Old Vs New Tax Regime: How Often Can You Make The Change? EXPLAINED

For a salaried individual, it is quite easy to move between the tax regimes and they can also make this change multiple times in each fiscal year

As the new 2024-25 financial year starts today (Monday), taxpayers should take note that now their income will be taxed under the new tax regime as default. However, the government hasn't taken away the option to opt for the old tax regime from the public if it suits their financial goals better. The frequency and ease of making the switch between the tax regimes depends on the type of employment of the individual taxpayer.

Salaried Taxpayers

For a salaried individual, it is quite easy to move between the tax regimes and they can also make this change multiple times in each fiscal year. They can simply opt for their preferred taxation regime while filing their Income Tax Return (ITR) for the relevant year. The Central Board of Direct Taxes (CBDT) has made it mandatory for employers to provide the option to pick their tax regime when filing their tax returns. 

Business Or Professional Income Taxpayers

However, taxpayers with business or professional income can opt for this change in their taxation regime only once. For instance, if a taxpayer with business income opts for the new tax regime in FY2023 once, they cannot go back to the old system again. Also, if they choose to opt out of the new tax regime, they will not be able to select it again in the future. So it is crucial that they utilise their chance to change their tax regime. The taxpayers can opt out of the new tax regime by filing Form 10-IEA before the return filing deadline.

Old vs New Tax Regime

The old tax regime is preferred for the multiple tax exemptions and deductions options provided by the system to the taxpayer. This helps reduce the tax liabilities of individuals as they can claim benefits on house rent allowance (HRA), leave travel allowance (LTA), along with deductions under Section 80C, 80D, 80CCD(1b), 80CCD(2), and many others. 

However, the new tax regime provides few tax deductions and exemptions, however, it raises the thresholds for taxpayers, allowing them more room before they have to pay tax. The below table provides the current tax slabs for the 2023-24 fiscal year. 

Income Slab	Tax Rate Under New Tax Regime	Income Slab	Tax Rate Under Old Tax Regime
0-3 Lakh	0%	0-2.5 Lakh	0%
3-6 Lakh	5%	2.5-5 Lakh	5%
6-9 Lakh	10%	5-10 Lakh	20%
9-12 Lakh	15%	Over 10 Lakh	30%
12-15 Lakh	20%
Over 15 Lakh	30%