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Can You Change the Tax Regime While Filing an Income Tax Return (ITR)?

In the world of taxation, changes are inevitable. The introduction of the new tax regime in the 2020 Budget brought about significant alterations to the way individuals and HUF file their Income Tax Returns (ITR). However, taxpayers still have the flexibility to switch between the old and new tax regimes, subject to certain conditions. If you're wondering whether you can change the tax regime while filing your ITR, this article will provide you with all the information you need.

Understanding the Old Tax Regime

The old tax regime refers to the taxation system that was in place prior to the introduction of the new tax regime. It still exists as an option for taxpayers. Under the old tax regime, there are approximately 70 deductions and exemptions available that can help minimize your taxable income. For instance, individuals can avail of a deduction of up to Rs.1.5 lakhs under section 80C, which is covered under these 70 deductions.

Introducing the New Tax Regime

The new tax regime was introduced in addition to the existing tax slabs in the 2020 Budget. The primary objective of this regime was to simplify taxes by offering lower tax rates. However, unlike the old tax regime, the new regime does not provide any deductions or exemptions, except for the deduction under section 80CCD(2) and 80JJA (available for business income).

In the Budget 2023, the new tax regime has been made the default regime. The basic exemption limit has been increased, and the rebate has also been raised to 7 lakhs. Additionally, the standard deduction has been allowed under the new tax regime, and the surcharge has been reduced.

Tax Slabs Under the Old and New Tax Regimes

Under the old tax regime, taxpayers can claim deductions under section 80C and various other exemptions. However, the new tax regime offers lower tax rates and does not allow any deductions except for 80CCD(2). The table below illustrates the existing tax slabs for the financial year 2023-2024 under both the old and new regimes:

Income

Tax Slab - Old Tax Regime (AY 2023-24) and FY 2023-24

Tax Slab - New Tax Regime (AY 2024-25)

Rs.0 - Rs.2,50,000

-

-

Rs.2,50,001 - Rs.3,00,000

5%

5%

Rs.3,00,001 - Rs.5,00,000

5%

5%

Rs.5,00,001 - Rs.6,00,000

20%

5%

Rs.6,00,001 - Rs.7,50,000

20%

10%

Rs.7,50,001 - Rs.9,00,000

20%

10%

Rs.9,00,001 - Rs.10,00,000

20%

15%

Rs.10,00,001 - Rs.12,00,000

30%

15%

Rs.12,00,001 - Rs.12,50,000

30%

20%

Rs.12,50,001 - Rs. 15,00,000

30%

20%

More than Rs.15,00,000

30%

30%

Can You Change the Tax Regime While Filing ITR?

Yes, individuals are allowed to switch between the old and new tax regimes as per the Budget 2023. However, the number of times an individual can switch between the regimes depends on the type of income.

Salaried Individuals

Salaried individuals have the flexibility to switch between the new and old tax regimes every financial year. Although the new tax regime is set as the default tax regime for the financial year 2023-2024, individuals can still choose to switch to the old regime based on their income.

Individuals with Income from Business or Profession

While individuals with income from business or profession can also switch between the old and new tax regimes, they are only permitted to do so once in their lifetime. For instance, if an individual with business income opts for the new tax regime in the financial year 2023, they won't be able to switch again. Once they opt-out of the new tax regime, they cannot opt-in again in the future.

Switching Tax Regimes While Filing ITR

To switch between the old and new tax regimes, taxpayers need to file Form 10IE while filing their ITR. Form 10IE is a declaration that informs the Income Tax Department about the taxpayer's choice of tax regime. However, the process of switching between regimes varies based on the type of income.

Salaried Individuals

If you're a salaried individual without any income from business or profession, you can simply select the new regime while filing your ITR without the need to file Form 10IE. In other words, individuals who file ITR-1 and ITR-2 are not required to file Form 10IE.

Individuals with Income from Business or Profession

If you have income from a business or profession, you must file Form 10IE to switch between the old and new tax regimes. However, individuals with business or professional income can only switch between regimes once in their lifetime. You can file Form 10IE before the due date for filing ITR, which is typically July 31st.

Conclusion

In conclusion, taxpayers have the flexibility to switch between the old and new tax regimes while filing their Income Tax Returns. The old tax regime offers various deductions and exemptions, while the new tax regime provides lower tax rates but no deductions except for specific cases. Salaried individuals can switch between the regimes every year, while individuals with income from business or profession can only do so once. To switch between regimes, taxpayers need to file Form 10IE, but the process differs based on the type of income. It's important to carefully consider your income and the benefits offered by each regime before making a decision.

author

The Tax Heaven

Mr.Vishwas Agarwal✍📊, a seasoned Chartered Accountant 📈💼 and the co-founder & CEO of THE TAX HEAVEN, brings 10 years of expertise in financial management and taxation. Specializing in ITR filing 📑🗃, GST returns 📈💼, and income tax advisory. He offers astute financial guidance and compliance solutions to individuals and businesses alike. Their passion for simplifying complex financial concepts into actionable insights empowers readers with valuable knowledge for informed decision-making. Through insightful blog content, he aims to demystify financial complexities, offering practical advice and tips to navigate the intricate world of finance and taxation.

Frequently Asked Questions

Yes, it is possible to change the tax regime while filing an Income Tax Return (ITR) under certain conditions.

The two tax regimes available for individual taxpayers in India are the old tax regime and the new tax regime introduced in Budget 2020.

The primary difference between the old and new tax regimes lies in the structure of tax deductions and exemptions. The old regime offers various deductions and exemptions, while the new regime provides lower tax rates with fewer deductions and exemptions.

Yes, taxpayers have the flexibility to switch between the old and new tax regimes every year based on their preference and financial circumstances.

Taxpayers can opt for a different tax regime while filing their ITR for a particular financial year. However, they must make this choice before the due date of filing the ITR.

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