MYTHS & REALITY about TAXES (In INDIA)

Myth: Tax Deducted cannot be recovered?

Reality: This is a myth and the most common. The reality is that if your income is below the taxable limit, then you can claim a Refund by filing a return.

Myth :Tax Filing is very tedious and needs a lot of time, money and expertise?

Reality: Tax filing is a straight forward simple job. It can be done investing a limited amount of time and needs very limited expertise. The IT dept has also appointed tax agents who can do this job

Myth : Having a Pan Card makes it compulsory to file returns?

Reality: This is not true. Having a pan card does not make it compulsory to file returns.  If your income is taxable in a particular year then you have to file returns. However, if your income is below the taxable limit you can still have a Pan card and not file tax returns. PAN card can be used as a Photo Identity proof and when required for filing INCOME TAX RETURNS.

Myth: IF tax is deducted at source no returns are required to be filed.

Reality: This is only true if your entire tax liability is deducted at source and you don’t have any other source of income. If you have any other taxable source of income then it is mandatory to file your returns and pay your taxes.

Myth: There is a deadline to file my Return and the RETURN once file, cannot be revised:

Reality: The last date of filing returns is till 31^st July each year. However, if you miss the deadline you can still file your return. Belated Return- The last date of filing the returns is 31^st July but if you miss the deadline you can file a late return of 31^st March 2012. If there is a tax liability then interest will be charged at 1% per month. The income tax department may impose a penalty of Rs.5000/- for late filing of returns.

Revised Return-If you find any errors or omissions in your return you can always revise your return at a later date. The same also can be filed till March 31 ,2012.  If any errors are noted after the return is filed, it is best to get the same corrected with the income tax department to avoid any future consequences

Myth: I can invest only in LIC to save TAX?

Reality: Section 80C has various options which shall quality as a TAX deduction. However, it is a common myth that an LIC can be only bought to save taxes. Please see below the options available to save taxes. 

CURRENT TAX RATES & OPTIONS TO SAVE TAX

CURRENT TAX RATES

No income tax is applicable on all income up to Rs. 1,60,000 per year. (Rs. 1,90,000 for women and Rs. 2,40,000 for senior citizens of 65 and above and must be resident of india)

From 1,60,001 to 5,00,000 : 10% of amount greater than Rs. 1,60,000 (Lower limit changes appropriately for women and senior citizens)

From 5,00,001 to 8,00,000 : 20% of amount greater than Rs. 5,00,000 + 34,000 ( Rs. 31,000 for women and Rs. 26,000 for senior citizens)

Above 8,00,000 : 30% of amount greater than Rs. 8,00,000 + 94,000 ( Rs. 91,000 for women and Rs. 86,000 for senior citizens)

OPTIONS TO SAVE TAXES

Section 80C provides the following deductions if invested during the financial year. The total limit under this section is Rs. 100,000 (Rupees One lac) which can be any combination of the below:

• ·         Contribution to Provident Fund or Public Provident Fund (PPF)
• ·         Payment of Life Insurance Premium or investment in Pension Plans
• ·         Investment in Equity Linked Savings schemes (ELSS) of mutual funds
• ·         Investment in National Savings Certificates (interest of past NSCs is reinvested every year and can be added to the Section 80 limit)

·         Tax saving Fixed Deposits provided by banks for a tenure of 5 years. Interest is also taxable.

·         Payments towards principal repayment of housing loans. Also any registration fee or stamp duty paid.

·         Payments towards tuition fees for children to any school or college or university or similar institution. (Only for 2 children) or towards coaching fee of various competitive exams.

·         Post office investments The investment can be from any source and not necessarily from income chargeable to tax.

From April, 1 2010, a maximum of Rs. 20,000 is deductible under section 80CCF provided that amount is invested in infrastructure bonds. This is above the 80C exemption of Rs.100,000/=

Section 80D: Medical Insurance Premiums: Health insurance, popularly known as Mediclaim Policies, provides a deduction of upto Rs. 35,000.00 (Rs. 15,000.00 for premium payments towards policies on self, spouse and children and (read as in addition to) Rs. 15,000.00 for premium payment towards non-senior citizen dependent parents or Rs. 20,000.00 for premium payment towards senior citizen dependent). This deduction is in addition to Rs. 1,00,000 savings under IT deductions clause 80C