New update for taxpayers, know who will suffer loss?

Disappointing news for taxpayers. After the update of tax filing utility on the income tax site this month, taxpayers were getting a rebate of Rs 25,000 under the new tax system. This will happen if taxpayers have booked short term capital gain. But the Income Tax Department has repealed the 1961 law. So know what is the rule.

Know the new update

According to the new facility, it becomes necessary to pay Rs 25,000 as short term gain tax. If the IT return filer has not paid the short term gain tax before July 5, then he will get a notice. That is, the difficulties of those who file returns before the announcement of the new facility for IT returns may increase. Exemption is a rebate on income tax, which helps low-income people to reduce their tax. As per the changes in the Union Budget 2023, if you opt for the new tax regime and your taxable income is Rs. 7 lakh. You are allowed to claim an exemption of up to Rs 25,000.

what's the problem?

• The issue arises from differences in the manner in which the portals calculate their 'total taxable income' to avail the exemption.
• According to chartered accountants, it is wrong to include Short Term Capital Gain (STCG) in this calculation in the current system.
• This eliminates the exemption for STCG holders, even if their income excluding these gains is less than the Rs. 7 lakh limit.

Why is the problem occurring?

• The point is that taxpayers who file returns before July 5, 2024 can claim tax exemption despite STCG.
• This inconsistency raises concerns about compliance with the update to the Income Tax Act, which does not include STCG information denying exemption eligibility.
• Section 111A clearly allows exemption for STCG holders, if their total income (excluding STCG) exceeds Rs. 7 lakh or less.

Impact on taxpayers

• Many taxpayers having STCG may miss out on the exemption due to portal calculation.
• Taxpayers who do not claim exemptions due to a portal error may receive a notice at the end of the year.
• Clarifying or disputing exemptions can cause unnecessary delays and frustration.
• The Income Tax Department should address this issue and ensure that the portal correctly calculates the exemption eligibility based on the provisions of the Income Tax Act.
• Taxpayers in the new tax regime with STCG should be aware of this issue and consult a tax professional if they feel they are eligible for exemptions.

The Income Tax Department has made income tax return forms ITR-1, ITR-2, ITR-3 and ITR-4 for the financial year 2023-24 (AY 2024-25) available on the e-filing portal from April 1, 2024. Now taxpayers can file income tax returns by selecting Form ITR1-4 on the portal. The last date for filing income tax returns for the financial year 2023-24 is July 31, 2024. This means that income tax returns can be filed without any fee till July 31.