You still have about two months to file your taxes on your income earned for the financial year 2019-20. With the onslaught of the COVID crisis, the Income Tax department has postponed the deadline for filing taxes till 30th of November 2020.
Thanks to recent budget initiatives, computations of tax liabilities for individuals have gotten simpler. Should you file your taxes on your own?
1. Easy and simple
Budget 2020 has introduced the new tax regime whereby you pay taxes at a lower rate on your income. However, you will not be entitled to any deductions and exemptions whatsoever.
Under the old tax regime, tax rates are higher (see table) but you will be allowed to make various tax deductions from your income.
While filing taxes, you can select from any of the above – one with all the deductions and exemptions or the other without it.
So, if you just have salary income and no deductions to be claimed from investments in ELSS, medical insurance, donations or interest on education loans amongst others you can opt for the new tax regime. Here, the tax calculations will be a breeze. Furthermore, the ITR forms will come pre-filled with items under some heads making the filing process a lot simpler.
So, when can you do it on your own?
Single source of income
When your source of income is predominantly from salary, then it’s easier to file it yourself. In such cases, you need to just feed-in the figures mentioned in the Form-16 (given by your employer).
You can compare tax liabilities under both the new and the old tax regime and choose the better of the lot.
If your tax situation has changed during the year, it’s better to hire a Chartered Accountant. For instance, if you have changed a job, then the Form 16 computations might need a tweak unless the new employer has accounted for your previous tax payments and deductions. Moreover, it’s likely that you might fall in a higher tax slab (with its applicable higher taxes).
Similarly, if there are major capital gains from the sale of a property, you need to account for it and look at options to save on taxes.
Basic financial proficiency is all that is needed to compute personal taxes along with awareness about the basic tax rules. What is more, it can be learnt quickly from the internet.
Over the years, the tax structures have gotten simpler. And if in doubt, you can always make a call to the helpdesk number of the IT department for further clarifications.
When to hire a CA?
If you own a business or are self-employed, you might have to maintain a book of accounts for your business. Furthermore, it needs to be compulsorily audited by a CA, if the business turnover is more than Rs 1 crore (or gross receipts for a professional are more than Rs 50 lakh).
By being aware of the latest tax rulings and regulations, a CA can help you save on taxes and make necessary filings and advance tax payments before the due date.
Assume, you sold your property within five years of buying and had claimed tax deductions under Sec 80 C for principal repayment of your home loan in the past. In this case, all the tax benefits availed will be added back to your income and taxed in the year of sale.
Similarly, if you failed to account for any income (say interest income of a minor child) in the past, you will have to do so in the current filing along with payment of interest and penalty.
Tax complications or notices are best dealt with the help of a CA who is likely to be fully apprised of the regulatory procedures.
Dearth of time
Doing the tax filing at the last minute can prove disastrous as any wrong computation can lead to its rejection by the IT authorities. Any delay in filing beyond the due date in turn attracts a hefty penalty of Rs 10,000 or more.
If you don’t have the time and wherewithal to do the tax computations, it is better to hire a CA.
If you just have salary income and have no major tax changes during the year, then you need not hire a CA for filing your tax return.