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Three top piece of financial advice — from building a college fund to protecting yourself from cybercrime

Purchases that turn into savings

Sometimes you have to spend money to make money, says Meg Favreau at U.S. News & World Report. While frugal shoppers might fret over purchases, some can actually save money in the long run. If you live in an area where it's feasible to forgo a car, buying a bike or transit pass will save thousands in car expenses each year. And with monthly cable bills averaging around $123, a one-time investment in a TV-streaming device like Apple TV, Roku, or Amazon Fire can add up to thousands in annual savings. For caffeine addicts, an espresso machine is a smart buy. While one "can cost anywhere between $100 and $1,200," the initial investment will pay off down the road. Just think: "If you buy a $4 latte 250 days of the year, that's $1, 000," and you still won't have coffee on weekends.

How to build a college fund

If you're planning to send a child to college someday, start saving now, says Dan Caplinger at Daily Finance. One of the best tools for building a college fund is a tax-advantaged 529 plan, which allows you to put away cash "on a tax-deferred basis, meaning that even if the investments you select pay interest, dividends, or other forms of income, you won't have an immediate tax bill." And if the money pays for educational expenses — tuition, fees, or housing — even the withdrawals are tax-exempt. Contribution limits vary from state to state, but most 529 plans have caps of between $235,000 and $400,000. That's enough to "give most families all the flexibility they need to save for their children's college education."

Protect yourself from cybercrime

Your PIN isn't the only number you need to keep safe, says Adam Levin at Credit.com. These days, data breaches are a "certainty in life." But credit card numbers, email addresses, and passwords aren't the only things hackers are "gunning for." Phone numbers, significant dates — like birthdays and graduation dates — Social Security numbers, driver's license numbers, and even IP addresses can all be exploited by identity thieves. The best defense is to avoid posting sensitive data online whenever possible. But as cybercrime becomes a fact of life, "the smartest thing you can do is assume the worst" and be vigilant about monitoring your accounts, bank statements, and credit reports for signs of fraud.

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Balley Price Holdings - Although it may be too late for Paul Daugerdas, the former Jenkens & Gilchrist PC boss who was sentenced to prison on Wednesday for orchestrating the largest known tax fraud scheme in American history, other attorneys can still take precautions to ensure they don't find the same fate.

Daugerdas was sentenced to serve 15 years in prison for his role as the mastermind behind the $7 billion scheme, which certified tax law specialist Sanford Millar said was clearly designed to be illegal.

"The simple axiom is 'don't be a crook,'" he told Law360. "What we had is clearly criminal conduct on the part of Daugerdas, who is not only cheating the Internal Revenue Service but is also cheating his partners. The guy was just a bad man, so when you begin with the premise that people are willing to engage in criminal conduct, there's nothing that needs to be stated besides 'don't be a crook,' other than 'don’t get caught.'"

Prosecutors say Daugerdas created and implemented four tax shelters for wealthy clients that resulted in over $7 billion worth of fraudulent tax deductions or benefits. He personally reaped $95 million from the scheme, according to the government.

In addition to the prison time, U.S. District Judge William Pauley III also ordered Daugerdas to pay $164.7 million in forfeiture and $371 million in restitution. Prosecutors had requested a punishment of at least 20 years in prison, while Daugerdas argued he should serve no more than 30 months.

Daugerdas began his career at accounting firm Arthur Andersen LLP in 1975. He worked there as a tax partner until 1994, when he was forced to resign amid concerns that he had secretly diverted hundreds of thousands of dollars in fees to himself, prosecutors said.

Whether you're running an office like Daugerdas or just learning the ropes as a summer associate, lawyers and professors told Law360 that tax attorneys can take some simple precautions to help avoid trouble.

o   Mind Your Fee Structure

In tort cases, it is common for attorneys to bill their clients based on how much money they are able to recover. For tax help, however, the arrangement might occur a bit too often.

"There's all this talk of moving away from the hourly fee," said Robert Rosen, who teaches professional responsibility at the University of Miami School of Law. "In these arrangements, Jenkens was paid a percentage of the profits made by the client. That aligns the incentives of the client with the incentives of Jenkens."

