Budget 2024 reduces time limit for ITR reassessment, gives compliance relief to taxpayers with foreign assets

livemint.com:

MUMBAI: Union finance minister Nirmala Sitharaman has reduced the time limit for reopening old income tax returns (ITRs) for reassessment.

In her Union Budget 2024-25 speech, she said ITRs can be opened three years after the end of the assessment year only if the escaped income is over ₹50 lakh. The aim is to reduce tax uncertainty and disputes in reassessment cases, she said.

This means that tax returns where the escaped income is believed to be below ₹50 lakh can be reopened by the tax department only within the first three years after the end of the assessment year in which the ITR is filed.

Further, the time limit for reassessing ITRs for escaped incomes over ₹50 lakh has been capped at five years from 10 years. The window for search-related ITRs has also been capped at six years.

For instance, ITRs filed for the assessment year 2024-25, where the escaped income is below ₹50 lakh, can be opened until 31 March 2028. Those with escaped income over ₹50 lakh can be reassessed until 31 March 2030.

“If the AO (assessment officer) alleges that income exceeding ₹50 lakh has escaped assessment, he can issue notice under Section 148 for up to five years from the end of the assessment year, provided he has in his possession books of accounts or other documents or evidence related to any asset or expenditure or transaction or entries that show that income chargeable to tax has escaped assessment," said Sandeep Bhalla, partner, Dhruva Advisors.

Bhalla said these changes are aimed at reducing litigation and providing clearer timelines, thereby facilitating ease of business for taxpayers.

In another change, the budget has provided compliance relief to residents who hold foreign assets.

IT laws mandate that residents declare all