Unless you are living under a rock, you must be aware that the new tax regime (NTR) was introduced in Budget 2020. And year after year, it became increasingly significant with the finance minister trying to woo taxpayers by offering lower tax rates vis-a-vis the old tax regime.
In Budget 2023, the new tax regime was made the default tax regime for FY 2023-24. This means when you don’t opt for one of the two, the new tax regime will be considered as the ‘default regime’. And in order to opt for the old tax regime, one has to categorically opt out of the new tax regime this year.
In April this year, several media outlets wrongly portrayed that the tax regime became a default regime from this financial year. The Finance Ministry, later, clarified, via a press release, that the news was incorrect, and there was no change which came into force from April 1, 2024.
An individual, HUF, AOP must submit form 10-IEA if they wish to opt out of the new tax regime and pay income tax as per the old tax regime.
Form 10-IEA is a declaration made by the income tax return filers to opt out of the New Tax Regime.
The taxpayers who do not have income from business or profession can simply tick the ‘opting out of new regime’ in the ITR form without the need to file form 10-IEA.
Put simply, form 10-IEA is meant to be submitted to those who file ITR-3, ITR-4 or ITR-5 if they have business income.
However, individuals and HUFs filing their returns in forms ITR-1 or 2 are not supposed to submit form 10-IEA.
I. Taxpayers with business income
Those taxpayers who have business or professional income will not be eligible to choose between the two regimes every year. Once they opt out of the new tax regime, they have only one chance for switching to the new regime.
And once they switch back to the new regime, they won’t be permitted to choose the old regime in future.
II. Taxpayers with non-business income
Those taxpayers who have non-business income are given discretion to switch between the new and old tax regimes each year.
It is noteworthy that the new tax regime is the default tax regime this year. So, any choice made last year will have no bearing on the choice of regime this year. In case one has to opt for the old tax regime, you have to either submit form 10-IEA or tick the ‘opt out of new regime’.
