Can You Switch Back To Old Tax Regime As New Becomes Default? Here’s What Has Changed – News18

Old Tax Regime vs New Tax Regime: In the ever-evolving landscape of taxation, the introduction of the New Tax Regime has brought significant changes for taxpayers. While designed to simplify the tax structure and streamline processes, individuals may find themselves pondering whether the benefits of the new regime truly align with their financial goals. For those considering a return to the familiarity of the Old Tax Regime, understanding the procedures for switching back is paramount.

Last week, the Income Tax Department unveiled tax return forms for individuals. In addition to requesting various details for tax exemption claims, these forms specify the new tax regime as the default for the assessment year 2024-25 (reflecting income for the financial year 2023-24). However, if opting to revert to the old regime, individuals are required to complete a new form: Form 10-IEA.

The introduction of the new tax regime occurred with the unveiling of the Union Budget 2020.

New Form To Change Tax Regime?

The new tax regime is automatically selected by default. Should an assessee wish to opt out of this regime, they must file a declaration form.

In the newly introduced tax return forms, individuals who wish to switch from the default ‘Old Regime’ to the new tax regime must fill out a separate form. Failure to do so will result in their tax computation being processed under the new regime by default.

Clarity Missing

According to a report by Moneycontrol, clarity is still pending from the IT department regarding who is eligible to fill out this form: whether it applies to everyone or solely to businessmen and self-employed individuals.

Tax professionals are currently grappling with confusion regarding the mandatory nature of Form 10-IEA for all individuals. Clarity regarding the procedure for opting out of the tax regime is still awaited.

Purpose of Form 10-IEA

Form 10-IEA is used specifically by individuals with income from business or profession who want to opt out of the new tax regime and choose the old tax regime. However, clarity is still awaited.

Key Points:

Deadline: File Form 10-IEA before the due date for filing your ITR for the relevant financial year.

Download: You can download the latest version of Form 10-IEA from the official website of the Income Tax Department.

Filing: Submit the filled form electronically through the e-filing portal of the Income Tax Department.

Key highlights of the new system include an elevation in the basic exemption threshold and enhanced tax rebates. Taxpayers have the option to choose between the previous tax regime and the updated one.

The modifications were specific to the new tax regime, leaving the old tax regime unchanged. Despite the new tax regime becoming the default option starting from 2023-24, taxpayers retain the flexibility to select the old one if they prefer.

Choosing between the new and old tax regimes can be tricky, especially with the differences in tax slabs. Let’s break down the key points to help you understand:

Old Tax Regime

Slab structure:

• 5%: From Rs 2.5 lakhs to Rs 5 lakhs
• 20%: From Rs 5 lakhs to Rs 10 lakhs
• 30%: Above Rs 10 lakhs

• In the old tax regime, there are seven tax slabs, with the liability going from NIL to 30 per cent of the income.
• People with an annual income of up to Rs 2.5 lakh are exempt from paying income tax.
• Those earning between Rs 2.5 and 5 lakh have to adhere to a tax rate of 5 percent.
• For people whose yearly income falls from Rs 5 lakh to 7.5 lakh, the income tax rate is at 10 percent of the total earnings.
• Individuals in this bracket have an annual income of Rs 7.5 to 10 lakh. The tax rate for them is 15 percent.
• For income ranging from Rs 10 to 12.5 lakh per year, the tax rate is 20 percent.
• Those earning between Rs 12.5 and 15 lakh have to follow a tax rate of 25 percent.
• For annual income exceeding Rs 15 lakh, the tax rate is 30 percent.

Under the new income tax regime, the number of slabs has been reduced.

Slab structure:

• 0%: No tax on income up to Rs 3 lakhs
• 5%: From Rs 3 lakhs to Rs 6 lakhs
• 10%: From Rs 6 lakhs to Rs 9 lakhs
• 15%: From Rs 9 lakhs to Rs 12 lakhs
• 20%: From Rs 12 lakhs to Rs 15 lakhs
• 30%: Above Rs 15 lakhs

Surcharge: Applies to certain income brackets:

• 10%: Above Rs 50 lakhs
• 15%: Above Rs 1 crore
• 25%: Above Rs 2 crore (reduced from 37% in 2023)

• Those who earn up to Rs 3 lakh a month have to pay no income tax.
• Annual income ranging from Rs 3 to 6 lakh will invite a tax rate is 5 percent.
• However, a tax rebate is applicable for income earned upto Rs 7 lakh, making it tax-exempt as well.
• Those earning between Rs 6 lakh and Rs 9 lakh a year have to follow a tax rate of 10 percent.
• The tax rate for a yearly income of Rs 9 lakh to Rs 12 lakh has been set at 15 percent.
• For the next tax bracket, which covers annual income of Rs 12 lakh to 15 lakh, the tax rate is 20 percent.
• The last tax slab covers all those whose yearly income exceeds Rs 15 lakh. They have a tax liability of 30 percent.

New vs Old Tax Regime: Which Tax Regime Is Better?

The best regime for you depends on your income, investments, and deductions. If you have a simple income structure and limited deductions, the new regime might be more beneficial. However, if you have significant investments or claim many deductions, the old regime might save you more tax.

Before switching, carefully consider the pros and cons of each regime based on your income and deductions. It’s recommended to consult a tax advisor to determine the most suitable regime for your circumstances.

Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Readers are advised to check with certified experts before making any investment decisions.