Choosing the Old Regime but Deducting 80C? Why You’ll Get a Notice
- Nimisha Panda
- Sep 11
- 8 min read
Section 80C of the Income Tax Act allows taxpayers to claim deductions on various investments and expenses, reducing their taxable income. Under both the old and new tax regimes, 80C offers valuable opportunities for tax savings. However, with the introduction of the new tax regime, taxpayers need to be extra cautious when filing their returns to ensure they are claiming 80C benefits correctly. Let's explain why you might receive a notice for incorrectly claiming deductions under the new tax regime, how the old tax regime works with 80C, and what to do if you forget to select your tax regime or make mistakes in your filing. We’ll also discuss how TaxBuddy can help you avoid these common tax filing errors.
Table of Contents
Why You’ll Get a Notice for Deducting 80C Under the New Tax Regime
Under the new tax regime, taxpayers are not eligible for most exemptions and deductions, including those under Section 80C. However, if you mistakenly select the new tax regime while claiming deductions like 80C, the Income Tax Department will likely issue a notice. This happens because the new regime does not allow deductions, and claiming them could lead to discrepancies in your filing. If you fail to select the correct regime, the department may notice the mismatch, resulting in a delay in processing or even penalties for incorrect claims. It’s crucial to choose the right tax regime to avoid such issues.
How the Old Tax Regime Works with 80C
Under the old tax regime, taxpayers can claim deductions up to ₹1.5 lakh under Section 80C. This includes investments in instruments such as Public Provident Fund (PPF), Employees' Provident Fund (EPF), National Savings Certificates (NSC), 5-year fixed deposit with banks, and life insurance premiums, among others. The old tax regime allows these deductions in addition to other exemptions, like House Rent Allowance (HRA), making it ideal for those with significant investments in tax-saving instruments. However, taxpayers who opt for the old regime must forgo the lower tax rates provided by the new tax regime. The choice between these two regimes depends on your specific financial situation and eligibility for deductions like 80C.
What Happens if You Forget to Select the Tax Regime
If you forget to select the correct tax regime while filing your ITR, the tax authorities may assume that you are filing under the regime that doesn’t allow deductions under 80C. This could result in the rejection of your deduction claims and penalties. In such cases, the Income Tax Department might send you a notice asking for clarification or correction. You will be required to rectify the error by submitting a revised return. This process can cause delays in your refund processing, and if the mistake goes unnoticed, you might lose the benefit of deductions like 80C altogether.
Consequences of Incorrectly Claiming 80C
Incorrectly claiming deductions under 80C, particularly under the new tax regime, can lead to several consequences. The primary issue is that such claims are not valid, as the new tax regime does not allow deductions. As a result, the Income Tax Department will issue a notice, and you may be asked to pay the outstanding taxes along with interest for the incorrect claim. In some cases, you may also be subject to penalties. These penalties can add up and lead to a higher tax liability. It is essential to carefully check the tax regime selection and ensure that only those deductions allowed under the chosen regime are claimed to avoid any penalties or further scrutiny.
How to Correct Your Filing After Receiving a Notice
If you receive a notice for incorrectly claiming deductions under 80C, the first step is to review your filing and determine where the error occurred. If you mistakenly chose the wrong tax regime, you will need to file a revised return. The revised return should accurately reflect the correct tax regime and exclude any deductions that are not permitted under the chosen regime. In addition to correcting the regime, ensure that all the necessary documentation supporting your deductions is included. If you’re unsure how to proceed, seeking expert assistance can help you make the necessary corrections efficiently and avoid further complications.
How TaxBuddy Can Help Avoid Tax Filing Mistakes
TaxBuddy offers a comprehensive solution for avoiding tax filing mistakes, including issues with 80C deductions and tax regime selection. With its AI-driven platform, TaxBuddy ensures that your return is filed under the correct tax regime, automatically adjusting deductions based on the selected regime. The platform offers step-by-step guidance throughout the filing process, minimizing the risk of errors. TaxBuddy’s expert-assisted services provide an additional layer of assurance, where qualified professionals can review your return to ensure accuracy and compliance with all regulations. This proactive approach helps you avoid notices and penalties, ensuring a smooth filing process.
Conclusion
Filing your tax return with the correct tax regime is crucial to avoid penalties and ensure that you benefit from available deductions like 80C. Under the new tax regime, claiming 80C deductions is not allowed, and failing to select the correct regime could lead to a notice from the Income Tax Department. Understanding how the old tax regime works with 80C and taking steps to correct any mistakes can help you avoid unnecessary complications. TaxBuddy simplifies the tax filing process, ensuring accuracy and helping you choose the right tax regime. For a seamless and hassle-free filing experience, download the TaxBuddy mobile app.
FAQs
Q1: Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options? Yes, TaxBuddy provides both self-filing and expert-assisted plans. Self-filing is ideal for taxpayers who are comfortable navigating the process on their own and prefer to file their returns independently. TaxBuddy's self-filing plan offers easy-to-use tools to guide you through each step. On the other hand, the expert-assisted plan is designed for individuals or businesses who prefer professional help. With expert assistance, a qualified tax professional will guide you through the filing process, ensuring accuracy, compliance, and optimal tax benefits. Both options are designed to cater to different needs, providing flexibility based on the complexity of your filing and your comfort level with tax matters.
