Missed filing your income tax return last year? You can still file your income tax return for previous years as per section 139(4). 

Knowing how to file ITR online or offline after missing the due date makes it easier to still stay compliant. 

In this guide, let’s discuss in detail all about the procedures, required documents, and conditions for the previous year income tax return filing. 

Understanding the Process of Filing Belated Income Tax Returns

What Constitutes a Belated Return?

A belated return is an income tax return filed after the due date under Section 139(4) of the Income Tax Act. If you couldn’t file your return on time, you can still submit your income tax return for previous years, but there are certain conditions and penalties to consider.

Eligibility for Filing Belated Returns

Any taxpayer who misses the original due date for filing income tax return for previous years can file a belated return, provided they do it within the allowed time, by 31st December of the relevant assessment year. For example, for AY 2025–26, the belated return can be filed until 31st December 2025.

Penalties and Interest for Late Filing

Filing your previous year income tax return filing late does lead to extra costs:

1. Late Filing Fee (Section 234F):

• If your income is up to ₹5 lakh — ₹1,000
• If your income is above ₹5 lakh — ₹5,000

2. Interest on Tax Payable:

Interest of 1% per month is charged on any unpaid tax amount. This is calculated from the original due date until the date you file your belated return. It applies under Sections 234A, 234B, and 234C.

3. Penalty and Prosecution: 

In cases where you fail to file even a belated return and no valid reason is provided (such as illness), the department can impose further penalties or even initiate prosecution.

Steps to File Your Previous Year’s Income Tax Return

Gathering Necessary Documents

Before starting your previous year income tax return filing, collect the following:

• PAN and Aadhaar
• Form 16 (for salaried individuals)
• Bank statements
• Details of capital gains from shares, mutual funds, or property sales
• TDS certificates
• Details of advance tax or self-assessment tax paid
• Investment proof for deductions under old tax regime (if applicable)

Choosing the Correct ITR Form

Selecting the right ITR form depends on your income sources. For example:

• ITR-1: Salary, pension, interest income
• ITR-2: Capital gains, income from more than one house property
• ITR-3: Income from business/profession

Choosing the correct form is important so that your filing is accurate and accepted.

Online Filing Methods

Using the Income Tax Department’s e-filing Portal

• Log in to your e-filing account at www.incometax.gov.in. If you don’t have an account, you’ll need to register first.
• Go to ‘e-File’ on the top menu, select ‘Income Tax Returns’, and click on ‘File Income Tax Return’.
• Select the relevant Assessment Year for which you are filing your previous year income tax return filing.
• For Mode of Filing, choose ‘Online’.
• Click ‘Start New Filing’.
• Select your applicable taxpayer status (Individual, HUF, etc.).
• Choose the correct ITR form that applies to your income profile. If unsure, you can take the help of equity advisory services or consult a CA.
• Go to the ‘Personal Information’ section and confirm that all your details are accurate.
• In the Filing Section, select Section 139(4), this is for belated returns.
• Enter your income details from all sources. Make sure to include all applicable incomes and deductions (as per the old tax regime or otherwise).
• Complete the tax computation and proceed to pay any outstanding taxes.
• Submit the return and complete e-verification using Aadhaar OTP, net banking, or another available method.

Utilizing Third-Party E-filing Portals (e.g., ClearTax)

If you find the government portal a bit complicated, third-party platforms like ClearTax offer an easier experience. They guide you in choosing the correct ITR form, auto-fill many details, and help track your filing. This can be especially helpful if you’re filing income tax returns for previous years or managing deductions under the old tax regime.

Offline Filing Methods

Using a CA or Tax Professional

If your return involves complex income sources such as foreign income or multiple capital gains, you might want to consult a CA or tax advisor. They can also help resolve discrepancies if you’re filing for multiple years.

Manual Filing (if applicable)

Manual (physical) filing of ITR is allowed only for very specific cases now, usually for senior citizens aged 80 and above, who can still submit paper returns without uploading online. In all other situations, you need to file your ITR online. If your case qualifies for paper filing, visit your local Income Tax Office with the filled-in form and required documents.

Addressing Specific Scenarios

Filing for Multiple Previous Years

If you’ve missed filing income tax returns for two or more years, you can only file for the immediate previous year using the belated return option. Returns for earlier years cannot be filed unless you’ve received an official notice from the tax department. In such cases, responding within the notice timeline is very important to avoid further penalties or action.

Dealing with Discrepancies or Errors in Previous Returns

If you find mistakes in a return already filed within the deadline, you can submit a revised return. If you missed filing or the deadline has passed, you may use the ITR-U form, which allows corrections or updates within two years from the end of the relevant assessment year. This can help you fix errors like incorrect income details, missed deductions, or under-reported capital gains or share transactions that may show up through TCS vs TDS tracking.

Handling Late Payment Notices

When you receive a late payment or non-filing notice from the Income Tax Department, make sure to respond on the income tax portal without delay. You may need to file the pending income tax return for previous years, pay outstanding taxes along with interest under Section 234A, 234B, or 234C, and settle any applicable late fee or penalty.

What Happens if ITR Isn’t Filed for Two or More Years?

If you fail to file ITR for multiple years, the risk increases—not just of penalties but also of prosecution. The department may impose a penalty of up to ₹5,000 under Section 271F or take further legal action. In serious cases, prosecution can result in imprisonment.

Important Considerations Before Filing

Verifying Your Personal Information

Check your PAN, Aadhaar linking, and contact details on the portal. Errors in basic data can delay processing or refunds.

Reviewing Your Income and Deductions

Whether using the old tax regime or new, carefully review your income from all sources and deductions to optimize your tax liability.

Understanding Capital Gains and Losses

If you have capital gains from shares, mutual funds, or property, report them accurately. You may also want to consult shares advisory services if unsure about how to calculate short-term vs long-term gains.

