New Delhi: File an Income Tax Return (ITR) can be confusing, especially when choosing between old and new tax systems. Although the government has adopted the new tax regime as the default option in its 2023 budget, taxpayers can still choose the old tax option if they like. But, can you switch between tax plans every year? What about the business owner? Are they the same flexibility? Understanding these rules is crucial because your decision directly affects your tax savings.
If your income comes from salary, interest, or rent (non-business income), you can switch between the old and new tax plans every year. So if you chose the new tax system last year, you can go back to the old tax system this year. However, this choice must be made before the ITR application deadline (July 31, 2025). The Income Tax Department notes that you can choose the old tax system only if you submit your return on time.
For those who earn from business or professional income, the conversion tax system is not that flexible. Individuals, HUFS (Hindu family), AOPS (Association of Humans), BOI (Physical Body) and artificial judicial personnel cannot change their tax system every year. If they choose a new tax system and then decide to switch to the old tax system, they will not be able to return to the new regime again. They only have one chance to switch.
Under the 2023 budget, taxpayers who choose the old tax system must submit Form 10-IEA before submitting the ITR. This form confirms their chosen tax system and qualifications. Salary individuals and non-business income individuals can switch between old and new tax systems every year. However, they must make a decision before the ITR application deadline. If you want to continue with the old tax system, you must select it before the deadline under Section 139(1) of the Income Tax Act.
ITR File 2025: The Key Deadlines You Need to Know
The Income Tax Department has set it as July 31, 2025 as the deadline for taxpayers who do not require auditing, and these taxpayers cannot submit their Income Tax Return (ITR) in fiscal 2024-25 (AY 2025-26). If you miss this deadline, you can still submit a belated return by December 31, 2025, but there will be a late fee. Have submitted your ITR, but want to switch your tax system? You can submit a revised return, provided that your original return is submitted by the due date.
Which tax system should you choose?
Before submitting an ITR, it is important to determine that the old tax system is more beneficial to you.
Old tax system: Allows various exemptions and deductions, including:
- Article 80C (PPF, EPF, life insurance)
- No. 80D (Medical Insurance)
- HRA (House Rent Allowance)
- New tax system: Provides lower tax rates, but does not allow most exemptions and deductions.
Choose wisely based on your income, investment and saving tax goals.
