TaxMarg vs ChatGPT: We Asked Both the Same 5 Tax Questions

We asked both TaxMarg and ChatGPT (GPT-4) the same 5 tax questions that CAs commonly research. Here is what each tool returned, unedited.

Question 1: "What is the TDS rate under Section 194C of the IT Act?"

ChatGPT's answer:

"Under Section 194C of the Income Tax Act, 1961, TDS on payments to contractors is deducted at 1% for payments to individuals/HUFs and 2% for payments to other entities. The threshold is Rs. 30,000 for a single payment and Rs. 1,00,000 for aggregate payments during the financial year."

TaxMarg's answer:

"Section 194C of the IT Act 1961 (now Section 393 of the IT Act 2025) provides for TDS on payments to contractors at the following rates:

• 1% for payments to individuals or HUFs
• 2% for payments to any other person (company, firm, etc.)

Threshold: No TDS if the single payment does not exceed Rs. 30,000 AND total payments during the tax year do not exceed Rs. 1,00,000 [Section 393(5), IT Act 2025].

Note: With effect from AY 2026-27, the relevant section is 393 of the IT Act 2025. Section 194C of the 1961 Act continues to apply for assessment years up to AY 2025-26."

Verdict: ChatGPT gave the correct rate but cited only the old Act without noting the 2025 Act transition. TaxMarg cited both Acts with the exact new section number and the threshold sub-section.

Question 2: "Compare old vs new tax regime for a salaried person earning Rs. 18 lakh"

ChatGPT's answer:

"For FY 2025-26, under the new regime: Income up to 3L: nil, 3-7L: 5%, 7-10L: 10%, 10-12L: 15%, 12-15L: 20%, above 15L: 30%. Standard deduction of 75,000. Tax would be approximately Rs. 1,95,000. Under old regime with 80C (1.5L), 80D (25K), HRA (2.4L): Tax would be approximately Rs. 1,56,000. Old regime is better if you have total deductions above Rs. 3.75 lakh."

TaxMarg's answer:

"For AY 2026-27 (Tax Year 2025-26), comparison for gross salary of Rs. 18,00,000 under the Finance Act 2025 revised slabs:

New Regime [Section 202, IT Act 2025]:

• Standard deduction: Rs. 75,000 (old Sec. 16(ia) IT Act 1961 / Sec. 19 IT Act 2025)
• Taxable income: Rs. 17,25,000
• Slab-wise tax: 0 (0–4L) + 20,000 (4–8L @ 5%) + 40,000 (8–12L @ 10%) + 60,000 (12–16L @ 15%) + 25,000 (16–17.25L @ 20%) = Rs. 1,45,000
• Rebate u/s 87A: Nil (taxable income exceeds Rs. 12,00,000)
• Cess 4%: Rs. 5,800
• Total tax: Rs. 1,50,800

Old Regime (opt-out from Sec. 202 IT Act 2025 / old Sec. 115BAC IT Act 1961):

Assuming deductions: 80C Rs. 1,50,000 + 80D Rs. 25,000 + HRA Rs. 2,40,000 + standard deduction Rs. 50,000

• Taxable income: Rs. 13,35,000
• Slab-wise tax: 0 (0–2.5L) + 12,500 (2.5–5L @ 5%) + 1,00,000 (5–10L @ 20%) + 1,00,500 (10–13.35L @ 30%) = Rs. 2,13,000
• Cess 4%: Rs. 8,520
• Total tax: Rs. 2,21,520

Winner: New regime by Rs. 70,720. Break-even: Old regime matches only when total deductions (excluding standard) reach approximately Rs. 6.25 lakh — Rs. 3.75 lakh of deductions is not enough at ₹18L salary under the FA 2025 slabs.

Cross-reference: Section 115BAC of IT Act 1961 corresponds to Section 202 of IT Act 2025. The old regime is not a separate section — it is the default taxation under the First Schedule when a taxpayer opts out of Sec. 202."

Verdict: ChatGPT's slabs are stale (pre-FA 2025) and its ₹1,95,000 figure applies the wrong slab structure. TaxMarg uses the current FA 2025 slabs (0/4/8/12/16/20/24L brackets), gives exact slab-wise math with cess, and cites the correct cross-mapped sections.

Question 3: "What is the time limit for reassessment under the new Act?"

ChatGPT's answer:

"Under the new provisions, reassessment can be initiated within 3 years from the end of the assessment year if income escaping assessment is Rs. 50 lakh or less, and within 10 years if it exceeds Rs. 50 lakh. Prior approval of specified authority is required."

TaxMarg's answer:

"Under the Income-tax Act 2025 (effective 01-04-2026, superseding the IT Act 1961 with FA (No. 2) 2024 amendments), the reassessment time limits are in Section 282 (ex-Sec. 149):

Time limits for issuing a notice under Sec. 280 (ex-Sec. 148):

• Up to 4 years 3 months from the end of the relevant tax year — for any amount of escaped income [Sec. 282(1)(a)]
• Up to 6 years 3 months from the end of the relevant tax year — only if escaped income is ₹50 lakh or more, and the AO has books, documents, or evidence of an asset, expenditure, or entry [Sec. 282(1)(b)]

Mandatory prerequisite: Before issuing a Sec. 280 notice, the AO must run the Sec. 281 (ex-Sec. 148A) show-cause procedure — provide the 'information', allow a reply (7–30 days), and pass an order under Sec. 281(3). Prior approval of the specified authority is required under Sec. 284 (ex-Sec. 151).

