Income Tax Return e-filing: Can you keep switching between new and old tax regime every year? What taxpayers should know
The new income tax regime offers lower tax rates and higher standard deduction compared to the old tax regime. (AI image)
ITR filing FY 2024-25 (AY 2025-26): When filing your income tax return every year, the choice between the old and the new income tax regime is an important one. The new income tax regime offers lower tax rates and higher standard deduction compared to the old tax regime.
On the flip side, the old tax regime allows for popular deductions and exemptions like Section 80C, 80D, House Rent Allowance (HRA), Leave Travel Allowance (LTA) and more.
As your financial situation evolves over years, you may find it beneficial to be in the old regime versus the new or vice-versa. What if you opted for the new tax regime last year, but realise that for this year's ITR filing the old tax regime results in lower tax outgo? A common question that taxpayers have is: can they choose between the new and old income tax regime every year, or is it a one time choice?
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ITR filing FY 2024-25: Do you need to file your income tax return if TDS has been deducted? Explained
Old vs New Tax Regime: Can you switch every year?
According to Sudhakar Sethuraman, Partner at Deloitte India, the Income-tax Act, 1961 allows individual taxpayers (who do not have business income) to choose between the regular (old) and simplified (new) tax regimes each financial year.
'The choice of income tax regime is at the discretion of the individual and they can choose every year (provided they don't have business income) depending on what is beneficial for them,' he tells TOI.
Sudhakar Sethuraman goes on to explain, 'Further, even if an individual had declared one tax regime to the employer for TDS purposes, he/she can change the choice of tax regime at the time of filing tax return (if he/she does not have business income).'
It's important to note that the new income tax regime is now the default tax regime. In case you wish to file ITR under the old income tax regime, then you will have to opt for it. This can either be done at the start of the financial year by informing your employer, or at the time of filing the income tax return.
Yet another fact that is of consequence is: you can opt for the old income tax regime at the time of ITR filing only if you file your tax return within the due date. Once the deadline to file ITR is crossed, you will automatically be switched to the new income tax regime.
Also Read |
ITR filing FY 2024-25: Several changes in Form 16! Top things salaried taxpayers shouldn't miss
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