Starting from FY2023-24, the new tax regime in India is set to become the default option for taxpayers. But taxpayers who want to avail deductions such as home loan, House Rent Allowance, Public Provident Fund, etc still have the flexibility to opt for the old tax regime if it benefits them financially.
For taxpayers who earn income from business or profession, specifically those who file Income Tax Returns (ITR) through ITR-3 and ITR-4, the process to opt for the old regime requires an additional step. These individuals must file Form 10-IEA before the due date of their income tax return filings. Not submitting this form in time will result in automatic enrollment in the new tax regime, potentially impacting tax liabilities.
“This form is mandatory for those who file ITR-3 and ITR-4 (usually individuals with income from business or profession) and want to opt for the old regime. It must be filed before the due date of filing your income tax return,” said Yeeshu Sehgal, Head of Tax Markets, AKM Global, a tax and consulting firm.
Form 10-IEA is crucial as it formally registers the taxpayer’s choice of the old regime, which could include various exemptions and deductions that might not be available in the new regime. This is particularly relevant for businesses and professionals who may have significant deductible expenses and investments.
On the other hand, salaried individuals who file their taxes using ITR-1 or ITR-2 will find the process simpler. They are allowed to indicate their preference for the old tax regime directly in their ITR filings. Unlike ITR-3 and ITR-4 filers, they do not need to submit Form 10-IEA. This provision ensures that salaried employees can easily choose the most tax-efficient option for themselves without additional paperwork.
“Individuals who file ITR-1 or ITR-2 (usually salaried individuals) can simply indicate their preference for the old regime while filing their ITR. There's no need to file a separate Form 10-IEA in this case,” said Sehgal.
Sehgal further explains the procedure while filing ITR:
For ITR-1 and ITR-2 filers - Simply choose the option for the old tax regime in your ITR form. The tax calculation will then be done accordingly.
For ITR-3 and ITR-4 filers:
• File Form 10-IEA before the ITR due date.
• While filing your ITR, choose the option for the old tax regime. Ensure that the information in Form 10-IEA and your ITR matches.
If you don't fill the required form (Form 10-IEA for ITR-3 and ITR-4 filers) it will be assumed that you have opted for the new tax regime, and your tax liability will be calculated accordingly. This could lead to a higher tax outgo if the old regime is more beneficial for you.
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