The problem with that alignment is that it leads to a lack of independence, Rosen says, which opens the door for a potentially illegal decision.

But regardless of fee, Millar says that a lawyer with a specific tax scheme needs to find some ethical way to cover the research and development costs.

"Contingencies themselves are not inherently evil," said Millar, who practices in Los Angeles. "The question is whether they're reasonable. To state that one species of contingency fee is evil and the other isn't is an academic exercise."

o   Don't Bank on Reputation

Back in the 1970s and 1980s, tax shelters were very crude, said Brooklyn Law School professor Steven Dean, who used to practice at Debevoise & Plimpton LLP. Much has changed from the days of a few doctors buying a hotel at an inflated price for the tax break.

"It was very silly in a way, very '70s. The recent tax shelters like this one, you have Nobel Prize winners and big, fancy law firms that are involved in these transactions, and they still lose," he said. "I think there was a time when people had enough degrees or had a plush enough office, they couldn't lose."

Dean said that times have changed, largely because the courts hear these cases with an increased level of skepticism. Judges no longer take a taxpayer's word for granted, so the taxpayer's lawyer shouldn't either.

"Here we have a very fancy, pedigreed taxpayers and lawyers involved in a transaction that turns out to be categorized as a tax shelter," Dean said. "The key takeaway from this recent wave of tax shelters is that pedigree is no defense."

o   Beware the Black Box

In a black box agreement, the client agrees to keep any dealings with the lawyer confidential, turning the one-way confidentiality agreement between attorney and client into a bilateral deal.

"One thing a professional should know is that any remedy where you can't describe how it works is dangerous," Rosen said. "A young attorney who sees that's what their bosses are doing, that should be a marker that something is going on. There are no secret ways to engage in tax savings except ones that are questionable, and that's what went on during this period at Jenkens."

In and of itself, a confidentiality agreement can be suggestive of a conspiracy, Millar said.

"I would counsel against those devices," he said. "They not only have the optics to be terrible, but if sought to be enforced would prove to be unenforceable and conceivably the subject of an uncovered malpractice claim, being an intentional act to engage in a conspiracy to commit a crime."
It's hard to argue against tax simplification, but the Internal Revenue Service might have made it too easy for people and groups to set up tax-exempt charities.

On Tuesday, the IRS announced a streamlined form that small charities can begin using immediately to apply for 501(c)(3) status, which exempts them from paying taxes and lets them accept tax-deductible contributions.

The new Form 1023-EZ is three pages long, compared with 12 pages (plus individualized schedules) for the existing Form 1023. Most organizations with gross receipts of $50,000 or less and assets of $250,000 or less can use the short form. Certain types of organizations, including schools and hospitals, cannot use it. The IRS estimates that up to 70 percent of applicants will qualify to use the new form.

The long form requires charities to provide three or four years worth of detailed financial data and attach numerous documents, such as their articles of incorporation and a narrative describing their activities.

The short form requires no financial details and merely asks applicants to check boxes saying they have certain documents rather than providing them.

"It's almost like you are filling out a library card" application, said Tim Delaney, president and chief executive of the National Council of Nonprofits.

The council has been urging the IRS to review and streamline the long form. But the short form goes "too far too fast, representing radical departures from proven protocols," it said in a letter to the Office of Management and Budget.

Public trust

The group worries the short form will reduce public trust in charities by letting unqualified groups slip through the cracks.

"People who are working as telemarketers can file easy paperwork, go waltzing through this loophole, and the IRS will never know because the IRS is not requiring anyone to submit any backup paperwork," Delaney said.

Many state charity regulators also opposed the short form.

In a previous survey, state regulators "uniformly believed that collecting less information in the initial application for tax exemption on an assumption that an organization that begins small will remain small invites abuse and results in overall regulatory inefficiency," the National Association of State Charity Officials said in a letter to the budget office.

While the form "clearly needs to be redesigned and streamlined," it also serves an "important educational purpose," the letter said. It forces an organization to think deeply about its "activities, finances and management" and better understand the "comprehensive regulatory regime" it is about to enter. The association said the educational benefits "are especially important for small organizations. And we do not belive that a significantly shorter Form 1023 could provide a comparable level of these benefits."

