Problem Statement

Taxpayers and professionals often face challenges in choosing between the Old Regime and the New Regime of income tax. With two parallel systems, each having different slab rates, deduction rules, and rebate provisions such as Section 87A and marginal relief, the comparison is rarely straightforward. Manual calculations can be lengthy and error-prone, especially when factoring in multiple deductions, surcharges, and special-rate incomes.

Since the introduction of the New Regime, one recurring doubt has been: ‘How much minimum deduction is required to make the Old Regime more beneficial than the New?’ This question arises almost every tax season during discussions with clients.

For example, a client may come in with a stack of receipts for LIC premiums, medical insurance, or donations and request: ‘Please reduce my tax liability by claiming these deductions.’ The professional, after analysis, often has to clarify: ‘These deductions are not available under the New Regime. To gain the benefit of these investments, you would need to opt for the Old Regime.’

Such conversations reveal the confusion taxpayers face. Clients expect quick and clear guidance on whether their deductions justify opting for the Old Regime, or whether the New Regime is still more beneficial despite those investments. Without a structured tool, professionals end up performing repeated trial-and-error computations, which consumes time and leaves room for uncertainty. This practical difficulty created the pressing need for an automated solution that not only compares liabilities under both regimes but also indicates the exact minimum deduction required for the Old Regime to become advantageous."

2. Solution Overview

With the help of AI (ICAI AI Agent, Claude, and ChatGPT as coding co-pilot), I designed a browser-based Income Tax Calculator for FY 2024-25 and FY 2025-26. The tool provides a structured step-by-step computation of income and tax under both the Old and New Regimes.

Key functional features include:

1. Head-wise Input: Salary, House Property, Business/Profession, Capital Gains, and Other Sources.
2. Special Rate Incomes: Separate input with manual tax entry and choice of 87A rebate eligibility.
3. Deductions Handling: Chapter VI-A deductions for Old Regime, and permitted deductions for New Regime.
4. Automated Calculations:
5. Standard deduction (₹75,000 in New Regime, ₹50,000 in Old Regime).
6. House property deduction @30%.
7. Correct application of slabs, rebate u/s 87A, surcharge, and cess.
8. Marginal relief for surcharge.
9. Comparative Output:
10. Detailed tax tables for both regimes.
11. Side-by-side comparison chart.
12. Highlight of which regime is more beneficial.
13. Computation of the minimum additional deduction required under Old Regime to equalize with New Regime.
14. Export Options: Results can be exported to PDF, Word, or printed for client records.

This design ensures that a client can instantly see not only their liability under both regimes but also the deduction threshold at which the Old Regime starts to make sense, making advisory discussions more efficient and transparent.

3. Role of AI

AI was integral at every stage—from drafting requirements to delivering a stable, cross-platform tool.

1. Prompt drafting (ChatGPT): I first collaborated with ChatGPT to articulate a detailed, testable specification. After a round of re-prompting, ChatGPT produced a polished Word document capturing the full prompt and feature list.
2. Initial build (ICAI AI Agent → Claude): I uploaded that prompt to the ICAI AI Agent, selected Claude, and gave a single instruction: “Can you prepare a tool according to this.” The agent generated a working HTML/CSS/JS application that runs in any modern browser (Windows, macOS, iOS, Android).
3. Early fixes via re-prompting: Initial errors and edge cases were resolved by targeted re-prompts.
4. Stabilization with surgical edits (ChatGPT): To avoid breaking already working parts, I switched to a “minimal-diff” approach. I provided ChatGPT the current code, the exact problem, and asked for step-wise corrections only—what to replace with what, what to add where, and what to remove—rather than full file rewrites.
5. Implementation workflow: I applied those small patches manually in Notepad, then followed an iterative loop: test → find errors → modify → test. After multiple careful cycles, the tool stabilized with correct logic and cleaner UI/UX.
6. Outcome: This AI-assisted pipeline accelerated development, reduced regression risk, and let me focus on professional accuracy (tax law logic, edge-case handling, and client-ready outputs) while AI handled code generation, diffs, and rapid iteration support.

4. Impact

The tool delivers tangible value to both taxpayers and professionals by transforming how income tax comparisons are made.

1. Instant Decision Clarity: Instantly identifies which regime — Old or New — is financially more beneficial for the taxpayer.
2. Time Efficiency: Eliminates the need for manual computations and trial-and-error analysis, saving valuable professional time.
3. Enhanced Accuracy: Minimizes human error through automated logic for slabs, deductions, surcharges, and marginal relief.
4. Smarter Client Advisory: Enables Chartered Accountants to provide data-backed, real-time advice during client discussions.
5. Accessible Planning: Empowers individuals with a clear, interactive visualization of their tax position and potential savings.

Overall, this use case demonstrates how AI can amplify professional expertise, allowing Chartered Accountants to deliver faster, smarter, and more value-driven advisory services with technology as an intelligent assistant.

Disclaimer

This tool is developed by CA Anshu Agarwal with the help of AI. It is intended for educational and professional assistance purposes only and not for legal reliance.