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Can you switch tax regime from previous/ last year when filing belated ITR?

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The deadline for filing an original ITR for FY 2022-23 (AY 2023-24) was July 31, 2023. However, if an individual has missed this deadline, there is no need to worry for one can still file ITR by paying a penalty. This ITR, which is filed after expiry of the deadline of the original ITR, is called a belated ITR. The last date to file belated ITR for FY 2022-23 (AY-2023-24) is December 31, 2023.

To file a belated ITR an individual has to pay a penalty of Rs 5,000 if net taxable income is above Rs 5 lakh or Rs 1,000 if net taxable income is below Rs 5 lakh. Penal interest on the income tax due, if any, will also have to be paid.

A belated ITR is filed in a similar manner as an original ITR with some differences.. But if you want to switch the tax regime (from that chosen in the previous year), while filing a belated ITR, then it is a different matter and is dependent upon your source of income. For example, there could be a case where a person who filed ITR under old tax regime for FY 2021-22 wants to file a belated ITR for FY 2022-23 under new tax regime.

Click here to know more about belated ITR deadline and penalty amount.

Can salaried people opt for new tax regime for FY 2022-23 in belated ITR?

« If an individual has income from salary, house property, or other sources but no income from business or profession in FY 2022-23, then the only way one can opt for new tax regime for FY 2022-23 (AY 2023-24) is by filing their ITR by July 31, 2023 (original ITR), » says Ankit Jain, Partner, Ved Jain and Associates, a Delhi based CA firm. »If a individual is filing belated return under section 139(4) for FY 2022 -23 (AY 2023-24), then new tax regime cannot be opted, » says Chartered Accountant Mehul Aggarwal, Partner, JMKP & Co LLP, a Delhi based CA firm.

Who can switch to the new tax regime in belated ITR for AY 2023-24?

Those with business or professional income can opt in or opt out of the new tax regime by communicating the choice of tax regime to the income tax department by filing Form 10-IE.Switching to new tax regime in belated ITR
“The decision to opt in (for new regime) for individuals having business/profession income for FY 2022-23 (AY 2023-24) has to be made by furnishing Form 10-IE on or before the due date for filing original return of income under section 139(1). Once Form 10-IE is filed within the due date for filing original ITR , the claim for new tax regime can be made in original ITR under section 139(1) or belated return under section 139(4),” according to Amarpal S. Chadha, Tax Partner and Mobility Leader, EY India, a consultancy company.

According to CA Manas Chugh, head, regulatory services, Osgan Consultants, a Delhi based tax and business consultancy company, “Once Form 10-IE is filed, it is applicable for subsequent years, unless another Form 10-IE is filed withdrawing the consent of regime change. Hence if an individual has already submitted Form 10-IE in FY 2021-22 by the original ITR due date to opt for new tax regime, he can continue to file ITR (original or belated) in new tax regime for FY 2022-23 ( YY 2023-24).”

The due date for ITR filing is July 31, 2023 for those tax filers who are not required to get their accounts audited for income tax purposes. For those who are required to get their accounts audited, the ITR deadline is October 31, 2023.

Changing tax regimes is allowed only once in a lifetime for business persons/ professionals
“Individuals having income from business or profession are not eligible to choose the tax regime every year. Upon selecting the new tax regime, they have a once-in-a lifetime option for switching back to the old tax regime. Once they switch back to the old tax regime, they cannot choose the new tax regime anytime in the future,” said Vijay Bharech, Director, Deloitte Haskins & Sells LLP, a consultancy company.

This is relevant for FY 2022-23 (AY 2023-24) as the law regarding the default tax regime has changed from FY 2023-24 (AY 2024-25) onwards.

Switching from new to old tax regime in belated ITR may not be possible in all cases
Experts say that the Income Tax Act mentions that to opt out of the old tax regime and go into the new tax regime, Form 10-IE has to be filed before the ITR deadline. However the law relating to the opposite ie to opt out of the new tax regime and switch to the old tax regime is not clear.

According to Mitesh Jain, Partner, Economic Laws Practice, a Delhi based law firm, “The provision of the Income-tax Act, 1961 permitting withdrawal from the new regime does not specifically provide a time limit for opting out of the new regime.”

“Therefore, on a plain reading of the provisions, the assessee may exercise the said withdrawal option under original or revised or belated return by filing Form 10-IE before filing ITR,” says Jain.

However, there is a possibility of the tax department raising objections/sending notice regarding the withdrawal from the new regime if Form 10-IE is filed after the due date of filing original ITR, Jain added.

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