Missed ITR deadline? You must now file under new regime
What's the story
The Income Tax Department has clarified that taxpayers who have missed the deadline to file their Income Tax Return (ITR) will automatically be shifted to the new tax regime. This means if you had opted for the old tax regime and missed your ITR filing deadline, you will now have to file belated returns under the new regime. The change comes as an effort to simplify compliance and reduce misuse of extended timelines.
Regime transition
Understanding the shift in tax regimes
The new tax regime, which is now the default option, offers lower tax rates but fewer exemptions and deductions. Taxpayers can still opt for the old regime if they file their returns by the due date. For instance, those who missed this year's September 16 deadline for AY 2024-25 and had chosen the old regime to claim exemptions will now have to file belated returns under the new one.
Compliance requirements
Stricter compliance for business and professional income
Taxpayers with business or professional income have stricter compliance requirements. They must file Form 10-IEA on or before the deadline to continue under the old regime. Missing this step automatically shifts them to the new regime for that year. The Income Tax Department hopes these changes will simplify administration and encourage timely filing by reducing last-minute adjustments and ensuring certainty in compliance.
Financial implications
Consequences of late ITR filing
Late filing of ITR can be expensive, irrespective of the tax regime. A penalty of up to ₹5,000 is levied, but capped at ₹1,000 for incomes below ₹5 lakh. Interest at 1% per month on unpaid tax also accrues. Taxpayers may also lose certain deductions and their ability to carry forward losses. In cases of concealment or misreporting, penalties can reach 50% of the tax avoided with potential prosecution in serious instances.