What is the penalty for fake invoicing?

 

What is the penalty for fake invoicing?

Section 122:- Penalty for such Section 122 of CGST Act 2017:

Penalty for Certain Offences (CHAPTER XIX – OFFENCES AND PENALTIES)

(1) Where a taxable person who–

(i) supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;

(ii) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder; ……. …….. ……. …… ……….

(vii) takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder;

(ix) takes or distributes input tax credit in contravention of section 20, or the rules made thereunder;

1A) Any person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose instance such transaction is conducted, shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on.

Section 132 Punishment for Certain Offences (CHAPTER XIX – OFFENCES AND PENALTIES)

Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences, namely:-

(a) ……………… ………………. …………..

(b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;

(c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill; shall be punishable–

(i) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine;

(5) The offences specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) and punishable under clause (i) of that sub-section shall be cognizable and non-bailable

Section 69 of CGST Act 2017: Power to Arrest (CHAPTER XIV INSPECTION, SEARCH, SEIZURE AND ARREST)

(1) Where the Commissioner has reasons to believe that a person has committed any offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 which is punishable under clause (i) or (ii) of sub-section (1), or sub-section (2) of the said section, he may, by order, authorise any officer of central tax to arrest such person.

Section 271AAD in the Income Tax Act –

-Penalty for false entry or ommission, including fake purchase/sale invoice in books of account equal to value of that transaction which is capable of altering (or evading) his tax liability.

-The penalty amount shall be equivalent to the aggregate amount of all such false entries or omitted entries. Furthermore, it is provided that any other person who causes the defrauding person to make such incorrect entries or omission will also be punishable with the same amount of penalty.

-Thus, penalty on the entity issuing and receiving fake invoice as well as other person like accountant, CA, broker, etc. who found to be assisting the said entity would also be liable for penalty of value of said transaction

Section 114AC of the Customs Act, 1962

“Where any person has obtained any invoice by fraud, collusion, willful misstatement or suppression of facts to utilize input tax credit on the basis of such invoice for discharging any duty or tax on goods that are entered for exportation under a claim of refund of such duty or tax, such person shall be liable for a penalty not exceeding five times the refund claimed.”

SAFEGUARD MEASURES BY ASSESSEE

-Books of Accounts u/s 35(1) r.w. rules 56,57,58 should be properly maintained.

-all the recipients are summoned, and original supplier has admitted that the supply of goods has not taken place, ITC should be reversed accordingly.

-Non co-operation or apprehension of tampering with evidence could lead to arrest.

-Copies of documents seized – Assessee has the right to get copy & restrictions (67(5)).

-Return of un-relied upon documents within 30 days of issue of Notice (67(3)).

-Presence of Advocate During Investigation:- The advocate of the person summoned is allowed to be present within visible distance, but beyond hearing range. (Vijay Sanjani v UOI, reported as 2017 (345) E.L.T. 323 (S.C.). & Sangit Agarwal v The Director General, Directorate of Revenue Intelligence, reported as 2017 (356) ELT 518 (Delhi.) (HC)

CONCLUSION:- Hence, it can be concluded that both Supplier & Receiver of Fake invoices are liable to 100% penalty of ITC availed u/s Sec.122(1). Furthermore, Not only issuer or receiver of fake invoice but even brokers as well as practitioners who facilitated in such transactions are also liable for penalty of 100% of GST amount [Sec. 122(1A)] and prosecution as well as arrest as per Sec. 132 & Sec. 69.

What makes an accountant?

 What makes an accountant?

Accountants possess crucial skills that can make or break a business’s ability to succeed.

So exactly what makes a good accountant?

They are detail-oriented and results driven

Being passionate about a business’s financial vision is one thing, but good accountants are skilled at funneling those visions into fruitful business plans. They are masters at ‘sweating the small stuff’ to ensure records are up to date and error-free and can confidently grasp legislative requirements and complex fiscal formulas.

They have a mind for business and the heart of an entrepreneur

Good accountants are flexible and understand a variety of business models so are able to determine what economic methods best suit a business’s required goals. Because they know how to grow their own business, they can also offer credible advice in terms of revenue building and financial outcome management.

They’re adept at financial wizardry.

Being able to crunch the numbers and swiftly determine a business’s core financial health is something a good accountant excels at. They realize that the most critical part of financial mastery is cash. They understand its peaks and troughs and thrive on facts, figures and hard-core problem solving.

They are considered, not conservative

Good accountants are ethical, diplomatic and have well-developed people skills that enable them to develop trust and rapport with their clients. They’re able to use their integrity to foster collaborative and respectful environments, which helps clients make good business decisions.