Checking for Tax Audits

If your business turnover crosses certain limits, a tax audit may apply. Consult your CA to comply with audit rules when doing previous year income tax return filing.

Conclusion and Next Steps

Missing your tax deadlines can lead to unnecessary penalties and complications. Going forward, keeping your income and investment details well-organized will make future filings smoother. Whether you choose to file returns on your own or with professional help, staying proactive about your tax responsibilities will help you avoid any last-minute stress.

FAQs on Filing Belated Income Tax Returns

1. Can I file returns for years earlier than two years ago?

Only if you receive a notice from the tax department.

2. Do I need to pay interest on unpaid tax while filing belated returns?

Yes, interest under Sections 234A, 234B, and 234C applies when filing belated returns.

3. How do I check if I have TDS credit?

Verify your Form 26AS on the income tax portal.

4. What if I forgot to report capital gains?

If you forget to report capital gains, you can file a revised return if eligible, or consult a CA.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Imagine a business considering the construction of a new building in the suburbs; one that is moving its old facility to a more energy-efficient building; and one that is embarking on an ambitious project to digitize its whole supply chain. 

None of these projects are cheap, nor will they produce immediate returns, but they are all undertaken after careful evaluation. And most likely, they will be the foundations of a future for the business.

Underneath these more important and timely strategic decisions is a straightforward financial concept — Capital Expenditure. It is not simply a line of spending money—it usually is about vision, resilience, and creating a capability to have a voice in your next opportunity.

What is Capital Expenditure?

Capital Expenditure (CapEx) denotes the funds a business spends to acquire, improve, or maintain its long-term assets like land, buildings, equipment, or technology that would deliver value over several years. 

Capital expenditures are made with the intention to benefit a business in the future and are distinct from operational expenses related to a business’s normal operations.

Capex is recorded on a company’s balance sheet as an asset and not fully expense in the year it was incurred.

Capex Formula

Capex isn’t always listed explicitly in the income statement, but it can be calculated using data from a company’s balance sheet and cash flow statement.

🔹 CapEx Formula:

CapEx = PP&E (Current Year) – PP&E (Previous Year) + Depreciation

Where:

• PP&E = Property, Plant, and Equipment (fixed assets on the balance sheet)
• Depreciation = Non-cash expense charged over the asset’s useful life

This formula adjusts for any asset wear and tear (depreciation), giving a clearer view of new investments.

Why Does Capital Expenditure Matter?

Decisions about capital expenditures provide insight into a company’s strategy and future direction. Here are a few important reasons why capital expenditures are so key in business and in planning from a financial perspective:

1. Signals Business Growth and Strategic Intent: When a company makes a large investment in new facilities, new equipment, or new technologies, that means the company believes strongly in future demand and future growth opportunities. 

Large expenditures are not small decisions because they are not quick fixes; they are long-term bets on the company’s future. 

Whether it’s a manufacturer putting in more production lines or a retailer increasing their footprint into new geographies, Capital Expenditures are well known to signal strategic intent to the market.

2. Effects Free Cash Flow and Capital Allocation: Capital Expenditures will influence Free Cash Flow (FCF) because they relate to cash or capital outlay, utilized (in many cases) after determining EBITDA but before allocating the free cash flow of a business. In many cases, lower or negative FCF from Capex is acceptable when future cash inflows can be predicted. 

For example, a logistics company who invests in an automated warehouse might not have the same level of free cash flow as they had previously (due to the expense from their automation), but they may obtain future cost savings or efficiency because of their investment.

3. Impacts Ratios and Valuation: Capex is important in financial analysis and the valuation of companies. Ratios such as the Capex-to-Depreciation ratio can help give insight into whether a company is simply replacing lost investment in current assets or is investing to expand. A ratio above 1 suggests that the company is investing in growth, while a ratio below 1 may suggest under-investment. 

Other indicators, such as Return on Capital Employed (ROCE), and Asset Turnover are affected by the quality and productivity of capital assets, which are also influenced by Capex decisions. In capital-intensive industries, these ratios can be used to assess how efficiently a company is utilizing and managing its capital resources.

4. Supports Long-term Sustainability and Competitiveness: Planned and strategic Capex supports companies to modernize, increase efficiencies, and retain their competitive advantage. 

Through investment in new technology, initiatives that support the environment, or increased production capabilities, companies not only future proof their business; they may also mitigate costs while improving product quality.

5. Reflects Leadership’s Views and Long-Term Vision: Capital Expenditure typically has to be planned, approved, and sanctioned at senior management level, and hence any organization willing to invest capital without knowing whether a return will follow (especially in uncertain/untried situations) shows a level of longer-term thinking and confidence in its operating model. 

Repeatedly low levels of Capex may suggest conservatism or financial stress or perhaps limited prospects for new opportunities.

Types of Capital Expenditure

Capital expenditure can be generalized into three types based on the nature and intent of the investment.

1. Fixed Asset Acquisition

This type of Capex is the purchase or construction of an asset that is physical, long-term, and is related to the business operations aspect of the business.

A fixed asset acquisition indicates infrastructure set-up or business expansion and demonstrates that the company is focused on long-term growth. The associated fixed assets will usually help the company grow, penetrate new markets, or greater efficiency depending on the nature of the asset.

2. Upgrade or Extension

This type of Capex is considered spending on the upgrades or extensions of an asset, as opposed to current asset acquisition.

Upgrades of existing assets generally include major repairs, renovation, or enhancement of a current asset that increase an asset’s capacity, improve operational safety, or efficiency. 

Like ordinary upgrades and maintenance, when a company invests in upgrading existing assets, it has an interest in getting the most from that asset. The upgrades will help to extend asset life, and take advantage of cost savings.

3. Intangible Capital Expenditure

Capital expenditures often do not always provide fixed physical assets. Many presenters in a modern economy concentrate on intangible investments that can provide future long-term value.

