Income Tax Regime Change While Filing ITR: Can You Switch Between Old and New Tax Systems?

Salaried Individuals Can Switch Every Year, But Business Professionals Have Limitations

NEW DELHI — As the Income Tax Return (ITR) filing season for the financial year comes into full swing, a common question among taxpayers has resurfaced: Can I change my tax regime while filing ITR? With both the Old Tax Regime (with deductions and exemptions) and the New Tax Regime (with lower tax rates but no deductions) available, taxpayers are seeking the flexibility to choose the most beneficial option at the time of return filing.

Here’s what you need to know:

Can You Change Your Tax Regime?

Yes — but it depends on your income type.

1. Salaried Individuals and Pensioners

• Can switch between the old and new regimes every financial year

• Even if your employer deducted TDS based on a chosen regime, you can change it at the time of filing ITR

• For example: If you selected the new regime for TDS but after calculations find the old regime more beneficial, you are free to switch when filing your ITR

2. Individuals with Business or Professional Income

• Can change the tax regime only once in a lifetime

• If you switch from the old regime to the new, you can go back to the old regime only once

• Once you revert to the old regime, you cannot opt for the new regime again unless your business/professional income ceases

How to Choose the Tax Regime While Filing ITR?

When filing your ITR using the official portal or utility tools, you will be prompted with a question:

“Do you wish to opt for the new tax regime under section 115BAC?”

• Select ‘Yes’ if you want the new regime

• Select ‘No’ to continue with the old regime

Important for Business/Professionals:
If you are opting for the new tax regime and have business/professional income, you must file Form 10-IEA before submitting your ITR — starting from Assessment Year 2024–25.

Which Tax Regime Should You Choose?

• Choose the Old Regime if you:

  • Claim multiple deductions (like HRA, 80C, 80D, home loan interest)

  • Have significant exemptions

• Choose the New Regime if you:

  • Don’t have many deductions

  • Prefer a simplified filing process

  • Fall under lower tax brackets and want lower rates

Using an online tax calculator can help you compare both regimes based on your income and eligible deductions.

Final Advice

• Salaried taxpayers have the flexibility to make the choice annually while filing ITR

• Business owners and professionals must choose wisely, as their switching options are limited

• Use this flexibility strategically to optimize your tax outgo