They’re organized and structured

A clean workspace and solid time management skills are key traits in good accountants ensuring they can negotiate deadlines and manage complex projects. They love a highly structured environment and are comfortable with repetitive processes and strict rules and regulations.

They are creative, inquisitive and adaptable

Although good accountants are supremely comfortable with structure, they are also able to foster fresh ideas in dealing with financial difficulties. An inquisitive mind means they embrace change, are always keen to learn more and see each new challenge as an opportunity to learn and test their skills.

They have first-rate communication skills

Because accounting is such a precise science, good accountants are adept at communicating in a clear and informative voice and can write in a style that is clear and persuasive. They have well-developed interpersonal skills and an innate ability to assert themselves when networking.

They are great leaders

Good accountants are great role models and have the patience, skills and confidence to delegate while maintaining a measure of approachability. Their core leadership skills extend to include strategic thinking, meaning they can make logical decisions that prove to clients that they are working to improve both the present and the future.

What is the role of an accountant?

 THE ROLE OF AN ACCOUNTANT

Accountants work in both the public and the private sector roles within different types of organizations.

WHY DO ORGANISATIONS NEED ACCOUNTANTS?

Accountants generally record, collect, analyze, and report on financial data. In addition to playing this general role, different types of accountants perform different, specialized roles.

Different types of accountants include:

• Cost Accountants
• Financial Accountants
• Management Accountants
• Project Accountants
• Public Accountants
• Tax Accountants

Accountants are also able to make strategic recommendations regarding specific financial situations.

FUNCTIONS OF DIFFERENT TYPES OF ACCOUNTANTS?

Have a look at the descriptions below to get an idea of what the different roles entail:

COST ACCOUNTANT

Cost accountants help organizations to reduce costs and maximize profits. As cost accountants provide financial information that is aimed at helping managers to make good business decisions.

FINANCIAL ACCOUNTANT

It is possible for someone outside of the organization to get an accurate picture of the organization's financial position and performance through financial accounting.

MANAGEMENT ACCOUNTANT

Management accountants assist in strategic planning by providing accurate financial and non-financial information to the managers and key decision-makers within an organization. The role of management accountant are therefore expected to conduct themselves with professionalism and integrity at all times.

PROJECT ACCOUNTANT

Project accountants are responsible for tracking the financial progress of projects.

PUBLIC ACCOUNTANT

Public accountants provide a wide range of accounting services to non-profit organizations and government departments. They usually work as external consultants in public accounting firms.

TAX ACCOUNTANT

Tax accountants provide tax-related advice to individuals and organizations. They provide a range of tax-related services.

Is accounting Hard?

 Is accounting Hard?

Accounting may seem difficult, sometimes it is not clear for non-practitioners. It is the type of job where some say it is hard and other say it is easy. It makes us wonder, is accounting hard?

Accounting is not hard for those who exert extra effort and time. Accounting is manageable for those who are ready to sacrifice their life outside work during the busy season. If you can adjust to the conditions and requirements needed in accounting, it’s not going to be that hard for you.

Let us discuss the 6 myths and their realities of why accounting can be hard.

1. Accounting is for Math Wizards

A lot of people have a misconception that accounting is just for math wizards. No, it is not. There are a lot of things involved in accounting, including how you prepare a report, how you present your report to your boss or to your clients, and how you follow the process.

The reality is that accountants possess other skills that qualify them as accountants. You just need a good understanding of the work you are doing so you can perform all your duties and responsibilities in your accounting job.

You only need to apply basic math, but you have to be good at it. It’s not something to fear but it is something worth practicing. You have to make sure that you know basic addition, subtraction, multiplication, and division so well. Your mental ability to do math will save you time and effort throughout the process.

2. Complicated Computations

Many others think that accounting is all about computations, which makes it hard per se. However, it is not just computation.

The reality is that accounting is an art and a process. It is an art of classifying, journalising, and summarising transactions. In that definition, the process includes classifying, journalising, and summarising. So basically, it’s not just the math that you need to take into account. You also need to follow the guidelines and the process.

3. Complex Recording/Reporting

Aside from math, what makes accounting hard? Well, the very thing that makes accounting difficult for a lot of people is that it requires a simple yet complex tasks.

Classification

You have to classify transactions as assets, liabilities, equity, revenue, and expenses. It’s not easy to classify items if you are not familiar with them. What will save you from the difficulty of this process is studying accounting in theory. You have to know what assets, liabilities, and equities are. You have to be aware when an item is revenue or an expense.

Journal Entries

Accounting uses double-entry bookkeeping wherein when you record a debit, you have to record a credit. What’s vulnerable here is the tendency that the accountant may commit an error in recording the amounts. It all depends on practice.

