ITR Filing: Can I switch to the new tax regime when filing a belated income tax return?
Taxpayers have time till December 31, 2023, to file their belated returns with a fine of Rs 5,000, or Rs 1,000 if taxable income is below the Rs 5 lakh. But, while filing belated ITRs switching to New Tax Regime wont be possible. To switch tax regimes taxpayers must file Form 10-IE within the ITR filing deadline.
The due date for filing Income Tax Return (ITR) for FY 2022-23 (AY 2023-24) was July 31, 2023. Those taxpayers who have missed the deadline still can file their ITR with late fees.
As per Section 139(4) of the Income Tax Act, 1961, filing of belated return is allowed. However, this will attract a fine of Rs 5,000. If your income is below Rs 5 lakh the late fee will be Rs 1,000. The taxpayers have time till December 31, 2023, to file their belated returns. Taxpayers are encouraged to file their returns as soon as possible due to penal interest charged on the total tax amount.
The taxpayers can choose between the old tax regime and New Tax Regime for filing their belated return. Old tax regime could be a better option if you have many deductions to claim as per different sections of I-T Act, including Section 80C for tax saving investments.
It could be confusing when you realise that you don’t have as many deductions as thought and want to take advantage of the lower income tax rates in the New Tax Regime? Can you switch tax regime when filing the belated ITR? Read on to find details.
Special provisions for Opting-In
Despite being introduced in the Union Budget of 2020, the New Tax Regime is not the default tax regime for tax payers in India. In order to use the New Tax Regime, tax payers need to file Form 10-IE.
However, this can only be done within the deadline for filing your returns, i.e. July 31 for most and October 31 for those who need to have their accounts mandatorily audited.
So if taxpayers wish to take advantage of the lower tax rates under the New Tax Regime, they must do so before the deadline. The option to switch to the alternative tax regime is not possible when filing a belated ITR.
Additional restrictions
On top of the time limits for switching tax regime, there are certain other restrictions that taxpayers should be aware of. Those who have only salaried income and house income without any business or professional income cannot freely switch between the tax regimes. When such taxpayers switch to the New Tax Regime, they are only allowed to switch back to the Old Regime once. If they take this option, they won’t be able to choose the New Tax Regime ever again.
Taxpayers with professional or business income can switch between the regimes by filing the appropriate Form 10-IE within the required time limit. However, interestingly while the law lays out clearly that taxpayers need to opt for the New Regime by filing their taxes before the July 31 deadline, there is no clear provision which states that the reverse is true. The law is unclear over whether taxpayers can switch from the New Regime to the Old Regime even with belated filings.
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