How to Switch Regimes While Filing ITR Online
- PRITI SIRDESHMUKH
- 14 hours ago
- 9 min read
Switching between the old and new tax regimes while filing Income Tax Returns has become a key decision for taxpayers in India. For FY 2024-25 (AY 2025-26), the new regime is the default, but individuals can still opt for the old regime if it proves more beneficial. The process varies for salaried taxpayers compared to those with business or professional income, and the choice must be made before the ITR due date. Understanding the rules, deadlines, and filing procedures is essential to ensure compliance and optimize tax savings.
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How to Switch Regimes While Filing ITR Online
Switching between the old and new tax regimes has become a critical step while filing income tax returns. The new regime under Section 115BAC is the default choice from FY 2024-25 (AY 2025-26), but taxpayers can opt for the old regime if it offers better tax savings. Salaried taxpayers enjoy more flexibility in switching, while business or professional taxpayers face stricter rules. The decision must always be made before the return due date, as belated returns do not allow any regime change.
Switching for Salaried Individuals (ITR-1 and ITR-2)
For salaried individuals filing ITR-1 or ITR-2, the process is straightforward. The income tax return form includes a question such as: “Do you wish to exercise the option u/s 115BAC(6) of opting out of the new tax regime?” The default answer is “No,” which means the return will be processed under the new regime. By selecting “Yes,” the return gets computed under the old regime. Salaried taxpayers can make this choice each year, giving them the flexibility to evaluate which regime is more beneficial based on their deductions, exemptions, and overall tax liability. No separate forms are required in these cases.
Switching for Business and Professional Income (ITR-3 and ITR-4)
Taxpayers with business or professional income have additional compliance requirements. If they wish to opt for the old regime instead of the default new regime, they must file Form 10-IEA within the due date under Section 139(1). Unlike salaried individuals, the flexibility is limited. Business taxpayers can switch regimes only once in a lifetime. For example, if they initially opt for the new regime and later return to the old regime, they cannot switch back again. This restriction makes the decision more strategic, requiring careful tax planning before making the switch.
Filing Form 10-IEA: When and Why It’s Needed
Form 10-IEA is the mandatory declaration for taxpayers with business or professional income who want to continue with or return to the old tax regime. This form must be submitted electronically before filing the ITR for that year. If the form is not submitted by the deadline, the taxpayer is automatically locked into the new regime. The once-in-a-lifetime switching rule makes Form 10-IEA a crucial document, as it determines long-term tax positions and eliminates the possibility of yearly switching flexibility.
Step-by-Step Process on the Income Tax Portal
Step 1: Begin by logging in to the official income tax e-filing portal using your Permanent Account Number (PAN) as the user ID along with your password. For additional security, you may also be prompted to enter a captcha code or confirm an OTP sent to your registered mobile number or email. Access to the portal is essential since all regime selections and return filings must be carried out online.
Step 2: Once logged in, navigate to the option to file your Income Tax Return (ITR). The system will ask you to select the relevant assessment year and the applicable form based on your income sources. It is important to ensure the correct form is chosen, as regime switching options are tied to specific ITR forms like ITR-1, ITR-2,ITR-3, or ITR-4.
Step 3: For salaried individuals, the regime choice is integrated directly within the ITR form. The form usually contains a question asking whether the taxpayer wishes to opt out of the default new tax regime. By selecting the appropriate response, the taxpayer can decide whether to file under the old regime with deductions or remain in the new regime with lower rates and fewer exemptions. This option can be exercised every year, providing flexibility for salaried taxpayers.
Step 4: For individuals with business or professional income, an additional step is required before filing the ITR. Such taxpayers must first complete and submit Form 10-IEA through the portal. This form serves as an official declaration of the chosen regime and must be filed before the return itself. Without this step, the system will automatically default to the new regime, and the taxpayer may lose the option of switching. Filing Form 10-IEA is particularly critical because business taxpayers are restricted to a once-in-a-lifetime switch between regimes.
