With the launch of the new income tax regime under section 115BAC, Indian taxpayers now have the option to switch between two:
1. Old tax regime: Provides deductions and exemptions, but with higher tax rates.
2. New tax regime: It provides lower tax rates, but no deductions and exemptions except for a few.
A question that readily comes to the mind of taxpayers is whether they can switch between these regimes while submitting their income tax return (ITR). The response is based on the income source of the taxpayer.
Salaried persons and pensioners
Yes, salaried individuals and pensioners can switch their tax regime annually while submitting their ITR. Even though they have intimated their employer regarding a particular regime for the purposes of TDS, during their return filing, they may switch over to another regime.
For instance, if you have chosen the new regime with your employer but later find the old regime more beneficial after calculating deductions, you can switch to the old regime while filing your ITR.
Those having business or professional income
Taxpayers who have income from profession or business can shift their tax regime once in their lifetime. Once they shift to the new regime and then come back to the old regime, they cannot switch to the new regime in future years of assessment, unless their professional or business income stops.
While filing ITR, the utility or tax software will ask you to select your desired regime under section 115BAC.
– Select “Yes” if you wish to opt for the new regime.
– Select “No” if you want to continue with the old regime.
Taxpayers with business income who have chosen the new regime are required to file Form 10-IEA from AY 2024-25 prior to filing ITR.
When does ITR filing begin?
The filing of ITR usually starts in April when the Central Board of Direct Taxes (CBDT) issues new forms. In the case of AY 2025-26, these forms should be released this month. But salaried taxpayers most often start filing in May end or June when they get Form 16 that employers have to issue on or before June 15. With this understanding, taxpayers are in a position to make effective decisions to maximize their tax liabilities.
ALSO READ: Senior Citizens Income Tax Guide: Choosing the Correct ITR Form
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