Income Tax: How To Switch From The Old Tax Regime To The New Tax Regime

In the Union Budget of 2025, Finance Minister Nirmala Sitharaman announced that in the new tax regime, taxpayers with an annual income of up to Rs 12 lakh do not have to pay any income tax. However, no changes regarding the old tax regime were mentioned in this year's budget.
Considering the potential advantages offered by the new tax-regime, many taxpayers may wish to switch from the Old Tax Regime to the New Tax Regime. However taxpayers who wish to make the switch must understand some key rules related to the New Tax Regime.

The New Tax Regime was introduced in 2020-21. Taxpayers are allowed to choose between both tax regimes while filing for income tax. However from FY 2023-24 onwards, the new tax regime was made default for the taxpayers. Other than reshuffling the tax slabs, the tax rebate available under Section 87A has also been increased, meaning that individuals with net taxable income up to Rs 12 lakh will not have to pay tax in the new tax regime after claiming rebate.

The old tax regime allowed deductions and exemptions under various sections like Section 80C, 80D and House Rent Allowance. However the new tax regime has lower tax slabs the deduction and exemption benefits are not provided under the new regime. This action, according to the government, simplifies the tax structure and complexities of income sources for the public.

Who Are Eligible To Make The Switch

Both salaried individuals and persons earning income from businesses are eligible to switch between the old tax regime and the new tax regime. However, the rules and flexibility to do so differ between the two. 

Salaried Individuals

A person earning a monthly salary has the flexibility to choose between the old and the new tax regime. This can be done while filing the Income Tax Return (ITR) or before the due date mentioned under Section 139(1).  Notably the Income Tax Department says individuals with businesses 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.

How to Switch

Taxpayers can switch between the regimes before filing the ITR, in the case of a salaried individual, they can make this switch by letting their employer know about this choice at the beginning of the financial year. Note that taxpayers have to submit the Form 10IE to be submitted before you file the income tax return.

Post submission, a 15-digit acknowledgement number will be generated which is pertinent for filing the ITR.

For persons having business income, to opt out of the old tax regime, they can do so by furnishing Form 10-IEA, but this can be done only once.  In case the person forgets to file Form 10IE before filing ITR, he/she will not be able to switch from the old tax regime to the new one.
On the other hand, for individuals having income from business and profession wanting to opt out of the new tax regime and moving to the new, one will have to fill up Form 10-IEA on or before the due date mentioned in Section 139(1).