Myths On Income Tax Busted!

Anuj Goel | 9811260001 | The 15A Chronicles' Desk

Dear Readers,

Come July, and it is “tax-time”! Well, given the jargon loaded news surrounding this, it could indeed become taxing for some. It is every citizen’s duty to pay its due taxes and file tax returns, where applicable, and for most people this is the month when the law requires them to do so.

In this issue, we would like to clarify some commonly held misconceptions about tax obligations of an individual with a view to make them more confident and comfortable in dealing with their responsibilities.

Myth 1: Filing tax returns necessarily means paying taxes.

People often consider tax-returns filing as synonymous with paying taxes. The two are different. The law requires an individual to file tax returns whence the total income in a financial year exceeds a minimum threshold or for those having specified transactions. Filing return does not necessarily mean paying taxes. Thus, you may well file your income details vide the return but it is does not become necessary to pay anything as tax unless your “taxable income” is above the specified threshold. Put simply there is difference between “gross income” that determines your obligation to file tax returns and “taxable income” which is the level beyond which tax is required to be paid.

Myth 2: Tax has already been deducted at source (commonly called TDS) from salaries; from interest paid on deposits; from company dividends; and that suffices as taxes have been paid and this also fulfills all tax related obligations.

The tax deducted by your employer or your bank or the company that paid you dividends is their statutory responsibility! This is not in substitution of your obligation to file tax returns as you are required to declare all your incomes, besides other related information, through the annual tax returns.

TDS is only an advance payment of tax (for which you’ll get due credit) but is neither a settlement of your tax liability (if any) nor of your return filing obligations. Interestingly, the TDS deducted could actually be claimed back as refund, if the overall tax liability comes lower than what has been deducted at source. Thus, the tax return filing process becomes more rewarding as you can possibly claim a refund of your TDS!

Myth 3: Claiming refunds is a complicated and lengthy process.

Another commonly held belief is that claiming refunds of excess taxes paid (including TDS) is a cumbersome process.

The income tax return filing and processing is completely computerized and requires no human intervention. Any refund due on account of the excess taxes paid are computed and credited to the claimant’s registered bank account electronically. Getting refunds was never so easy!

Myth 4: Filing tax returns is a hugely complicated, time consuming and costly affair. I do not have either the time or the wherewithal to do it myself and hence would need to necessarily hire a tax consultant.

In most cases, with income sources like salaries or rent or interest, the tax return filing process is fairly simple, if one could become familiar with the basic documents such as Form 26AS (Annual Tax Statement) and AIS (Annual Information Statement), issued by the Income Tax Department. These are generated electronically and accessible online through the Income Tax portal. This would enable most people to file their tax returns online without needing to know a lot of tax rules.

The 15 A Chronicle is happy to provide a tax consultation and advisory desk for the benefit of the Sector residents who may need some assistance or for clarifying any doubts, on a pro bono basis. Pls feel free to write to the15achronicle@gmail.com or call 9811260001.