ITR Myths Busted: 6 Common Misconceptions About Filing Income Tax Returns

Filing Income Tax Returns (ITR) is a responsibility for millions of people, yet many myths continue to circulate around the process. From believing that only the wealthy pay taxes to thinking every gift is taxable, misconceptions often lead to confusion and mistakes. Understanding the reality behind these myths is crucial for every taxpayer.

Here are six of the most common myths about ITR filing — and the truth behind them.

Myth 1: Only the Rich Need to Pay Taxes

Many people assume that income tax applies only to the wealthy or big business owners. In reality, the tax system applies to all individuals whose annual income exceeds the basic exemption limit set by the government. This includes salaried professionals, freelancers, small business owners, and even those earning through investments. Taxes are not limited to millionaires; they affect a much wider population.

Myth 2: Every Gift Is Taxable

A common misconception is that all gifts are subject to tax. The truth is different. Gifts received from specific relatives — such as parents, siblings, and spouses — are fully tax-free. Gifts from non-relatives are exempt up to ₹50,000 in a financial year. If the value exceeds this threshold, the entire amount becomes taxable. Understanding this distinction helps you avoid unnecessary tax worries.

Myth 3: Tax-Saving Investments Are Optional

Some taxpayers believe that making investments under tax-saving schemes is unnecessary and provides no real benefit. In fact, tax planning plays a major role in reducing liability. Under Section 80C, you can claim deductions of up to ₹1.5 lakh annually through investments such as Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), and Life Insurance Premiums. Ignoring these options often means paying more tax than required.

Myth 4: You Cannot File ITR After the Deadline

Missing the deadline is stressful, but it doesn’t mean you cannot file your return at all. The law allows individuals to file a belated return until December 31 of the assessment year. However, penalties and interest charges may apply. To avoid these additional costs, it is always better to file your ITR well before the due date.

Myth 5: No Need to File ITR If TDS Is Deducted

Another widespread myth is that if your employer has already deducted Tax Deducted at Source (TDS), you don’t need to file ITR. This is incorrect. TDS is merely a mechanism to collect tax in advance; it does not replace your obligation to file returns. Filing ITR is essential to claim refunds, carry forward losses, and maintain accurate financial records.

Myth 6: ITR Is Not Required If Income Is Below Taxable Limit

Some individuals think that if their income is below the taxable limit, filing ITR is unnecessary. While you may not owe tax, filing a “nil return” or zero ITR still has advantages. It helps build a financial history, makes it easier to secure loans, and strengthens your case when applying for visas. Even if you don’t fall under the tax bracket, filing ITR is a smart financial practice.

Final Takeaway

ITR filing is surrounded by several misconceptions that can mislead taxpayers. The truth is that income tax applies to a wide range of individuals, not just the wealthy. Not all gifts are taxable, tax-saving investments can significantly reduce liability, and even if your employer deducts TDS, you must still file your return. Moreover, filing ITR is valuable even if your income falls below the exemption limit.

By clearing these myths, taxpayers can not only stay compliant with the law but also make informed financial decisions that benefit them in the long run.