If a person opts for the new tax regime without tax benefits in one particular year, can he change to the regular tax regime with benefits in the next financial year, if he finds it more beneficial? Also, is such a change allowed in the same financial year?


As per the provisions of Section 115BAC of the Income-tax Act, 1961 (’the Act’), for Individuals having income from business or profession, once such taxpayers opt for new taxpayer regime, the same can be withdrawn only once in subsequent years (till the time such taxpayers continue to earn business/professional incomes) and once the person opts for the withdrawal then such person shall never be eligible to exercise the option in this section again. Also, in such a case, Form 10IE is required to be filed before the due date of filing original tax return of income.

In case you do not have income from business or profession, option to choose or withdraw from the new tax regime is available on a year-on-year basis.

It is pertinent to note that the option to choose new tax rate regime is available only for returns that are filed by the due date for filing original tax return (as prescribed u/s 139(1) of the Act). Hence, in case the return is filed after the original due date, new regime cannot be opted for.

Further, a salaried taxpayer intending to opt for the concessional rates of tax under section 115BAC of the Act may intimate the deductor, being his employer, of such intention for each previous year. Upon such intimation, the deductor shall compute his total income and deduct appropriate taxes thereon in accordance with the provisions of section 115BAC. Also, the taxpayer, while filing the original income tax return for respective financial year, would choose and finalise the tax regime in such return of income.

The writer is a Partner with BDO India LLP.

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