Although the new income-tax regime has been made the default regime, you could still switch back to the old regime if you claim deductions and loan exemptions. But make sure you fill this form by July 31.
If you have done your math and found that the old income-tax regime is beneficial for your income, yearly investments and expenses, then you would have to follow an additional procedure to continue claiming the benefits of the old tax regime.
The Income Tax Department last week released the tax return forms for individuals. The forms, apart from asking for several details for tax exemption claims, also mention the new tax regime as a default tax regime for the assessment year 2024-25 (where income for the financial year 2023-24 is accounted for). However, if you wish to switch back to the old regime, there is a brand new form you’ve got to fill: Form 10-IEA.
The new tax regime was first introduced under the Union Budget 2020.
There is still clarity awaited from the I-T department as to who can fill this form; everyone or just businessmen and self-employed.
What is the change?
Under the freshly introduced tax return forms, apart from selecting ‘Old Regime’, a separate form would have to be filled by individuals, who wish to “opt out” of the new tax regime. Failing to do so will mean that the tax computation will be under the new regime.
Maneet Pal Singh, partner at I.P. Pasricha & Co, says, “By default the new tax regime is selected. If an assessee wants to opt out of the new regime, then he will have to file a declaration form.”
When Budget 2023 made the income-tax regime the default regime, it automatically pushed hundreds of taxpayers who were still sticking to the old regime due to the deductions, into the new regime. Additionally, the finance minister also sweetened the deal in the new tax regime, by lowering tax rates, increasing tax rebates and introducing standard deduction in the new regime.
The Form 10-IEA asks for details such as the permanent account number (PAN), tax status (individuals, HUF, resident etc) and also if any tax benefits for the International Financial Services Centre (IFSC) are being claimed. Additionally, the form also asks for your history of switching in and out of the two regimes. Remember: You need to submit this form before the tax filing deadline (July 31). This is important because you can file a belated return till December 31. But if you miss the July 31 deadline, and then realise that the old tax regime was more beneficial and aim to switch to the old regime, you cannot. That’s because the last date for submitting Form 10-IEA is July 31.
Switching back from the new income tax regime to the old tax regime could be important for those who want to claim tax deductions and exemptions such as Section 80 C, Section 80 D of medical insurance, home loan deduction, education, house rent and leave travel allowance, which aren’t allowed under the new tax regime.
The tax rates are also lower under the new tax regime for lower-income groups. The basic exemption limit of Rs 2.5 lakh is applicable and a 5.20 percent tax is levied for income up to Rs 5 lakh under the new tax regime. A tax of 10.4 percent is deducted for income between Rs 5 lakh to Rs 7.5 lakh under the new tax regime. However, under the old tax regime, individuals earning Rs 5 lakh to Rs 7.5 lakh have to pay a steeper rate of tax at 20 percent, with 78 permissible deductions and tax exemptions.
Fill declaration form
For those who wish to switch back to the old regime, the new form asks for more details. “The income tax department wants to know whether you opted in or out of the new tax regime in the past,” says Rajarshi Dasgupta, Executive Director – Tax, AQUILAW, adding, “The taxpayer needs to mention the 10IE details for both selections – switching to or from new tax regime to old tax regime.”
Changes for business and self-employed only?
However, confusion prevails among tax professionals on whether Form 10-IEA is mandatory for all or not. Clarity on the procedure to follow for opting out of the tax regime is yet to emerge.
Sudhir Kaushik, co-founder of TaxSpanner.com, says, “For ITR-4, which is designed for individuals with business or professional income, taxpayers are required to submit Form 10-IEA to opt out of the new tax regime.”
No belated returns under old tax regime
Submitting past details at length might sound cumbersome, but the government finds it crucial to collect the details to make sure you are claiming the deductions and exemptions properly. This is because the self-employed are permitted to opt back to the old tax regime only once in a lifetime.
“Failing to fill this form before the deadline for tax return submission could mean that you would not be allowed to file belated tax returns (between August 1 and December 31) under the old tax regime. You would forcefully have to give up on your tax exemptions under the old tax regime and automatically will be considered to have opted for the new tax regime if you do not fill Form 10-IEA,” says Paras Savla, partner at KPB and Associates.
Source: https://www.moneycontrol.com/news/business/want-to-stick-with-the-old-income-tax-regime-dont-forget-to-fill-this-form-first-12273191.html
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