Should we worry about HRA and Medical Bills ???
A colleague approached me and asked me to sign on a paper titled "Rent Receipt". She had prepared the format herself and wanted me to sign on it....she said I was her paying guest owner and wanted me to put some dummy signature. I was wondering why she had to approach me at all in the first place. Well she herself could have done the signature...was she planning some major crime??
Nooooooo it was tax time!!...and we had to submit our saving certificates/medical bills/rent receipts/home loans etc...
She stayed at a PG paying 3000 odd bucks per month. She was claiming HRA (House rent allowance) of more than 3000 INR and so she could approach the house owner for his signature. She is not the only one who is doing this; more than 95% of salaried people do this.
People doing such things are normal people like you and me, not some criminals.
When it comes to paying tax, each one of us gets brilliant ideas to avoid tax. The culprit is not just the tax payee but also the authorities responsible for framing these rules (or should I say LOOP-HOLES) 1250 per month which is 15k per annum of medical allowance. Medical bills worth 15,000 would save you 4k-5k INR.
1) All you need to do is pay a meager sum of 4-10% of the bill amount and you have in hand medical bills
2) Some people save on this 4-10% also by striking a deal with the pharmacy store, that they would purchase 15k worth products(non-medical) from the pharmacy and in exchange they be provided with medical bills. Smart!
These medical bills are for treatments ranging from Diabetes-Arthritis-and what not. The bill is taken in the name of parents to be careful so as to not to run into any problems later on.The bills are professionally prepared; the person prepares monthly bills with ease, taking care of receipt number, doctor's name etc. And you dont need any prescription for this (In the worst case a doctor will come to save you, he is part of the gang!!)
Its a known fact that people fake medical bills to save tax, why cant the authorities remove the requirement of the need to produce medical bills to get tax benefits when the entire IT(Income Tax) department knows what is going on behind the scenes.
Either people should not adopt such smarter ways (which is next to impossible!!) or the authorities should mend the rules. It is not that simple, in the entire process we are introducing corruption. The Pharmacy has to pay 4% tax on the billed amount; on top of that he has to make money so he charges more than 4% which is his margin. Some pharmacy stores go even beyond this by creating fake bills for which he doesnt pay even a pie taxNow the sales tax people also know that this is happening so the pharmacy guy makes a deal with the sales tax professionals also. What about the doctor??? Yes he is also part of it, his role is not so important here unless some strict officer makes a serious check on these bills
We ourselves are involved in introducing corruption, but we do talk a lot when it comes to politicians being corrupt!! Strange :)
Why do we have to stick on to such rules??Next is the HRA (House Rent Allowance) which is taxable if you are not renting a home. I know many friends who create fake rent receipts most of the times faking signatures of house owners, and some even produce rent receipts even staying at their own house that they are paying rent to their parents ! Honestly I also did produce fake medical bills (Only Once!!!) for around 10000INR by paying 4% of the bill amount. If I didn’t do so I would be loosing appx 30% of 10,000INR. To save 3k i just had to spend 400INR. I did choose paying 400 to save 3k!! I filed my tax returns and well nothing happened...no one ever checks these documents i guess!!
But then i thought over it a lot and i had a strange feeling that i was cheating myself by indulging into such activities. I decided that from next year onwards no matter what i would never ever produce medical bills.
People close to me said i was pretending to be too clean a person an ideal person etc....I did not heed to their words ...i am not an ideal person but yes if something is in my hands then i will definitely try not to take the wrong path. Software Engineers are supposedly highly paid professionals and if educated people also do not pay taxes, whom should we expect to pay tax ???
The maximum one can save on medical bills is 30% of 15k, which is 4.5k per annum 400 odd bucks per month. Now think for a moment is it worth producing fake bills for 400 INR per month ???
If your answer is YES, let me try again ....The way I see it is, medical allowance and HRA given in CTC are extra benefits. So if your total CTC is X. I see my CTC as only X minus Medical minus HRA. So now medical and HRA are not my CTC and so i do not bother about saving tax on the additional benefits which i am getting. I urge people not to fake receipts instead if you really want to earn money, prove yourself at workplace and ask for more CTC. Plan your investments, make smart investments there are hell lot of opportunities to make money the right way.