Step 5: After completing the initial selection, proceed to fill in all required financial details such as income from salary, business, property, capital gains, and any deductions or exemptions that apply under the chosen regime. The portal’s system will compute tax liability based on the selection, allowing you to review and confirm the calculations. This step ensures there are no errors or mismatches before moving forward.
Step 6: Once the form is filled and the regime choice is confirmed, move to the final stage of e-verification and submission. E-verification can be done through multiple methods such as Aadhaar OTP, net banking, or electronic verification code (EVC). Successful e-verification completes the filing process. It is essential to file the ITR before the statutory due date, as filing late removes the option to switch regimes and locks the taxpayer into the default new regime.
Key Considerations Before Switching Regimes
Switching regimes is not just about checking a box in the ITR form. Taxpayers should first calculate their liability under both regimes. The old regime allows deductions such as Section 80C (investments), Section 80D (health insurance), and HRA exemptions, while the new regime offers lower tax rates but fewer deductions. Salaried taxpayers may benefit from the new regime if they do not claim many deductions, whereas those with significant investments may still find the old regime more suitable. For business taxpayers, the long-term restriction means regime selection must align with future income expectations and investment strategies.
Is Switching Allowed in a Belated Return?
No. Switching tax regimes is permitted only if the return is filed within the due date under Section 139(1). If a return is filed late as a belated return, the regime cannot be changed for that year. This condition makes timely filing crucial, as missing the deadline not only attracts penalties but also locks the taxpayer into the default regime.
How Often Can You Switch Tax Regimes?
Salaried taxpayers have the flexibility to switch regimes every year by choosing the preferred option in their ITR form. Business or professional taxpayers, however, do not have this flexibility. Once they choose the new regime and later switch back to the old regime, the switch is permanent. This rule under Section 115BAC ensures that business taxpayers cannot alternate between regimes each year to reduce their liability opportunistically.
Common Mistakes to Avoid When Choosing a Tax Regime
Common mistakes while choosing a tax regime often occur because of misunderstanding the rules or failing to plan in advance. One of the most frequent errors is not comparing liabilities under both regimes before filing. The old regime continues to allow deductions such as Section 80C, Section 80D, and HRA exemptions, while the new regime offers lower slab rates but restricts deductions. Taxpayers who do not run the numbers under both regimes may end up paying higher tax than necessary simply because they did not calculate carefully.
Another mistake is forgetting to file Form 10-IEA on time, which particularly affects taxpayers with business or professional income. If this form is not filed within the due date of return filing, the taxpayer is automatically locked into the new regime, even if the old regime would have been more beneficial. Once locked, the option cannot be exercised retroactively for that year.
Filing the income tax return after the due date is another common slip-up that removes the option to switch regimes altogether. Belated returns do not allow regime switching, which means taxpayers lose the flexibility to decide and are bound by the default choice of the new regime. Timely compliance is therefore crucial not only to avoid penalties but also to retain the right to choose.
A widespread misconception is that the regime selected by the employer for deducting TDS during the financial year automatically decides the regime for the taxpayer. In reality, the final choice rests with the individual at the time of filing the ITR. Even if TDS has been deducted under one regime, the taxpayer can still choose another regime, and the return will recalculate the liability accordingly.
Finally, ignoring long-term planning is a serious mistake, especially for business taxpayers. Unlike salaried individuals, they are restricted by the once-in-a-lifetime switch rule. Choosing a regime without considering future income levels, deductions, and investments may lock them into an option that is not suitable in the long run. For this reason, business taxpayers must evaluate not just immediate savings but also the impact of their decision on future tax years.
Conclusion
Switching regimes while filing ITR online requires careful consideration of income type, filing deadlines, and tax planning goals. Salaried individuals benefit from annual flexibility, while business taxpayers must weigh long-term consequences before committing through Form 10-IEA. For anyone seeking professional assistance, it is advisable to use platforms that simplify this decision-making process. For a streamlined and secure filing journey, download the TaxBuddy mobile app to ensure hassle-free compliance and optimised tax savings.
