In the intricate maze of tax laws, salaried employees in India navigate between two tax regimes – the traditional and the contemporary, with the aim to optimise their tax liabilities. The decision-making process begins with a declaration to the employer, specifying the preferred tax regime, often facilitated through internal portals or HR documentation.
Crucially, this choice, crucial for Tax Deducted at Source (TDS) purposes, remains immutable throughout the fiscal year.
But can this choice be revisited during the Income Tax Return (ITR) filing?
Absolutely. Regardless of the initial preference communicated to the employer, employees retain the prerogative to alter their tax regime during ITR filing.
By default, the new tax regime applies if an employee abstains from making a selection. Throughout the year, TDS deductions by the employer are aligned with the chosen tax slab.
So, can salaried employees switch tax regimes?
Indeed. Salaried individuals possess the liberty to toggle between the old and new tax regimes while filing their ITR. The new regime, introduced in the Union Budget 2020, boasts lower tax rates but discards most deductions and exemptions, necessitating a thorough evaluation of its suitability.
Even if the new regime was selected for TDS deductions, the option remains open for a regime switch.
Once elected, however, the chosen regime remains unalterable for the fiscal year. Thus, the decision hinges on aligning the regime with one’s financial circumstances and maintaining consistency throughout the filing process.
Benefits of this flexibility are manifold:
It empowers taxpayers to minimise tax liabilities based on income and deductions.
Switching regimes during ITR filing incurs no additional paperwork, with the option seamlessly integrated into the form itself.
However, prudence dictates a comprehensive assessment of both regimes and their impact on deductions before cementing a decision during ITR filing.
In the labyrinth of tax complexities, this flexibility offers a beacon of empowerment for salaried individuals, enabling them to navigate the fiscal landscape with greater autonomy and financial acumen.
