Deadlines, Penalties, and Tax Regime Switch TAXCONCEPT

The deadline for submitting a belated ITR for the fiscal year 2022-23 (Assessment Year 2023-24) is December 31, 2023. However, it’s important to bear in mind that a fine will be imposed for filing an overdue ITR. The penalty amount varies based on an individual’s total income.

For individuals with a total income of ₹5 lakh or less, the penalty for an overdue ITR filing is ₹1,000. Meanwhile, for those with a total income surpassing ₹5 lakh, the penalty is ₹5,000.

Adhering to the ITR filing deadline is essential to avoid penalties. Yet, if the deadline is missed, you can still submit a belated ITR by paying the penalty.

Outlined below are the steps for filing a belated ITR:

  • Visit the official Income Tax Department website.
  • Click on the “File Income Tax Return” section.
  • Opt for the “Belated Return” choice.
  • Provide your PAN number and password.
  • Input your income and expenses particulars.
  • Make the penalty payment.
  • Submit your return.

Penal interest due also must be paid

On top of the penalty associated with filing an overdue ITR, you will also be liable to pay penal interest on any outstanding income tax due. The penal interest accrues at a rate of one per cent per month or part thereof, based on the unsettled tax liability.

For instance, consider having an outstanding tax liability of ₹10,000 and filing your belated ITR three months after the due date. In this scenario, you would incur a penalty of ₹1,000 along with penal interest totalling ₹300.

Penal interest begins accruing from the day immediately following the deadline for ITR filing. For instance, if the ITR filing due date is July 31, 2023, penal interest will start accumulating from August 1, 2023.

Importantly, this penal interest continues to accumulate until the entire outstanding tax liability is settled. Hence, if only a portion of the outstanding tax liability is cleared when submitting your belated ITR, penal interest will persist on the remaining amount.

It is advisable to ensure timely ITR filing to evade penalties and interest charges. However, if the deadline is missed, you can still file a belated ITR by settling both the penalty and the accrued penal interest.

Switching regime while filing belated tax returns

Filing a belated ITR follows a comparable process to that of an original ITR, albeit with a few distinctions. When considering a shift in tax regime during the process of filing a belated ITR, there are specific prerequisites that must be met.

You are eligible to transition to a different tax regime only if you earn income from salary, house property, or other sources, but do not have income derived from business or profession.

Furthermore, this switch in the tax regime is permissible only when you are filing your belated ITR within the same financial year. For instance, if you intend to alter the tax regime for FY 2022-23, the option is available only by submitting your belated ITR prior to March 31, 2024.

Upon meeting these criteria, you can effectuate the change in tax regime by submitting Form 10-IE alongside your belated ITR. Form 10-IE serves as a declaration form utilized to specify the desired tax regime for your ITR filing.

Crucially, it’s important to understand that upon changing the tax regime, you will be subject to the new tax framework for the entire financial year. Thus, even if you had business or professional income in the initial portion of the financial year, transitioning mid-year would result in taxation under the new regime for the full year.

Here are a few instances illustrating when a tax regime switch can be executed while filing a belated ITR:

Salaried individual who previously filed an ITR under the old tax regime for FY 2021-22 can transition to the new tax regime while submitting a belated ITR for FY 2022-23.
An individual with income sourced from house property and other avenues but devoid of business or professional income can opt for the new tax regime when filing a belated ITR for FY 2022-23.

An individual who filed an ITR under the old tax regime for FY 2021-22 and earned business or professional income in the initial segment of FY 2022-23, but not in the latter part, can switch to the new tax regime while filing a belated ITR for FY 2022-23.
Individuals possessing income from business or profession have the flexibility to choose to join or depart from the new tax regime by conveying their tax regime preference to the income tax department through the submission of Form 10-IE.

Transitioning to a different tax regime while filing belated ITR

The choice to opt for the new tax regime for individuals with business or professional income for FY 2022-23 (AY 2023-24) necessitates the submission of Form 10-IE on or before the due date prescribed for filing the original income return as per section 139(1) of the Income Tax Act.

Upon the timely filing of Form 10-IE within the specified deadline for the original ITR, the selection for the new tax regime can be endorsed in the original ITR under section 139(1) or in a belated return under section 139(4).

Moreover, the effect of Form 10-IE extends to subsequent years unless countermanded by the filing of another Form 10-IE that rescinds the consent for a regime change.

Consequently, if an individual has already submitted Form 10-IE for FY 2021-22 within the stipulated original ITR deadline to opt for the new tax regime, they can persist in filing ITR (whether original or belated) under the new tax regime for FY 2022-23 (AY 2023-24). Highlighted below are additional noteworthy points:

Business individuals and professionals are permitted to alter tax regimes on a singular occasion throughout their lifetime.

Switching tax regimes allowed for businesspersons allowed only once

For individuals earning income from business or profession, the capacity to elect a tax regime isn’t an annual privilege. Once they choose the new tax regime within a given fiscal year, they have a single opportunity to switch back to the old tax regime. Subsequent to reverting to the old tax regime, opting for the new tax regime again in the future is precluded.

This holds significance particularly in the context of FY 2022-23 (AY 2023-24) due to the alteration in legislation concerning the default tax regime starting from FY 2023-24 (AY 2024-25) onward.

Commencing from FY 2023-24 (AY 2024-25) onward, the default tax regime for individuals with income from business or profession will be the new tax regime. Consequently, individuals will need to explicitly opt for the old tax regime if they wish to be taxed under its provisions.

However, those who chose the new tax regime in FY 2022-23 (AY 2023-24) will remain subject to the new tax regime in FY 2023-24 (AY 2024-25) unless they actively select the old tax regime. Highlighted below are supplementary points to take note of:

  • The option to revert to the old tax regime is accessible only once in an individual’s lifetime.
  • Executing the switch back to the old tax regime can be accomplished by submitting Form 10-IE.
  • Form 10-IE can be submitted either online or offline.
  • The online version of the form can be filed via the official Income Tax Department website.
  • The offline form can be downloaded from the Income Tax Department website or obtained from a certified tax consultant’s office.
  • Once filled out, the form can be submitted to the Income Tax Department office or any authorized post office.

It is prudent to retain the acknowledgement number generated upon filing Form 10-IE for future reference.

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