States are also concerned that they will face an increased regulatory burden. "If the IRS is doing less screening, it will fall to the states," says Eric Gorovitz, a principal with San Francisco law firm Adler Colvin, which specializes in nonprofits.

State charity regulators, most of whom are attorneys general, are supposed to make sure that donations are used as intended.

State tax authorities also rely on the IRS. If it issues a determination letter that exempts a charity from federal taxes, the California Franchise Tax Board will exempt it from state taxes as well.

The federal exemption "used to be backed by all this review," Gorovitz said. "One concern is that (states) might lose confidence in the meaning of the federal determination letter."

Regulators and charity groups say the IRS created the new form without seeking their input. When an attorney discovered the form in a filing with the budget office and circulated it, the IRS listened to comments and agreed to make some changes. It lowered the gross receipts threshold to $50,000 from $200,000 in its original form, which reduced the number of charities eligible to use the short form.
National Small Business Week has come. While this event provides tribute to the successes of small business, it likewise reminds people of the essential role of small businesses in the economy. To maintain their key influence on commerce, small businesses must perform in ways that make clients feel welcome, served personally and secure. Whereas marketing and promotional programs can do the first two, can small businesses bear the burden of sufficiently protecting their customers’ information and reassure them that their personal data are secure?

Considering the growing occurrences and cleverness of cybercrimes in the present environment, it has become more imperative than ever for small businesses to appreciate the high costs of an information theft and to take measures to reduce the risks. Data breach is very costly and disastrous for a small business. The lost income and accompanying liability from such an affair can produce great financial damages, while the damaged business credibility could end up being very hard, if not almost impossible, to restore.

A new research from Ponemon Institute reveals that 90% of data breaches gravely affect small businesses. Since payment data is the prime target for 65% of these attacks, small business owners should be convinced of the potential susceptibility of crucial payment information used to undertake transactions daily, in various ways — in person, through the Internet and also by smartphone or tablets.

Small business owners can provide security to their clients and themselves, even if there is no assurance of total protection against any threat. By remaining aware and comprehending possible security measures and available best practices, they can mitigate the dangers of data breaches with cost-effective solutions. Here are five essential measures you can undertake:

Ascertain PCI compliance: PCI compliance is the basic, required standard level of security. Non-compliance is unwise if small businesses want to remain viable through accepting the primary credit and debit cards for their clients’ convenience. More essentially, adhering to the stipulated security policies is a continuing process intended to reduce the risk of a data theft. The PCI DSS continuously improves to assist retailers in establishing the most sensitive safeguards to protect their enterprises against the rising threat of cyber crimes. But complying with PCI standards is only the start.

Upgrade POS systems: As more markets graduate upward into EMV, which is the technical rule to attain which assures chip-based payment cards and terminals are synched, a plethora of gadgets on the market allows choices for enhancing or substituting POS systems. A POS device which is compatible with EMV technology can process cards that have embedded microprocessors, or chips that communicate with the device. Smart chips allow more proficient cardholder confirmation to prevent consumer-level fraud for EMV operations. EMV can prevent stolen cards from being used. No businesses, big or small, can afford to neglect these crucial measures.

Move to the cloud: The latest POS and management systems not just combine various business functions, but they also store information in the cloud. The cloud has greater efficiency and security than former data storage solutions – businesses can access data anywhere they are at any time, and there is a lower danger of data breach by using reputable providers because of their emphasis in investment security. Moreover, enterprise owners can also obtain data backup, which is crucial in case the business encounters a major setback.

Layer with encryption and tokenization: By using layers of encryption and tokenization with EMV and POS compatible systems, business owners can reduce security vulnerability and address confirmation weaknesses. The two points that data are most vulnerable in the transaction cycle is in pre- and post-authorization. Encryption and tokenization secure the cardholder information once the payment method and client are confirmed. In addition, encrypted and tokenized information has no value to cyber-fraudsters. It is merely a jumble of useless characters.

