Taxes
This blog debunks five common myths about taxes, clarifying misconceptions around tax deductions, taxability of gifts and interest income, e-filing requirements, and house rent deduction rules, empowering readers to make informed tax decisions.
You are catching up with friends over coffee, and the conversation turns to taxes. Suddenly, everyone’s got a story, a rumour, or a bit of “advice” to share: “You don’t need to file if you didn’t earn much,” says one. “Claiming deductions will put you under scrutiny,” warns another. Tax myths and misconceptions swirl around, leaving even the savviest taxpayers scratching their heads. These myths can lead to costly mistakes or missed opportunities. In this blog, we will debunk five common tax myths to help you confidently approach tax season, knowing how taxes work.
Fact: A homeowner can claim a deduction of ₹1.5 lakh towards the compensation of a Home Loan principal under Section 80C of the Income Tax Act. In addition, he/she can claim up to ₹2 lakh deduction on the Home Loan interest under Section 24 of the Income Tax Act.
Many people mistakenly believe this tax benefit applies to only one house, but that’s false. You can claim this benefit for multiple housing loans. Tax deductions are available on the repayment of multiple Home Loans; however, the total deduction amount in a year is capped at ₹1.5 lakh under Section 80C and ₹2 lakh under Section 24.
Apply for a Home Loan here now!
Fact: A common misconception about personal income tax is that interest earned from bank savings accounts, post office savings accounts, fixed deposits, or Recurring Deposits is not taxable. In reality, all interest income must be reported in your income tax returns as it falls under the ‘Income from Other Sources’ category and is taxable.
However, provisions like Section 80TTA allow a tax exemption of up to ₹10,000 per year on interest earned from bank or post office savings accounts. HDFC Bank also offers tax-saving options, such as Tax-Saving Fixed Deposits, that can help you earn interest while saving on taxes.
Fact: It’s common for people to receive gifts from relatives on their wedding day. However, gifts (including money, jewellery, immovable property, shares, and securities) are not always exempt from tax. Not all cash gifts are tax-free. Any cash gift over ₹50,000 received from non-relatives is taxable. However, gifts received from non-relatives on the occasion of one’s wedding are tax-free.
Fact: Many people mistakenly believe that e-filing taxes is not mandatory in India. However, this is incorrect, as all taxpayers earning more than ₹5 lakh per year must file their tax returns online. It’s important to note that the process is only complete once an ITR-V (Income Tax Return Verification) form is sent as an acknowledgement to the Central Processing Centre (CPC) in Bangalore.
Fact: Even if you don’t receive your employer's House Rent Allowance (HRA), you can still claim a deduction on your rent payments. Here’s how:
Myths belong in folklore, not in tax matters. Knowing the facts is essential to maximise your tax benefits each year.
Read more about HRA benefits on payment of house rent.
Under Section 80C of the Income Tax Act of 1961, you can save tax by investing in Tax-saving FD. Calculate using an FD calculator.
Disclaimer: *The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice before you take any/refrain from any action. Tax benefits are subject to changes in tax laws. Contact your tax consultant for an exact calculation of your tax liabilities.