The Union Finance Minister Nirmala Sitharaman presented the full – budget 2024 yesterday before the parliament. has proposed significant reforms to the Income Tax Act, 1961, including measures to limit the reopening of old income tax returns (ITR) beyond specified time limits. These changes aim to reduce tax uncertainty and disputes, providing much-needed relief to taxpayers.
“I propose to thoroughly simplify the provisions for reopening and reassessment. An assessment hereinafter can be reopened beyond three years from the end of the assessment year only 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. Even in search cases, a time limit of six years before the year of search, as against the existing time limit of ten years, is proposed. This will reduce tax-uncertainty and disputes.” FM stated.
The budget explanatory memorandum further clarified, “In normal cases, no notice under Sections 148A shall be issued if three years have elapsed from the end of the relevant assessment year. Notice beyond the period of three years from the end of the relevant assessment year can be taken only in a few specific cases.”
For cases where the escaped income is Rs 50 lakh or more, the time limit extends to five years. The memorandum elaborates, “In specific cases, where as per the information with the Assessing Officer, the income escaping assessment amounts to or is likely to amount to fifty lakh rupees or more, notice under Section 148A can be issued beyond the period of three years but not beyond the period of five years from the end of the relevant assessment year.”
To illustrate, if the escaped income in the financial year 2023-24 is below Rs 50 lakh and the ITR was filed in AY 2024-25, tax authorities cannot reopen this case or reassess the ITR after 31.03.2028. Even if the escaped income exceeds Rs 50 lakh, the reopening or reassessment cannot happen beyond five years after the end of the assessment year in which the ITR is filed. Thus, in the given example, if the income exceeds Rs 50 lakh, the case cannot be reopened or reassessed after 31.03.2030.
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