Intangible capital expenditures include software systems, intellectual property, research and development (if capitalized), and, or technology platforms. They’re not usually visible on the shop floor but are still arguably subject to as much investment as a capital asset for the purposes of delivering a return on innovation, or sustained brand value, and the practicality of extending continued growth.

Intangible capital expenditure is increasingly becoming a more relevant and accepted measure of investment in knowledge driven and tech led companies.

Conclusion

Capital Expenditure is a key driver of long-term business growth, efficiency, and innovation. It reflects a company’s priorities and confidence in its future. 

However, capex decisions must be made carefully, while smart investments can unlock future value, excessive or poorly planned spending can strain finances. A balanced, well-aligned capex strategy helps businesses stay competitive while maintaining financial stability.

Frequently Asked Questions (FAQs)

Is Capital Expenditure better than Operating Expenditure?

Not necessarily—both serve different purposes. Capex builds long-term assets and supports growth, while opex covers daily operations.

Can Capex reduce a company’s profitability in the short term?

Yes, it can. Capex often involves significant upfront costs that don’t show immediate returns. While these investments may lower free cash flow or profitability in the short term, they are usually made with the expectation of future gains.

Why do investors pay attention to Capex trends?

Capex trends help investors understand how a company is allocating capital for future growth. Rising capex may indicate expansion plans or modernization, but it could also suggest rising costs. Investors should look at Capex alongside cash flow and profitability to get the full picture.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Income tax is a part of every earning individual or business’s financial responsibility. But sometimes, even after filing your return and paying your taxes, you may receive a demand notice from the Income Tax Department. 

Knowing income tax concepts to understand what is income tax demand notice, why it is sent, or how to reply to income tax notice can make the process simple and stress-free.

Here’s a low-down on the concept and how to respond to income tax demand notice.

What is an Income Tax Demand Notice?

An Income Tax Demand Notice is an official communication from the tax department stating that you owe a certain amount of tax. This could be due to mistakes in your return, late payments, or missed tax entries.

Meaning of Notice Under Section 156 of Income Tax Act

When you get a notice under Section 156 of the Income Tax Act, it means the tax department has made a formal demand for payment. This section is invoked after the tax officer completes an assessment or reassessment and finds that additional tax is due. The notice will clearly mention the amount you owe and the due date by which it must be paid.

Reasons for Receiving a Demand Notice

Before getting into how to respond to income tax demand notices, it’s important to understand why the notice was issued in the first place. Here are the most common reasons.

Mismatch in Tax Paid and Tax Liability

This happens when the tax amount mentioned in your return doesn’t match what the department has on record. It could be due to a delay in TDS reporting by your employer or incorrect PAN linking.

Incorrect Reporting of Income or Deductions

If you forget to report some of your income—like interest from savings accounts or capital gains—or if you claim a deduction you’re not eligible for, the department may raise a demand after reviewing your records.

Arithmetical Errors in Return Filing

Sometimes, simple calculation mistakes while filing your Income Tax Return (ITR) can result in wrong tax amounts. These are picked up during processing and can lead to a demand.

Non-Payment or Short Payment of Advance Tax/Self-Assessment Tax

If you’re required to pay advance tax or self-assessment tax but fail to do so in full or on time, a demand notice may be issued for the pending amount along with interest.

How to Respond to Income Tax Demand Notice

You can reply to the demand notice easily through the income tax portal. Here’s how.

Step-by-Step Guide to Responding Online

This is the first step in understanding how to respond to income tax demand notice digitally

1. Go to www.incometax.gov.in
2. Log in using your PAN, password, and Captcha.
3. Navigate to Pending Actions > Response to Outstanding Demand.
4. You’ll see details of the notice, including the demand amount, assessment year, and date.
5. Click on “Submit Response”.

You can choose from three options:

• Demand is correct
• Demand is partially correct
• Disagree with demand

Choose the appropriate one based on your case.

Accepting the Demand and Making Payment

If you agree with the demand, you must make the payment before the due date. Once paid, submit the details online:

• Select “Demand is correct”
• You will be redirected to the payment page
• After payment, update the BSR code, challan number, and payment date on the portal.

Disagreeing with the Demand: How to Submit a Response

If you believe the demand is incorrect:

• Select “Disagree with demand”
• Choose the reason (e.g., demand already paid, appeal filed, or TDS mismatch)
• Upload supporting documents (like challan copies or Form 26AS)

Your response will be reviewed by the tax officer. This is a key step in how to respond to income tax demand notice if you believe the claim is incorrect.

Partial Acceptance and Partial Disagreement Cases

In some cases, you may agree to part of the demand but dispute the rest. For such cases:

• Choose “Partially correct”
• Enter the amount you agree to pay
• Provide reasons and documents for the disputed part

In such cases, knowing how to respond to income tax demand notice with partial disagreement can help you avoid excess payment. It helps avoid penalties on the accepted portion and initiates review of the rest.

How to Pay Outstanding Demand

Paying tax dues has become much easier with online services.

Online Payment Through Challan 280

1. Go to the income tax portal
2. Under “e-Pay Tax”, select Challan 280
3. Choose “Self-Assessment Tax” or “Tax on Regular Assessment” depending on your case
4. Enter the assessment year and other details
5. Pay through net banking, UPI, or debit card

Save the payment receipt carefully.

Providing Payment Details on Income Tax Portal

After paying, revisit the demand notice section:

• Click on “Submit Response”
• Select “Demand is correct and paid now”
• Fill in the BSR code, challan number, and amount paid
• Submit to complete the process

What if the Demand Notice is Incorrect?

Mistakes can happen at the department’s end, too. You have the right to dispute such notices.

Submitting Disagreement Response

As mentioned earlier, choose the “Disagree” option on the portal and explain your reason clearly. This may include:

• Incorrect tax calculations
• Wrong PAN used
• Duplicate entry of demand
• Demand already paid

Documents Required to Dispute a Demand Notice

You may need to upload:

• Form 26AS
• Tax payment challans
• TDS certificates
• Copy of filed ITR
• Communication with employer or banks (if TDS was not reported)

Make sure the documents are clear and accurate to avoid delays in resolution.

