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The finance ministry introduced a ‘New tax regime’ in the Finance Act 2020.
Form 10IE is a declaration made by the return filers for choosing the ‘New tax regime’
So first, let us understand what do you mean by the new tax regime?
A tax regime refers to the computation of the individual’s income tax liability after considering all the deductions and tax benefits.
When we refer to the old/existing tax regime it means the tax on the income which is calculated as per the old tax slabs.
Under this regime, various levels of income are taxed according to slab available after considering all the deductions under Chapter VIA (such as deduction under section 80C, 80D, etc) as well as other tax benefits such as HRA, LTA and many others as allowed in the Income Tax Act 1961.
The existing regime levies tax at 3 levels i.e 5% tax on income between Rs 2.5 Lakh-Rs.5.00 Lakh, 20% tax on income between Rs.5.00 Lakh to Rs. 10 Lakh and 30% tax on income above Rs. 10 Lakhs. A 4% education cess is levied on the tax calculated on the above.
Click here to check the Income-tax slab applicable to you as per old regime.
The new tax regime allows for lower tax rates while most of the deductions and tax benefits allowed in the old/existing tax regime are not allowed.
Click here to check the Income-tax slab applicable to you as per New regime.
The choice for selecting the tax regime is to be made before filing the income tax return of the relevant financial year. The taxpayer has to communicate the selection of tax regime by sending an intimation through Form 10IE to the income tax department before the filing of ITR.
The new tax regime is applicable from the FY 2020-21, i.e. AY 2021-22.
The choice between ‘New tax regime’ and ‘Old tax regime’ is available to individuals and HUF, which can be opted by filing Form 10IE.
If you are salaried, your employer might ask for a declaration from you to choose between the old or new tax regime.
Scenario 1. Employer has asked for a declaration to choose the regime
In such a case, you will have to declare the choice of the regime by the due date as allowed by the employer. The TDS liability will be calculated according to the regime declared by the employee.
However, if the employee fails to provide the declaration then the employer will calculate the default TDS liability as per the old tax regime.
Scenario 2. Employer has not asked for any declaration
In such a case, the employer will go ahead and will calculate the default TDS liability as per the old tax regime. Also, the regime selected for deducting TDS will be provided in Form 16 furnished by the employer to the employee.
However, in both the above situations, the employee will have an opportunity to switch to the regime other than the one declared to employer for TDS deduction at the time of filing ITR.
Please remember to fill declaration under Form 10IE before 31st July (unless extended)
The Central Board of Direct Taxes has released Form 10IE. Any individual or HUF who wishes to pay income tax as per the new tax regime can communicate to the income tax department by filing Form 10IE.
Also, Form 10IE is required to be filed if the taxpayers want to opt out of the new tax regime. Form 10IE to be furnished before filing the income tax return of the relevant assessment year.
For individuals with business income, Form 10IE can be filed before the due date of filing of ITR, i.e. 31st July or another date (in case due date is extended by the government)
For individuals having a salary income, Form 10IE can be submitted before or at the time of filing of ITR.
Basic details required to file Form 10IE are mentioned below:
Individuals having ‘Business income’
Individuals having income ‘other than business income’
Individuals with business income will not be eligible to choose between the two regimes every year. Once they select a new tax regime, they have only once in a lifetime option for switching back to the old regime. Once they switch back to the old regime, they won’t be able to choose a new regime anytime in future.
An individual with salaried income and no business income can choose between the new and old tax regimes every year.
Hence, people with business income probably will have to file Form 10IE twice in a lifetime – once to choose the new tax regime and the second time for switching back to the old regime.
Hence, the salaried individual will have to file Form 10IE every year for opting new tax regime.
Form 10IE is required to be filed in an electronic form.
Taxpayers can file the form through the income tax department portal to opt for the new tax regime for FY 2020-21 and onwards.
The form will be filed using either the digital signature or through an electronic verification code (i.e EVC). The income tax department is yet to notify the procedure of filling and verifying the form.
Click here to Download Form 10IE
If the taxpayers forget to fill the Form 10IE before or at the time of filing of ITR, the taxpayer will be disallowed to use the benefit of the concessional tax rates of the new tax regime. The income tax department will calculate tax based on the old/ existing tax regime.
Only salaried individuals can opt out of any of the regimes every year. Also, the taxpayer is free to choose a different regime than he/she chose for TDS deduction with the employer, i.e. the employee can file an ITR using a different regime than the one he opted for before.
No single regime is beneficial for all. Both the regimes come with their benefits and shortcomings. However, we can give you some insight into both the regimes :
Hence, it is advisable to do a comparative evaluation and analysis under both regimes and then choose the most beneficial one as it may vary from person to person.
You can compare the tax outflow using Tax Calculator by Cleartax which gives tax outflow in both Old scheme and New scheme and will prompt you the most beneficial regime for you.