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Mint
4 days ago
- Business
- Mint
Income Tax: Do you need an expert to file your ITR? Pros and cons explained
Income Tax: Fewer than 40 days remain before the September 15 deadline to file the income tax return (ITR) for FY25. Some taxpayers could be busy arranging necessary documents as advised by their chartered accountant, whereas others would be doing it all on their own. Those who opt for the DIY approach have their hands full - examining the documents i.e., Form-16 to 26AS, choosing the appropriate ITR form, selecting the right tax regime, evaluating total amount of deductions and computing the tax liability. But is it all feasible and advisable? Perhaps yes, if you have only one source of income and not too many nuances involved in your tax return. Alternatively, you could engage an expert -- a chartered accountant, and thereby outsource your responsibility to the one who knows tax provisions like the back of their hand. Experts recommend that taxpayers engage a chartered accountant when earning income from a myriad of sources. This helps ensure clarity and compliance and avoids mismatches between AIS and Form 26AS. 'A professional brings clarity, ensures compliance with the latest tax rules, and helps avoid mismatches with AIS or Form 26AS, which are becoming common triggers for scrutiny. Especially for anyone with multiple income sources, capital gains, or business income, expert guidance is essential,' says Kinjal Bhuta, Treasurer, Bombay Chartered Accountants Society (BCAS). Some taxpayers resist the idea of engaging a chartered accountant to avoid paying the fee. But the avoidance of inconvenience when an expert takes over is worth paying that fee for. When you pay ₹ 5,000 as a fee to the CA, it may look like an unreasonable sum, since you believe you could do it all by yourself. But if some anomaly creeps in -- the penalty or fine would far outstrip this humble sum of ₹ 5,000. It is, therefore, recommended to let the expert do this job. "Often the cost saving of not hiring a professional leads to huge tax litigation liability in future - straining the taxpayer's time, money and efforts. Many taxpayers unknowingly make mistakes—like misreporting income, selecting the wrong ITR form, or missing out on eligible deductions. These errors may seem minor, but can lead to notices, delayed refunds and even interest and penalties," Bhuta added. Importantly, when you engage an expert, the chances of getting a tax notice would be minimal. After all, the Income Tax (I-T) Act is a piece of legislation which needs to be interpreted and inferred correctly, and CAs are trained in doing this. 'ITR filing is not just about filing information in a form. It's about interpreting law, optimising tax and presenting correct information to avoid future litigation. For that, you should always consider an expert. Taxpayers should not be penny-wise, pound-foolish as spending money on compliance today helps to save big in future,' says Pratibha Goyal, a Delhi-based practising chartered accountant. Another argument experts make is that CAs tend to advise their clients about tax planning. 'CAs know all the provisions and therefore, can advise taxpayers about how they can save their tax, going forward. If someone uses online tools, then customised tax planning may not be as effective,' says Deepak Kumar Agarwal, a Delhi-based chartered accountant. For all personal finance updates, visit here
Mint
30-07-2025
- Business
- Mint
Selling property? The 12.5% tax may push you into a higher surcharge bracket
A change introduced by the government in 2024 to ease capital gains tax on real estate has inadvertently created a tax trap that could leave many individuals paying more than expected. The government had allowed taxpayers to choose between a lower 12.5% tax rate on long-term capital gains (LTCG) without indexation or a 20% rate with indexation from property sales. This applies to properties sold on or after 23 July 2024. The concession doesn't extend to surcharge and cess calculations, leading to a higher overall tax burden. This article explains the changes in LTCG on real estate and what can be done to ease the tax burden. Grandfathering benefit doesn't extend to surcharge The Finance Bill 2024 introduced the optional lower tax rate with retrospective effect for individuals selling land or buildings. 