The new tax regime has been made the default tax regime in the Union Budget 2023. This means that taxes will be automatically calculated under the new regime if an individual does not choose between the old and the new tax regimes.
However, individuals also have the flexibility to choose the old tax regime before the due date for filing their income tax return (ITR) for the relevant assessment year, depending on their profession or specific criteria set by the tax regulations.
According to Suneel Dasari, founder and CEO of EZTax, individuals can change their tax regime during the submission of their tax returns, even if they have business income. Taxpayers without business income are allowed to specify their favored tax regime (old or new) while filing their ITRs.
For taxpayers with business income filing their return under ITR 3 or ITR 4, it is required to submit form 10-IEA by the due date to elect the old tax regime. However, submission of Form 10-IEA is not mandatory for those wishing to continue operating under the new tax regime.
Rahul Singh, senior manager at Taxmann, explains that under Section 115BAC of the Income-tax Act, 1961, there is a provision for an alternative tax regime (new tax regime) for individuals, Hindu undivided families (HUF), associations of persons (AOP), bodies of individuals (BOI), and artificial juridical persons (AJP). Eligible assesses have the option to be taxed at reduced rates based on their income brackets.
For those who want to opt out of the new tax regime, the process varies based on their income sources. Individuals without income from business or profession can indicate their choice of tax regime in the ITR form while filing their return of income, without needing to file Form 10-IEA. On the other hand, individuals with income from business or profession can opt out of the new tax regime and switch to the old tax regime by furnishing Form 10-IEA on or before the due date for filing the return of income.
It is important to note that there is no limit on how many times one can opt in or out of the new tax regime, and assesses without business or professional income can choose between the new or old tax regimes each year based on which is more beneficial.
Form 10-IEA can be filed on the income tax portal, under the ‘e-file’ tab, by selecting ‘Income Tax forms’ and clicking on ‘File Income Tax Forms’. The required details can then be filled in and submitted.