No more reopening, re-assessment of old ITR beyond 3 years if escaped income is below Rs 50 lakh

Budget 2024 has introduced a significant relief, as tax authorities can no longer reopen old income tax returns (ITR) beyond the specified time limits.

Finance Minister Nirmala Sitharaman said while presenting Budget 2024, "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."

This proposal is expected to reduce the number of litigations. "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..." says budget explanatory memorandum


The time limit goes up to 5 years in some specific cases. “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…” adds the budget explanatory memorandum.

"The re-haul of re-opening proceedings by reducing the time limit to re-open assessments where the income escaping assessment is more than 50 lakhs, from 10 years to 5 years is also a measure towards avoiding long drawn litigations," says Sanjay Sanghvi, Partner, Khaitan & Co.

These provisions are going to be effective from September 1, 2024. “One of the far-reaching changes is the reduction in time limit for re-opening of the assessments” says Suresh Surana, a Chartered Accountant.

For example, if the escaped income in financial year 2023-24 is below Rs 50 lakh for which ITR has been filed in AY 2024-25 then tax authorities can not reopen this case or reassess the ITR after 31 March 2028. Even if the escaped income is above Rs 50 lakh the reopening of the case or reassessment of the ITR can not happen beyond 5 years after the end of the assessment year in which ITR is filed. So in previous case if the income is above Rs 50 lakh the case can not be reopened or reassessed after 31 March 2030.

Chander Talreja, Partner, Vialto Partners says "It's a welcome move helping to reduce the tax complexities." As per Talreja the proposed timelines for reopening the assessment/reassessment under section 148 after the close of the relevant assessment year, are as follows:

Level of income (Rs.)	Existing Provisions	Proposed Ones
Less than 50 lacs	3 years	3 years 3 months
50 lacs or more	10 years	5 years 3 months

"These changes are a step towards rationalisation of assessment/ reassessment procedures and provide better clarity for taxpayers. Moreover, it reduces their hardship which may occur when the return is picked up for audit/ reaudit after several years. They may face challenges in recalling the income/ deductions claimed, retracting the transactions, retrieving supporting documents, reconciling the statements etc. In fact, the proposed timelines will help to close the audit within half a decade of filing the return," says Talreja.

The reduction of time line in high value case is signficant. "Reduction in limitation period for reopening of high value cases involving undisclosed income over INR50 lakhs represented in the form of an asset, expenditure or book entry reduced from 11 years from the end of the relevant financial year sought to be reopened up to six years and three months from the end of the relevant financial year sought to be reopened," says a report from EY India.