Income Tax Returns: The Budget 2023 saw FM Nirmala Sitharaman announce multiple changes in the New Tax Regime. Individual taxpayers can make a switch from the Old Tax Regime to the New Tax Regime as many times as they want. But that’s not the same for individual taxpayers with business income.
ITR 2024: In Union Budget 2023-24, Finance Minister Nirmala Sitharaman announced that the new personal tax regime will be the default tax regime. The new tax regime was introduced in 2020. This means, that if a taxpayer fails to mark his choice with his employer, then the tax will be deducted as per the new tax regime.
In her Budget speech for 2023-24, FM Sitharaman emphasized that the new income tax regime aims to empower individuals by allowing them to have more control over their finances. Instead of the government influencing their decisions through incentives or disincentives, taxpayers will now have the freedom to choose how to allocate their money.
But those who want choose to the Old Tax Regime can switch between the old and new regimes as per Budget 2023. However, the number of times an individual can switch between both depends on the type of income.
Salaried Individuals
A salaried individual has the flexibility to switch between the new and old tax regimes multiple times within each financial year. The new tax regime offers fewer tax deductions and exemptions compared to the old tax regime, which provides various deductions under Chapter VI A from taxable income. Section 80C is a well-known and commonly used deduction.
Income from business or profession
However, individuals with income from business or profession can only make a one-time choice. For instance, if an individual with business income switches from the old to the new regime in FY 2023, they will not be eligible to switch again. Once an individual with business income opts out of the new tax regime, they cannot opt back in for the new tax regime in the future.
How to switch while filing ITR?
The Central Board of Direct Taxes (CBDT) has recently introduced two new income tax return forms, ITR-1 (SAHAJ) and ITR-4 (SUGAM), for the Assessment Year 2024-25. ITR Form 1 now includes the option to select the tax regime. For ITR 4 (individuals with business or professional income), taxpayers will need to file form 10-IEA to opt out of the new tax regime.
Previously, individuals had to fill out Form 10-IE to choose the new tax regime. However, Form 10-IE, which allowed individuals to opt into the new tax regime, has been discontinued. This change aims to make the new tax regime the default setting, starting from the financial year 2023-24. Therefore, the new tax regime will automatically apply unless individuals take specific action to opt for the old regime.
Old Tax Regime vs New Tax Regime
The old tax regime provides several tax exemptions and deductions for individuals. Some of the frequently claimed exemptions and deductions include house rent allowance (HRA), leave travel allowance (LTA), deductions under Sections 80C, 80D, 80CCD(1b), 80CCD(2), and others.
Income Slabs Individuals Below 60 Years and NRIs
> Up to Rs 2.5 lakh NIL
> Rs 2.5 lakh – Rs 5 lakh 5%
> Rs 5 lakh – Rs 10 lakh 20%
> Rs 10 lakh 30%
New Tax Regime
The exemptions and deductions in the Old Regime are not available in the New one. If the taxable income (after all deductions) under the old regime is below Rs 5 lakh, then the individual doesn’t need to pay any tax. Under the New Regime, the entire income will be tax-free if the taxable income is under Rs 7 lakh.
> For income up to Rs 3 lakh, there is no tax.
> For income of more than Rs 3 lakh up to Rs 6 lakh, it is 5 per cent.
> Over Rs 6 lakh up to Rs 9 lakh, it is 10 per cent.
> Over Rs 9 lakh to Rs 12 lakh, it is 15 per cent
> Over Rs.12 lakh to Rs.15 lakh, it is 20 per cent.
> Above Rs 15 lakh, it is 30 per cent
Source: https://www.businesstoday.in/personal-finance/tax/story/income-tax-returns-2024-how-to-make-a-switch-between-new-and-old-tax-regimes-412411-2024-01-09
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