Tax Planning & Savings
28 April 2020
As tax season approaches, a sense of urgency sets in among all taxpayers alike. With a maze of laws and by-laws governing Income Tax in India, it becomes quite challenging to accurately comprehend the procedures and nuances involved in filing tax forms and income declarations. It is because of this confusion that people end up believing in false or half-baked information, which propagates several myths in the minds of the masses.
Even though the process of Income Tax has been simplified in the recent past, with the increasing popularity of digitalisation and ease of starting and maintaining businesses, it is important that a few of these popular myths are debunked in order to make things easily understandable for all people alike. Some of the popular ones:
In fact, in a time where digital penetration peaks at all-time high, banking and financial transactions online have become increasingly safe and secure. Robust cryptographic encryption and increasingly secure transmission channels with security measures like OTPs and 2-factor verification have contributed to this. Additionally, there are several other benefits of filing tax returns online, like speedier processing, and greater accuracy. In short – e-filing is entirely safe, and in fact, a superior option.
Contrary to popular belief, even if a company, LLP or partnership is not generating any profit, that is to say there is no income but rather a loss, the law mandates that IT returns must still be filed.
In fact, in cases of an entity duly filing loss in their IT returns, the future tax liability of such an entity can be further diminished in subsequent financial years.
In many instances, the tax liability of a person may be fulfilled via indirect means of collection such as TDS, TCS and other such deductions. Or this liability is discharged prematurely by way of advance Tax. In such cases, most people believe that they do not have to file IT returns. However, that is not the case. Even in cases where a person might not have any tax liabilities due, IT returns have to be filed to serve as a record for both the government and the individual on taxes paid.
If a PAN card has already been duly issued to the tax filing entity, having physical possession of the card is not at all mandatory. In case of paper-based filing of IT returns, the online copy of the PAN card or simply the PAN card number can be produced. If the assessee is using the E-filing method, there is no need of a physical PAN card at any stage at all.
Income tax is not a voluntary payment but a permanent liability imposed by the government of the country on each and every person, natural or artificial. Not only is it a compulsory payment but in case of arrears in paying this tax, heavy penalties can also be imposed on defaulters as per the provisions of the Income Tax Act of 1961.
Ever since 2013, the process of filing of Income Tax has been fairly simplified and the number of forms required to file IT returns has been reduced from 5 to 1. You can file an income tax return on your own or take the help of a professional, but the choice remains entirely yours. There is no mandate in law making it compulsory for a CA/Lawyer to file an IT return on your behalf.
In fact, any gift received by the assessee in the form of cash, gold jewellery, etc. beyond the monetary value of Rs. 50,000 falls within the tax limit and is taxable. As for the tax liability of windfall gains such as lotteries, or crossword puzzles, among others, TDS has to be cut at the flat rate of 30% in case the prize value exceeds Rs. 10,000.
With these common myths out of the way, filing IT returns is much less of a difficult task than it might appear to be at first. In fact, among other important aspects that you may want to know, one is that even personal loans can be tax deductible in India.
It is important to remember that regular payment of taxes on time is necessary not only to ensure that no penalties are imposed on the payee, but also to contribute constructively towards the development and progress of the country. If you’re bracing yourself for tax season, check out this handy guide on tax filing.