Consequences of Not Responding to Demand Notice

Ignoring a tax notice is never a good idea. Here’s what may happen if you don’t respond.

Interest and Penalty Implications

If you don’t pay the demanded amount on time, interest under Section 220(2) is added monthly. Additional penalties may also be levied for non-compliance.

Initiation of Recovery Proceedings

In serious cases, the department can:

• Adjust your refund against the demand
• Attach your bank account
• Recover money directly from your employer or clients

Hence, timely action is very important.

Best Practices When Dealing with Demand Notices

Receiving a tax notice can be stressful, but it doesn’t have to be. The key is to stay calm, act quickly, and follow a clear plan. Understanding how to respond to income tax demand notice correctly can save you from penalties, unnecessary interest, and even legal complications.

Here are some best practices to follow:

Review Form 26AS, AIS, and TIS Carefully

These documents show all your income and tax deductions. Make sure everything reported is correct and matches your return.

Consulting a Tax Professional for Complex Cases

If you don’t understand the demand or the issue is complex, consult a CA or tax consultant. This is especially helpful for a stock market advisory company or freelancers with multiple income sources.

Maintaining Proper Documentation

Always keep records of your ITR, Form 16, Form 26AS, TDS certificates, and tax payment challans. Good record-keeping avoids future problems.

Conclusion

Importance of Timely and Correct Response to Demand Notices

A demand notice is not the end of the world. It’s simply the department’s way of pointing out a gap. Whether it’s an error or an actual shortfall, responding quickly and accurately is key. Knowing how to respond to income tax demand notice can help you stay stress-free and compliant. Understanding income tax basics and using official resources can ensure your tax journey remains smooth and trouble-free.

FAQs

1. How do I check if there is a pending tax demand against me?

Log in to www.incometax.gov.in, go to Pending Actions > Response to Outstanding Demand to view any pending demands.

2. Can I ignore a small demand amount?

No, even small demand amounts must be addressed. Ignoring them may result in interest, penalties, or refund adjustments.

3. How long do I have to respond to a demand notice?

Generally, you are given 30 days from the date of the notice to respond. Always check the specific due date mentioned in your notice.

4. Can demand notice errors be rectified online?

Yes. You can dispute incorrect demands through the income tax portal by submitting the reason and uploading documents.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Medical expenses are a significant portion of household budgets today. For salaried employees, managing doctor visits, hospital stays, and health check-ups can put a strain on their finances. This is where employee health insurance deduction becomes vital, it helps lower taxable income, eases financial burden, and encourages proactive healthcare.

To avail these benefits, it’s essential to understand how to file ITR online correctly by declaring insurance premiums and medical expenses under the appropriate sections to ensure smooth processing and maximum tax savings.

Importance of Medical Expense Tax Benefits for Employees

By claiming an employee health insurance deduction on premiums and medical bills, salaried individuals can reduce their taxable income and save a significant amount on taxes.

Key Sections Providing Tax Relief on Medical Costs

In India, tax laws offer relief on medical expenses mainly through:

1. Section 17(2) – related to medical reimbursement by employers (under the old tax regime).
   
2. Standard Deduction – replaced most earlier exemptions.
   
3. Section 80D – covers deductions for health insurance premiums and preventive health check-ups.

Together, these help reduce overall tax liability and provide flexibility in managing healthcare expenses.

Medical Reimbursement and Tax Exemption (Old Rules)

Tax Benefit Under Section 17(2) Before Standard Deduction

Before the standard deduction was introduced in FY 2018–19, salaried employees could claim tax exemption for employer-funded medical reimbursements under Section 17(2). In simpler terms, any amount your employer paid back for your medical bills was not added to your taxable salary.

Exemption Limit for Medical Reimbursement

There was a fixed exemption cap, typically ₹15,000 per financial year. Any amount claimed via submitted medical bills up to this limit was fully exempt from tax when processed under “employee health insurance deduction” benefits.

Conditions for Claiming Medical Expense Reimbursement

To claim exemption under Section 17(2), you had to:

• Submit original medical bills to your HR department.
  
• Receive reimbursement from your employer (credited to your salary slip).
  
• Ensure that reimbursement does not exceed ₹15,000 per year.
  
• Be under the old tax regime, where this specific exemption was recognized.

Standard Deduction and Its Impact on Medical Expense Tax Benefits

Introduction of Standard Deduction for Salaried Employees

Starting FY 2018–19, the government introduced a flat ₹40,000 standard deduction (later increased to ₹50,000 from FY 2019–20) for salaried individuals and pensioners. This lump-sum reduction replaced multiple exemptions, including:

• Transport allowance
  
• Entertainment allowance
  
• Medical reimbursement under Section 17(2)

Replacement of Medical Reimbursement Exemption

The arrival of the standard deduction rendered Section 17(2) medical reimbursement obsolete. Now, instead of filing bills for tax breaks, employees can simply claim ₹50,000 off their gross salary, with no documentation required.

Current Tax Implications for Medical Expenses

You cannot claim medical reimbursement under the old tax regime once you choose the standard deduction route. However, you can still claim deductions via employee health insurance deduction under Section 80D, which applies whether you opt for the old or new tax regime.

Tax Benefits on Medical Insurance Premiums Under Section 80D

Section 80D offers tax relief on health insurance premiums paid for you, your family, and your parents. It’s one of the most beneficial routes to manage healthcare costs.

Deduction Limits for Self and Family

For premiums on health insurance covering yourself, your spouse, and children:

• Maximum deduction is ₹25,000 per financial year.
  
• If any member is a senior citizen (60 years or older), the combined limit remains ₹25,000 for yourself and your spouse, plus ₹50,000 for senior parents, totaling up to ₹75,000.

