Tax season for the Financial Year 2024-25 is in full swing, and many taxpayers — from salaried employees to gig workers and small business owners — are falling for common tax myths that could cost them dearly. Understanding the Income Tax Act, 1961, is crucial to avoid penalties, delayed refunds, and unwanted scrutiny.
Don’t Fall for These Common ITR Myths!
- Myth 1: “TDS means I don’t need to file ITR.”
- Reality: This is a big trap! Even if Tax Deducted at Source (TDS) has been withheld, you still must file your Income Tax Return (ITR) if your gross income exceeds the basic exemption limit (₹2.5 lakh for under 60, ₹3 lakh for 60-80, or ₹5 lakh for 80+). TDS is just an advance payment; it doesn’t exempt you from filing. Without filing, you can’t claim refunds for excess TDS, and it could hurt your chances for loans or visas.
- Myth 2: “If I don’t owe tax, I don’t need to file.”
- Reality: Not always true. Even with no taxable income, you might need to file if you meet certain criteria. For example, if you’ve deposited over ₹1 crore in a current account, spent more than ₹2 lakh on foreign travel, or paid electricity bills exceeding ₹1 lakh in a financial year, filing is mandatory. It helps build a strong financial history.
- Myth 3: “All gifts are tax-free.”
- Reality: Be careful here! Gifts exceeding ₹50,000 in a year are generally taxable under Section 56(2)(x), unless they’re from specified relatives like parents, siblings, or your spouse. Gifts from friends or extended family beyond that limit are taxable. Even exempt gifts (like those received during marriage or inheritance) still need to be reported in your ITR.
- Myth 4: “Crypto profits aren’t fully taxed, and losses can be adjusted.”
- Reality: Profits from virtual digital assets (VDAs) like cryptocurrencies are taxed at a flat 30% under Section 115BBH. What’s more, you cannot offset crypto losses against any other income, nor can you carry them forward. Plus, a 1% TDS is now required by the buyer under Section 194S, leaving a clear digital trail for the tax department. You must report all VDA transactions, including losses, to stay compliant.
- Myth 5: “Foreign income for freelancers via PayPal/Stripe isn’t taxable.”
- Reality: False! If you’re an Indian resident, your global income is taxable in India under Section 5(1). This means all foreign earnings, regardless of how you receive them, must be declared. Schedule FA also requires you to disclose all foreign assets. Failing to do so can lead to hefty penalties under the Black Money Act, 2015.
The Tax Department is Cracking Down!
The Income Tax Department recently launched a major crackdown on fraudulent ITR claims, which began on July 14, 2025. They’ve already uncovered over 40,000 taxpayers who filed inflated claims with the help of unethical agents, leading to an additional ₹1,045 crore in taxes! These scams involved fabricated claims under sections like 80C, 80D, 80E, and 80G, often using fake email addresses and documents.
These refund rackets thrive on taxpayer ignorance and the lure of quick, big refunds. The department is using AI analytics, financial data, and field intelligence to uncover these digital trails and seize evidence.
Your Best Defense: Clarity and Caution
The rise of such schemes underscores why clarity and caution are your best allies this tax season. Filing your ITR accurately — even if you have low income, capital losses, or global earnings — helps build long-term financial credibility and keeps you on the right side of the law. The general due date for most individual taxpayers for FY 2024-25 is September 15, 2025. Don’t wait until the last minute!