Using It Dept’S New Tax Calculator? Why You Need To Exercise Caution

(As Published in The Financial Express on April 14, 2016)
The income tax department recently launched its calculator to enable taxpayers to gauge their annual tax liability. The calculator has been calibrated to include IT-related amendments made in Budget 2016. Once you feed in your basic details and information, the calculator computes your tax liability.
But how good is the calculator? Is it comprehensive or would you need more help when you file your returns?
“Tax computation remains complex because of so many sections/sub-section, deduction, exemptions, limit, rules and changes in all these from time to time. In present case, there are some limitation being a calculator as compared to consultant (who has the complete knowledge of tax). Therefore, the calculator should be used for guidance and one should consult an expert for complexity. A layman is at risk to some extent due to their limited tax intelligence,” Sudhir Kaushik, CEO and founder, Taxspanner.com told FeMoney.
However, he says that the calculator is a good option for calculating tax for earlier years. “The IT department’s tax calculator is a good option for computing the tax payable for assessment year (AY) 2010-11 to 2016-17 if you know basic tax laws, especially for earlier year computation which at times may not be easy,”Kaushik said.
Nidhi Goyal, Managing Director, Tax and Regulatory Affairs, Protiviti India, said the tax calculator is part of the government’s efforts to encourage and simplify tax payment process. “Though the calculator would provide the taxpayer with easy check on their tax liability, there is a word of caution from the tax department that taxpayer should not solely rely on it as complicated cases of ITR have different requirements which may not be addressed by the calculator,” Goyal said.
With the help of analysis by Sudhir Kaushik of Taxspanner.com, FeMoney brings to you some of the missing fields and mistakes in the calculator and provides you some tips to assess your tax in a better way.
Following are the highlights:
A. Deduction section:
1. Employee’s contribution/self-employed contribution towards NPS (upto 10%) (u/s. 80CCD):
a. If the income from salaries is entered, the calculator should restrict the same to 10 per cent of the salary income.
b.If the income from salaries is not entered, the calculator should restrict the same to 10 per cent of the gross total income.
This is not being captured by the calculator at present.
2. Deduction u/s 80G (donations) should have been more in detail. The amount needs to be restricted as follows:
There are 4 types of deduction –
a. Unrestricted 100 per cent deduction
b. Unrestricted 50 per cent deduction
c. Restricted 100 per cent deduction
d. Restricted 50 per cent deduction
3. Deduction u/s 80CCF is not available from AY 2013-14 but the calculator allows to enter amount. However, does not calculates this deduction but it would have been better to restrict and inform through pop up.
4. Deduction u/s 80GG is not provided in the calculator which can be claimed by individuals paying rent but not getting any HRA.
5. The calculator is asking individuals to input the due date for submission of return. The individuals might not be aware of the due dates and hence there can be a ready reference of extended due dates for each assessment year in the calculator.
6. Income from salaries should have been named as “Net taxable salaries after exemptions and professional tax/entertainment tax deductions’. In salary option, there should be helping tips for user.
7. More than one rented property owners would not find it easy to compute the tax liability.
8. Interest on house loan is deductible with conditions and individuals are not having complete knowledge hence chances of wrong claim/assumptions are there. Hence, providing help is necessary.
9. Capital gains computation needs knowledge of indexation before putting the amount in the calculator. Moreover, the determination of short-term and long-term at times need expertise.
10. Relief u/s 87A is inbuilt in calculation but is not displaying in calculator. Hence it may create confusion for the user.
11. Marginal relief is also not displaying if income is more than Rs 1 crore. It is inbuilt in calculations automatically.