Tax-filing portals don't want to be called just that
September, 01st 2015
The last date to file tax returns for assessment year 2015-16 has culminated. But tax-filing portals aren't yet heaving a sigh of relief.
"Our portal continues to receive good amount of traffic post the deadline for people who may have missed the filing deadline. A lot of taxpayers also reach out to understand how they can verify their tax return and track their refunds, and this sort of traffic will intensify this year since several new means have been introduced by the tax department to e-verify tax returns and track refunds electronically," Archit Gupta, co-founder of ClearTax says.
But it isn't late-returns, past refund claims and erroneous return rectification that are keeping them busy. Tax-filing portals are expanding their wings and aiming to offer holistic tax and financial planning.
Aashish Ramchand, co-founder of makemyreturns.com says, "We don't want to be positioned merely as a tax-filing service provider. We aim to become the online tax and financial advisor." Makemyreturns.com offers a dedicated CA for the whole year, who would help you plan and save taxes for the next year.
Full-fledged tax and financial planning service would be a good extension to offer as they already help customers claim the best possible deductions and reduce their tax outgo. Individuals are lapping up the offering as is evident from the sharp rise in taxpayers opting for assisted tax-filing facility which clubs tax filing for the past year and tax planning for the current financial year.
Individuals, ever hungry to save taxes, have found solutions to unfulfilled needs in these product offerings. Tax Spanner has been offering peer comparison report where you can get a view of your income growth over years, peer level comparison of your tax ratio and the potential taxes you can save in a year. They launched the "Tax Optimization" product after seeing that individuals paid far more tax than their peers purely due to ignorance of tax benefits.
"Within 2-3 years of offering tax filing since 2007 we noticed that tax out go was different even if the income is same, that too when same tax laws are applicable to them. The concept of tax ratio was generated and we published yearly reports on tax payment trend in India," says Sudhir Kaushik, co-founder and CFO of TaxSpanner.com, where about 5% of those who enroll to file taxes opt for the 'Tax Optimization' and peer comparison report.
"Tax optimistion service is being opted for by those who earn Rs 2.5 lakh and needn't pay any tax to a person earning Rs 1.5 crore as everyone wants to save tax. But they don't believe they can save tax," says Kaushik. The necessity to offer tax and financial planning has been felt by chartered accountants at the helm of the portals as there was a gap left between the financial product selling on the back of tax-planning by agents offered and the expensive advisory fee that financial advisors provide.
Kaushik observes, "Tax saving is mostly used to sell some financial products rather than matching the financial needs of individual and all the available options under tax laws."
But he declines that they are in head on collision with financial planners. "Financial advisors help you plan your goals. But under tax-planning, individuals look for the tax impact of financial decisions and weighing other tax-effective options," Kaushik adds. As the grouse of not being able to save on enough taxes grips individuals during the tax filing stage, the tax-filing portals are able to suppress their nerves with the tax-planning offering. For instance, people commit regular premium of Rs 1 lakh for next 15 -20 years under insurance to save taxes, when they don't need to as the tuition fee of children would have sufficed to save the taxes. "This results in financial crunch at times or reversal of decision by way of policy surrender thus making tax-inefficient decision," Kaushik points out.
Hence, chartered accountants feel they are better positioned to help people save as well as plan taxes. "We understand the taxes and help people get the optimum tax advantage. We can help you get not just the maximum possible returns on your financial investments, but also ensure you pay the least tax based on our experience in the field," Ramchand elucidates.
The websites wouldn't need much of an internal change in organization structure to offer the services they say. Typically, the front end is managed by a team of either chartered accountants or MBA graduates, while the rest of the services are outsourced to chartered accountants and associates. "Since we have the tax information of the individual, we are also in a position to help him/her with a financial plan, say for instance if he/she desires to save money for his house, based on his income and salary components, we sit down with them and recommend funds they can invest in," Ramchand elaborates.
Presently makemyreturns.com offers the service offline, wherein emails are exchanged between clients and tax consultants. A few tie-ups with either advisories or investment product manufacturers such as life insurance and mutual funds and they are ready to go. "We intend to offer this additional service of full-fledged tax planning online. We are in the process of integrating financial investment process online by typing up with mutual funds and building our systems. We would have a few tie-ups," Ramchand revealed.
They hit the nail spot on when they say they are offering all the services at a cost much lower than what a brick and mortar chartered accountant would. This low-cost taxation expertise is also available at the fingertips, whithout moving from your home or office.
Drawing the cost comparisons, Ramchand says a full-fledged chartered accountant would charge an individual, Rs 3000-5000 for filing tax returns, depending on the complexity, while they offer it at 1/10th the cost. The low-cost advantage is likely to generate more eyeballs for the ancillary services he anticipates.
"We offer other ancillary services under our premium assist package, which costs Rs 1500. If there are tasks such as rectification of returns, replying to notices and getting refunds released, a traditional CA would charge Rs 10,000-15,000 where several rounds of the income tax department are required. We wanted to tap into this market and offer simple tax advice, which does not come at exorbitant costs," says Ramchand.
Though the tax-filing portals are offering services at a cheaper cost, they may be flouting the rules. Former president of ICAI, Sunil Talati, says, "Presently the Code of Ethics prohibits a chartered accountant to solicit any kind of work by way of advertisement, marketing, etc. The Council has been debating on the issue because how would people know your area of expertise."
Apart from a classified ad in the ICAI's journal, practicing Chartered Accountant cannot use advertisement to solicit clients or professional work either directly or indirectly as per the Clause (6) of Part-I of the First Schedule to the Chartered Accountants' Act, 1949. Practicing Chartered Accountants aren't allowed to secure any professional business, either through the services of a person who is not an employee of such Chartered Accountants or who is not his partner too.