Change Your Tax Regime Even When You Have A Business Income

Taxpayers having business income and filing their income tax returns under the old tax regime have to submit form 10-IEA by the due date
Income Tax Department, 
Income Tax Department, SMS, Tax

We all know that the new tax regime was made the default tax regime, in Union Budget 2023. This means that your taxes will be automatically calculated under the new tax regime if you don’t exactly choose between the old and the new tax regimes.

However, you could also have the flexibility of choosing the old tax regime at any point, before the due date for filing your income tax return (ITR) for the relevant assessment year. This will, however, depend on your profession or specific criteria set by the tax regulations.

Says Suneel Dasari, founder and CEO of EZTax: “Regardless of whether you have business income, it is entirely feasible to change your tax regime during the submission of your tax returns. During the filing of their ITRs, taxpayers who do not have business income are permitted to specify their favoured tax regime (old or new).”

To elect the old tax regime, taxpayers who have business income and are filing their return under ITR 3 or ITR 4 must submit form 10-IEA by the due date. Nevertheless, taxpayers are not obligated to submit Form 10-IEA if they wish to continue operating under the new tax regime.

“Additionally, business taxpayers are obligated to include the date of filing and the Form 10 IEA Acknowledgement number in their ITR. If taxpayers are filing ITR after the due date and have a business, they will be unable to select the old tax regime,” adds Dasari.

Also read: 9 High-Value Transactions You Should Be Aware Of To Escape The Income Tax Notice

Changing Tax Regime At The Time Of Filing Your Return

Rahul Singh, senior manager, Taxmann, tax and corporate advisor says that under Section 115BAC of the Income-tax Act, 1961, there is a provision of alternative tax regime (new tax regime) for the assessee if they are an individual, Hindu undivided family (HUF), association of persons (AOP), body of individuals (BOI), and artificial juridical person (AJP).

“Under this tax regime, eligible assesses have the option to be taxed at reduced rates based on their income brackets. With effect from the assessment year 2024-25, the new tax regime will be the default regime for taxpayers. If a taxpayer does not want to pay tax according to the new tax regime, he will have to explicitly opt out of it and choose to be taxed under the old tax regime,” adds Singh.

How To Opt Out From New Tax Regime

Here’s how one can opt out of the new tax regime.

Assessee Not Having Income From Business Or Profession: If the assessee does not have income from business or profession and wants to opt for the old tax regime, there is no need to file Form 10-IEA. Opting out from the new tax regime can be done by indicating a choice of ‘tax regime’ in the ITR form while filing a return of income.

There is no limit on how many times you can opt in or out of the new tax regime. An assessee without business or professional income can choose between the new or old tax regimes each year based on which is more beneficial.

Assessee Having Income From Business Or Profession: If an assessee has income from business or profession, he can opt out of the new tax regime and switch to the old tax regime by furnishing Form number 10-IEA on or before the due date for filing the return of income. Further, once the option of the old tax regime is exercised by him, it shall apply for the year in which the option is exercised and for the subsequent year.

“If an assessee wants to switch back to the new tax regime in a subsequent year, he can do so. But this switching shall be allowed only once, which means once he switches from the old tax regime to the new tax regime, he shall not be allowed to switch back to the old tax regime again until he ceases to have any income from business or profession,” says Singh.

“For example, Mr. X has business income in AY 2024-25 and opts for the old tax regime by filing Form 10-IEA. He then switches to the new tax regime in AY 2025-26 by filing the same form. Later in AY 2026-27, he cannot switch back to the old tax regime because a taxpayer with business income can only switch back once. However, he can switch to the old tax regime if he has no business or professional income in AY 2026-27,” adds Singh.

How To File Form 10-IEA

This form can be filed on the income tax portal.

Login to the portal and go to the ‘e-file’ tab, select ‘Income Tax forms’, and click on ‘File Income Tax Forms’.

You will find Form 10-IEA at the beginning.

Click on ‘File Now’ and fill in the required details.

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