Starting from the financial year 2023-24, the new tax regime has become the default option for taxpayers, with tax deductions being based on this system unless individuals specifically opt for the old tax regime. The choice between the two tax regimes is crucial and depends on the source of income, with different rules for salaried individuals compared to those earning from business or profession.
Can You Switch Tax Regimes Every Year?
For individuals earning from salary, interest, or rent, they have the flexibility to switch between the new and old tax regimes annually. This means that if you opted for the new tax regime last year, you can switch to the old one this year, as long as you make the decision before the ITR filing deadline of July 31, 2025. However, it’s important to note that the old tax regime is only available if the return is filed on time.
On the other hand, for business and professional income earners, the process of switching tax regimes is more restricted. Once they opt for the new tax regime, they are unable to freely switch back and forth. If they do decide to move to the old tax regime, they only have one opportunity to return to the new regime. According to Budget 2023, individuals choosing the old tax regime must submit Form 10-IEA before filing their ITR to confirm their choice.
ITR Filing 2025: Key Deadlines
For taxpayers who do not require an audit, the deadline for filing their ITR is July 31, 2025, for the financial year 2024-25 and assessment year 2025-26. It is important to note that a belated return can be filed until December 31, 2025, but with the imposition of a late fee. If you realize after filing your tax return that you should have chosen a different tax regime, you can submit a revised return, but only if the original ITR was filed on time.
When it comes to determining which tax regime is better for you, it is essential to carefully evaluate your options before filing. The old tax regime offers deductions under sections such as 80C (PPF, EPF, Life Insurance), 80D (Medical Insurance), and HRA (House Rent Allowance). On the other hand, the new tax regime features lower tax rates but excludes most exemptions and deductions. The choice you make can significantly impact your tax savings, so it is crucial to assess your options thoroughly.
In conclusion, the decision between the new and old tax regimes is a critical one that every taxpayer must consider carefully. Whether you are a salaried individual, business owner, or professional, understanding the implications of each tax regime and evaluating your options before the ITR filing deadline is essential for maximizing your tax savings and ensuring compliance with the Income Tax Act. Make sure to consult with a tax professional or financial advisor if you need guidance in making this decision.
