As the Income Tax Return (ITR) filing season for FY 2024-25 (AY 2025-26) begins, many taxpayers are faced with a recurring yet critical question: Should I opt for the old tax regime or the new one?

This choice can have a significant impact on your total tax liability, and the flexibility to change regimes depends on whether you earn from a salary or run a business/profession. Let’s break it all down in an easy-to-understand format.

What Are the Old and New Tax Regimes?

The old tax regime allows you to claim various deductions and exemptions, such as:

• Standard deduction

• HRA (House Rent Allowance)

• Section 80C, 80D, 80G, and many others

In contrast, the new tax regime, introduced in FY 2020-21, offers lower slab rates but eliminates most deductions and exemptions.

Key Differences Between Old and New Regimes:

For Salaried Individuals and Pensioners

If your income comes from:

• Salary

• Pension

• Rent

• Interest

• Other non-business sources

Then, you're in luck!

You Can Switch Every Financial Year

• Salaried individuals can freely choose between the old and new regime every year.

• You must indicate your preferred regime at the time of filing your ITR under Section 139(1).

• There is no limit to how often you can switch between regimes.

Example:

If in FY 2023-24 you chose the new regime and in FY 2024-25 you find the old regime more beneficial, you can switch without restrictions.

This flexibility makes yearly tax planning easier and helps in maximising savings.

For Business Owners and Professionals

If your income comes from:

• Business

• Profession (e.g., Doctor, Lawyer, Consultant)

then you have stricter rules.

You Can Switch Only Once

• You can opt into the new regime at any time.

• But if you opt out later, it’s a one-time exit only.

• Once you opt out, you cannot go back to the new regime in future years.

Form Requirement:

• You must file Form 10-IEA before the due date under Section 139(1) to either opt in or opt out.

Why This Matters

This rule makes your regime selection almost permanent if you're self-employed. Therefore, it's crucial to:

• Consult a financial advisor

• Use online tax calculators

• Assess tax savings across years

The New Regime Is Now the Default

The Finance Act, 2024 introduced a key change:

• The new tax regime is now the default option.

• If you don’t actively select the old regime, your ITR will be processed under the new one.

But There’s a Way Out

You can still opt for the old regime by:

• Filing Form 10-IEA within the specified deadline.

• Selecting the appropriate option while filing ITR.

When and How to File Form 10-IEA

• Applicable to: Business owners and professionals

• Purpose: To choose or opt out of the new regime

• Where to File: Online via the income tax portal

• Deadline: Before the due date of your return under Section 139(1)

Points to Remember:

• If Form 10-IEA is not filed, you will be taxed under the new regime by default

• Salaried taxpayers do not need to file Form 10-IEA for switching

Which Tax Regime Is Better for You?

There’s no one-size-fits-all answer. It depends on:

• Your income level

• Your investments

• Your eligible deductions

Scenarios:

Important Tips for 2025 ITR Filing

• Use trusted online calculators to estimate taxes under both regimes

• Keep a copy of all investment proofs if choosing old regime

• File Form 10-IEA on time if you're in business/profession

• Consult a CA or tax expert if confused

Final Takeaway

Choosing between the old and new tax regimes in 2025 can impact your overall tax outgo significantly.

• Salaried individuals enjoy yearly flexibility

• Business/professional income earners have a one-time switch option

• New regime is the default now, but opting for the old regime is still possible with the right forms

Being aware of the rules helps you save more, file correctly, and avoid penalties.

For maximum benefit, compare both regimes every year and consult a tax expert if you're unsure.

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