Additional Deduction for Senior Citizens

If you buy insurance for both parents and they are senior citizens, you can claim:

• ₹25,000 (or ₹50,000 if you/your spouse are seniors) for your policy
  
  • ₹50,000 for parents
    
• Grand total deduction: ₹75,000 (or ₹1 lakh if you’re a senior yourself)

Example:

• You (45), spouse (41), child (10) insured for ₹20,000
  
• Parents (65+) insured for ₹45,000
  Your total deduction = ₹20,000 + ₹45,000 = ₹65,000 (falls within allowed ₹75,000)

Deduction for Preventive Health Check-Ups

Section 80D allows extra deduction up to ₹5,000 per year for preventive check-ups (blood tests, X-rays, health screenings). This is part of the ₹25,000/₹50,000/₹75,000 limits above, but doesn’t reduce the insurance premium limit.

Medical Expenditure Deduction for Senior Citizens Without Insurance

Special Tax Benefits Under Section 80D for Uninsured Elderly

If your parents are above 60 and don’t have health insurance, you can claim a deduction for medical expenditure directly (instead of for premiums). The same ₹50,000 limit applies.

Conditions for Claiming Medical Expenditure Deductions

To claim:

• Parents must be senior citizens
  
• No insurance for parents
  
• You must actually pay the medical expenses
  
• You have original hospital bills, prescriptions, and receipts
  
• Limit: ₹50,000 annually (in place of the insurance premium cap)

Documents Required to Claim Tax Benefits on Medical Expenses

Medical Bills and Receipts 

• Original hospital bills & doctor’s fees 
• Pharmacy receipts 
• Paid stamp and invoice for services rendered 

Health Insurance Premium Payment Proofs

• Premium payment certificate from the insurer 
• PAN/Policy number indicated 
• Check or bank statement entry 

Preventive Check-up Payment Receipts

• Separate receipts for preventive tests 
• Must clearly show nature of check-up

Save all documents for at least 6 years, as the Income Tax Authority may ask during assessments.

Important Points to Remember

Limitations and Restrictions Under Sections 17(2) and 80D

• Section 17(2) medical reimbursement is no longer available under the standard deduction.
  
• Section 80D applies to both the old and new tax regimes.
  
• Deductions are based on the payment due date (not necessarily the actual payment date): insurance premiums paid by March 31 qualify.
  
• The combined family and parent deduction maximums at ₹75,000 (or ₹1 lakh in the senior employee scenario).

Impact of Opting for New Tax Regime on Medical Expense Benefits

The new tax regime (effective from FY 2020–21 onwards) offers lower slab rates but eliminates many deductions, including Section 80D. If you rely heavily on medical premiums and preventive care coverage, the old tax regime may remain more beneficial, especially for households with senior members or high medical costs.

Conclusion

To maximize tax benefits on medical expenses, it is advisable to opt for the old tax regime if you pay high health insurance premiums, especially for senior parents, and incur costs for preventive check-ups. 

Ensure you maintain adequate insurance coverage and keep all receipts and proof of premium payments safely. Consulting a reliable share advisory company or financial advisor can help optimize your tax planning. While filing your ITR online, carefully fill in Section 80D details, retain relevant documents for audit purposes, and be aware of distinctions like TCS vs TDS, as insurance premiums usually don’t attract TDS, though salary-based reimbursements may be treated differently.

FAQs

Is medical reimbursement taxable under the new regime?

Medical reimbursement under Section 17(2) no longer exists once you opt for the standard deduction in the old tax regime. Under the new regime, it’s neither available nor taxable. 

Can I claim both the health insurance premium and medical bills?

Yes, within Section 80D, you can claim insurance premiums and preventive health check-up bills, up to your limit. For senior parents without insurance, you can claim medical bills under the ₹50,000 provision. 

What is the limit for the preventive health check-up deduction?

A maximum of ₹5,000 per financial year can be claimed for preventive health check-ups under Section 80D of the Income Tax Act.

Are parents’ medical expenses eligible for deduction under Section 80D?

Absolutely, if they are senior citizens and either insured or uninsured, you can claim: – ₹50,000 (if elderly insured) or – ₹50,000 (if elderly uninsured, for medical expense).

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Casual Income under Income Tax Act refers to income that arises from irregular or unexpected sources, which aren’t part of your usual business, salary, or investments. 

It’s the kind of income you receive by chance, such as winning a lottery, a game show prize, a horse race bet, or a crossword puzzle reward, and isn’t earned under any contract or expectation of recurring success.

Why Understanding Casual Income is Important for Taxpayers

Understanding Casual Income under Income Tax Act matters because:

• It’s taxed at a flat rate without considering deductions or exemptions.
  
• It may be subject to TDS (Tax Deducted at Source) at the source.
  
• Non-disclosure can result in penalties, interest, and increased scrutiny.
  
• It’s distinct from normal income, so blending it can lead to compliance errors.

Additionally, understanding how it fits under the new vs old tax regime and how it interacts with indirect taxes, such as the windfall tax, is crucial for accurate tax planning.

What Qualifies as Casual Income?

Definition Under Income Tax Law

Tax laws in India categorize casual income under “Income from Other Sources.” Section 115BB of the Income Tax Act specifies that income from gambling, betting, lottery, crossword puzzles, races, or any game of chance is taxable as casual income. It is irregular, unpredictable, and unrelated to one’s regular work or business.

Common Examples of Casual Income

Frequent examples include:

• Lottery winnings (jackpots, raffles).
  
• Prize money from quiz shows, reality competitions, and TV game shows.
  
• Income from horse races or sports betting.
  
• Rewards from crossword or puzzle contests.
  
• Online gaming earnings.
  

These are all clear instances of “Casual Income under Income Tax Act.” They often involve a windfall nature, hence sometimes nicknamed “windfall tax” events in common parlance.

