Form 10-IE/10-IEA Compliance Issues Leading to Wrong Regime Processing in ITR-3: A Practical Guide
From FY 2023–24 onward, the New Tax Regime under Section 115BAC is the default, but business taxpayers filing ITR-3 must still submit Form 10-IE/10-IEA on or before the Section 139(1) due date to validly opt for it. Many assessees recently faced higher tax demands because CPC processed their returns under the Old Regime despite selecting the New Regime in the ITR. This occurs when Form 10-IE/10-IEA is not filed, filed late, or when the return itself is belated, making the New Regime option invalid. Issues also arise from data mismatches or filing errors. If both the return and Form 10-IE/10-IEA were filed on time, remedies include filing a rectification request, a revised return, or a grievance with supporting documents. However, if the due date was missed for either, the law mandates application of the Old Regime with no corrective relief. Identifying whether the lapse is procedural or technical is essential for resolution. This article explains why this happens, the background, and the corrective steps available.
Why Does This Happen?
As per Section 115BAC, a taxpayer having business income must file Form 10-IE/10-IEA on or before the due date specified under Section 139(1) to validly opt for the New Tax Regime.
If the form is:
- Not filed, or
- Filed after the due date, or
- The ITR is filed belatedly,
then the option for the New Regime becomes invalid for that year.
In such cases, even if the return is submitted selecting the New Regime, the CPC will mandatorily process it under the Old Regime, resulting in a higher tax demand.
Common Scenarios Where This Issue Arises
- ITR-3 filed after the due date (Belated return u/s 139(4)) under the New Regime
- Form 10-IE/10-IEA filed late
- Filing errors or acknowledgment mismatch
- Mismatch between ITR data and Form 10-IEA (e.g., Assessment Year, business code, etc.)
Remedies based on scenarios:
Scenario 1: Return filed before the due date AND Form 10-IEA filed on time or mismatch with the ITR data and form data.
In such a case, file Rectification Request u/s 154 (Incorrect Tax Regime Applied) with the proof of timely filing ITR and form 10 IEA acknowledgment. Generally demand will be nullified in such cases.
1. File Revised Return u/s 139(5) provided while original is filed well within the time and the revised return is filed within the permitted time.
2. Submit grievance using the category return processed incorrectly attaching all such supporting documents of ITR and form acknowledgment along with the intimation order.
Scenario 2: Return filed after the due date (belated return u/s 139(4)) or Form 10-IEA filed after due date:
Section 115BAC clearly states that the assessee with the business income can opt for this regime only on or before due date. In such a case
Revised return cannot change the tax regime and rectification will not be entertained and even submission of grievance may not also provide the resolution in the favour of the assessee.
The only remedy in the above case is to go for old tax regime and pay the tax accordingly.
Conclusion:
Understanding this distinction is crucial for business taxpayers, as the tax regime option becomes locked once the due date passes.
Therefore, it is crucial to identify whether the compliance gap lies in:
1. Filing the return on time,
2. Filing Form 10-IE/10-IEA on time, or
3. A data mismatch or technical error.
If the assessee has fully complied with all requirements, then rectification or grievance escalation can generally resolve the issue.
However, if the due date was missed or the form was filed late, the law mandates application of the Old Regime for that year.
This article is meant to help taxpayers understand the issue in a simple manner. Since every case may differ, kindly review your specific situation before proceeding.
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