In this article, Manmohan Sethumadhavan, answers the question, “Should Professionals or Business Owners File Form-10IEA for continuing in Old Tax Regime for AY 2024-2025 (FY 2023-2024)” and considers several other scenarios.
Note that this is only for people with business/ professional income, since others can choose any regime any year without any limits.
About the author: Manmohan Sethumadhavan is a Freelancer, investor, and personal finance enthusiast, “in search of the absolute truth” You can follow Manu on Twitter @ManuTsr.
Introduction – the case till FY 2022-23
- The New Income-tax regime u/s 115BAC was introduced in FY 2020-21 to simplify the tax returns with reduced tax slabs and without most of the deductions.
- Those who needed to opt for the new regime had to declare it explicitly.
- Those who do not have any business/professional income can opt for the new regime while filing the returns. They can opt-out to shift to the old regime also in any year by declaring it while filing the returns. They can opt to choose any regime while filing the returns each year without any limits irrespective of their history of choices.
- Those with business/professional income need to file an option in Form-10IE to opt-in for new regime, before filing their returns and before the due date. They can opt out only once in lifetime to shift back to the old regime and can never return to the new regime again.
Changes in budget 2023
- From FY 2023-24 onwards, the new-regime was made the default option.
- Those who do not have any business/professional income can continue opting while filing returns, as before.
- Those with business/professional income now need to file an option in Form-10IEA to opt-in for the old-regime, before the due-date. They can opt-out only once in life-time to shift back to the new regime, and can never opt for old-regime again.
Now, a doubt arises whether people who had filed an option in Form-10IE in a previous year, or have returned back to old-regime by filing the option again, need to file Form-10-IEA this year?
Let us analyse the section 115BAC with the amendments. I have simplified it for clarity.
115BAC.
(1) The income-tax payable from assessment year beginning from 01-04-2021 [but before the 01-04-2024], shall at the option, be computed at the rates given in the following Table, if the conditions contained in sub-section (2) are satisfied:
[TABLE of rates]
(1A) The income-tax payable for other than a person who has exercised an option under sub-section (6), from assessment year beginning from 01-04-2024, shall be computed at the rate of tax given in the following Table:
[TABLE of rates]
(2) Exemptions or deductions that are not allowed. …
(5) This section shall not apply unless option is exercised in the prescribed manner.
(i) having income from business or profession, before the due date, and such option once exercised shall apply to subsequent assessment years;
(ii) others, along with the returns.
Provided that the option under clause (i), once exercised can be withdrawn only once (and not in the same year) and thereafter, it shall be final, except where such person ceases to have business /professional income.
Provided further that the provisions of this sub-section shall not apply from the assessment year beginning 01-04-2024.
(6) Sub-section (1A) shall not apply to a person where an option is exercised in the prescribed manner,
(i) before the due date, for person having business/professional income, and such option once exercised shall apply to subsequent assessment years; or
(ii) along with the returns for not having business/professional income.
Provided that the option under (6)(i), once exercised, can be withdrawn only once (not in the same year) and thereafter, it shall be final, except where such person ceases to have business/professional income.
So, it is clear that for FY 2020-21, 2021-22 & 2022-23, the option was filed under sub-section 5(i) using Form-10IE for opting the new regime and for returning back to the old-regime once for all. This sub-section is valid only till FY 2022-23.
From FY 2023-24, the new regime is the default regime, and the option is filed under sub-section 6(i) using form-10IEA, for opting the old-regime, and for returning back later to the new regime once for all. This is irrespective of what was done in the previous years.
The different scenarios and actions to take are as follows:
|
Scenario previous FYs |
Scenario FY 2023-24 | Action to take |
| Opted for New-regime in previous FY. | Need to continue with New-regime. | Nothing to do. New-regime is the default option. |
| Opted for New-regime in previous FY. | Need to go back to Old-regime. | File Form-10IEA. Option required under 115BAC(6)(i). |
| Opted for New-regime in previous FY, and returned back to Old-regime. | Continuing with Old-regime. | File Form-10IEA. Option required under 115BAC(6)(i) irrespective of option under 115BAC(5)(i). |
| Opted for New-regime in previous FY, and returned back to Old-regime. | Need to opt New-regime again. | Nothing to do. New-regime is the default option. 115BAC(5)(i) is not valid from this year onwards. |
| Did not opt for New-regime. Filed under Old-Regime only. | Continuing with Old-regime. | File Form-10IEA. Option required under 115BAC(6)(i). |
| Did not opt for New-regime. Filed under Old-Regime only. | Need to opt New-regime. | Nothing to do. New-regime is the default option. |
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