'The Finance Bill 2024 changed the tax rate on long term capital assets, being land or building for Individual and HUFs, from 20% to 12.5%. This change was brought with retrospective effect from properties which are sold on or after 23 July 2024," said CA Kinjal Bhuta, treasurer, Bombay Chartered Accountants Society. To protect older buyers, the government introduced a "grandfathering" clause, allowing those who purchased property before the cut-off to choose whichever option — 20% with indexation or 12.5% without — results in lower tax liability. However, this relief doesn't apply when calculating surcharge, which is based on total income, not the taxable income after indexation. This subtle but crucial detail is where taxpayers are getting caught unaware, experts say. 'Your capital gains from real estate get added to your total income, and that can push you into a higher surcharge bracket. This means, even if your salary is just ₹20 lakh, if your unindexed capital gains push your total income above ₹50 lakhs, surcharge will still kick in," said CA Gautam Nayak, partner at CNK & Associates LLP. How surcharge works Surcharge is an additional tax charged on the income tax payable when an individual's total income exceeds certain thresholds. The surcharge rate varies based on income slabs. If your total income falls between ₹50 lakh and ₹1 crore, a 10% surcharge is applied on the income tax. This increases to 15% for income between ₹1 crore and ₹2 crore, and 25% for income between ₹2 crore and ₹5 crore. There are certain cases where the surcharge is limited to 15%. This includes income from dividends, short-term capital gains under Section 111A (like gains from listed shares or mutual funds with STT), and long-term capital gains under Sections 112 and 112A (such as profits from selling real estate, unlisted shares, or listed shares where STT is paid and gains exceed ₹1 lakh). The 15% surcharge cap also applies to income earned by foreign portfolio investors under Section 115AD(1)(b). For associations of persons (AOPs)—entities formed by individuals or groups for a common purpose but not registered as companies—the surcharge is also capped at 15%. This ensures that AOPs are not burdened with excessive tax rates, even when their total income is high. Under the Income Tax Act, AOPs are treated as separate taxable entities. Where it hurts, an example Suppose you bought a property for ₹1 crore and sold it for ₹2 crore. Without indexation, your capital gain is ₹1 crore. With indexation, your cost rises to ₹1.5 crore, reducing the gain to ₹50 lakh. Add a ₹50 lakh salary, and your taxable income is ₹1 crore. But for surcharge purposes, income is treated as ₹1.5 crore — pushing you into the 15% surcharge slab instead of 10%. 'The choice to calculate capital gains with or without indexation is available solely for the limited objective of computing capital gains tax under Section 112. However, when it comes to determining total income, capital gains calculated without indexation are taken into account in the absence of similar relief", according to Ashish Karundia, chartered accountant and founder, Ashish Karundia & Co. In simple terms, you could owe no tax on capital gains due to indexation but still be liable for surcharge — a tax on tax. This is because the income tax utility considers your total gross income, including capital gains without indexation, for surcharge purposes. That disconnect between what's used for tax calculation and what's used for surcharge is at the heart of the problem. What experts say Experts say part of the confusion stems from how the income tax utility software is programmed. "The utility software is adding non-indexed capital gains to the total income for surcharge. That's how income tax utility coding has been done. Ideally, it should have been a corresponding gains calculation. If tax as per indexation calculation is to be considered, then indexed gains should have been considered," noted CA Pankaj Bhuta, founder of P.R. Bhuta & Co. According to Bhuta, the Supreme Court has in the past pulled up authorities over such mismatches — yet the problem persists. 'If the GTI (gross total income) increases beyond ₹50 lakh, then surcharge will continue to apply even in a case when there is no tax payable on LTCG. This may bring some absurd results and higher tax burden due to surcharge applicability." This leaves taxpayers in an odd position, choosing indexation might lower capital gains tax, but it may still increase surcharge liability, especially if the gross income crosses ₹50 lakh or ₹1 crore. The bottom line The disconnect between how tax is computed and how surcharge is applied has created an unintended tax trap for property sellers, according to experts. Choosing indexation may save tax but still push gross income past surcharge thresholds, leading to a higher overall outflow. Experts say a simple clarification or software correction could fix the issue. Until then, taxpayers using the new 12.5% LTCG option must tread carefully and consider not just the tax but also the surcharge.
