It's been more than 2 years since launching the new tax regime in India, where taxpayers can opt for a different rate of tax. You, as an individual, opt for the regime under which you have to pay less as you are able to switch between two every assessment year. However, such a facility is not given to businesses or professionals.
The new tax regime has made return filing easier for those who haven't made any investments during the financial year or lost the required documents for investments. If you are one of them, new tax rates are best for you as you have to pay lower taxes than the old ones.
But here is the take!
The last tax return filing date was 31 July of each assessment year. You can file your returns even after that date which will be known as belated returns. In the case where you opt for a new tax regime, you will not be allowed to claim its benefits. In order to claim benefits under Section 139(1), the new tax system declaration states that returns must be filed by the deadline.
READ MORE: Income tax filing: Which tax regime is favourable to salaried individuals?
What does "not benefits" exactly mean?
As we already know, while opting for a new tax regime, you have to let go of almost 76 deductions and exemptions; what benefits couldn't you claim?
In India, we follow a progressive tax system, meaning the average tax burden rises with income under a progressive tax. Low- and middle-income taxpayers bear a disproportionately tiny amount of the tax burden compared to high-income families.
Hence, you have to pay less tax in the initial tax brackets under the new regime. Now, if you haven't filed your returns before the due date, your tax returns will automatically convert into the old tax regime, and you will have to pay as per old tax rates.
Monetary consequences of filing belated returns
You have to pay a penalty of ₹5,000 for late return filing.
Additional tax as per the old tax regime
You must have calculated your tax as per new rates. Now you have to calculate your tax as per the old tax rates, and an additional amount of tax (if any) has to be paid, including a penalty.
If you are a salaried individual, TDS must differ from the return filed as there could be a shortage as a result of the change in regime. You have to pay the shortage amount as an additional tax.
Let's understand the scenario via an example:
If your taxable income is ₹6,50,000, there would be a difference in the tax amount of ₹15,000.
Under the old regime - 47,500
Under the new regime - 27,500
If you haven’t filed your income tax return before the due date, you have to bear the consequences of ineligibility of paying taxes at lower rates as explained in the above example.
Anushka Trivedi is a freelance financial content writer. She can be reached at anushkatrivedi.com