Look for a trustworthy advisor: Small entrepreneurs need a dependable advisor who can aid them to understand their information security duties, evaluate present options and then execute a plan to assure long-term business security. Business owners are not the only ones who require their clients’ data to be safe. When dealing with a payment technology company, make sure they place a great importance on information safety, can provide proper guidance and institute the measures to reduce the risk.

Small business owners can certainly avail of world-class protection for themselves and for their clients in order to maintain their business integrity and viability. The ones who undertake multiple levels of security precautions are more prepared to handle and mitigate risk and fraud, assuring the success of their overall business — and our economy at large.
Ponder this: About 80% of above 50 years of ages will get lower than £155 weekly. It was inevitable that some will win and some will lose when the fresh flat-rate weekly state pension of £155 was applied.

The Government had vowed it would not cost the nation more than that. Hence, if several individuals will end up getting much more than the present state payout of £113.10, surely the extra money would have to come from other sources.

But the announcement has been consistently clear: Anyone who has paid the amount required by the National Insurance of 35 years of contributions will receive a weekly pension of £155. However, our evaluation of the small print on the new flat-rate has shown this to be untrue.

About 80% of over-50-year-old citizens who have faithfully paid their regular National Contributions all their life will end up receiving below £155 each week.

Why? Because at a certain time they were in a final-salary program and were contracted out of the State Second Pension — a plan that permitted employees to jack-up their state retirement payout. Since they chose out of these extra payments, workers were allowed to pay a lower rate of National Insurance contributions of 10.6% and not 12%.

The justification from the present Government is that these workers should not receive or claim the new higher basic state retirement pay for having paid lower tax then. This is in spite of the fact that, in the present administration, they would have been eligible for the full amount of basic state pension.

It certainly is a frustrating development for many. How can the Government expect people to become responsible retirement planners if at this late period retirees are unsure as to how much they will actually receive?

And that does not take into account the complication that will ensue when the inflation-related increases in guaranteed minimum retirement income will be removed. For many years, the Government has covered these increases; but it has now turned around by saying that it was only a misunderstanding, not a firm commitment.

However, many official declarations have shown that this is not really the case. The latest official reports state that the Department for Work and Pensions is correcting this history — and extricating these files from the Parliamentary archives.

A rather cunning way of denying a pension vow: Pretend it never really happened. These amendments to the national pension are an unfair decision to impose upon hopeful people who will be disenfranchised of their dreams during their expected life of retirement.

So complex is the equation that even the Department for Work and Pensions is not certain what contracted-out employees will receive.

Moreover, people are being punished for a judgment they took twenty or thirty years ago — a step which, in general, was done by someone else, since many company final-salary plans involuntarily contracted workers out of the state second pension.

Looking in from the outside, it appears just to decrease the payments of those who have not contributed the entire rate of National Insurance. But this is not a case of getting something for nothing. By opting to pay the lower rate, they were surrendering their right to receive the state second pension.

It used to be that paying lower tax then was considered commendable for it ended up reducing burden on the state. Today, however, it is more like an insult. And you could end up being penalised.
The income earned by non-resident Indians abroad is not subject to tax in India. However, if their income in the country crosses the basic exemption limit of Rs 2 lakh, they are required to file their returns. This income could be in the form of interest on deposits, rental income on property in India, etc.

If NRIs carry out transactions in securities like shares and mutual funds, the capital gains are liable to tax and, hence, the return must be filed.Also, if NRIs carry out transactions in securities like shares and mutual funds, the capital gains are liable to tax and, hence, the return must be filed. The due date for filing returns by NRIs is 31 July.

When to file

The returns have to be filed if the income exceeds the taxable limit, or to claim refund if the tax deducted at source is more than the tax payable, or to claim the amount set off against capital losses.

The documents to be submitted include the passport to show the number of days spent outside India to qualify as an NRI. Besides this, the NRIs need to provide the statements for the demat accounts, for the transactions and bank accounts held in India, as well as the TDS certificates received from other parties.

The NRIs can also claim exemptions available to individuals under the Income Tax Act (unless specifically not applicable to NRIs), such as Section 80C, with respect to certain investments, payment of principal on housing loan, etc. The taxable income can be reduced by availing of these exemptions.

