HENCY R SHAH AND ASSOCIATES

Myth: Only Form 16 is mandatory to file a return. vs Reality: Salary slips, AIS, and bank records can also help. Form 16 Is Not the Full Picture Last week, a salaried client shared Form 16 and expected the return to be filed in minutes. During review, the team requested salary slips, AIS, Form 26AS, and bank statements. The response was immediate. Form 16 already given. Why ask for more? The detailed check told a different story. Salary slips showed HRA, LTA, and reimbursements with tax treatment different from the final payroll summary. AIS reflected savings interest, fixed deposit interest, and dividend income not appearing in Form 16. Form 26AS showed TDS entries from banks which were not considered. Bank statements confirmed interest credits and a few high value transactions. One small capital gain entry was visible in AIS from mutual fund redemption. Form 16 is issued by the employer. It covers salary paid and TDS deducted by that employer. It does not include income from banks, i...

HRA EXEMPTION: MYTH VS REALITY Rohit reviewed Form 16 and felt relieved. HRA received during the year looked fully exempt. Rent receipts were in place. Case closed. During tax review, numbers told a different story. Exemption was not equal to HRA received. Law applied three tests. What matters under Income Tax Act 2025 and Rules 2026: Actual HRA received from employer Rent paid minus 10 percent of salary 50 percent of salary for metro cities or 40 percent for non metro The lowest value decided the exemption. Salary for this purpose includes basic plus DA where terms of employment include DA. Rohit paid moderate rent in a non metro city. Result: a portion of HRA became taxable. Common gaps seen in practice: Salary definition ignored while computing limits City classification missed Rent paid to relatives without proper documentation No rent agreement or inconsistent payment trail Claim made despite living in own house Quick checklist before filing return: Confirm city category based on ...

Zero Tax Does Not Mean Zero Compliance Myth: Zero tax means zero compliance. Reality: Compliance obligations continue even when tax payable is nil. Many taxpayers assume no liability removes reporting duties. Law does not support this view. Key situations where compliance still applies: Return filing: Income below taxable limit still requires filing in cases like foreign assets, high-value transactions, or loss carry forward. Example: Capital loss of Rs. 2 lakh needs return filing to carry forward. TDS and TCS: Deduction and collection provisions apply based on transaction nature, not final tax liability. Example: Payment to contractor above threshold triggers TDS under section 194C. Audit requirements: Turnover thresholds decide audit applicability. Profit or tax liability does not override this. Example: Business turnover above prescribed limit requires audit under section 44AB. Compliance reporting: Forms like Form 15CA, 15CB, or specified disclosures still apply. Example: Forei...

𝗠𝗬𝗧𝗛: Income below basic limit means no filing vs 𝗥𝗘𝗔𝗟𝗜𝗧𝗬: Filing may still be mandatory Many taxpayers skip filing when total income stays below the basic exemption limit. Law does not always permit this. Filing is required in specific cases, even with low income:   • Deposit in savings bank accounts exceeds ₹50 lakh in a year   • Foreign travel expense exceeds ₹2 lakh   • Electricity bill exceeds ₹1 lakh   • TDS or TCS exceeds ₹25,000, ₹50,000 for senior citizens   • Business turnover exceeds ₹60 lakh or professional receipts exceed ₹10 lakh   • Claim of refund due to TDS deduction 𝗘𝘅𝗮𝗺𝗽𝗹𝗲: Total income: ₹2,30,000 TDS deducted by bank on FD interest: ₹18,000 Tax payable after rebate: ₹0 Refund due: ₹18,000 Without filing, refund remains unclaimed. Funds stay with the government. 𝗡𝗼𝘄 𝗰𝗼𝗻𝘀𝗶𝗱𝗲𝗿 𝗮 𝘁𝗮𝘅 𝗽𝗮𝘆𝗮𝗯𝗹𝗲 𝗰𝗮𝘀𝗲: Total income: ₹2,80,000 Tax after rebate limit crossed due to special rate income or conditions Tax pa...

  Myth vs Fact: Salary TDS Means No Further Tax Liability Myth vs Fact: Salary TDS Means No Further Tax Liability Myth: Employer deducts TDS every month. Form 16 shows tax deducted. Employee believes tax is settled. This belief is common. This belief is wrong. Fact: TDS is only a provisional deduction. Final tax liability depends on total income and disclosures in the return. Neha earns Rs 8,50,000 salary. Employer deducts TDS of Rs 40,000 after standard deduction. Neha also has freelance income of Rs 1,20,000 not reported to employer. Revised income becomes Rs 9,70,000. Tax liability increases. TDS stays same. Gap leads to tax payable, interest under section 234B and 234C, and possible notice. Impact of not filing return and not paying tax: Interest under section 234A for delay in filing Interest under section 234B and 234C for short payment Late fee under section 234F up to Rs 5,000 Loss of refund if excess TDS exists Difficulty in loan processing due to missing ITR Notice fo...

𝟯 𝗚𝗦𝗧 𝗺𝗶𝘀𝘁𝗮𝗸𝗲𝘀 𝘁𝗵𝗮𝘁 𝗾𝘂𝗶𝗲𝘁𝗹𝘆 𝗶𝗻𝗰𝗿𝗲𝗮𝘀𝗲 𝗰𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲 𝗿𝗶𝘀𝗸 𝗳𝗼𝗿 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀𝗲𝘀 GST compliance is often treated as a back-office task, but small errors can lead to significant downstream issues. From our experience working with businesses and professionals, these are the 3 most common mistakes we consistently see: 𝟭. 𝗜𝗻𝗰𝗼𝗿𝗿𝗲𝗰𝘁 𝗰𝗹𝗮𝘀𝘀𝗶𝗳𝗶𝗰𝗮𝘁𝗶𝗼𝗻 𝗼𝗳 𝗴𝗼𝗼𝗱𝘀 𝗼𝗿 𝘀𝗲𝗿𝘃𝗶𝗰𝗲𝘀 Many businesses apply the wrong GST rate or misclassify transactions under the wrong HSN/SAC code. This can happen when: The product or service falls into a category with multiple possible rates The business assumes the rate based on industry practice instead of verifying it Updates to classification rules are not tracked 𝘐𝘮𝘱𝘢𝘤𝘵: This creates mismatches between the liability declared and the actual tax due, which can lead to interest, notices, and reconciliation work during audits. 𝟮. 𝗜𝗻𝗽𝘂𝘁 𝗧𝗮𝘅 𝗖𝗿𝗲𝗱𝗶𝘁 (𝗜𝗧𝗖) 𝗰𝗹𝗮𝗶𝗺...