Approval hierarchy under Sec. 284 (IT Act 2025): Additional Commissioner / Additional Director / Joint Commissioner / Joint Director — regardless of bracket. The earlier Principal CIT / Director level for the extended bracket (under the pre-2026 Sec. 151 hierarchy) has been simplified under IT Act 2025.

Transitional note: For notices issued between 01-09-2024 and 31-03-2026 under the FA (No. 2) 2024 regime, the limits were 3 years 3 months / 5 years 3 months. Those are the applicable limits for that window; from 01-04-2026, Sec. 282 of IT Act 2025 governs."

Verdict: ChatGPT quoted the legacy pre-FA (No.2) 2024 3-year / 10-year rule that has been superseded twice — once by FA (No. 2) 2024 and again by the IT Act 2025. TaxMarg gave the currently applicable IT Act 2025 Sec. 282 timelines (4y 3m / 6y 3m), the simplified Sec. 284 approval, and a transitional note for notices issued in the 01-09-2024 to 31-03-2026 window.

Question 4: "How to calculate HRA exemption?"

ChatGPT's answer:

"HRA exemption under Section 10(13A) is the minimum of: (a) Actual HRA received, (b) 50% of salary for metro cities or 40% for non-metro, (c) Rent paid minus 10% of salary. Salary means basic + DA."

TaxMarg's answer:

"HRA exemption is governed by Section 10(13A) of the IT Act 1961 (renumbered as Schedule III(11) of the IT Act 2025), read with Rule 2A of IT Rules 1962. The exemption is the least of:

1. Actual HRA received from employer

2. 50% of salary if the residence is in Mumbai, Delhi, Chennai, or Kolkata; 40% of salary for all other cities

3. Actual rent paid minus 10% of salary

Salary for this purpose means basic salary + dearness allowance (if forming part of retirement benefits) + commission based on fixed percentage of turnover. It does NOT include other allowances, perquisites, or bonus.

Example: Basic salary Rs. 60,000/month, HRA Rs. 25,000/month, rent paid Rs. 20,000/month (Mumbai):

• Actual HRA: Rs. 3,00,000/year
• 50% of salary: Rs. 3,60,000/year
• Rent minus 10% salary: Rs. 2,40,000 - Rs. 72,000 = Rs. 1,68,000/year
• Exemption: Rs. 1,68,000 (least of the three)

Note: HRA exemption is only available under the old tax regime. Under the new regime (Sec. 202 IT Act 2025 / Sec. 115BAC IT Act 1961), HRA is fully taxable."

Verdict: ChatGPT gave the formula correctly but did not specify which components are included in "salary," did not provide the new Act section, and critically missed the new-regime exclusion. TaxMarg provided the complete formula, salary definition, a worked example, and the regime applicability note.

Question 5: "Is GST ITC available on food and beverages?"

ChatGPT's answer:

"No, ITC is blocked on food and beverages under Section 17(5)(b) of the CGST Act. However, ITC is available if the food is provided to employees as per any statutory obligation, or if the food and beverages are used for making an outward taxable supply of the same category."

TaxMarg's answer:

"Input Tax Credit on food and beverages is blocked under Section 17(5)(b)(i) of the CGST Act, 2017, with the following exceptions:

Blocked: ITC on food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, UNLESS:

1. Inward supply used for outward supply of same category: If you are in the restaurant/catering business and purchase food ingredients, ITC is available [Section 17(5)(b)(i) proviso]

2. Statutory obligation: If providing food to employees is mandated by any law (e.g., Factories Act requirement for canteen in factories with 250+ workers), ITC is available [Section 17(5)(b)(ii)]

3. Employee perquisite as per employment contract: Blocked. ITC is NOT available on food provided as a perk, even if part of CTC

GST Council clarification: Circular No. 172/04/2022-GST dated 06.07.2022 clarifies that ITC on canteen services is available only when it is obligatory under the Factories Act, 1948 (Section 46) or any other law. Voluntary canteen facilities do not qualify.

Relevant case law: The Maharashtra AAR in the case of Tata Motors (2019) held that ITC on canteen services is available proportionate to the employer's cost where Factories Act mandates the canteen."

Verdict: ChatGPT gave a correct but incomplete answer. TaxMarg provided the exact section with sub-clause reference, all three exception scenarios, the relevant GST circular, and a supporting AAR ruling. The distinction between statutory obligation and voluntary provision is critical and was missed by ChatGPT.

The Pattern

Across all 5 questions, the pattern is consistent:

ChatGPT is a good starting point for general understanding. TaxMarg is built for professional research where precision and citations matter.