In-Depth Analysis of Relief Measures Introduced in Budget 2024-25 to Limit Reopening of Old Income Tax Returns
In the Budget 2024-25, the Union Finance Minister unveiled a series of relief measures aimed at restricting the reopening of old income tax returns beyond specified time limits. These proposed changes aim to enhance clarity, stability in tax administration processes, and provide relief to taxpayers by reducing tax uncertainties and disputes.
Key Details:
- Proposed Reforms: The Finance Minister proposed significant reforms to the Income Tax Act, 1961, including measures to restrict the reopening of old income tax returns (ITRs) beyond specified time limits. These changes are designed to simplify the provisions for reopening and reassessment.
- Time Limits for Reopening: The proposed time limit for reopening assessments has been set to beyond three years from the end of the assessment year. However, assessments can only be reopened if the escaped income is Rs 50 lakh or more, up to a maximum period of five years from the end of the assessment year.
- Search Cases: In search cases, the proposed time limit is six years before the year of search, as opposed to the existing time limit of ten years. This change aims to reduce tax uncertainty and disputes in such cases.
- Notice Issuance: The budget memorandum clarified that no notice under Sections 148A shall be issued if three years have passed from the end of the relevant assessment year. Exceptions to this rule include cases where the escaped income is Rs 50 lakh or more, where the time limit can be extended to five years.
- Illustrative Example: For instance, if the escaped income in the financial year 2023-24 is below Rs 50 lakh and the ITR was filed in AY 2024-25, the tax authorities cannot reopen or reassess the case after 31.03.2028. If the escaped income exceeds Rs 50 lakh, the reopening or reassessment cannot happen beyond five years after the end of the assessment year, allowing for enhanced taxpayer certainty.
The proposed relief measures in Budget 2024-25 aim to simplify tax procedures, provide stability in tax administration, and reduce disputes between taxpayers and tax authorities. By limiting the timeframes for reopening old income tax returns, the government seeks to alleviate the burden on taxpayers and create a more transparent and predictable tax environment.
