Mumbai: With the recent tax law changes, taxpayers in India now have two regimes to choose from: the old tax system and the new tax system. Here’s how you can switch between them effectively.
Understanding the Shift
Until FY 2022–2023, the old tax system was the default. However, Budget 2023 made the new tax system the default starting FY 2023–2024. This new system, introduced in Budget 2020, offers reduced tax rates but eliminates most deductions.
Choosing the New Tax Regime
To opt for the new tax regime, individuals and HUFs with business or professional income must submit Form 10IE. ‘If you have business or professional income, file Form 10IE to notify the income tax department,’ says an expert. For those without business income, simply select the new regime in your ITR form—Form 10IE is not needed for ITR-1 or ITR-2 filers.
Flexibility for Business Income
Taxpayers without business income have more flexibility. Starting Assessment Year 2023–24, they will automatically be under the new tax regime but can choose the old regime when filing their ITR. Most ITR forms, like ITR-1 (SAHAJ) and ITR-4 (SUGAM), include an option to select the preferred regime.
Annual Choice for Salaried Individuals
For salaried taxpayers, the new tax regime is now the default. This means reduced tax rates but no deductions for expenses like health insurance or house rent allowance (HRA). However, you can switch back to the old regime if it’s more beneficial for your situation. ‘You can change every year if the old system’s deductions offer better savings,’ an expert advises. To do this, file Form 10-IEA by the ITR filing deadline, usually July 31.
By understanding these steps and requirements, taxpayers can make informed decisions about which tax regime suits them best each financial year.
