)
Despite being a regular taxpayer, there are chances that you could be accumulating black money at home unknowingly. And you won’t realise this until an officer assessing your taxes raises a query and asks for an explanation.
“These days it’s very common to receive expensive gifts from friends and family, especially those living abroad. Not declaring them can land you in trouble,” said Mayur Shah, executive director, tax and regulatory services, Ernst & Young.
According to the Income Tax law, if a person receives a gift valued over Rs 50,000, he or she needs to pay tax on it. The value of such items is clubbed with your income and taxed as per the slab.
However, there are certain exceptions to this. For example, presents received on wedding. While they need to be declared, you don’t need to pay tax on them.
Those offering professional services such as doctors, dentist and lawyers need to be extra careful. If the gift is paid as part of remuneration for their services, then it compulsorily needs to be clubbed with income irrespective of the value.
There are few other areas that individuals usually are not aware about. For example, in many households, homemakers save from the household expenses and invest this money in instruments such as bank fixed deposits or post office savings schemes. Returns on such investments that are in the name of wife or children need be clubbed with the income of the bread earner and taxed as per his slab.
ALSO READ: Manage your tax outgo when selling property
In recent times, banks have started giving interest on money lying in savings accounts. This also amounts to interest income and needs to be mentioned while filing returns. But people don’t include this as earnings because they rely on banks to deduct taxes wherever applicable. As the interest paid out is usually below Rs 10,000 annually in savings account, banks don’t opt for tax deduction at source (TDS). To be on the right side of the law, it’s always better to declare this interest and pay applicable tax.
The income tax regulations change every year during the Union Budget. A person needs to abreast with the new developments. Four-five years back, the government introduced new rules for those who have a second home but it’s not let out.
Many are not aware that a second property attracts tax even if it not let out and the owner has no rent income from it. This means, even if your second house is unoccupied, and there’s no rent income from it, the person still needs find the prevalent rent in the area, take it as a notional income and pay tax on it. If the house is in the name of spouse, who is not earning, the notional rent is clubbed with the husband’s income.
These little things can amount to a considerable undisclosed income that can attract penalties in the future.
