Belated ITR Filing Under New Tax Regime: Can you claim the new tax regime benefit while filing belated income tax returns (ITR)?

If you planned your taxes according to the new tax regime but missed filing your income tax returns (ITR) before the July 31, 2022 deadline, then there is some bad news. As per current income tax laws, you cannot claim the benefit of the new tax regime while filing belated ITR. Not only, you will have to pay taxes according to the old tax regime while filing belated ITR, but there may be chances of a higher income tax liability as well.

What income tax laws say about filing ITR with new income tax regime

Once the deadline to file ITR is missed, then the individual can file a belated ITR using only the old income tax regime. The Finance Bill, 2020, introduced the new income tax regime and it came into effect from FY 2020-21 (April 1, 2020). The Finance Bill makes it clear that in order to avail benefits under the new regime, an individual has to file their ITR within the due date (usually July 31 unless extended by the government) under Section 139(1) of the Income-tax Act,1961. If the income tax returns are filed belatedly, the taxpayer will not be able to claim the benefit of the lower tax rates, as provided for in the new tax regime and the existing, old income tax rates would apply.

Due to the fact that the benefit of lower taxes would not be available if belated ITR is filed under Section 139(4) of the Act, late ITR filers will face problems if they have calculated their tax burden in conformity with the new tax regime.

Such taxpayers are now expected to settle their tax obligations in line with the old tax regime. This may lead to increased tax obligations and, as a result, higher interest rates for late payments on additional tax payments along with the late fee as specified under section 234F.

Let us understand the higher tax liability incurred with the aid of an example.

Mr A had a gross total income of Rs 18 lakh- from salary and interest income and no investments in LIC, provident fund and medical insurance were made during the year under consideration. Mr A opted for the new tax regime and advance tax was deposited accordingly amounting to Rs 2,88,600/-. However, Mr A was unable to file his return of income within the due date prescribed under section 139(1). Now belated return under section 139(4) will be filed in accordance with old tax regime.

Financial impact:

Hence, if you want the benefits under the new tax regime, file your income tax returns on time. Otherwise, not only would you be subjected to the late penalties of filing returns belatedly, but would also be subject to higher tax liability.

Who is mandatorily required to file ITR?

The income tax statute mandates that eligible taxpayers report their income and assets to the income tax department every year. A taxpayer includes- an individual, an artificial judicial person, a body of individuals, a Hindu undivided family, an association of persons, a firm, a trust, a company, or a society.

Accordingly, as a rule of compliance, ITR must be filed within a specified time limit excluding certain situations in accordance with Section 139(1) of the Income-tax Act,1961. According to Section 139(1), the following circumstances mandate the filing of ITR:

  • Anyone whose total income above the exemption threshold is required to file an income tax return by the deadline.
  • Any organisation, including LLPs (Limited Liability Partnerships) or Unlimited Liability Partnerships;
  • Any resident who has an asset located outside of India (which may include a financial interest in some entity as well); OR any resident who retains signing authority for an account based outside of India. This rule applies to all the aforementioned entities. Regardless of the amount of tax due on those incomes, a tax return must be completed in the authorised form.
  • If the combined income of any HUF (Hindu Undivided Family), AOP (Association of Persons), or BOI (Body of Individuals) exceeds the stipulated exception limit, they must file an income tax return in the prescribed format with the requisite documents.

(The writer is a Partner, I.P. Pasricha & Co. – a chartered accountant firm.)

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