Taxability of Casual Income

How Casual Income is Taxed in India

All casual income is taxed flat under Section 115BB as part of “Income from Other Sources.” There is no aggregation with salary/business income for rate calculation, but the final tax is included in your return and added to the overall taxable income.

Applicable Tax Rates for Casual Income

• A flat 30% tax on the gross amount.
  
• An additional 4% health and education cess, taking the effective rate to 31.2%.
  
• There is no benefit from the basic exemption limit or slab rates; the rate is the same for all taxpayers.

TDS:

• Section 194B for lottery/quiz prizes.
  
• Section 194BB for horse race winnings if the amount exceeds ₹10,000.
  
• Hence, the payer deducts 31.2% and remits directly, before you receive the amount.

Exemptions and Deductions on Casual Income

Are Any Deductions Allowed?

No deductions are allowed. You cannot deduct expenses like lottery ticket cost, betting outlays, or participation fees under Section 115BB.

Important Exemptions to Know

Strictly speaking, there are no exemptions for casual income, it is fully taxable. However:

• Gambling winnings from the UK or US may be subject to tax treaties, which could potentially reduce tax liability, but are still reportable in India.
  
• If total income (including casual income) after deductions is below ₹5 lakh, you might benefit under Chapter VI-A rebate rules, not because casual income gets special treatment, but due to the overall structure.
  
• Under the new versus old tax regime, casual income is always taxed at this flat rate, regardless of one’s total slab deductions.
  

Indirect Tax, like GST, doesn’t apply to casual income, but organizers of contests may have indirect tax responsibilities.

Differences Between Casual Income and Regular Income

Feature	Casual Income	Regular Income
Nature	Irregular, chance-based	Predictable, earned via contracts or work
Tax Rate	Flat 30% + cess (31.2%)	Slab-wise (0–42%), varies by regime
Expenses Deductibility	No	Yes (varies by nature of business or job)
Exemptions	None Under 115BB	Many (80C, 80D, HRA, etc.)
TDS Applicability	Mandatory above ₹10k (194B/194BB)	Varied (192, 194A, etc.)

Impact on Total Taxable Income

Although taxed separately, casual income must be reported in your ITR and added to total payable taxes. It may push you into a higher tax bracket under the old or new tax regime, affecting total liability. It also interferes with dividends or other investments when calculating effective tax.

Users under the new vs old tax regime should note that casual income doesn’t qualify for the standard slab benefit, making its impact distinct and predictable.

How to Report Casual Income in Income Tax Returns

• ITR‑1 (Sahaj): Only if casual income is from lotteries or horse races (along with salary/interest), and total income ≤ ₹50 lakh.
  
• ITR‑2: For all other cases—if you have other income or own property.
  
• ITR‑4: Not suitable, as casual income doesn’t fall under presumptive business.

Where and How to Declare Casual Income

• Under “Income from Other Sources” schedule.
  
• Enter gross winnings (e.g. ₹100,000 from lottery), TDS deducted, and net income.
  
• Fill in TDS details (section-wise) and upload TDS certificates during e-filing.
  
• There is no need to show “expenses”.
  
• If TDS < computed tax, pay the balance via self-assessment tax before filing. There is no carry-forward of casual losses either.

Penalties for Non-Disclosure of Casual Income

Consequences of Non-Reporting

Failing to disclose casual income can result in:

• Reassessment by tax authorities.
  
• Demand notices for underreported income.
  
• Late filing or concealment penalties.
  

Interest and Penalty Provisions

• Interest under Sections 234A/B/C if you delay payment.
  
• Penalties under Section 271(1)(c):
  
  • Up to 100% of tax unpaid if concealment is deliberate.
    
  • Minimum ₹10,000 for concealment; penalty can go up to 300%.
    
• Non-filing can also lead to legal complications, especially under the upcoming Income‑tax Bill 2025. 

Real-Life Examples of Casual Income Cases

Lottery Wins

Suppose you win ₹5 lakh in a state lottery. The organizer deducts ₹1.56 lakh (31.2%) and pays you ₹3.44 lakh. Upon filing, report ₹5 lakh gross, TDS ₹1.56 lakh, with no deductions.

Game Shows and Prize Money

Game shows offer prizes (e.g., ₹1 lakh + a trip worth ₹ 50,000). Tax applies on ₹150,000 at 31.2%. The organizer deducts accordingly before awarding.

Horse Race Winnings

Winning ₹ 20,000 at a race. Tax deducted under Section 194BB at 31.2% before payout. Report and reconcile in ITR to claim TDS.

These real-life cases vividly show how “Casual Income under Income Tax Act” is handled, often involving share advisory company-sponsored quiz contests, indirect taxes, etc.

Conclusion

Casual income is an irregular, chance-based income that is taxed separately under the Income Tax Act. Governed by Section 115BB and falling under the category of “Income from Other Sources,” it is taxed at a flat rate of 30% plus a 4% cess, resulting in an effective rate of 31.2%, with no deductions or exemptions permitted. 

If the amount exceeds ₹10,000, Tax Deducted at Source (TDS) is applicable under Sections 194B or 194BB. Whether you’re an individual investor or associated with a share advisory company, it’s essential to report such income accurately in the appropriate ITR form—usually ITR-1 or ITR-2—and reconcile it with TDS records. Non-reporting of casual income can result in penalties, interest charges, and legal action, particularly under the new income tax regime.

FAQs

Is Gift Money Considered Casual Income?

No. Gift money is covered under separate exemptions. If received from specified relatives or under ₹50,000 from non-relatives, it’s tax-free (Section 56). It’s not categorized as casual income. 

Are Casual Income Winnings Taxed at Flat Rates?

Yes. Casual income is always taxed at a flat 30% under Section 115BB, plus cess, regardless of your income slab, unlike salaries or business income.

Is TDS applicable on casual income?

