Synopsis:
- A glitch in the income tax system is preventing taxpayers from claiming tax rebates they are eligible for.
- This issue particularly affects low-income earners and individuals with income taxed at special rates.
- The glitch leads to incorrect tax calculations, potentially resulting in higher tax bills or incorrect rebate grants.
Thousands of taxpayers, especially those with lower incomes, are facing problems due to a glitch in the income tax filing system. This error might prevent them from claiming a tax rebate of up to Rs 25,000 under the new tax regime. With the deadline to file income tax returns fast approaching on July 31, 2024, there is an urgent need to resolve this issue.
Here’s the Problem:
The law (Income Tax Act, 1961) allows people earning under Rs 5 lakh (old tax regime) or Rs 7 lakh (new tax regime) to claim a tax rebate that can bring their final tax bill down to zero. But, after an update on July 5th, 2024, the system seems to be confused about income from sources taxed differently, like short-term capital gains on stocks. This is causing incorrect tax calculations.
Check how much you need to pay: Online Income Tax Calculator
Who is Affected?
This glitch is especially impacting two groups of taxpayers:
- Low-income earners under the new tax regime: If your total income falls under Rs 7 lakh annually under the new tax plan, you might be affected.
- People with income taxed at special rates: This includes income from sources like short-term capital gains on stocks, which often have a lower tax rate.
How Does This Glitch Hurt Taxpayers?
Instead of considering all your income, the system might only look at your main salary and ignore income taxed at a special rate. This mistake can lead to a higher tax bill for people who should qualify for the rebate.
Scenario 1: Missing Out on Rebates
Imagine Rohan, a teacher earning a salary of Rs 4.5 lakh and an additional Rs 1.5 lakh from freelance work (taxed at a special rate). Before the update, he could claim a rebate on his entire income (Rs 6 lakh). Now, the system might only consider his salary, completely ignoring his freelance income. This mistake would leave him with a higher tax bill than he deserves.
Scenario 2: Rebates Granted by Mistake
On the other hand, the system might accidentally give a rebate to someone who shouldn’t qualify. Let’s say Rahul, a salesman, earns Rs 6 lakh as a salary and has Rs 4 lakh in capital gains (total Rs 10 lakh). Since his total income exceeds the Rs 7 lakh limit, he wouldn’t normally get a rebate. However, the faulty system might grant him a rebate based solely on his salary, leading to an incorrect claim that could cause problems later.
How to File ITR After Due Date
What Needs to Happen?
Tax experts are urging the authorities to fix this glitch as soon as possible to avoid further confusion and financial strain for taxpayers, especially before the July 31st deadline. They also recommend simplifying the tax rules for income taxed at different rates to prevent such issues from happening again in the future.