Mint
10-07-2025
- Business
- Mint
Income tax filing: How to deal with inaccuracies in annual information statement
MUMBAI : The annual information statement (AIS), introduced by the Income Tax Department to enhance transparency, is instead creating hassles for taxpayers by reporting incorrect incomes, according to chartered accountants. Introduced in 2021, the AIS gives a snapshot of financial transactions—ranging from securities and mutual funds to property deals and fixed deposits—during a fiscal year, sourced from multiple reporting entities such as banks, registrars, depositories, and sub-registrars. Available on the Income Tax e-Filing portal, the AIS complements the form 26AS by providing an expanded view of various income streams and transactions that might attract tax implications. However, it is often riddled with inaccuracies that leave taxpayers vulnerable to notices and assessments. The problems One of the most frequent errors in the AIS concerns capital market transactions, especially equity trading. Brokers and depositories report trade details, but inconsistencies between actual trade values and reported prices often don't match. 'We've come across several critical mismatches in tax reporting that can create significant challenges for taxpayers. In equity transactions, for instance, depositories often report closing prices that differ slightly from the actual transaction prices," said Ashish Karundia, chartered accountant and founder, Ashish Karundia & Co. These discrepancies often arise from systems failing to capture real-time prices or settlement-specific data. 'I received cases of senior citizens who do not even have a demat account. Surprisingly, capital gains were reported in their AIS. These individuals have never transacted in any securities in their entire lives, yet the system showed transactions," said lawyer and chartered accountant Kinjal Bhuta, who is also a treasurer at the Bombay Chartered Accountants' Society. Property deals are another area where AIS creates major confusion, especially in cases of joint ownership. The system often attributes the entire property value to each co-owner, causing inflated income disclosures. 'One of the reasons is that immovable property, time deposits, securities, or mutual fund units were purchased in joint names merely for the sake of convenience or as a gesture of affection. However, the second (joint) holder did not make any financial contribution toward the purchase," said Pankaj Bhuta, chartered accountant and founder of P. R. Bhuta & Co. The reporting systems often double-count the property value, creating a mismatch that doesn't reflect the actual financial arrangement. Even gift transactions get misinterpreted. 'A peculiar case involving property gifting. When someone does a gift deed and registers it under stamp duty, the system incorrectly treats it as a registered purchase and sale. This means both the gifting and receiving parties start getting notices about stamp duty value and fair market value, even though it was just a gift," said Kinjal Bhuta. The issue lies with how sub-registrars report transactions, noted Ganesh Rajgopalan, partner at accounting services provider A.P. Rajagopalan & Co. 'When joint property transactions are registered, sub-registrars report the same transaction for each joint holder, creating a complex reporting scenario. This means a single property transaction gets recorded multiple times across different PAN (permanent account number) holders, without clarity on individual ownership shares," he said. The AIS often miscalculates even interest income from fixed deposits. This issue arises when a taxpayer opts to receive interest only upon maturity while still being liable to pay tax on the interest accrued each year under the accrual method. In such cases, the AIS often either misses out on the yearly accrual or overstates the income in the year of maturity. For instance, if a taxpayer invests ₹5 lakh in a five-year fixed deposit at an annual interest rate of 7%, interest of around ₹35,000 accrues each year, totalling ₹1.75 lakh over five years. Ideally, this interest should be reported annually and taxed accordingly. However, if the bank reports the full maturity value of ₹6.75 lakh (principal + interest) only in the final year, the AIS reflects the entire ₹1.75 lakh interest as income in one year, inflating that year's income. What can taxpayers do? If you've noticed inaccuracies in your AIS, the first step is reconciliation—comparing the AIS, Form 26AS, and Taxpayer Information Summary (TIS) with your own records. 