Yes, TDS of 31.2% applies if winnings exceed ₹10,000 under Section 194B (lottery, puzzle) or 194BB (horse races). This must be deducted by the organizer before payment.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

The Bombay Stock Exchange (BSE) is celebrating a major milestone in 2025, marking 150 years since its founding. Established in 1875, the BSE is not only Asia’s oldest stock exchange but also ranks as the tenth oldest in the world. 

What began as informal meetings under a banyan tree has grown into a modern, tech-driven financial institution.

This journey reflects India’s own economic and social progress over the decades. 

Throughout its history, the BSE has played a pivotal role in developing India’s capital markets, enabling businesses to raise funds and creating wealth for investors nationwide.

Historic Milestone with New Index Launch and Policy Recognition

Earlier this year in April 2025, BSE marked a significant milestone with a grand celebration attended by Finance Minister Nirmala Sitharaman. She lauded BSE’s transformation into a cutting-edge, technology-driven platform that now processes daily orders worth Rs 1,500 crore, an achievement she described as a clear reflection of India’s dynamic economic progress.

The Finance Minister also highlighted BSE’s impressive market capitalization of Rs 400 lakh crore, placing it among the world’s top stock exchanges. She also unveiled the BSE 150 index, a new benchmark designed to track the performance of the top 150 listed companies based on market capitalization and liquidity.

Source: newsonair.gov

From Banyan Tree to Formal Foundation

The roots of the BSE trace back to the 1850s, when informal stock trading began under a banyan tree near Mumbai’s Town Hall. Gujarati and Parsi brokers traded securities, including East India Company shares, relying on trust and reputation, principles that would shape India’s capital markets. 

On July 9, 1875, this informal group formalized into “The Native Share & Stock Brokers’ Association,” marking the official birth of BSE.

By 1921, it had established its base on Dalal Street, and by 1930, it was a central platform for corporate financing in British India, supporting industrial giants like Tata, Birla, and Bajaj.

To provide a clear overview of this extensive history, the following table highlights some of the most significant milestones in the BSE’s journey:

Year	Milestone/Event	Significance
1850s	Informal trading under a banyan tree	Roots of organized market
1875	Formal establishment as “The Native Share & Stock Brokers’ Association”	Birth of Asia’s oldest exchange
1921	Shift to Dalal Street premises	Centralization of operations
1956	Permanent recognition under Securities Contracts (Regulation) Act	Formal legal framework for operations
1986	Introduction of Sensex (Base 1979=100)	India’s first stock market index and economic barometer
1992	Establishment of SEBI (empowered)	Regulatory authority strengthened post-scam
1995	Introduction of BOLT (BSE Online Trading)	Transition to electronic trading
1996	Introduction of Dematerialization	Enhanced security, efficiency, investor participation
2001	Launch of BSEWEBX.com	World’s first centralized internet trading system
2005	Corporatization and Demutualization	Modernized ownership and governance structure
2023	Unveiling of new BSE logo	Symbolizing renewed vision and growth

Where BSE Fits in India’s Demat Account Growth Story

As more Indians embrace equity investing, BSE remains at the heart of this transformation — enabling millions of new investors to participate in India’s growth story with trust, transparency, and scale.

Domestic brokerages added a record-breaking 41.1 million demat accounts in FY25, taking the total number to 192.4 million. This marks the highest-ever annual increase in absolute terms. The monthly average stood at 3.42 million new accounts, setting a new benchmark for any financial year.

Total Demat Accounts		Change
Year	Count (in Cr)	Absolute (in Cr)	in %
FY21	5.5	1.4	33%
FY22	9.0	3.5	63%
FY23	11.5	2.5	28%
FY24	15.1	3.7	32%
FY25	19.2	4.1	27%

Source: IBEF.org

This surge in demat accounts was driven by easier account opening, rising smartphone usage, and strong market returns.

CDSL: BSE’s Trusted Partner in Secure Electronic Trading

Central Depository Services (CDSL), promoted by the Bombay Stock Exchange (BSE) in 1999, is one of India’s key depositories, enabling electronic holding of shares, bonds, and mutual funds. 

Though now a listed company, CDSL remains closely linked to BSE, which is its largest shareholder. 

CDSL works with exchanges, brokers, and intermediaries to maintain investor records and streamline trade settlements. Its integration with BSE enables investors to manage and store their securities securely in a paperless environment.

Source: Business Standard

BSE Still Going Strong: Potential for Deeper Market Reach

India’s capital markets have experienced a significant increase in participation over the past few years. However, despite these gains, mutual fund adoption remains surprisingly low, with only 3% of India’s population currently investing in mutual funds. 

When it comes to demat penetration, only 8% of the population holds demat accounts, compared to 62% in the US Monthly Systematic Investment Plan (SIP) inflows have also surged, tripling to around ₹25,300 crore, underscoring retail investors’ growing preference for disciplined investment strategies.

Yet, mutual funds’ Assets Under Management (AUM) relative to GDP remain low at 17%, significantly behind the global average of 65%. Stock market turnover velocity also lags international peers at around 70% versus nearly 115% on NASDAQ. 

Looking forward, robust demographics and rising incomes could propel further market growth. Over the next decade, an estimated 100 million people are expected to join the workforce, with a similar number of households entering the middle-income segment.

Source: aninews.in

Now let’s explore how BSE has overcome various challenges over time and transformed into one of the world’s leading stock exchanges.

BSE in the Planned Economy Era

In 1956, the BSE became the first stock exchange to gain permanent recognition under the Securities Contracts (Regulation) Act, providing a legal framework for regulated trading.

However, the exchange struggled with poor transparency, malpractices, and slow, manual systems. Trades happened through open outcry, and price updates often reached investors late via newspapers. These issues limited participation and fair pricing, highlighting the need for modernization. These early inefficiencies eventually led to important reforms and the adoption of technology in later years to improve market access and efficiency.

