Since the new tax regime (NTR) was introduced in Budget 2020, it has gained prominence with lower tax rates compared to the old tax regime. In Budget 2023, the NTR became the default for FY 2023-24, meaning if no choice is made, the NTR is automatically applied. To opt for the old tax regime, taxpayers must explicitly opt out of the NTR.
In April, some media outlets incorrectly reported that the NTR became the default regime from this financial year. The Finance Ministry later clarified that there was no change effective from April 1, 2024.
How to Opt Out of the New Regime?
Individuals, HUFs, and AOPs must submit Form 10-IEA to opt out of the NTR and pay taxes under the old regime. Form 10-IEA is a declaration for those filing ITR-3, ITR-4, or ITR-5 with business income. Taxpayers without business or professional income can simply tick the ‘opting out of new regime’ box in the ITR form without submitting Form 10-IEA. Those filing returns in ITR-1 or 2 are not required to submit Form 10-IEA.
How Often Can You Switch Between the Two Regimes?
Taxpayers with Business Income
Taxpayers with business or professional income cannot switch between the two regimes every year. Once they opt out of the NTR, they have only one chance to switch back. After switching back to the NTR, they cannot choose the old regime again.
Taxpayers with Non-Business Income
Taxpayers with non-business income can switch between the new and old tax regimes each year at their discretion.
Opted Out of the New Regime Last Year?
It’s important to note that the NTR is the default regime this year. Any choice made last year does not carry over. To opt for the old tax regime this year, submit Form 10-IEA or tick the ‘opt out of new regime’ box.
For more information on how to manage your tax regime choices, consult your tax professional or visit the Income Tax department’s official website.