Q2: Which is the best site to file ITR? There are various options for filing your ITR, but TaxBuddy stands out as one of the best platforms. It offers a comprehensive, user-friendly interface, making the filing process smooth and efficient. TaxBuddy’s platform allows for both self-filing and expert-assisted options, which ensures that taxpayers of all levels can file their returns correctly and efficiently. TaxBuddy also provides additional support features like real-time updates, TDS credit verification, and personalized assistance. This makes it an excellent choice for individuals and businesses looking for a seamless tax filing experience.
Q3: Where to file an income tax return? You can file your ITR on the official Income Tax Department portal at incometax.gov.in, or you can use tax filing platforms like TaxBuddy. The official portal allows you to file your returns directly with the government, but it can be complex and overwhelming for some users. Platforms like TaxBuddy simplify the process by providing step-by-step guidance, automatic error-checking, and professional assistance if needed. Whether you choose to file through the government portal or TaxBuddy, it’s important to ensure that the filing is accurate and done within the stipulated deadlines to avoid penalties.
Q4: Can I file my ITR after the deadline without penalties? No, filing your ITR after the due date will result in penalties and interest on any unpaid taxes. However, the Income Tax Department allows you to file a belated return if you miss the deadline, but this must be done by December 31, 2025, for FY 2024-25 (Assessment Year 2025-26). Filing late incurs penalties under Section 234F of the Income Tax Act, which can go up to ₹5,000 depending on when you file. Additionally, interest will be charged under Sections 234A, 234B, and 234C if there are any unpaid taxes.
Q5: What happens if I fail to file ITR within the extended deadline? If you fail to file your ITR within the extended deadline of September 15, 2025, you can still file a belated return until December 31, 2025. However, filing a return after the extended deadline will incur penalties and interest charges. You will also miss out on certain benefits, such as the possibility of claiming a refund sooner. Additionally, any tax deductions or credits that are missed due to late filing may complicate your tax position. It’s always best to file your return as early as possible to avoid delays and penalties.
Q6: How do I check the status of my income tax refund? To check the status of your income tax refund, you can visit the official Income Tax Department portal at incometax.gov.in and use your PAN and the relevant assessment year to track your refund status. If you filed your return through TaxBuddy, you can track your refund status directly within the platform. TaxBuddy also provides real-time updates on the status of your return and refund, making it easier for you to stay informed. If there are any delays or issues, TaxBuddy’s support team can assist in resolving them.
Q7: Does TaxBuddy assist with TDS credit verification? Yes, TaxBuddy provides TDS credit verification to ensure that the TDS deducted from your income is accurately reflected in your ITR. The platform checks for discrepancies between the TDS shown in your Form 26AS and the amounts reported in your ITR. By verifying these details, TaxBuddy helps prevent errors that could result in refund delays or additional tax liabilities. TDS credit verification is especially crucial for taxpayers who earn income from multiple sources, ensuring that all TDS amounts are accounted for before filing your return.
Q8: How long does it take for TaxBuddy to process an ITR filing? The processing time for ITR filings on TaxBuddy varies depending on the complexity of the return and whether you choose self-filing or expert-assisted services. For simple returns, TaxBuddy can process them quickly, often within a few hours. If you opt for expert assistance, the timeline may extend slightly depending on the complexity of your case. TaxBuddy strives to ensure that all returns are filed efficiently, accurately, and in compliance with tax laws, with minimal delays. You will receive updates throughout the process, ensuring transparency.
Q9: What if I file ITR after the extended deadline? If you file your ITR after the extended deadline of September 15, 2025, you can still file a belated return, but you will incur penalties and interest on any unpaid taxes. Penalties are applicable under Section 234F of the Income Tax Act, and interest is charged under Sections 234A, 234B, and 234C. Filing late also delays the processing of your refund, as belated returns are processed after timely returns. Therefore, it’s important to file within the given deadlines to avoid these consequences.
Q10: Are there penalties for errors in my ITR filing? Yes, if there are errors in your ITR filing, you may incur penalties, interest, and delays in the processing of your refund. Common mistakes include incorrect reporting of income, missing deductions, or discrepancies in TDS credit. If the error is detected after the return is filed, you may need to file a revised return, which can cause further delays. To avoid these issues, it’s best to use reliable platforms like TaxBuddy, which offers tools for error-checking and provides expert assistance to ensure your filing is accurate and complete.
Q11: Can I make corrections in my ITR after filing? Yes, you can make corrections in your ITR after filing by submitting a revised return. If you realize that there are mistakes in your filing, such as incorrect income or missing deductions, you can file a revised return before the end of the assessment year. The revised return will replace the original return and correct any errors. Filing a revised return helps avoid penalties and ensures that your taxes are correctly reported to the authorities.
Q12: Does TaxBuddy support all tax regimes for ITR filing? Yes, TaxBuddy supports both the old and new tax regimes for ITR filing. The platform allows you to choose the tax regime that best suits your financial situation. Whether you want to claim deductions under the old regime or benefit from the simplified new tax regime, TaxBuddy helps you evaluate which option will provide the most significant benefit based on your income and financial goals. The platform makes it easy to switch between regimes and file your taxes most advantageously.
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