Checkout: 9 Myths related to tax returns and tax deductions

Income Tax Return filing is an easy process but few of misconceptions around it residing in the minds of the people many a times leads to incorrect filing of Income tax returns resulting in unnecessary delay in processing or rejection of Income tax returns. 

Individuals should not hesitate to consult an expert rather than relying on ill-myths as it may result in tax payers paying more taxes than actual liability.

In this article, we have explained few of those myths that Individuals have with regard to income tax return filing and tax deductions.

Myth 1 - No need to file ITR if having only salary income & full TDS is deducted ITR filing is compulsory for every person whose gross total income before allowing for any deductions exceeds the basic income tax exemption limit (i.e. Rs. 2,00,000) even though tax has been deducted and there is no other source of income.

In addition to this, it is compulsory for every Individual having income more than Rs. 5 lakh to file ITR only through online mode. Further all the individuals holding foreign assets and other bank accounts have to file ITR and furnish details in respect of the said accounts and assets held even if the income is below exemption limit.

Myth 2 - Submit all the proofs and documents along with ITR AcknowledgementThere was a time when lot of back-up documents was required to be submitted along with the Tax returns, but now there is no need to submit any proofs or documents along with ITR Acknowledgment. Assessee need to keep all the details & documents with them and disclose the same to the department only when the department asks.

Myth 3- NRIs also have different tax slab as per age or genderDifferent tax slabs as per age or gender is available only to resident Individuals. There is only one tax slab applicable to NRIs which is same as tax slab of individuals other than senior citizen and  very senior citizen.

Myth 4 – NRIs have to file ITR only if taxable income in India exceed basic exemption limit NRIs are required to file ITR if they have earned short-term or long-term capital gains from sale of any investments or assets, even if the gains are less than the basic exemption limit. But, there are two exceptions:

• There is no need to file income tax returns if taxable income consists only of investment income (interest) and/or capital gains income with the condition that tax has been deducted at source from such income.
• There is no need to file income tax returns if there is long term capital gain from the sale of equity shares or equity mutual funds, which is exempt from tax.

Myth 5 - Deductions to individuals limited to 80C InvestmentsIndividuals have the mindset that deductions available to them are limited to Rs. 1 lakh under section 80 C.  Investments but other than this there are various other deductions also which can help Individuals to reduce their tax liability. Few of those deductions are described below:

• Under Section 80D deduction up to Rs 15,000 can be claimed for investment in health insurance premium paid. An additional deduction can be claimed of Rs 15,000 if investment is made in health cover for parents (below 60 years). For senior citizens, the deduction limit is Rs 20,000.
• Under Section 80DDB expenses for treatment of certain diseases is eligible for deduction up to Rs. 40000 (Rs. 60000 is for the treatment of senior citizen). But, no deduction can be claimed if the employer or an insurance company has reimbursed the expenses.
• Under Section 80CCG deduction shall be allowed for three consecutive years, beginning with the assessment year relevant to the previous year in which the listed equity shares or listed units were first acquired by the new retail investor.
• Under Section 80E interest paid during the period in respect of education loan taken for higher education of self, children or spouse is eligible for deduction without any limit. The deduction can be claimed upto 8 years or till the interest paid whichever is earlier.
• Under Section 80EE, individuals who have taken home loan upto Rs. 25 Lakh from the period April, 2013 to March 2014 then they will be eligible for deduction of interest upto Rs. 2.5 Lakh which means that apart from current deduction of Rs. 1.5 Lakh an additional interest deduction of Rs. 1 Lakh is allowable. If the interest component is less than the deduction limit, the balance can be claimed in the next financial year.
• Under Section 80G deduction is available for the donations made to charitable institutions.
• Under Section 80GG deduction is available upto Rs. 24,000/- for paying rent in case of no HRA.
• Under Section 80TTA deduction is available upto Rs. 10,000/- for interest received in saving Bank account.

Myth 6 – No need to disclose exempt income in ITRThere are various incomes even when they are exempt, it is compulsory to declare them in ITR like PPF Interest, Agricultural income, Dividend Income, long term capital gain from securities which is exempt from tax etc.

Myth 7 – Online filing of ITR increases the chances of scrutinyThis is purely a fictitious assumption. Every year Income tax department pulls out a random list of people to scrutinize. Whether the person has filed income tax returns electronically or manually, filing method have no bearing on this list.

Myth 8 – Disclosing one bank account interest is enough and department cannot track other bank account interests. Even if individual disclose only one bank account number in ITR & related interest, department can track all other accounts as well from the AIR scrutiny. So, Individual have to compulsorily  provide at least one bank account detail, even if not eligible for refund and have to disclose interest income from all the bank accounts in ITR.

Myth 9 – Furnish Assets details in ITR only if you are liable to auditWe have seen that individuals are totally unaware of the amendment made regarding disclosure of asset details. Department has clearly specified that if any individual is having income more than Rs. 25 lakh and filing ITR 3 or ITR 4 then Assets & liabilities details have to be furnished even if he/she is not liable for audit.

Moreover, now all the individuals holding foreign assets & other bank accounts will have to furnish details in respect of the said accounts and assets held.

To Conclude: Individuals should not take any step relating to Income tax with their own preconceptions as they might not be correct. Committing mistakes relating to these matters may lead to huge penalties and distress. It is always better to take precautions and clear all doubts by consulting a tax professional who can guide you with the correct actions.