TomorrowMakers

These myths could cost you a lot!

Tax filing myths
The Income Tax Department has extended the deadline to file tax returns to 31st October, and the deadline to link your PAN and Aadhaar card numbers has been extended to 31st December. 
 
But before you start scrambling to file your tax returns, there are a few misconceptions regarding e-filing, refunds and deductions that can cost you dearly if you are not aware of them. Here are 8 tax filing myths debunked for you:
 
Myth 1- I don’t need to e-file my tax returns. It is not mandatory
E-filing tax returns has been made mandatory under three conditions
  • For those with a total income of Rs. 5 lakhs or more
  • For those who want to claim a refund.
  • For those filling ITR Forms- 2, 4, 4S, 5, 6 and 7
The total income is the amount you get after deducting all relevant deductions from your gross income. Only those above the age of 80 years or who have a total income of less that Rs. 5 lakhs can file returns manually.
 
 
Myth 2- I need not disclose my previous salary amount to my current employer
If you switched jobs in the middle of the year and did not disclose your previous salary amount to your current employer, tax will be deducted based on your current salary. However, tax will be levied on the total amount of salary that you received in the previous year. When the two salaries are added, it could put you in a higher tax bracket.
 
Myth 3- I don’t need to pay tax on interest as the bank deducts the tax at the source
Depending on the tax bracket you fall in, you may be liable to pay tax on the income you earned from your fixed deposit, savings account, recurring deposit, and fixed deposit.
 
For example,
Your salary- Rs. 6 Lakhs p.a.
Interest earned on your fixed deposit- Rs. 20,000
Tax deducted by your bank- Rs. 2000
If you fall in the tax bracket of 20%, then you are liable to pay Rs. 4000 as tax, out of which your bank has only paid 10%.
 

 

Myth 4- All monetary gifts I receive will be tax-free
Only monetary gifts received from family members and relatives on your wedding, or from a charitable organisation or through inheritance are tax-free. If you did not receive the gift from any of these sources, and its value is more than Rs 50,000, you are liable to pay tax on the excess amount. 
 
 
Myth 5- I can’t claim deduction as I don’t get House Rent Allowance (HRA) from my company
Even if you don’t get HRA from your company, you can claim deductions on your house rent under Section 80GG, if you meet the following conditions:
  • Your declaration is filed under form 10BA.
  • If your employer hasn’t given you HRA, you can claim exemption under Section 10 (13A).
  • You don’t own any residential accommodation where you are a member of a Hindu Undivided Family (HUF), perform office duties or take part in business activities.
  • You don’t own residential accommodation whose value has to be ascertained under Section 23(4)(a) or Section 23(2)(a).
Myth 6- I can’t claim a deduction on my Housing Loan repayment
In this case, you can claim deduction for the repayment of a principal amount of up to Rs. 1.5 lakhs under Section 80C. The interest on your housing claim is also eligible for deduction on both, self-occupied (up to Rs. 2 lakhs) and ‘on lease’- property.
 
 
Myth 7- It’s fine if I mention one bank account
While a refund requires just one bank account, you must fill in the details of all bank accounts that you hold. Exceptions to this rule can be dormant accounts (inoperative for 3 years or more). Also, make sure you fill in your correct bank account numbers or else your refunds will be credited to the wrong account.
 
Myth 8- My e-filing process is complete once I submit my tax returns online
There is one more step after submitting your tax returns online. You need to e-verify these returns with your Aadhaar card. If you don’t have an Aadhaar card, you will be required to send a signed copy of the ITR-V acknowledgement to the CPC (Central Processing Centre), Bangalore, within 120 days of e-filing your tax return. Once you send this, you will get an acknowledgement that your ITR filing has been successful. 
 

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