Reporting

Creating reports makes the whole process of accounting a challenging one. At the end of the process, you need to use formally present the total figures you computed and analysed earlier so that interested parties can understand well how the company is performing. Yes, those figures you came up with will tell if the business is going well or not. The understanding of the viewer will depend on how good, clear, and concise your reports are.

4. Involves Tight Deadlines

Another reality that a lot of aspiring accountants must accept is the tight deadlines involved in an accounting job. Your reports have deadlines. You can’t frequently submit late reports because it will affect the major aspects of the business, including the meetings of the bosses to determine the performance of the company, auditing, and so on. This is why you can see accountants doing computations and recording transactions almost every day. Once you fall one to two days behind, you will definitely struggle to chase the deadline.

This is the reason why time management is highly required. You need to be disciplined at all times so that you will not end up rushing when the deadline is closed. If you can’t make the deadline flexible, you have to adjust yourself as an accountant.

5. Fluctuating Work Spikes

Accounting reports and consolidation have deadlines. They can be either monthly, quarterly, or annually. During those points, you have to give your time and best effort to finish what you need to finish.

Accounting demands your time and effort. If want to enjoy your life, you should practice doing your job in advance and refrain from procrastinating.

6. It is Like Foreign Language

Accounting is technical, which is why during college, there are theories involved. Technical terms are so frequent that you will get used to them after you work in accounting for some time. But, if you are a beginner, those technical terms are hard to comprehend.

Most of the time, you will have to ask your senior what a specific word means in order to understand it. While in the process of doing accounting work, you need to exert effort in understanding technical terms because you will use them almost every time in your future job.

Final Thoughts

I think in general, those who don’t have first-hand experiences with accounting would normally say it is easy because the only thing involved is computations and reports. Those who think accounting is hard believe the fact that it uses math all the time.

In the end, each side have their point of view and it all depends on the actual occupation and the person himself. The only thing I want you to take out of this post is if you find accounting interesting, do it. there is no downside of learning something new and pursuing what you want.

 

Double Entry System# Basics of Accounts

House Rent Allowance (HRA) – Calculation, Exemption Rules and Tax Deductions under Income Tax Act

 

House Rent Allowance (HRA) – Calculation, Exemption Rules and Tax Deductions under Income Tax Act

A complete guide on HRA exemption and tax saving

Salaried individuals, who live in rented premises, can claim the House Rent Allowance (HRA) to lower their taxes. 

This allowance is for expenses on rented accommodation. If you live in a self-owned accommodation, this allowance is fully taxable.

Please note that the tax exemption of house rent allowance is not available if you choose the new tax regime from FY 2020-21 (AY 2021-22)

What is HRA (House Rent Allowance)?

HRA is the house rent allowance in income tax. It means the salary component received towards the rent payment and is allowed as a deduction from taxable salary under Section 10(13A).

How is Tax Exemption From HRA Calculated?

The deduction available is the least of the following amounts:

·        Actual HRA received

·        50% of [basic salary + DA] for those living in metro cities or 40% of [basic salary + DA] for those living in non-metros

·        Actual rent paid should be less than 10% of [basic salary + DA]

 

Logic behind above limits

1.     Actual HRA – Exemption cannot exceed the actual benefit

2.     50%/40% of Salary – Govt consider it unreasonable if more than 40%/50% of salary is paid in HRA (this is pure tax planning). And if an individual is spending more than 50% on Rent, then what will go towards Education, savings and other daily needs.

3.     Rent minus 10% of Salary – 10% of salary towards rent is very minimum do not require any benefit as per Govt approach. And if you are paying higher rents then Govt is allowing Tax exemption.

Example

Mr Rahul, employed in New Delhi, has taken up an accommodation on rent for which he pays Rs 16,000 per month during the Financial Year (FY) 2020-21. He receives a basic salary of Rs 30,000 monthly and DA of Rs 2,000, which forms a part of the salary. He also gets an HRA of Rs 1 lakh from his employer during the year.

Let us understand the HRA component that would be exempt from income tax during FY 2020-21. As per the given data, calculate the following:

·        HRA received – Rs 1 lakh

·        50% of basic salary and DA – Rs 1,92,000 (50%*(Rs 30,000+Rs 2,000)*12 months)

·        Rent paid minus 10% of salary- Rs 1,53,600

Therefore, the entire HRA received from the employer is exempt from income tax in the above example.

 

 

Can I Claim HRA and Deduction on Home Loan Interest?

Yes, you can claim HRA exemption as it has no restriction on your home loan interest deduction. Both can be claimed. 

When Do You Need a Landlord’s PAN?

