ITR Filing 2024: You can still change your tax regime when completing your returns for a particular year, so don’t worry if you forgot to choose one at the start of the financial year.
The previous tax system had higher tax rates but several exemptions and deductions that might reduce taxable income. However, the new tax system, which goes into effect in 2020, offers fewer deductions but lower tax rates.
Selecting the regime that best suits one’s financial situation requires careful consideration of all available deductions and sources of income.
Who Can Switch?
People without a source of income from a business or occupation have more freedom to move between different tax regimes. With effect from the assessment year 2024–25 (financial year 2023-24), these people will by default be subject to the new tax regime. The majority of ITR forms, including ITR-1 (SAHAJ) and ITR-4 (SUGAM), allow users to choose their preferred regime, so they can simply choose to use the previous regime when filing their income tax return.
Hindu Undivided Families and individuals with business or professional income must file Form 10IEA in order to transition to the old tax system. But for entrepreneurs, professionals, or HUF, it’s a one-time deal. Either way, the old tax regime can be selected up front and cannot be amended in later years.
Read also: ITR filing 2024: Why are taxpayers asking for extension of July 31 deadline?
Key Factors To Consider Before Switching
The benefits that can be claimed are largely influenced by the tax regime that is chosen. It’s crucial to make sure that tax deductions like interest on a home loan and tax-saving investment alternatives like the Public Provident Fund or National Pension Scheme are in line with the selected regime. Optimising tax outgo requires careful planning of tax-saving measures long in advance of the deadline.
How often can I switch between the two regimes?
I. Taxpayers with business income
Taxpayers with income from businesses or professions won’t be able to select between the two regimes annually. They will only have one opportunity to move to the old tax structure when they opt out of the New one. They won’t be able to select the previous regime again after they return to the new one.
II. Taxpayers with non-business income
Individuals with non-business income are granted the option to annually transition between the current and previous tax systems.
Read also: ITR Filing 2024: How to check your online income tax return after filing
Form 10-IEA is a declaration made by the return filers for choosing the ‘Opting Out of New Tax Regime’. An Individual, HUF, AOP (not being co-operative societies), BOI or Artificial Juridical Person with business or professional income must submit Form 10-IEA if they wish to pay income tax as per the old tax regime.
On the other hand, taxpayers who do not have income from business or profession can simply tick the “Opting out of new regime” in the ITR form without the need to file Form 10-IEA. Simply put, only those who file ITR-3, ITR-4 or ITR-5 have to submit Form 10-IEA if they have business income (other than coop societies). Individuals and HUFs filing their returns in Forms ITR-1 or 2 are not required to submit Form 10-IEA.
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