Finance as per Rule of 72 ?

Do you maintain your Finance as per Rule of 72?

In personal finance, if you divide the number 72 by the rate of interest, you get to know the number of years it will take for you to double the money.

Eg: if the rate of interest is 9%, simply divide the number 72 by 9% and the answer is 8. Thus it will take 8 years to double your money if you invest at 9% p.a. the rate of interest.

INTEREST

We can use this rule in reverse to know the rate of interest needed to double your money to achieve your set goal.

Eg: If you have 250k today and you need 500k in 5 years. Just divide the number 72 by 5, the answer is 14.41%. Thus you need a type of investment avenue, where you earn at least 14.41% p.a. as a rate of interest/returns to double your investment amount in 5 years.

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INFLATION

This ‘Rule 72’ helps you to understand about inflation also. It helps you to calculate the amount of time it will take for inflation to make the real value of money half. Let’s say present inflation is 5.5%. When you divide 72 by 5.5% the answer is 13.09 years. That is to say, if you have 100k in your kitty today, it would take around 13.09 years for the value of the money to be halved.

Hope it helps you in your day to day investments and other finance-related activities. Happy investing!!!!

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Tax Audit – Relevant Clauses in case of Bank Audit

Books of Accounts 

1. Clause 9 (b) and (c)- Books of Accounts Maintained and Examined – Generally printed list.
2. Clause 14- Particulars of Depreciation allowable –Details of Purchase, Sale, Transfer and Disposal/ Write-off of           Fixed Assets to be verified by Branch Auditor.- Depreciation calculation – generally at HO.
3. Clause 17(a)– Any amount of Capital Expenditure debited to Profit and Loss A/c.
4. Clause 17(e)– Expenditure by way of Penalty or Fine for violation of any law debited to Profit and Loss A/c.

Books of Accounts

NRI & Related Clauses

5. Clause 17(f)– Any amount inadmissible u/s 40(a):

(a) Amount inadmissible u/s 40(a)(i):
~ Any interest paid to a Non-Resident person or to a Foreign Company without TDS.
(b) Amount inadmissible u/s 40(a)(i)(a):
~Any interest, commission, brokerage, fees for Professional/ Technical Services or Contract Amount paid to a                Resident person without TDS.
(c) Amount inadmissible u/s 40(a)(i)(a):
~ Any tax, interest or penalty under Income Tax Act or Wealth Tax Act debited to P&L A/c.

6. Clause 17(h)– Section 40A(3) read with Rule 6DD:

Whether any amount is inadmissible u/s 40A (3) read with Rule 6DD – relating to disallowance of any expenditure paid otherwise than by A/c. Payee Cheque?
– Obtain a Certificate from the Branch Management relating to payments covered u/s 40A(3).

PF & TDS

7. Clause 21- Bank’s Contribution and Employees’Contribution to Provident Fund– Annexure details to be verified. Particulars of Income/ Expenditure of Prior Period credited or Debited to the Profit and Loss A/c. of the Current Year

8. Clause 27- Compliance of TDS provisions: – Verify TDS compliance under all relevant sections like Salary, Interest, Interest to NRI, Contract Payments, Technical & Professional Fees etc.
Provide Details of :
(a) Tax Deductible but not deducted at all.
(b) The shortfall on account of lesser TDS than required.
(c) Tax Deducted late
(d) Tax Deducted but not paid to the Central government

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AUDIT UPDATES

BANK AUDIT UPDATES 

Bank Management is asking the Concurrent Auditor to sign/ carry out attest functions in respect of various Bank Audit documents Certifications including LFAR AND TAX audit report by payment of Lum Sum fees of a very small amount say Rs.5000/ only.ca, gst, auditors, incometax

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Whether the Concurrent Auditor should refuse to sign LFAR and Tax Audit Report?

FAQ (refer link below) brought in by Ethical Standard Board of ICAI clearly states that internal auditor cannot perform statutory audit function irrespective of amount.
LFAR and Tax Audit are statutory report prescribed by the statue and hence Internal Auditor cannot do that.

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