If you have taken a house on rent and are making a payment of over Rs 1 lakh annually – remember to provide the landlord’s PAN. Else, you may lose out on the HRA exemption.

Landlords without a PAN must be willing to give you a declaration as per circular No. 8/2013 dated 10 October 2013. Tenants paying rent to NRI landlords must remember to deduct TDS of 30% before making the payment towards rent.

What If I Don’t Receive an HRA?

If you pay rent for living in a residential accommodation but do not receive an HRA from your employer, you can still claim the deduction under Section 80GG. Conditions that must be fulfilled to claim this deduction:

1.     You are self-employed or salaried

2.     You have not received HRA at any time during the year for which you are claiming 80GG

3.     You or your spouse or your minor child or HUF of which you are a member – do not own any residential accommodation at the place where you currently reside, perform duties of office, or employment or carry on business or profession.

If you own any residential property other than the place mentioned above, you should not claim the benefit of that property as self-occupied. The other property would be deemed to be let out to claim the 80GG deduction.

How to Claim HRA When Living With Parents?

Let’s understand this with an example.

Gargi works in an MNC in Bangalore. Though her company provides her with HRA, she lives with her parents in their house and not in rented accommodation. How can she make use of this allowance?

Gargi can pay rent to her parents and claim the allowance provided. She has to enter into a rental agreement with her parents and transfer money to them every month. This way, Gargi can make a nice gesture to her parents while saving on taxes. Also, Gargi’s parents need to report the rent she paid as income in their ITR. If their other income is below the basic exemption limit or taxable at a lower tax slab, they can save tax on the family income.

How to Claim Deduction Under Section 80GG?

The least  of the will be considered as the deduction under this section:

·        Rs 5,000 per month;

·        25% of adjusted total income*;

·        Actual rent should be less than 10% of adjusted total income*

*Adjusted total income means total income minus long-term capital gain, short-term capital gain under Section 111A, income under Section 115A or 115D, and deductions 80C to 80U (except deduction under Section 80GG).

FAQ’s

How can I claim HRA exemption?

You can claim HRA exemption by submitting proofs of rent receipts to your employer. Alternatively, you can claim the HRA exemption yourself while filing your income tax return.

I am a self-employed individual. Can I claim HRA exemption?

A self-employed individual cannot claim HRA exemption. Only a salaried individual with an HRA component in their salary package can claim HRA exemption.

What is the tax liability in case my entire HRA is not tax-exempt?

The employer deducts TDS at the applicable rates on balance HRA, which is not tax-exempt.

Who can claim HRA exemption?

Salaried employees who receive house rent allowance as a part of salary and pay rent can claim HRA exemption to reduce their taxable salary wholly or partially.

What are HRA and DA?

Dearness allowance is a component of salary towards adjustment for living costs paid generally to government employees, public sector employees, and pensioners. Dearness allowance is calculated as a percentage of basic salary to cover the impact of inflation.

HRA is a component of salary paid by big employers towards rent payment by the employee. HRA exemption is allowed least of the below :

·        Actual HRA received by the employee

·        40% of salary for a non-metro city or 50% of salary if the rented property is in metro cities like Mumbai, New Delhi, Kolkata, and Chennai

·        Actual rent paid should be less than 10% of salary.

For the calculation above, the salary would include basic, dearness allowance and fixed percentage of commission.

How to claim HRA if not mentioned in Form 16?

If HRA is not mentioned in Form 16, that means your employer has not provided a separate component of HRA. HRA u/s 10(13A) can be claimed when the employer gives a separate component towards HRA. In the absence of it, you can claim for rent paid under Section 80GG.

How to submit HRA proof for ITR?

Documents like rent receipts and rental agreements must be submitted to the employer to claim a house rent allowance deduction. If the payment of rent is more than Rs 1 lakh per annum, then the PAN of the house owner must be submitted. Based on these proofs, employers will provide a deduction for HRA in Form 16.

How much HRA can be claimed without proof?

The employer mandatorily requires rent receipts as proof for claiming house rent allowance deduction.

What happens if HRA is not claimed?

If you missed submitting rent receipts and rental agreements to your employer at the time of proof submission, you could claim the HRA deduction while filing ITR. If you miss claiming the HRA while filing a return, you can file a revised return to correct the error before the end of the assessment year.

What is the maximum limit for HRA?

According to Section 10(13A), an employee can claim an HRA deduction maximum up to the actual HRA component received from the employer.

Can I claim both 80GG and HRA?

No, individuals paying rent but not receiving house rent allowance can claim deduction under Section 80GG. Also, the individual, spouse or children should not own a house property in the place of employment for claiming this deduction.