Liberalisation and Market Reforms in the 1990s

The 1990s marked a turning point for India’s economy, triggered by the 1991 reforms aimed at deregulation, foreign investment, and trade liberalisation. These changes greatly boosted the capital markets. BSE’s market capitalisation grew at 27% annually between 1991 and 1999, while trading volumes doubled in a year. The primary market expanded with fresh issues from private firms and mutual funds. Foreign portfolio inflows touched $3.8 billion by 1995, and SEBI gained full regulatory authority in 1992 to enhance market transparency and investor protection.

1992 Scam Sparked Reforms in Indian Stock Market

During India’s economic liberalisation, the 1992 Harshad Mehta scam exposed major flaws in the stock market. By manipulating stock prices using fake funds, Mehta triggered a 12.7% crash in the BSE Sensex on April 18, 1992. While it deeply shook investor confidence, the crisis became a turning point. It led to stronger powers for SEBI, the push for electronic trading, and enhanced transparency, proving that even major setbacks can drive essential reforms for a more robust and efficient market.

Technological Revolution

The launch of the fully automated National Stock Exchange (NSE) in 1994 pressured BSE to modernize. In response, BSE introduced its electronic trading system, BOLT (BSE Online Trading), in 1995, replacing the outdated open outcry system and enhancing speed and efficiency.

In 2001, BSE launched BSEWEBX.com, the world’s first centralized exchange-based internet trading system, allowing global investors remote access to Indian markets, marking BSE’s global push.

A key milestone came in 2005 when BSE corporatized and demutualized under SEBI’s direction. This governance shift enabled strategic partnerships with global exchanges like Deutsche Börse and Singapore Exchange, cementing BSE’s international presence.

Sensex: The Nation’s Economic Barometer

In 1986, the BSE introduced the Sensex, India’s first stock market index, with a base value of 100, which was set in 1979. The Sensex rapidly became a crucial indicator of India’s economic health and a sensitive barometer of market sentiment. Its early movements directly reflected significant economic policies and emerging industrial trends. 

Key Sensex Milestones and Their Triggers

• January 15, 1992: Sensex crossed 2,000 points after liberal economic reforms were announced.
  
• February 29, 1992: Surged past 3,000 points following a market-friendly Union Budget.
  
• March 30, 1992: Touched 4,000 points, driven by expectations of a liberalised export-import policy, shortly before the Harshad Mehta scam shook the market.
  
• October 11, 1999: Crossed 5,000 points, coinciding with the victory of a political coalition, boosting investor confidence.
  
• February 11, 2000: Surpassed 6,000 points, hitting a high of 6,006 due to the booming IT sector during the tech rally.
  
• 2007: The Sensex surpassed the 20,000-point mark, reflecting robust economic growth and heightened global investor interest.

• 2015 – 30,000 points The Sensex breached 30,000 as the RBI’s rate cuts and policy support boosted investor sentiment and confidence in economic growth.
  
• 2019 – 40,000 points:  Bullish market response to the decisive general election outcome, signaling political stability and continued economic reforms under a strong mandate.
  
• 2021 – 50,000 points:  Post-COVID recovery optimism and liquidity-driven rally propelled Sensex to 50,000, reflecting faith in India’s economic bounce-back.
  
• 2021 – 60,000 points:  Continued economic recovery, global liquidity, and robust corporate earnings lifted investor confidence, pushing Sensex past 60,000 mark.
  
• 2023 – 70,000 points:  Strong domestic demand and resilient macro indicators helped Sensex breach 70,000, a major psychological and historic milestone.
  
• 2024 – 80,000 points:  Sensex touched a record-breaking high driven by strong inflows, policy clarity, and positive economic and earnings outlook.
  
• 2024 – 85,978:  Sensex reached its all-time peak amid surging investor optimism, robust GDP growth, and global interest in Indian equities.
  

BSE’s Role in Supporting Indian Businesses

The large number of companies listed on the BSE demonstrates the importance of the exchange in helping businesses raise capital. BSE has the highest number of listed companies in the world. 

In January 1991, it had 4,510 listed stocks. This number has kept growing, reaching 5,595 in 2025, and 5,647 as of June 27, 2025, according to Wikipedia. 

This steady rise highlights how BSE continues to support a wide range of Indian companies by giving them a platform to access funds and grow.

Sensex Performance Analysis

The Sensex, as the benchmark index, provides a compelling narrative of the Indian market’s long-term growth and its ability to navigate periods of volatility. It has demonstrated remarkable long-term growth, achieving a Compound Annual Growth Rate (CAGR) of 15% over the past 20 years and an impressive 16% since its inception.  

While the Sensex’s journey has been predominantly upward, it has also experienced several significant single-day or short-period drops, reflecting the inherent volatility of financial markets in response to both domestic and global events.

Today, BSE is a strong global player in the financial world. By June 27, 2025, its market value had grown to ₹461 lakh crore (around US$5.5 trillion), making it the 6th largest stock exchange globally. It also leads the world in the number of listed companies, with over 5,500 firms.

Conclusion

The BSE has completed 150 years, marking a journey of resilience, innovation, and growth. From informal cotton trading under a banyan tree in the 1850s to becoming a formal exchange in 1875, BSE has adapted through every major shift in India’s financial history. 

It has seen planned economies, liberal reforms, and global market challenges. Today, BSE is not just a historic platform but a modern, tech-driven exchange that plays a key role in capital formation and economic growth. 

As markets evolve, so should your investment decisions. With over 5,000 listed companies and countless choices, investing without the right guidance can be overwhelming—or worse, risky.

That’s why we believe: If you do invest, do it right. With a SEBI-registered advisor who works for you—not for a brokerage.

Because real wealth isn’t built by following noise, it’s built with research, strategy, and accountability.

Watch out for this space as we’ll take you through what the next 150 years could look like for BSE, in our next post.

Happy Investing.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.