1 week ago
Why Income Below ₹12 Lakh Can Trigger Tax Demands
The new tax system is normally the default choice.
Earning less than ₹12 lakh does not always mean that no tax will be charged.
People who earn only salary or interest usually have more freedom to choose a tax system each year.
People who earn money from a business or profession have stricter rules.
They must submit Form 10-IEA on time if they want to change from the default system.
They also cannot switch back and forth freely every year.
One taxpayer earned ₹11,75,590 but received a ₹1,82,740 tax demand because the required form was not submitted.
The taxpayer was able to correct the issue because the notice came before the 31 August deadline.
People who combine jobs and freelance work must also check these rules.
Income below ₹12 lakh does not automatically guarantee zero tax or prevent a demand notice.
The new tax regime is the default, while taxpayers without business or professional income generally have more flexibility to switch regimes annually.
Business and professional taxpayers must furnish Form 10-IEA within the prescribed deadline when opting out of the default regime or switching back to it.
Such taxpayers cannot freely change regimes every year and generally receive only one opportunity to return to the new regime after choosing the old regime.
One cited taxpayer reported ₹11,75,590 in income and received a ₹1,82,740 demand after the return was processed under the old regime because Form 10-IEA was not furnished.
- Who
- Individual taxpayers, especially business owners, professionals and people combining salaried employment with consulting or freelance work.
- What
- The articles explain why income below ₹12 lakh can still result in tax liability or a demand notice when the applicable regime and procedural requirements are not followed.
- Where
- During the income-tax return filing and processing process.
- When
- The rules apply during the relevant financial year and when filing the income-tax return; one example refers to a 31 August deadline.
- Why
- The tax outcome depends on the selected regime, the type of income and whether Form 10-IEA is furnished as required.
Key facts
- Threshold discussed
- ₹12 lakh under the new tax regime.
- Default regime
- The new tax regime is the default option.
- Form required
- Business and professional taxpayers must furnish Form 10-IEA within the prescribed time to validly exercise the relevant regime option.
- Regime flexibility
- Taxpayers without business or professional income generally have greater flexibility to choose a regime each year.
- Switch-back limit
- After choosing the old regime, taxpayers with continuing business or professional income get one opportunity to return to the new regime.
- Illustrative income
- A cited taxpayer reported total income of ₹11,75,590.
- Illustrative demand
- An intimation under Section 143(1) resulted in a tax demand of ₹1,82,740.
- Example deadline
- The taxpayer was able to rectify the position because the intimation arrived before 31 August.
Quotes
Ankit Gupta
Chartered accountant and managing partner at Ankit Mahesh Gupta & Associates
“They can generally choose their preferred regime each year while filing their return. A tick in the appropriate box is usually enough.”
livemint.com
“Had the statutory deadline already passed, the taxpayer could have been left with the tax demand.”
livemint.com
Sources
Related news
Form 10-IEA Rules Limit Tax Regime Switching for Businesses
Audit and Non-Audit Taxpayers Face Different ITR Deadlines
Why Previous ITR-4 Filers May Need ITR-3 in AY 2026-27
Seven Freelancer Tax Filing Mistakes Before August 31 Deadline
Income Tax Department Clarifies ITR-3 And ITR-4 Selection
