Income TAX misconceptions

There are millions of questions on one's mind related to income tax -who should pay them, what are the exemptions, what are the rules?

Given below are a few well known myths and their solutions

 

1 Tax has been deducted at source, I don't have to worry. Just because taxes have been paid does not mean filing tax return is not required. You still need to put the tax deduction amount shown on the Form 16 on your tax return form 2 Filing tax returns is a complex process.

Contrary to popular belief, filing tax return is quite simple. You can fill and submit the returns online, print a receipt, sign it and drop it off at the income tax office within fifteen days 3 Home loan interest I pay is deductible from my income from house property. This is true if you have home loan for a single house. If you have loan on a second house, interest paid on loan can be claimed as a deduction from your income 4 I receive tax exemption on the rent I pay for my home. If actual rent paid is lower than 10 per cent of your basic salary you receive no exemption. Also, you cannot claim any exemption under this section if you live in your own home 5 Section 80C benefits are available only on making investment. You can claim a deduction for the tuition fees you pay for your children (maximum of two) as long as they are enrolled in a full time programme at any institute in India 6 If I avail medical reimbursement, I can't claim relief on health insurance premium.

Tax free medical reimbursement by your employer for your family's medical expenditure is separate from the deduction available under Section 80D 7 The only interest payment I can claim is the interest paid on home loans. There is a section in the Income Tax Act called 80E that allows deduction on interest paid on loans taken for higher education for self, spouse and children 8 Interest I earn on my savings account balance is exempt from income tax.

Interest income from any source is subject to income tax. If you do not want tax to be deducted you can spread your deposits across multiple bank branches 9 I have to pay taxes on interest received from my fixed deposits only on maturity.

Your tax liability on interest income from your fixed deposit is calculated on an accrual basis. You need to pay tax on the interest credited to your FD account 10 I received cash as a gift from a friend, so don't have to pay tax. If you receive a cash gift, which exceeds Rs 50,000 in one financial year, you are liable to pay I-T. The good news is cash gifts during marriage are totally free from tax Source: iTrust Financial Advisors