6 top income tax fallacies disproved5 min read . Updated: 14 Oct 2008, 11:36 PM IST
6 top income tax fallacies disproved
6 top income tax fallacies disproved
Every year, Mohit Gupta promises himself he will file his income-tax returns well before the last day. It never happens; it’s always a last-minute rush. Over the last 25 years that I have been in the profession, not a year has passed when some client or the other has not rushed in at the last hour to get his tax returns filed.
Gupta’s is not an isolated case. They all solemnly promise that it will not happen the next year, but I am yet to witness a last day of filing when my office does not resemble a wholesale market buzzing with people with files, folders and the works waiting for their turn. The faint of heart would baulk at filing more than 250 returns on the last day, as we did this year. And, though my office staff had the schoolboy-like excitement to manage it all, I was a little uneasy till it ended. I was unnerved at the thought of “what if we are unable to file them all?" and the problems my clients would face afterwards.
While the real personal income-tax action heats up in March, I face the impact of it in July. Despite discussions on salary structures, tax optimization and efficient tax management, I still get to interact with many people with serious doubts. The most common question I face is: Why should I file any return when my employer has already deducted TDS and issued the Form 16 to me? Such innocent questions make me sympathize with people’s inability to understand the most common aspects of their personal taxation duties.
For instance, technology, in the past two years, has emerged as a great leveller. Since the assessment year 2007-08, one can file returns and taxes online. Terrifyingly long queues at special collection counters are now passe, though some still prefer the manual procedure out of sheer habit. With initiatives by the government and organizations, more of the filing will be done from home in future. In the first year of e-filing, I found the system was slow, with issues related to digital signatures and associated costs. But many people are now finding this system convenient to file returns at the last hour. After all, the deadline is no longer 5pm; it’s midnight. But more than the tax-filing process, on the last day I encounter tax payers’ doubts and misconceptions. Many of them feel cheated that their assumptions about post-tax incomes were inaccurate.
Some even start doubting their negotiation skills. There are others who get disenchanted with the taxation system and start assuming that my job is to create wealth out of nowhere for them. I can only optimize tax payments for an individual. Beyond this, the individual needs to increase his or her income.
I will take you through some common myths and misconceptions harboured by people I came across in July.
VALUATION OF PERQUISITES
MULTIPLE EMPLOYMENTS IN AN ASSESSMENT YEAR
This happens because of non-disclosure of details of previous income. To avoid unnecessary interest and penalty it is very important to make proper disclosures or pay advance tax. After all, why burden payment at one go when it can be staggered through the year?
REPAYMENT OF HOME LOAN
INTEREST FROM BANK DEPOSITS
At the last minute, most assessees have to pay some amount as tax on interest income. To avoid this, one can always estimate the income on this account and ask the employer to deduct some extra tax to cover the earning or pay advance tax.
My only advice to all taxpayers: Do not take it as your accountant’s duty to file your returns. It is important for you to be involved with your tax-filing. Make use of the accountants to make taxes work for you and understand what you are paying for and why.
The author is a reputed tax expert.
The views expressed on this page are not the newspaper’s opinion and are provided for information purposes only by Outlook Money. Readers are requested to do their own research. Neither Mint nor Outlook Money will be responsible for any actions and outcomes based on information provided here.
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Top-ups: A plan that hikes cover at regular intervals without any financial or medical underwriting circumvents the problem of age-related health issues. (Sunil Dhawan)
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Account number: It’s alphanumeric. The first two letters indicate the state from which money is contributed. The next five are the employer’s code, followed by the employee’s. Knowing this number is crucial to ensure unfettered accumulation in the account despite any change in jobs.
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Closing balance: Sum of contributions for the previous and current years. (Deepti Bhaskaran)
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