ITR FILING UTILITY IMPOSING TAX OVER AND ABOVE WHAT IS IMPOSED BY INCOME TAX ACT
CA Sachin D Jain
Indian Chartered Accountant | Global Tax & Audit Specialist | Enabling Cross-Border Business Success | Open to Global Collaborations
Navigating the labyrinthine world of income tax filing can be daunting, particularly when unexpected issues arise. Recently, taxpayers have reported significant discrepancies in the Income Tax Return (ITR) filing utility, leading to erroneous tax calculations that deviate from what is mandated by the Income Tax Act. This article delves into these discrepancies, their implications, and steps taxpayers can take to rectify these issues.
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Understanding the Issue: Faulty ITR Filing Utility
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The recent updates to the ITR filing utility have introduced a critical error impacting taxpayers under the New Tax Regime. This error involves the incorrect calculation of tax rebates, particularly under Section 87A, leading to a higher tax liability than what is legally required.
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Case Study: Rajesh and Surabhi
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To illustrate the issue, let’s examine the cases of Rajesh and Surabhi:
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- Rajesh:
? - Salary Income: ?5 lakh
? - Equity Short-term Capital Gain: ?2 lakh
? - Total Income: ?7 lakh
? - Offered Rebate (87A): ?10,000 only on salary income
? - Future Action: Foregoing rightful rebate
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- Surabhi:
? - Salary Income: ?6.5 lakh
? - Equity Short-term Capital Gain: ?3 lakh
? - Total Income: ?9.5 lakh
? - Offered Rebate (87A): Faulty ?25,000 despite income > ?7 lakh
? - Future Action: May receive notice
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In Rajesh’s case, the utility only offers a rebate of ?10,000 on his salary income, whereas, in Surabhi’s case, despite having a total income exceeding ?7 lakh, she receives a faulty rebate of ?25,000. This discrepancy highlights the fundamental issues within the ITR utility's recent update.
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Impact of the Faulty Update
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The faulty update to the ITR utility has far-reaching consequences for taxpayers:
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Financial Impact
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1. Overpayment of Taxes:
?? Taxpayers like Rajesh may end up paying more than their due taxes because of the incorrect rebate calculations.
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2. Erroneous Tax Notices:
?? As seen in Surabhi's case, the incorrect rebate can lead to receiving erroneous tax notices, causing unnecessary stress and administrative burden.
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Compliance Challenges
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1. Foregoing Legitimate Rebates:
?? Taxpayers might miss out on rebates they are rightfully entitled to, leading to an inflated tax liability.
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2. Legal Repercussions:
?? Misreporting due to utility errors can lead to legal complications and potential penalties.
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Detailed Tax Calculation Before and After Update
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To understand the changes better, let’s break down the tax calculation for Rajesh before and after the update:
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Prior to July 5
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- Salary Income: ?5 lakh
- Equity Short-term Capital Gain: ?2 lakh
- Tax on Normal Income: 5%
- Tax on STCG: 15%
- Rebate: ?25,000
- Tax Before Cess: ?15,000
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After July 5
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- Salary Income: ?5 lakh
- Equity Short-term Capital Gain: ?2 lakh
- Tax on Normal Income: 5%
- Tax on STCG: 15%
- Rebate: ?10,000
- Tax Before Cess: ?30,000
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The revised utility imposes a tax liability of ?30,000 instead of the correct ?15,000, doubling Rajesh’s tax burden.
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Steps to Rectify the Issue
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Verify Your Tax Calculation
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Taxpayers should manually verify their tax calculations. Utilize trusted tax calculators or consult with a tax professional to ensure accuracy.
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Report the Discrepancy
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If discrepancies are found, report them to the Income Tax Department through their official grievance redressal mechanism.
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Seek Professional Assistance
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Engage a chartered accountant or a tax consultant to review your ITR filing. They can provide expert guidance and help rectify errors.
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Stay Updated
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Regularly check for updates or patches released by the Income Tax Department to the ITR filing utility. Ensure you are using the latest version.
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Conclusion
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The recent issues with the ITR filing utility have underscored the importance of vigilance and proactive management in tax filing. By understanding the potential discrepancies and taking appropriate measures, taxpayers can safeguard themselves against undue tax burdens and compliance issues.