Since the new tax regime is the default tax regime, filing income tax return (ITR) under the old regime would require you to switch from the new tax regime. However, before you do that — it is imperative to be aware of certain key rules which govern the switch.
Notably, the rules with regards to switching of tax regime depend on the source of income of taxpayers: salary or business/ profession.
Which tax regime to choose?
Taxpayers can file tax return under the old tax regime if they believe that this would lead to some amount of tax saving. On the other hand, if filing tax return under the new tax regime is profitable then naturally, one would opt for the default regime.
What rules apply to salaried employees?
Salaried taxpayers can switch the tax regime from old to new and vice versa every year.
There is no restriction on salaried employees with regards to switching between the two tax regimes as they can do it every year. However, the same flexibility is not available for persons who have business income.
If you have business or professional income, what rules apply?
The income tax website says that an individual with business or professional income won’t be eligible to choose between the two tax regimes each year.
So, after they opt out of new tax regime, they will have only one chance to switch to new regime. And once they switch back to the new regime, they won’t be able to choose old tax regime anytime in future.
And the choice of old tax regime can be made prior to the due date of filing the return under section 139(1) of I T Act.
If you opted for the old tax regime last year, will the new tax regime still be default regime?
The new tax regime has been the default regime for past two years. Any action in the previous years with regards to choosing of regime will not be applicable this time. Taxpayers are supposed to opt for the old regime.
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