9 reasons ClearTax or Quicko might not be your best tax filing option
First up, let's get this out of the way - We are in no way saying that people who are well versed with tax laws shouldn't file their own return. Of course you should! However, if you are unsure of what you are doing - Don't use free tax filing services!
We think ClearTax, Quicko and all other tax filing tools are great if you know what you are doing. Keeping aside our fears that these websites may eventually lead us to a TurboTax situation, right now at least - we think these websites do provide good tools for Income Tax Return filing. Problem is these websites make people believe they can file their own returns when a CA may be able to help them save more tax.
Here's 9 reasons why working with a Chartered Accountant may be a better option than ClearTax, Quicko or similar:
Small errors may lead to significant tax outflow. Tax software or websites give people the illusion that tax filing is easy. Problem is there's a maze of provisions called the Income-tax Act, 1961 that needs to be unraveled. Finding and entering ITR forms often isn’t always easy. That part of the process requires reading comprehension and critical thinking skills, made more complicated by a specialized vocabulary. Interpreting tax laws isn't for everyone and a small mistake might cost you much more than a CA's fees. And mistakes are possible when you do it all yourself. A new client, recently made a mistake in calculating the cost of acquisition of his stocks thanks to a mismatch between the broker's contract notes and tax filing website. We had to fix and e-file his revised ITR and he ended up getting a refund of over INR 5 lakh.
Tax filing websites are all numbers and no interaction Income tax return filing can be a grueling process. Add to that Income tax provisions need you to determine who are relatives, what gifts are exempt, whether you are salaried or work as professional, what investments will you make. Unfortunately, ClearTax or Quicko cannot help talk you through these decisions. Talking regularly about all these things with a human being is healthy, especially if anything has changed. While tax filing websites make one-off communication with a Chartered Accountant possible, it isn’t the same as establishing a long term working relationship. Chartered Accountants who work with you throughout the year, know you and will prod you to prevent errors that a website may lead you to make. Our view is that your tax return should be numbers on a form that you’ve thought and talked about all year, instead of throwing numbers up in the air and hoping for the best. We have a debrief with clients every year to plan their future taxes and investments to make sure they feel comfortable!
The Labyrinth that is the Income Tax Act A CA knows the ins and outs of the Income Tax Act and knows how to interpret tax laws. If you are aware of all tax laws, go ahead and file your Income Tax Return. For everyone else, a CA might be your best bet. There are lots of places in the Income tax laws where there is room for aggressive interpretation that might save you a significant amount of tax. However, only a CA can tell you whether this is possible in your case.
You're an NRI who doesn't know how taxes work in India If you are an NRI, we cannot stress this enough. NRIs have the highest amount of TDS deducted every year since tax is deducted at the maximum rate for them. 95% of our NRI clients have large tax refunds every year. Don't make the mistake of assuming that the TDS deducted is same as your tax liability. Make sure you are filing your Return of Income and claiming your refund. A website may not be able to help with the specific circumstances dealing with tax treaties, international tax (cross-border tax) and DTAA benefits.
You are inheriting assets from a deceased relative If you have lost a loved one, the sheer burden may be enough to hand off the task to a Chartered Accountant. We understand how difficult it is and it's very important to appropriately determine how income is to be treated before and after the date of death, which ITR to file, what are the tax implications of the will, figuring out how to pay tax on any sale of assets.
You can't determine if you are receiving Salary or Professional Fee The important distinction here is if you are on the payroll of the company or receiving consultancy fee. Unfortunately, there is a fine line here and it's easy for companies to structure payments whichever way suits them. We've had tons of clients come to us thinking they receive salary when in fact their company is deducting TDS under 194J and treating them as paid consultants. The tax provisions for Income from Salary and Income from Business/ Profession are completely different. No website is going to be able to determine this fine line of difference on its own without human intervention.
You have become a landlord or own more than 1 unoccupied property Renting out a property can be stressful in itself. Add to this the provisions under Income from house property for deemed let out property, municipal value, fair value of rent, TDS deduction, 30% deduction and you may be left pulling your hair out. There is also the age old question of Business Income vs Income from House property for rental income. A tax filing website cannot answer this (Fun fact: Even the Supreme Court has given differing opinions in different cases based on slightly different facts). Only a Chartered Accountant can help you determine how your income should be taxed in line with judicial and established precedents. Experienced landlords may be able to figure it out as they go. Or as we've seen more often, they don't know what they're missing.
Stock options are your best friend. Until you realize the tax implications, that is We've seen this so often. Software engineers receive stock options from their employers on a regular basis. Here’s what our new error-maker clients have in common: They act first before thinking of tax ramifications. A common situation: A newly flush employee sells shares, uses all the winnings for a down payment and is surprised once he realizes that he will have to pay tax on the perquisite amount as well as capital gains on sale. After painful discussions with a Chartered accountant, that employee ends up paying large chunks of tax to the government. Plan out any moves with your Chartered Accountant before hand. It might save you significant money in the long run!
You haven’t filed for longer than you can remember. It happens. We've seen this happen to NRIs so often. You've been out of the country and forget that you need to file Tax Returns in India. What you're doing is handing the Government free money by not claiming your tax refund. Fear of filing is not an excuse either. Neither is debt or confusion about what you owe. You can try to catch up by feeding years of numbers into software or website, but you’re probably facing a variety of charges and penalties. A Chartered Accountant knows all the penalties as well as where you can get refunds. There's a special provision for condonation of delay as well which allows you to claim refunds after the fact. We've had clients receive lakhs in refunds through this process. Not filing is the worst thing you can do!
Income Tax Return filing may not be the most fun thing to do. But until we move to a world where we have Returnless tax filing, it's a necessary evil. Let us help you through this so you can focus on what's important! Fancy UIs and simplifying websites are no substitute for a Chartered Accountant's ability to plan your taxes.
If you need our help with filing your ITR, click here. Our team will be in touch with you in less than 24 hours and from there, you can sit back and relax!