Filing Income Tax? Here’s How to Switch Between Old and New Regimes

As the deadline to file Income Tax Returns (ITR) for Assessment Year 2025-26 (FY 2024-25) approaches, many taxpayers are wondering whether they should stick to the old tax regime or opt for the new one. While both systems have their benefits, it is important to know that the option to switch is available, but with some conditions.

In this article, we will explain in simple terms who can switch, how often you can switch, and how to do it while filing your ITR.

Old Tax Regime vs New Tax Regime: What's the Difference?

The old tax regime allows you to claim deductions and exemptions like Section 80C (investments), 80D (health insurance), HRA (house rent allowance), home loan interest and more. This is usually better for those who make a lot of tax-saving investments.

The new tax regime, introduced in 2020 and updated in 2023, offers lower tax rates but fewer deductions. The basic tax exemption has increased from ₹2.5 lakh to ₹3 lakh. This regime suits people who don't have many deductions to claim.

For FY 2024-25, the new tax regime is the default option. However, you can still choose the old regime if you prefer it.

Who Can Switch Between the Regimes?

According to cleartax.com, "Salaried individuals using the ITR-1 or ITR-2 form can switch every year while filing their ITR. They don't have to stick to the same regime each year."

"People with business or professional income filing through ITR-3, ITR-4, or ITR-5 forms can switch to the old regime only once in their lifetime. If they move back to the new regime after that, they can't go back to the old one again. They must also submit Form 10-IEA before filing their return," mentioned cleartax.com.

Before filing your ITR, it's important to compare your tax under both the old and new regimes to see which one saves you more money. You can use the income tax calculator available on the official e-filing website for this.

"If you are a salaried person, you can choose your tax regime every year, so it's a good idea to check which option works better for you each time. Also, make sure to clearly declare your chosen regime while filing your ITR to avoid any confusion," said Tax Expert Gauri Chadha.

How to Switch While Filing ITR?

When filing your ITR, the Income Tax Department asks you to select your preferred tax regime. Here's how to switch:

1. Log in to the income tax e-filing portal https://www.incometax.gov.in.
2. Choose the correct ITR form (usually ITR-1 or ITR-2 for salaried individuals).
3. Fill in your income details.
4. Select your tax regime under the section: "Do you wish to exercise the option u/s 115BAC(6) of opting out of the new tax regime?" Default option is 'No'. Choose "Yes" for opting old regime. Choose "No" to stay with the new regime.
5. Proceed to verify and file your return.

For business income filers, you'll need to fill and submit Form 10-IEA before the due date (usually July 31 or October 31 depending on audit status) to switch between regimes.