Five mistakes people commit while paying taxes

Friday, July 10, 2009

Five mistakes people commit while paying taxes

As you come closer to tax filing deadline, you start running to your chartered accountant to make sure everything is pronounced perfectly.

The nature of tax payment is such that you may commit mistakes if you do not understand the stringent rule of tax laws.

It is advisable to hire a tax expert to make your tax filing a bit easier.

If not, you should be careful to transact each detail while paying taxes.

Here are five mistakes that you should avoid while paying taxes.

  • Interest accrued from my bank savings account is exempted from tax. I wonder how many people think that way. Each country may have its own limits, but interest that you receive on your bank’s savings account may be taxable if it touches the limit. Taxes will get deduct at source. Therefore, you should not put everything on a single basket; rather stretch your savings on many banks, as it helps you save taxes.
  • My cousin sent me a cash gift. Why should I pay taxes on the gift? Yes, you may be right if the cash gift you receive doesn’t touch the taxable limit. If the cash gift you receive do not touch the taxable limit, then you won’t have to pay a penny as tax.
  • I will transfer a part of my savings to my child’s name to get relief from tax, or pay less tax. Your idea will work only if your child is not a minor. Transferring any amount to your minor child’s name will not help you by any means. The tax laws are such that your minor’s income is clubbed with your income, and the calculation is done on the final amount. Never commit a mistake of increasing your child’s age as it will then result in a much heavier punishment for you. But if your child is not a minor, then you could avoid taxes as the amount transferred to your child’s name will be taxed as an individual item on your child’s name.
  • I will invest on tax saving mutual fund scheme to save income tax. That’s fine, but you should be aware of the locking period of the mutual fund scheme that you invest in. Normally, there’s a three year locking period on mutual funds, and if you withdraw your funds before the locking period, you will not be able to avoid taxes.
  • I had purchased a flat, and now I would get a tax rebate on the repayment. To avail the tax benefits, you must occupy the house. You won’t get any tax rebate if you give your apartment on lease.
Make sure you keep your eyes wide open while you file your returns. Never fail to mention any income that you accrue.

No comments:

Related Posts Plugin for WordPress, Blogger...