This way you would never need to worry about fake receipts.
13 comments:
Nicely written.. No Doubt. But I wud like to b part of crowd .. Our system demands :( I see loop holes at many places .. I dont think collected tax is utilised in proper way(atleast 50%) .. so cant expect educated ppl to fill politician's pocket from their's. Question is not 400 INR per month .. the biggest one is it's utilization. We can't afford to make sun rise in west .. Meaning we dont ve control on certain things ..
It's a collective effort which can lead to better India. The more tax we pay the more fatter the Netas and Babus fortune becomes. For instance, i have filed my returns 2 years back and I am yet to get 3.2k from the Govt. Who is accountable to such money.
Good effort...could have been more convincing. Try addressing the comments in continuation of this topic...if you can...that way you blog would not end up like another "TV show - Debate".
I am happy I don't fake my HRA and medical bills... and I can't as well:)Somewhere down the memory lane... I can remember we discussing this topic:)
Since the title says this is about the IT of a salaried class. Undoubtedly this topic has a myriad aspects to it. I felt that the flow went too deep into the Medical & HRA and never returned to the main theme of IT.
The tax time comes and goes. Each year new fields added and some removed. From my perspective, i always see my saving methods diminish while new unavoidable taxing schemes put in their places. I really dont understand why there should be fields like HRA, medical, etc., for the money one earns. Simply, y dont they say, 33% of what u earn is mine, coz i am the king of the jungle-"shell it out or off with your head!!".. Its simple, dont you think? Its grandoisely stupid to categoriize ones earnings into such stupid sub-classes. I have come to another country in EU here, and one would immediately notice that these guys tax a lot. No they dont! The scheme, in a very broad sense is such that, the rich doesnt get any richer and the poor are not gettin any poorer! The idea is something like what i tend to name as the Robin-hood method, more u earn - more u give, less earning then less tax, and incases u are bankrupt, the govt., takes care of u for a specified period of time. At the same time, the rich-poor difference is maintained, the poor are not stomped to ground, while the rich are dragged a bit from flying too high. In simple terms, rich here are the ones who tend to do more to get their more money consuming passions fulfilled, unlike the rich back home who lock the moolah up in the closet for future generations. getting back, Everyone he gets the bare minimum monetary support from their government. Isnt that what your friendy neighborhood politician promises when the elections are around? Thínk about it. :)
Yes gundapi, may be you are right but personally that doesnt convince me to think otherwise
Kiran, you can always query at the IT dept, they might have misplaced the cheque or may not have prepared the same till date !! However one thing assured is you get back the money with simple interest :)
Your money is still not lost, only thing is its not been given to you yet ..thats the way the govt dept works :)
yes jayanth we did discuss this over chat and also when u had come to india :) good memory
sure will give it a try
yeah vikas :(
actually what i had @ the back of my mind was about HRA and Medical Bills ..i think i gave a wrong title :(
sure let me know if you can help me in giving a good title now that u have read the blog :)) i am not joking ..seriously
i wanted to talk only about how engineers manipulate the Medical bills and HRA ..as i have come across such situations personally ...
and i agree that the title is too vague :(
gautam, you are right...but i do not know how feasible such a system is for INDIA.....because till date i am not sure why such a system has not been thought of...or may be there are some practical implementation problems for INDIA ..
infact when i said "The culprit is not just the tax payee but also the authorities responsible for framing these rules (or should I say LOOP-HOLES) " i actually meant of having a system which will not have any place for fraud....
thank for a bringing out your idea :)
hey guys thanks a lot for all your comments ..keep it coming in :)
May be the best thing is for the government to increase the exemption limit by another 50K and remove medical, LTA, etc etc. This will take care of both the mindset a) who think medical & LTA are required for tax benefit b) who think better fake than be sorry.
Ofcourse junta will still crib but they have to be TOLD that 50K taxfree is not free but in lieu of ...
yes ..thats a good suggestion ..but i dont think things would become so fair atleast not in the near future :)
by the way ..who are u Mr. Anonymous ??
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