The new tax regime offers more liberal tax slabs and attractive rates of tax than the old regime but sans some of the legacy deductions — namely, interest on self-occupied house property, Section 80C or specific weighted deductions/depreciation or losses arising thereto from those respective sections, set off of house property losses against any other head of income.

The wordings in Section 115BAC(6)(i) and (ii) for eligible assessees having business income and not having business income appear discriminatory.

Section 115BAC(3) proviso 2(ii) reads that the “new regime” of taxation under Section 115BAC(1A) will be the default provision in the case of an individual, HUF, AOP/BOI for financial year 2023-24/assessment year 2024-25; unless an option is exercised under Section 115BAC(6) for the “old regime” in the prescribed Form 10-IEA/vide Rule 21AGA. Section 115BAC(1A) is applicable for non-residents as well.

For an assessee who has business income, the opting out of the new regime or applying for the old regime will need to be done “on or before the due date specified under Section 139(1)” and once opted out the same shall apply to subsequent assessment years as well.

For an assessee not having business income, the opting out of the new regime or applying for the old regime will be “along with the return of income to be furnished under under Section 139(1)”. Such assessees not having business income can choose the best of both worlds — new/old regime for every year — also needs noting.

The conspicuous absence of “along with the return of income” in the case of business income assessees opens the debate of discrimination as to whether the opting out alone is good enough if done before the due date, even if the return is filed belatedly or under Section 139(8A) (updated return ITR-U) to avail of the old regime. This is vis-a-vis an assessee not having business income, where both the opting out and filing need to be done before the due date under Section 139(1) as the wording suggests.

Simply said, it is enough if the opting out is exercised before time limits of Section 139(1) for an assessee with business income while filing of return can happen any time thereafter whether within Section 139(1) or otherwise, while this leeway will not be available to one without business income where opting old regime as well as return need to be done alongside before the due date under Section 139(1). Return filing forms do not contain a field to be filled where opting in for the old regime is chosen by filing Form 10-IEA with its date but does not give further clear pointers on this aspect.

It is well-known that the law has wide amplitude/latitude to pick and choose what to tax and what not to tax while taxing something. But on tax procedures there cannot be discrimination. Such discrimination is condemned via Non-discrimination Article-24 in Double Taxation Avoidance Agreements (DTAA) as well.

This inadvertent choice of wording not only discriminates between residents having business income and not having business income on procedural aspects but also resident and non-resident having business income vis-a-vis not having business income, thereby opening the floodgates of litigation. It is better if the fine-print on this is clarified as soon as possible.

The writer is a chartered accountant

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