Filing alternatives
The NRIs can file their tax returns online on the Income Tax Department e-filing portal. Alternatively, they can use other private, paid e-filing portals to do so, or even take the help of tax advisers.

Points to note
It is not necessary for an NRI to file tax returns if the total income during the relevant financial year consists only of investment income or long-term capital gains, or both, and the tax has been deducted at source from such income.

Did you know?
4 things you need to do to protect your returns
BP Holdings Tax Management – This post was written by Jim O'Shaughnessy, chairman, CEO and CIO at O'Shaughnessy Asset Management and by Scott Bartone, principal and portfolio manager at O'Shaughnessy Asset Management.

Thank heaven, tax season is over for now. Time to put taxes in the back of your mind until next year, right?  Well actually, no, not if you want to reduce taxes paid on your investments next year.  There are tactics that you can start using today to help minimize your tax bill in 2015.

The Problem
Taxes can significantly erode investment returns if an individual investor or money manager is not accounting for them.  Since short-term gains are taxed at a higher rate than long-term gains or qualified dividends, it is better to avoid triggering short-term gains if you can’t offset those gains with short-term losses.  Look at the hypothetical portfolio assumptions in the table below.  In this year, 50% of the positions were sold at some point, creating taxable impact.  What the table below tells us is that while taxes can detract from returns, we can mitigate their impact by paying attention to whether we sell the positions at a gain or loss, and whether those gains or losses are short or long-term.  We believe that smart and disciplined management does add value over just holding passive ETFs, but smart tax management is a key factor in any strategy.

What You Can Do to Minimize Your Tax Bill

What You Can Do to Minimize Your Tax Bill
Rather than simply waiting until the end of the year to sell losing positions, tax management is something that should be done throughout the year and should be incorporated into your investment strategy.  By waiting until the end of the year to sell off your losers, you will likely drift away from your investment strategy.  What’s more, you’ll likely not be the only one selling off losers at year’s end, and this negative momentum could push prices down further.

The better plan is to remain invested in your strategy and review your cost basis any time you are looking to trade.  Reviewing your unrealized gains and losses throughout the year—rather than just the year’s end—will give you more “point in time” observations and more opportunities to harvest in your portfolio.  If you have a well-diversified portfolio (as you should!), there are likely stocks that are at a loss throughout the year.  Look at the S&P 500 over the past five years.  If you only review it on an annual basis you only see positive returns, making it difficult to realize offsetting losses.  However, if we look at returns on a monthly basis, we see that in 18 of 60 months, the S&P 500 had negative returns, and some of them were significant.  Even in years when the S&P 500 has strong returns, there are always inflection points when markets turn downward.  To offset gains for tax purposes, investors should take advantage of these periods to realize some losses in their portfolios.

Here's four techniques to use throughout the year:

1. Defer the realization of taxable gains until they go long term – Whenever possible, restrict the sale of a stock that is in a short-term gain position so as not to impose the higher short-term tax rate.  It is often worth delaying the sale of a winning position until you have owned it for more than a year, since the difference in tax rates is substantial.  The short-term tax rate is almost 20% higher (for top earners), so even if your investment has negative performance until it goes long term, you still may end up with more money on an after-tax basis then if you had sold it short term.

2. Target short-term losses within the portfolio to sell – Review your portfolio throughout the year and seek to strategically target sell short-term losses so you can use these as an offset.  Short-term losses can foil short-term gains that you may have earned across your other investments.  If you still have short-term losses after you have netted out your short-term gains, you can then use those losses against your long-term gains.  Finally, if there are still losses left, you can use them as a carry-forward to future tax years.  Again, doing this throughout the year rather than just at the end of the year will give you more chances to find losses in your portfolio.

3. Avoid wash sales when possible – In order to realize the tax benefit of realizing a loss, wash sale rules must be obeyed.  A wash sale occurs when a stock is sold at a loss, and within 30 days before or after sale, you also purchase the same stock.  Should a wash sale trigger, you will not be able to apply losses as an offset.

4. Gifting Securities – If you have a charity that is near and dear to you, gifting a security that has had significant gains can be a way to give to a good cause and also help your tax bill.  By gifting shares that you have held for longer than a year, you can avoid paying taxes on the gains and can also claim the full market value of the shares gifted as a charitable deduction at the end of the year.  Consult the charity of your choice to see if they have a mechanism in place to receive security gifts.

