Common Income Tax Myths That Could Cost You Money while Filing returns– Kotak Life

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9 Income Tax Myths That Could Cost You Money while Filing returns

Term Insurance Quote
  • 11th Oct 2019
  • 3,321

9 Income Tax Myths That Could Cost You Money while Filing returns

Anybody who earns an annual income above INR 5 lakh must file tax returns. However, there are several myths associated with filing income tax returns. Here are nine common myths that may cost you if you are not careful:

1. E-filing tax returns is not mandatory

E-filing is compulsory:

  • If you have filed returns during previous assessment years
  • When you need to claim a refund
  • When your annual income exceeds INR 5 lakh

2. One need not disclose the previous salary to the current employee

If you switch jobs during the financial year without disclosing the previous salary, the new employer will deduct tax on current earnings. However,tax liability is computed on total income during the year.

3. No tax is levied on interest

Your bank may levy tax deducted at source (TDS). However, you may still be liable to pay tax on interest earned via fixed account, recurring accounts, and savings accounts based on your tax slab.

4. Monetary gifts are not taxable

Monetary gifts received from family at your wedding, charitable organizations, and inheritances are not taxable. All other monetary gifts exceeding INR 50,000 are taxable.

5. No deduction on house rent allowance (HRA) if it is not given by your employer

Even if your employer does not pay HRA, you are eligible to claim a deduction. The same is available under section 80GG if you:

  • Have filed a declaration as per Form 10BA
  • Claim exemption under section 10(13A) when employer does not pay HRA
  • Do not own a home in the location where you partake in business activities or where you are a member of HUF (Hindu Undivided Family)
  • Are not a homeowner of a property that has been valued as per sections 23(4) (a) and 23 (2) (a)

6. Tax deduction is not available on home loan repayment

Another tax filing myth is that no tax benefit is available on repaying a home loan. However, deduction under section 80C of the Income Tax Act, 1961 provides income tax deduction

on principal repayment of the home loan up to INR 1.5 lakh. Additionally, you may claim benefits for the interest payment for self-occupied and leased property.

7. Mentioning a single bank account is sufficient

You may think that providing details of only one bank account to claim a refund is enough. However, it is important for you to provide details of all the banks accounts that you hold to ensure the refund is received in the correct account.

8. Once you file online tax returns, the procedure is complete

One of the common tax filing mistakes is the belief that the process is complete once the returns are filed online. However, it is not complete until you receive acknowledgement stating that the income tax return (ITR) filing is successful. You also need to e-verify the returns using your Aadhar number, or send a copy of the acknowledgement to the Central Processing Center in Bengaluru.

9. Electronic filing results in audits

While you may believe that online filing may increase the chances of an audit, in reality audits are not common. Only about 2% of the total returns filed are audited.

It is important to complete your tax planning well in advance to avoid any last-minute rush, thereby decreasing the possibility of costly mistakes.

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