Can you Change the Tax Regime While Filing an Income Tax Return (ITR)?

Tax season, with its calculations and deadlines, often raises the critical question of maximizing tax efficiency. Choosing the right tax regime is a key decision, but what if you realize it's not the right fit while filing your Income Tax Return? Good news – in certain cases, you can change the tax regime while filing the Income Tax Return (ITR).

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What is ITR Filing, and When is the Last Date to File an ITR?

Income Tax Return (ITR) filing refers to the annual process of submitting a formally structured document to the Income Tax Department, declaring your total income earned in a specific financial year (April 1st to March 31st of the next year). This document details your various income sources, allowable deductions, tax credits, and, ultimately, your net tax liability or potential refund. You have the option to choose between Old and New Tax Regimes while filing the ITR. 

The deadline for filing your ITR depends on your circumstances:

  • For individuals and non-audit cases: The last date for FY 2023-24 (Assessment Year 2024-25) is July 31, 2024.

  • For audit cases: If your accounts require an audit, the deadline extends to October 31, 2024.

What is the Old Tax Regime?

The old tax regime refers to the traditional and existing system of income tax calculation and payment, where individuals are taxed based on the applicable slab rates without the option of availing certain deductions and exemptions. It contrasts with the new tax regime, which limits the scope of deductions. 

The Old Regime offers over 70 deductions and exemptions, allowing you to significantly reduce your taxable income. Popular deductions include:

Section 80C: Up to Rs. 1.5 lakh on investments in PPF, ELSS, tax-saving FDs, etc.

Section 80D: Up to Rs. 50,000 on medical expenses for self, spouse, parents, and children.

HRA and LTA: Allowances for house rent and travel expenses, further reducing your taxable income.

What is the New Tax Regime?

The New Tax Regime, introduced in 2020, offers an alternative tax filing system to the traditional Old Tax Regime. In the New Regime, the tax brackets are wider, and deductions and exemptions available under the Old Regime are unavailable in the New Regime. The New Regime does not offer deductions for investments in PPF, ELSS, tax-saving FDs, or expenses like medical insurance premiums and child education. This could increase the tax burden for individuals.

Income Tax Slabs for Assessment Year (AY) 2023-24

Individuals and HUFs under the age of 60 have the option to opt for either the Old or New Tax Regime. It is advisable to prioritize the old tax regime as it provides greater deductions and exemptions, potentially leading to a reduction in your tax liability.

  1. Old Tax Regime

      Income Slab Applicable Tax Rate
    ₹0 - ₹2,50,000 -
    ₹2,50,001  - ₹5,00,000 5%
    ₹5,00,001 - ₹10,00,000 20%
    ₹10,00,001 - ₹15,00,000 30%
    >₹15,00,001 30%
  2. New Tax Regime

    Annual Taxable Income Applicable Tax Rate
    Up to ₹3,00,000 Nil
    ₹3,00,001 to ₹6,00,000 5%  (Tax rebate under section 87A)
    ₹6,00,001 to ₹9,00,000 10% (Tax rebate under section 87A up to Rs. 7,00,000)
    ₹9,00,001 to ₹12,00,000 15%
    ₹12,00,001 to ₹15,00,000 20%
    Above ₹15,00,000 30%

Invest & Save upto ₹46,800 per annum in taxInvest & Save upto ₹46,800 per annum in tax

Can We Change the Tax Regime While Filing ITR?

Yes, you can change your tax regime between the Old Tax Regime and the New Tax Regime as per budget 2023 while filing your ITR, but the process and flexibility depend on your income source and the timing of your decision.

  1. Salaried Individuals:

    • You can easily change your chosen tax regime while filing your ITR, even if you opted for the new regime for TDS throughout the year.

    • Simply choose the desired regime (new or old) within the ITR form.

    • No additional forms or procedures are required.

    However, it’s important to note that the new tax regime will be the default tax regime in FY 2023-24. 