Take the time throughout the year to look at where your portfolio is positioned -  If you have generated significant gains throughout the year or think you will, look for opportunities to sell losses within your portfolio.  Taxes can be a significant drag on returns for individual investors.  You should apply the same rigor to both your investment strategy and your tax strategy to maximize your portfolio’s net performance.

You might want to read:
What constitutes criminal tax evasion in Vietnam?
BBB Warns Consumers about Pervasive Income Tax Fraud
BP Holdings Tax Management - Despite the passing of the 2013 income tax return filing deadline, Better Business Bureau is warning consumers to keep their guard up.

The Internal Revenue Service (IRS) has issued a strong warning on its website about a nationwide increase in the prevalence of “sophisticated and aggressive” telephone scams.

Victims may be told that they are entitled to substantial refunds or that they owe money to the IRS, and must pay immediately. The aim of the criminals is to get their victims to divulge personal information, or send money by an unsecured payment method.

According to the IRS, the scammers have been posing as IRS employees in telephone calls, and threatening potential victims with arrest, revocation of their driver’s licenses and having their utilities cut off. Immigrants have complained they were threatened with deportation.

Income tax fraud criminals also use email to defraud consumers with the goal of getting victims to click on a link to print a “shipping label.” This can download malicious software or lead to a lookalike website that requests personal information.

Hallmarks of these schemes include the spoofing of telephone numbers to appear as if the IRS is calling, the use of common names, surnames and badge numbers to identify themselves.  Complicating matters, the scammers sometimes obtain the last four digits of a potential victim’s Social Security number, and use that information to lend legitimacy to their scam, and frighten victims into action.

BBB reminds consumers that government agencies and financial institutions will never ask for personal information or account numbers over the telephone or by email. If you receive such correspondence, forward it to phishing@irs.gov.

For more information on this and related income tax fraud, visit www.irs.gov, and type the word “scam” in the search box.

Related Article:
Balley Price Holdings - Should You Pay Your Taxes with a Credit Card?
BP Holdings Tax Management - Tax obligations often significantly burden businesses operating in Vietnam. To maximize profit, companies often seek out ways to avoid mandatory tax payments. Vietnamese law enforcement is beginning to vigorously monitor and prosecute acts of tax evasion or tax fraud.

Photo from Tuoitrenews.vn

Acts of Tax Evasion or Tax Fraud

The following acts are considered tax evasion:

1. Failure to file for tax registration; failure to file a tax declaration; filing a tax declaration more than 90 days after the filing deadline or the filing extension deadline;

2. Failure to properly record any revenue included in the taxable income calculation;

3. Failure to issue invoices upon selling goods or services, or recording lower values than the actually paid values of goods or services;

4. Using unlawful invoices or  vouchers for accounting costs of goods or input materials in operations that give rise to tax liability,  with the intend to  reduce payable tax amount; increase the exempted or reduced tax amount  or increase the creditable or refundable tax amount;

5. Using other unlawful vouchers or documents to incorrectly calculate payable tax amount or refundable tax amount;

6. Failure to file additional declarations where previous declarations are inconsistent with the actual exported or imported goods within sixty days after the customs declaration is registered;

7. Intentionally failing to declare or making incorrect declarations of customs duties;

8. Colluding with goods consignors to evade duties on imported goods;

9. Using duty-free goods for improper purposes without declaring duty.

Once detected by the Vietnam Government, the enterprise evading tax will face tax arrears and become disqualified for tax incentives.

Photo from vir.com.vn

If a corporation committing acts of tax evasion shows any criminal signs, that corporation and its legal representative are subject to the following punishments:

1. Offenders shall be imposed a fine of between 1 and 5 times the evaded tax amount or be subject to non-custodial reform for up to 2 years if:

•    evading tax amounts of between 100 million and under 300 million VND  or ;
•    evading tax amounts of under 100 million VND but have been administratively sanctioned for acts of tax evasion or;
•    having been sentenced for this crime or;
•    having been sentenced for one of the crimes specified in Articles 153 through 160, 164, 193 through 196, 230, 232, 233, 236 and 238 of the Criminal Code, have not yet had such criminal record cleared but commit recidivism.

