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Can you receive the new tax regime advantage when filing late income tax returns?

If you scheduled your taxes for the new tax system but failed to file your income tax returns (ITR) by the July 31, 2022 deadline, there is some unpleasant news for you. According to present income tax legislation, you cannot claim the advantage of the new tax system if you file a late ITR. Not only will you have to pay taxes under the old tax scheme if you file a late ITR, but you may also face a greater income tax burden.

What do the income tax regulations say about submitting an ITR under the new tax regime?

If the ITR filing date is missed, the individual can file a belated ITR under the former income tax structure. The new income tax system was implemented in the 2020 Finance Bill and went into effect in the fiscal year 2020-21. (April 1, 2020). According to Section 139(1) of the Income-tax Act of 1961, to profit from the new regime, an individual must file their ITR before the due date (typically July 31 unless extended by the government). If income tax returns are filed late, the taxpayer will be unable to claim the advantage of the reduced tax rates provided for in the new tax system, and the current, old income tax rates would apply.

Because the benefit of lower taxes would not be accessible if a late ITR is filed under Section 139(4) of the Act, late ITR filers will encounter difficulties if they assessed their tax burden by the new tax system.

Such taxpayers are now required to pay their taxes by the previous tax scheme. This may result in greater tax responsibilities and, as a result, higher interest rates on subsequent tax payments, in addition to the late charge mentioned in Section 234F.

Let us provide an example to better comprehend the increased tax liability.

Mr. A earned a total gross income of Rs 18 lakh- from pay and interest income, and he made no investments in LIC, provident fund, or medical insurance during the fiscal year under consideration. Mr. A chose the new tax system, and an advance tax deposit of Rs 2,88,600/- was made. Mr. A, on the other hand, was unable to file his income tax return by the due date specified in section 139. (1). Belated returns under Section 139(4) will now be filed in conformity with the previous tax regime.

As a result, if you wish to reap the benefits of the new tax regime, file your income tax returns on time. Otherwise, you would face not just late penalties for submitting returns late but also increased tax liabilities.

Who is obliged to file an ITR?

The income tax legislation requires qualified taxpayers to submit their income and assets to the income tax department each year. A taxpayer is defined as an individual, an artificial judicial person, a group of individuals, a Hindu undivided family, a group of people, a firm, a trust, a company, or a society.

As a result, in line with Section 139(1) of the Income-tax Act of 1961, ITR must be filed within a set time limit, barring specific cases. Section 139(1) requires the filing of an ITR in the following circumstances:

  • Anyone with a total income that exceeds the exemption threshold must file an income tax return by the deadline.
  • Any organization, including LLPs (Limited Liability Partnerships) or Unlimited Liability Partnerships; 
  • Any resident with an asset situated outside of India (which may include a financial stake in some firm); OR Any resident with signing power for an account headquartered outside of India. This regulation applies to all of the entities listed above. Regardless of the amount of tax payable on those earnings, a tax return in the authorized form must be filed.
  • If the combined income of any HUF (Hindu Undivided Family), AOP (Association of Persons), or BOI (Body of Individuals) exceeds the specified exemption limit, they must file an income tax return in the approved format, together with the necessary papers.

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