“The I-T department has taken away the benefit of lower taxes via the new regime in returns filed belatedly so as to encourage taxpayers to file within the deadline," said Karan Batra, founder and CEO, charteredclub.com. Tax rates under the new regime are lower for incomes up to ₹15 lakh.
Things will get complicated for those taxpayers who have paid their advance tax or asked their employer to calculate TDS liability as per the new tax regime as they are most likely looking at a higher tax liability now. “In such cases, it can result in changes in the tax liability, which taxpayers will have to adhere to," said Deepak Jain, chief executive, TaxManager.in, a tax e-Filing and compliance management portal.
Mint answers some of the key questions that this tax rule raises.
1. I opted for the new tax regime in the last assessment year. Do I still need to file belated ITR under the old regime this year?
It will vary depending on whether you’re a salaried taxpayer or have income from business or profession. The former is required to select between the two regimes every year while filing their ITR. Salaried individuals who opted for the new regime in the last assessment year and are filing a belated returns this year will not have the option to continue with the new regime this year. They will have to file their tax returns under the old regime.
Rules are different for self-employed individuals. “Taxpayers who have income from business or profession have to choose the regime only once and can continue in the same regime even if they file a belated return. Therefore, this rule affects taxpayers with income from business or profession only in the first year, while other taxpayers get affected every year," said Prakash Hegde, a Bangalore-based chartered accountant.
2. On my request, my employer deducted tax at source as per the new tax regime. Can I get Form-16 changed?
While, technically, you can get your Form 16 revised, this request may face practical challenges. “It is unlikely that the employer would agree because there may be interest and late filing fees payable by the employer," said Neeraj Agarwala, Partner, Nangia Andersen India.
Batra suggests using income tax calculator available on the IT website to calculate the new tax liability. “Alternatively, when the taxpayer fills in all the information in the ITR, they’ll be shown the final tax liability along with the applicable interest and fees," he said.
3. I have paid advance tax as per tax liability calculated under the new regime. What should I do?
You need to calculate your tax liability again as per the old regime and pay additional tax, if any. Take note that if additional tax liability arises, you will have to pay 1% interest under section 234C for delay in paying advance tax.
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“This will kick in from the first instalment of advance tax, i.e., 15 June, and is calculated in proportion to the tax due," said Jain.
This interest is over and above the 1% interest that taxpayers have to pay on outstanding tax under section 234A for defaulting on ITR filing within the due date. Effectively, if you have outstanding tax, you will pay 2% monthly interest on it post 31 July.
4. I did not make any tax-saving investments as I had to opt for the new regime. Are there any tax breaks that I can now claim?
There are certain expenditures that qualify for tax deductions. Medical expenses up to ₹50,000 of uninsured parents aged 60 years and above and up to ₹5,000 spent on preventive health check-ups of self, spouse, children or parents can be claimed as deduction. Preventive health check-ups fall under the overall ₹25,000 ceiling of section 80D.
Apart from these, stamp duty and registration fee on house purchase and children’s tuition fee (for both school and college) can be claimed under section 80C ₹1.5 lakh limit. Donation, too, qualifies for deduction under Section 80G.
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