How To Switch Tax Regimes? Last Date To Do So Is April 1

Understanding Tax Regime Options

Individuals must choose between the old and new tax regimes at the beginning of the financial year for salary tax deductions. Despite the initial choice, the income tax laws permit individuals to switch between tax regimes if needed.

Default Tax Regime

From April 1, 2023, the new tax regime automatically applies if not chosen otherwise. Theres ambiguity regarding whether an employee can switch tax regimes during the financial year as per an April 2023 CBDT circular.

Employee Flexibility, Employer Policy

Tax experts suggest that employees can change tax regimes during the financial year based on company policies. However, certain employers might restrict employees from switching tax regimes mid-year.

Changing Tax Regime

Individuals can opt for either tax regime when filing their income tax return, regardless of the regime chosen earlier for salary deductions. The CBDT mandates employers to collect information on employees preferred tax regimes for TDS purposes.

Switching Tax Regimes

Section 115BAC of the Income-tax Act, 1961, governs the new tax regime, allowing individuals to select their preferred regime while filing income tax returns. Notified ITR forms for FY 2023-24 offer an option to opt out of the new tax regime.

Considerations, Proofs For Tax Deductions

Individuals switching from the new to the old tax regime must complete tax-saving investments and expenditures by March 31, 2024. Necessary proofs of deductions should be maintained as Form 16 issued by employers may not include detailed deduction information.

Deductions Under New Tax Regime

Switching to the new tax regime allows individuals to claim standard deductions from salary and employer contributions to Tier-I NPS accounts. These deductions should be carefully claimed in the income tax return form when opting for the new tax regime.