In the Union Budget 2023, the union government made some key changes to the rules pertaining to switching income tax regimes. One of the changes introduced was making the new tax regime a default regime in the absence of non-declaration by a taxpayer about the preference of regime.
ITR Filing for AY2024-25: Like many taxpayers, are you also wondering whether the tax department will allow you to change the income tax regime while filing income tax return (ITR) or not? The Indian government introduced the new tax regime in 2020 (FY2020-21), giving taxpayers one more option alongside the old tax regime for computation of their tax liability.
Now, it’s been 5 years since the new tax regime was introduced and during this period there have been many changes brought in to make the new regime look more appealing so that taxpayers switch from the old tax regime. Earlier, when the new tax regime was introduced there was no restriction on how many times one can change tax regime, irrespective of the status of the taxpayer. Both non-salaried and salaried taxpayers were allowed to change the tax regime next year from the other regime they opted in that particular financial year.
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Changes in rules pertaining to tax regime switch
In the Union Budget 2023, the union government made some key changes to the rules pertaining to switching income tax regimes. One of the changes introduced was making the new tax regime a default regime in the absence of non-declaration by a taxpayer about the preference of regime. Another change was those who have income from business and are non-salaried are now allowed to change their tax regime only once, which means that if they switch to the new taxation system, they won’t be allowed to return to the old regime.
Are salaried taxpayers allowed to switch their tax regime?
Yes, if you are a salaried individual, you can change your tax regime every financial year. Further, you are also allowed to switch back to the previous respective tax regime at the time of income tax return filing even if you continued with the other regime throughout the financial year.
So, if you feel that the new tax regime is better for you and the lower tax slabs provided under it can help you save on taxes, you can make a transition from the old regime even if you had submitted your investment proofs to your employer based on old tax regime calculations.
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Taxpayers with business/profession income
Those taxpayers who earned income from a business or profession are not allowed to change regimes more than once. Since they are allowed to change the regime once, they can also transition to a new or old regime at the time of ITR filing. They must file Form 10-IE with their ITR, if switching their tax regimes.
What is Form 10IE?
Taxpayers – individuals or HUFs with business or professional income – are required to file Form 10IE. This is a declaration that you are switching to the new tax regime. This declaration must be made before filing of ITR. By submitting this form, you basically inform the Income-Tax Department of your altered choice.
