that then was used to make both online ( using digital payments mode) and offline purchases.

Solution: Ensure that you don’t swipe your cards at suspicious looking ATMs. One of the key ways to identifying this is that the machine will have a protrusion in the card well and will be having a friction that will be much greater than the normal swipe well. Also, the keypads of the ATM shall be slightly bulged and will have paint on them instead of embossed keys.   

Follow the above five rules strictly while making digital payments and stay safe.

You can think of a better tit

Covid – 19 pandemic has resulted in huge disruption of transport and hospitality sector. Due to this, employees are not able to avail Leave Travel Allowance (LTA) benefit provided by employers. LTA benefit entitles an employee to avail tax exemption in respect of travel costs incurred by an employee for himself and his family to any destination within India. The exemption is available in respect of two travels made in a prescribed block of four calendar years (currently 2018-21). In order to incentivise employees and also boost the consumption, the government has come up with LTA cash voucher benefit.

As per the same, an employee is entitled to a cash allowance of Rs.36,000 per person. So, in case of a married person having two kids, the maximum amount of Leave Travel Allowance cash benefit would be Rs.1,44,000 (36000*4) i.e., for himself, spouse and two kids. Since, this is the maximum amount, if the employee is entitled to only Rs.1,20,000 as LTA in his salary package, the benefit would be restricted to such amount. Such LTA benefit would be exempt from taxation if the following conditions are fulfilled –

  • Leave Travel Allowance (LTA) should be forming part of the salary structure.
  • Employee should not have availed LTA exemption with respect to both the travels made during the current block period.
  • Employee spends 3 times the value of LTA cash allowance on goods and services which are subject to GST at the rate of 12% or more
  • The above spending should be during the period from 12 Oct 20 to 31 Mar 21
  • The payment for such purchases must happen in digital mode. The purchases made by cash payment will not be eligible for this benefit.
  • The employee must obtain an invoice indicating the GST number and the amount of GST paid.
  • Invoice should be in the name of the employee.

Points to note

  • Employees opting for simplified tax regime are not eligible to avail LTA cash benefit.
  • It is optional for the employee to choose between cash benefit and the normal Leave Travel Allowance.
  • Though 31st March 2021 has been specified as the last date for spending, tax proof submissions in most of the corporates may happen in Jan/Feb. So, employees would need to plan their spending accordingly.
  • If an employee spends less than 3 times of the LTA cash allowance, the income tax exemption would be proportionately reduced.

Example

Here is an example of tax savings in case of an employee who is married and having two kids.

ParticularsAmount (INR)
(A) Maximum cash benefit (36,000*4)1,44,000
(B) LTA as per his salary package1,20,000
(C)Cash benefit entitlement – Lower of (A) and (B)1,20,000
(D) Amount to be spent to avail full exemption – (C)*33,60,000
(E) Tax savings assuming 30% tax slab with no surcharge37,440
Tax savings at maximum spend

Suppose if the employee spends only Rs.1,80,000 his benefit would be proportionately reduced as shown below.

ParticularsAmount (INR)
(F) Amount spent1,80,000
(G) Exemption – (C)*1,80,000/3,60,00060,000
(H) Tax savings18,720
Tax savings at less than maximum spend

Conclusion

If you observe the above example closely, the tax saving is coming to just above 10% of the total amount spent. That means, in order to save 10% of taxes, one need to spend 3 times the benefit provided which may not be practical in many cases, especially during these difficult times. Hence, employees need to be cautious before making this choice and exercise their prudential judgement.

Another benefit provided under the normal Leave Travel Allowance(LTA) rules is that, if an employee is unable to claim the exemption with respect to one or more travels in a block of four years, he may carry forward one such journey to the next block. However, such carry forward LTA exemption needs to be utilised in the first year of the subsequent block.  For example, if an employee has availed LTA exemption only once in the current block of 2018-2021, he can avail exemption with respect to the travel undertaken in the first year of the subsequent block i.e., 2022. He can further claim exemption in respect of two more journeys between the years 2023 and 2025. Employees whoever is eligible could explore the option of carrying over the Leave Travel Allowance(LTA) benefit instead of spending thrice the amount of cash benefit.