Income tax in India — many myths swirl around this phrase. These myths lead to wrong assumptions, missed filings, or compliance issues. In this article, we debunk some common misunderstanding.
Myth: No Tax Due Means No Need to File ITR
Some taxpayers assume that if their payable tax is zero, they need not file ITR. However, that is incorrect. Even if your income falls below the tax liability threshold, you may still have to file under certain conditions. Filing ensures compliance and preserves eligibility for refunds, loan applications, or other financial benefits.
For example, large bank deposits, high foreign travel expenses, or substantial electricity bills can trigger mandatory filing under the provisos of Section 139(1).
Myth: Savings Interest, Fixed Deposit Interest, or Gifts Are Tax-Free
Many believe interest from savings accounts, fixed deposits, or gifts are tax-free. In reality, these are considered under “Income from Other Sources” and must be declared. You can get limited relief — for instance, interest from savings accounts may be eligible for deduction under Section 80TTA (up to ₹10,000 per year).
Similarly, gifts from non-relatives over ₹50,000 in a financial year are taxable in the hands of the recipient (as per Section 56). Hence, whether it’s bank interest or gift money, don’t assume it’s automatically exempt — always check the rules.
Myth: Home Loan Deductions Apply Fully to Principal + Interest
Another persistent myth is that you can claim full tax deductions on both principal and interest paid toward home loans — for multiple properties no less. That’s incorrect.
Under Section 80C, only the principal repayment is deductible up to a combined limit of ₹1.5 lakh (along with other eligible investments).Interest paid, on the other hand, qualifies under a different provision (for example, Section 24), and deduction limits are different. Therefore, merely paying home loan EMIs doesn’t guarantee full deduction benefits according to myths.
Myth: ITR Filing Is Optional or Too Complex
Many view ITR filing as optional, especially if income is low — or even too complex to attempt. In fact, ITR filing is mandatory when income crosses exemption limits, or other specified conditions apply. As for complexity — modern online filing portals and tools make the process far easier than many assume.
Therefore, don’t skip filing just because of perceived complexity. Instead, invest a little time — it can save you from penalties or missing refunds.
Conclusion:
Believing these common myths about income tax in India costs honest taxpayers lakhs every year in avoidable tax, interest, and penalties. Always verify rules on the official Income Tax portal or with a chartered accountant before acting on social media tips. Remember: Tax planning is legal. Tax evasion due to myths is expensive. File accurately, save legally!
– Ketaki Dandekar (Team Arthology)
Read more about here – https://taxfoundation.org/10-common-tax-myths-debunked