FAQs
Q 1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
TaxBuddy provides flexibility by offering both self-filing and expert-assisted plans. Taxpayers who are comfortable filing on their own can use the platform’s guided, automated self-filing option. For those with complex income sources such as capital gains, F&O trading, or business income, expert-assisted plans are available, where professionals review and file the return on behalf of the taxpayer.
Q 2. Which is the best site to file ITR?
The official Income Tax e-Filing portal is the government’s platform for filing returns. However, for a more user-friendly experience, many prefer private platforms like TaxBuddy. With features such as automated data entry, AI-driven checks, and expert review, TaxBuddy has emerged as one of the most reliable sites for accurate and timely ITR filing.
Q 3. Where to file an income tax return?
Income tax returns can be filed either directly on the Income Tax Department’s official portal (incometax.gov.in) or through registered e-filing intermediaries. Platforms like TaxBuddy simplify the process by offering a clean interface, step-by-step guidance, and support in choosing between the old and new tax regimes.
Q 4. Can I switch between old and new tax regimes every year?
Salaried individuals and taxpayers without business income can switch between the old and new tax regimes every financial year while filing their ITR. However, taxpayers with business or professional income face restrictions: they can opt out of the new regime only once in their lifetime using Form 10-IEA and can switch back to the new regime once thereafter.
Q 5. What is Form 10-IEA and who needs to file it?
Form 10-IEA is required by taxpayers with income from business or profession if they want to opt out of the new regime and continue under the old one. It must be filed online before submitting the ITR for that assessment year. Without filing this form, the choice of switching regimes is not valid for such taxpayers.
Q6. What happens if the ITR filing deadline is missed?
If the return is filed after the deadline, the taxpayer automatically falls under the new tax regime. The option to choose the old regime is not available for belated returns. This makes timely filing critical for those wishing to claim deductions and exemptions under the old system.
Q 7. Can I change the tax regime after submitting my ITR?
Once an ITR is submitted and verified, the tax regime selected cannot be altered for that assessment year. Taxpayers must carefully evaluate their options before final submission. If a mistake is made, the only remedy is to file a revised return within the allowed timeframe, provided the deadline has not passed.
Q8. How do I decide which regime is better for my income and deductions?
The decision depends on the level of deductions and exemptions available. The old regime allows claims under sections like 80C, 80D, HRA, and LTA, which can significantly reduce taxable income. The new regime offers lower tax rates but fewer exemptions. Tax calculators or expert services like TaxBuddy can help compare tax liability under both regimes and identify the most beneficial option.
Q9. Do business owners have the same flexibility as salaried individuals?
No, business owners or professionals do not have the same flexibility. While salaried individuals can switch regimes each year, business income taxpayers can opt out of the new regime only once in their lifetime by filing Form 10-IEA. They can later return to the new regime, but once that is done, they cannot go back to the old regime again.
Q10. Are deductions like 80D or 80TTA allowed in the new regime?
Most popular deductions, including those under Section 80C (investments), Section 80D (health insurance premiums), and Section 80TTA (savings account interest), are not available under the new regime. Taxpayers opting for the new regime can only claim limited deductions, such as the employer’s contribution to NPS and the standard deduction.
Q11. How does switching impact belated or revised returns?
For belated returns, switching is not allowed, as the new regime automatically applies. For revised returns, the regime choice made in the original filing cannot be changed. A revised return only allows correction of errors or updates in income details, not a change in tax regime.
Q12. Can TaxBuddy help analyze which tax regime is more beneficial?
Yes, TaxBuddy offers tools and expert consultation to evaluate which regime results in lower tax liability. By analysing income, deductions, and exemptions, the platform helps taxpayers make an informed decision. The mobile app further simplifies the process by providing personalised suggestions and filing options for both regimes.
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