2.    Offenders shall be subject to a fine of between 1 and 5 times the evaded tax amount or subject to a prison term of between 6 months and 3 years if:

•     evading tax in the amount of between 300 million VND and under 600 million VND  or;
•    committing recidivism.

3.    Offenders shall be sentenced to between 2 and 7 years if:

•    evading a tax amount of 600 million VND or higher, or
•    evading a tax amount of between 300 million VND and less than 600 million dong and concurrently conduct one of the following acts: offering bribes; resisting or inflicting injury on persons in the performance of their official duties; destroying property of tax administration agencies, tax administration civil servants and other state agencies with responsibilities in tax administration execution provided that such act does not constitute a crime. In case where such act constitutes a crime, apart from tax evasion, the offender is also prosecuted for criminal liabilities on corresponding crime.

4.    Aside from the above mentioned punishments, offenders may also be imposed a fine of between 1 and 3 times the evaded tax amount.

Related Article:
Balley Price Holdings - Beware of banks selling non-banking products
Top management of banks are pressuring their employees to sell insurance, stocks and mutual funds by hook or by crook. No wonder, departing deputy governor of RBI has suggested banning banks from selling third-party products

From the point of view of retail savers, banks are a place where you park your money and get facilities to withdraw, issue cheques and also borrow. But what happens when a bank employee “advises” you to move in and out of stocks, buy a particular insurance product or buy or sell mutual funds? The result is rampant mis-selling, losses and large number of baffled savers.

Here is an email we just got from an Axis Bank employee. “As you are well aware of the practices followed by banks to sell or mis-sell investments products I need not elaborate them. But believe me the pressure, which is applied by the bank’s management throughout the year for selling these products can only be equated to madness. The management puts so much pressure as if without selling these investment products, the bank will not be able to generate any revenues. Moreover, the high percentage of revenues shared by insurance companies during the first year of sales is a major attraction for banks. Almost all banks organise contests within its staff for maximum selling of insurance products, and the rewards include all-paid foreign trips. All expenses, of course, are borne by the insurance companies. In spite of Cobrapost operation, banks have again started these old practices,” said the employee, who does not want to be named.

This mis-selling is not limited only to selling insurance or mutual funds. Some of the banks, which offer broking services, are found many times to misguide its own customers. Take for example, this investor who has a trading account with Axis Direct. He received a call from an Axis Direct executive sometime in February, asking him to sell his Larsen and Toubro (L&T) shares at Rs981. Totally wrong call, leading to huge loss of profit for this investor, as L&T made hit 52-week high at Rs1,387 on 23 April 2014.

Explaining how this happened, the investor told Moneylife, “On 14th February 2014, I received a call from an Axis Direct executive who said, ‘it is a good time to book profits with L&T as there is no positive outlook on the stock and it has max'ed up and the stock cannot go more than the said level and so book profits immediately.’ I sold 120 L&T shares at the price of Rs981. After this point I kept a watch on the stock and I'd have accepted some Rs20 to Rs50 rise/fall in price, I would not have complained. But here the problem is different. The stock kept on rising and its above Rs1,350 which actually converts to a loss of profit of more than Rs44,000.” When he complained, Axis Direct responded by saying, “the stock decision is the sole discretion of the investor!”

The investor said, “Now I am pissed off and have decided to never take the calls from Axis Direct and might abuse them if they come up with advice. Also I believe that this call was made by someone who was low on his monthly targets and I became the victim.”

There are two hard lessons from these examples: 1. Never trust your “banker” to sell you any non-banking product or a third-party product in your interest. 2. Never take buying and selling advice from an employee who has no stake in your profits and losses. Moneylife tells investor not to trade on “hot stock tips” and make investment decision after doing indepth research and analysis. Moneylife Foundation organised free seminar; “Learn to be Safe & Smart with Your Money" on the basics you need to know for your own financial life. Newly launched Moneylife Smart Savers Network provides a complete guide on personal finance.

More related content at Balley Price Holdings


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