'Always reconcile your income with Form 26AS, AIS, and TIS. If any discrepancies are found, you can submit your disagreement through the AIS portal on the Income Tax Department website. Ensure you retain all supporting documents to substantiate your response," said Pankaj Bhuta. He shares a step-by-step guide: Log in to Go to Pending Actions → Compliance Portal Click 'Proceed" and select the AIS tile Choose the financial year → View AIS → Select the transaction Click 'Optional' under 'Provide Feedback' and submit your response. Keep the acknowledgement (Reference ID) for future reference. Karundia suggested that taxpayers should identify the type of mismatch, prepare a reconciliation, and then raise it through the AIS platform. 'If the issue remains unresolved through the AIS feedback mechanism, taxpayers may also consider directly writing to the reporting entities for correction." What should the tax department do? Annual information statements lack legal backing. 'Taxpayers can challenge these AIS entries because there's no law validating these reports. The department has created these things without a proper legislative basis," said Kinjal Bhuta. She also recommended that the government issue public circulars whenever there are errors or delays. 'There should be an option for taxpayers to specify the reason for including a second/joint name and also upload supporting documentary evidence," added Pankaj Bhuta. Karundia recommended expanding feedback options on the AIS platform. 'Introducing a mechanism for taxpayers to directly communicate feedback to reporting entities would enhance accountability and potentially lead to faster resolution times." 'The current process of sending queries to sub-registrars is fundamentally flawed and creates unnecessary complications for taxpayers. The Income Tax Department should develop sophisticated software logic to automatically match transaction values," highlighted Rajgopalan. The income tax department didn't respond to Mint's emailed queries.
Mint
25-04-2025
- Business
- Mint
How you can save up to ₹7,000 on interest income under the new tax regime
MUMBAI : Though the new tax regime offers a simpler framework by eliminating deductions and exemptions, some incomes are still eligible for tax benefits. One such income is the interest on post office savings accounts. Under the new regime, taxpayers can claim a tax exemption of up to ₹ 3,500 on a single account and up to ₹ 7,000 on a joint account under Section 10(15) of the Income Tax Act. While deductions under Sections 80TTA and 80TTB—applicable to interest from savings accounts—are no longer available in the new regime, certain exemptions under Section 10 continue to be valid. 'Interest earned in statutory provident funds under Section 10(11), recognized provident funds up to 9.5% under Section 10(12), Sukanya Samriddhi accounts under Section 10(11A), and Post Office savings accounts under Section 10(15) is exempt under the new tax regime," said Abhishek Kumar, a Sebi-registered investment advisor and the founder of SahajMoney. 'Interest from post office savings accounts continues to be exempt under Section 10(15), and this is applicable under both the old and new tax regimes," added Kinjal Bhuta, a chartered accountant and the secretary of Bombay Chartered Accountants' Society. "Taxpayers are not required to add this exempt income to their gross taxable income," said Kumar. 'However, they must report it as 'exempt income' in their income tax return (ITR) form." If the interest earned exceeds ₹ 3,500 for an individual account or ₹ 7,000 for a joint account, the excess amount is taxable and must be declared under 'income from other sources'. Opening a post office savings account is straightforward and can be done both online and offline. According to Kinjal Bhuta, the steps are as follows: Step 1: Visit the nearest post office branch. Step 2: Obtain and fill out the account opening form. Forms are also available for download from the official India Post website. Step 3: Submit the form, along with know your customer (KYC) documents such as Aadhaar and PAN. Step 4: Deposit the minimum required amount to activate the account. It takes 2-3 working days to open an account. 'As per the latest notification from the ministry of finance, Aadhaar and PAN are mandatory for opening a new post office savings account. If Aadhaar hasn't been issued yet, one must provide proof of Aadhaar enrollment and furnish the Aadhaar number within six months," Kumar added. Any resident Indian aged 10 years or above can open an account. Minors can have accounts opened by parents or guardians. While the process is mostly hassle-free, some procedural quirks remain. 'There is a penalty of ₹ 50 plus GST annually if the minimum balance of ₹ 500 is not maintained," added Kumar. Failure to make any transaction in the post office savings account for three fiscal years also makes it dormant, and one needs to do the KYC again to revive it. Still, post office accounts remain an attractive option for many, especially those looking for low-risk savings and tax efficiency. The interest rate on post office savings accounts is 4%.
