Filing of Form 10-IE if the persons is not having Income from Business & Profession

The taxpayers now have a choice to either opt for a new tax regime or old tax regime.

The new tax regime is covered by section 115BAC and is available to Individuals and HUF. By opting for a new tax regime, such taxpayers can pay income tax at lower slab rates when compared to normal slab rates. However, such taxpayers will not be able to claim various deductions and exemptions.

Section 115BAC provides that a person opting to pay tax under the new regime has to furnish Form 10-IE to the Income Tax department before filing the Income Tax Return for the relevant Assessment Year. This option has to be exercised by filing Form 10IE.

The question arises whether Filing of Form 10IE is compulsory for opting the new tax regime or its optional. Let us understand from the provisions of Section 115BAC the requirement of filing Form 10-IE. The relevant part is sub-section (5) of Section 115BAC of the Income Tax Act which reads as under:

(5) Nothing contained in this section shall apply unless option is exercised in the prescribed manner* by the person,—

(i) having income from business or profession, on or before the due date specified under sub-section (1) of section 139 for furnishing the returns of income for any previous year relevant to the assessment year commencing on or after the 1st day of April, 2021, and such option once exercised shall apply to subsequent assessment years;

 (ii) having income other than the income referred to in clause (i), along with the return of income to be furnished under sub-section (1) of section 139 for a previous year relevant to the assessment year.

Prescribed Manner = Rule 21AG of the Income Tax Rules specifies the manner in which the option to opt payment of tax under new regime can be exercised/withdrawn under Section 115BAC of the Income Tax Act.

From bare reading of above, one may draw the conclusion that Form 10-IE has to be filed for exercising option to pay tax under new regime only by persons having income from business & profession on or before the due date of filing income tax return specified u/s 139(1) for AY 21-22 & subsequent AY and such option exercised shall apply to all subsequent assessment years.

In short, individuals & HUF not having income from business/profession opting to pay tax under the new tax regime can directly exercise the option under section 115 BAC in the Income Tax return ITR 1 or ITR 2. Such taxpayers are not required to file Form 10IEon the new income tax portal. It may be noted that the functionality is automatically enabled which means the assessee who is having business income only will be able to File Form 10IE.