  2. Individuals with Business/Profession Income:

    • You have limited flexibility to switch regimes.

    • Once you choose the new regime, you can only switch back to the old regime once in your lifetime.

    • This switch requires filing Form 10-IE along with your ITR.

    • If you haven't already filed Form 10-IE by the original due date for filing your ITR, you cannot switch back to the old regime for that year.

How Can We Switch the Tax Regime While Filing ITR?

Choosing the right tax regime before filing your ITR can significantly impact your final tax liability. Both salaried and business individuals have the option to switch regimes during the filing process, but the procedures and limitations differ for each category. The following steps can be taken to switch the tax regime while filing the ITR:

Step 1: Decide on your preferred regime:

  • New Tax Regime: Offers lower tax rates but eliminates most deductions and exemptions.

  • Old Tax Regime: Offers higher tax rates but allows various deductions and exemptions.

Step 2: Check your eligibility:

  • Salaried individuals: You can choose either regime directly in your ITR form; no need for extra forms.

  • Individuals with Business/ Profession Income Can switch regimes only once in a lifetime and need to file Form 10IE before July 31 of the assessment year.

Step 3. Follow these steps based on your situation:

  • Salaried individuals:

    • Open your ITR form (e.g., ITR-1 or ITR-2).

    • Look for the section on choosing the tax regime.

    • Select the "New Tax Regime" option if that's your choice.

    • Complete the rest of your ITR and submit it.

  • Individuals with Business/ Profession Income:

    • Switching to a New Regime:

      • Download and fill out Form 10IE, stating your desire to switch to the new regime.

      • Submit Form 10IE before July 31 of the assessment year.

      • File your ITR by choosing the "New Tax Regime" option.

    • Switching to Old Regime:

      • This option is available only if you haven't switched before.

      • Download and fill out Form 10IE, stating your desire to switch to the old regime.

      • Important: You CANNOT claim deductions or exemptions available under the old regime in your current year's return.

      • File your ITR without choosing any specific regime.

  • Double-Check and Submit:

    • Review your ITR carefully to ensure accuracy.

    • E-verify your ITR using Aadhaar OTP or PAN and bank details.

    • Submit your ITR electronically after choosing your preferred regime.

When Should We Submit Form 10IE?

Form 10IE should be submitted before filing your income tax return. Upon successful submission, you'll receive a 15-digit acknowledgement number. This number is crucial for filing your ITR under the old tax/new tax regime.

What is the Time Limit to Submit Form 10IE?

Form 10IE must be filed before the original due date for filing your ITR for the relevant financial year.

For most individuals (excluding those requiring an audit), the ITR filing deadline is July 31st of the following year. Therefore, this is typically the deadline for Form 10IE as well, unless there is some extension granted by the government of India.

Individuals with audited accounts: If your accounts are subject to audit, the deadline to file Form 10IE is on or before the due date of the audit report, which is usually September 30th of the following year.

For the financial year 2023-24, the deadline to submit Form 10IE would be July 31st, 2024.

FAQ's

  • Who is not eligible to change tax regimes annually?

    Individuals earning income from business or profession cannot switch income tax regimes every year. However, those with income from sources other than business or profession have the flexibility to switch regimes annually.
  • Is it mandatory for employees to communicate their chosen tax regime to employers?

    Yes, employees must inform their employers about the preferred tax regime. They can switch regimes at the time of filing their Income Tax Return (ITR) based on what is more advantageous for them.
  • How frequently can one switch between tax regimes?

    Individuals without income from business or profession can switch tax regimes annually. On the other hand, individuals with income from business or profession are restricted to switching regimes only once in their lifetime.
  • Can I opt for a new tax regime after the due date?

    No, you cannot opt for the new tax regime after the due date for your ITR filing.
    • The deadline for salaried individuals to choose the new regime for FY 2023-24 was July 31, 2023.

    • For non-salaried individuals with income from business or profession, the deadline to switch to the new regime for FY 2023-24 was July 31, 2023.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
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