Budget 2020: Whether Concessional Income Tax Rates benefit would be available if the income tax return is filed belatedly U/s. 139(4)

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INCOMETAX

The taxpayers are given a choice and option to opt for new tax rate or old tax rate, whichever is beneficial to them from the AY 2021-22.

In budget 2020, there is no change in basic tax rates for the assessment year 2021-22 (financial year 2020-21). However, Finance Bill, 2020 has proposed to introduce a new section 115BAC whereby individuals, HUFs can get reduced tax rate benefit if they don’t avail any exceptions & deductions. The taxpayers have to exercise the choice of choosing the option before filing income tax return.

The new sections 115BAC and 115BAD are inserted in Chapter XII. This Chapter contains various cases where tax is to be charged at special rates / in special manner / as special cases.

Section 115BAC(1) and 115BAD(1) specifically says that the concessional rates are subject to the provisions of Chapter XII which means that the concessional tax rates will not be applicable to all such income which are taxable at a special rates etc. like in cases of long term capital gains U/s 111A , short term caital gain u/s 111A, section 68 etc. income cases, certain short term capital gain cases etc.)

Further, the concessional tax rates are optional & applicable only if the option for adopting them is be exercised within allotted prescribed time and in a a prescribed manner. If the option is not exercised or exercised but not in given time and given manner then the basic tax rates will automatically become applicable. Presently, the concessional rate is applicable for corporates u/s 111BAA & 115BAB wherein the corporate has to file a newly notified declaration form No. 10IC & 10ID to avail the benefit of lower tax rate.

Other conditions for opting concessional rates is that various deductions, claims, set off of losses etc. allowable under the Income Tax Act in computing the total has been forgone by the taxpayers. As of now. The basic exemption limit is different for different type of individual tax on the basis of their age under the present system. But the concessional tax rates are common for both resident and non resident individuals and no where dependent on their age.

 

At present, basic tax rates have remained common for individuals (non senior citizens), HUFs, AOPs, BOIs and artificial judicial persons. However, the new concessional rates will be applicable only in respect of individuals and HUFs. The income of AOP, BOI and artificial judicial persons will continue to be charged at basic tax rates. Further, after insertion of new section 115BAC, there is no consequential amendment in section 87A. F

Taxpayers have free entry and free exit options every year in old tax regime vis a vis new tax regime provided that the persons don’t have any business income. Person having business income don’t have free movement of in and out from old regime vs. new regime. Once the option is exercised validly, they are bound to follow the same for subsequent years also. As a relief, one time chance for withdrawal from the concessional rate scheme is offered to such individuals/HUF having business income. In short, there is a discrimination for business entities. It is mentionable that one time withdrawal cannot be made in the initial year of opting for the scheme itself. It can be made only in any of the subsequent years. It appeas that, subject to suitable clarification from CBDT that in case of conversion from business to non business entity, assessee will be considered afresh ignoring the previous history.

The persons not having business income are required to exercise the option every year. This option is to be exercised along with their return of income. The system of exercising option obviously will start from the return for assessment year 2021-22. The persons having business income are not required to exercise option every year. They have to exercise it only once for any assessment year.

Option once exercised, option will automatically become applicable for them in subsequent assessment years. However, till the option is not exercised, they will be continued to be governed by old tax regime. The system of exercising option will start from assessment year 2020-21. They are not mandatorily required to exercise option from assessment year 2020-21. They may exercise it for any later year also. As mentioned earlier, the option can also be withdrawn once by the business entity whereas in case of non business income the option is to be exercised along with return of income.

 

 

 

What if the belated return is filed?

NON  BUSINESS ENTITY

  1. In case of non business income, the return in which the option is exercised must be filed within due date u/s. 139(1).
  2. In short, in case of belated return U/s. 139(4), the option will not be available for non business entities.

 

BUSINESS ENTITY

  1. In case of business income it may be available even when the return is filed belatedly.
  2. For business entities, the basic requirement is that the option is to be exercised before the due date u/s. 139(1).
  3. It is not to be exercised along with return of income.
  4. In short, once the option is validly exercised otherwise than by way of filing of return within the above time period u/s. 139(1) then later on the return may be filed belatedly even u/s 139(4) with concessional rates.

 

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