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Form 10IE- Option to choose New tax regime

Updated on :  

08 min read.

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. 

What is the old tax regime or existing tax regime? 

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 the slab available after considering all the deductions under Chapter VIA (such as deduction under Section 80C, 80D, etc.) and other tax benefits such as HRA, LTA and many others as allowed in the Income Tax Act 1961.

The existing regime levies tax at three levels, i.e. 5% tax on income between Rs 2.5 lakh-Rs 5.00 lakh, 20% tax on income between Rs 5 lakh to Rs 10 lakh and 30% tax on income above Rs 10 lakh. 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.

What is the new tax 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 the new tax 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 filing ITR.

Applicability of new tax regime

The new tax regime applies from 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.

How to provide the declaration of choice between both regimes?

If you are salaried, your employer might ask for a declaration from you to choose between the old and 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. Your employer will calculate the TDS liability according to the regime declared by you.
However, if you fail to provide the declaration, 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 employer will mention the the selected regime for deducting TDS in Form 16 furnished 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 the employer for TDS deduction at the time of filing ITR.
Remember to fill declaration under Form 10IE if you wish to change the tax regime.

How to inform the IT department of the selection of the tax regime?

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, the taxpayers should fill Form 10IE if they want to opt out of the new tax regime. The taxpayers should furnish Form 10IE before filing the income tax return of the relevant assessment year.

Time limit for filing Form 10IE

For individuals with business income can file Form 10IE before the due date of filing ITR, i.e. 31st July or another date (in case the government extends the due date)

For individuals having a salary income, can submit Form 10IE before or at the time of filing of ITR.

Contents of Form 10IE

Basic details required to file Form 10IE are mentioned below:

  • Name of the individual/HUF
  • Confirmation of whether the individual or HUF have any income under ‘Profit or gains from business and profession.
  • PAN number
  • Address
  • Date of birth/date of incorporation
  • Nature of business/profession (mandatory in case of business income)
  • Confirmation in ‘yes/no’ of whether the taxpayer has any unit in IFSC (International Financial Service Centre) as mentioned in sub-section (1A) of section 80LA. Suppose the answer is ‘Yes’, then details of the unit to be provided.
  • Details of Form 10IE previously filed.
  • Declaration

How to switch between old and new tax regime?

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.

e-Filing of Form 10IE

  • The taxpayers should file Form 10IE electronically.
  • 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 (EVC). The income tax department is yet to notify the procedure of filling and verifying the form.

How to download the paper copy of Form 10IE?

Click here to download Form 10IE

Frequently Asked Questions

What if I forget to file 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.

Can I choose to file my return with a new tax regime if I have opted for the old tax regime for TDS deduction by my employer?

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 use a different regime than the one he opted for before while filing an ITR.

Which is better between the old tax regime and the new tax regime?

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 :

  • The new tax regime is expected to largely benefit taxpayers who have a taxable income up to Rs 15 lakh, whereas, in the case of high-income earners above Rs 15 lakh, the old regime would be a better option.
  • Also, as the new income tax regime does not allow any tax benefits or deductions, it is generally beneficial for low investment people. As the new regime offers seven income tax slabs, anyone paying taxes without claiming tax deductions can benefit from paying a lower rate of tax under the new tax regime.
  • That being said, if you already have in place a financial plan by making investments in tax-saving instruments; medical and life insurance; making payments of children’s tuition fees; payment of EMIs on education loan; buying a house with a home loan; and so on, the old regime helps you with higher tax deductions and lower tax outgo.

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 with the most beneficial regime for you.

Related Articles :
Section 115BAC-New tax regime
Old tax Regime Vs New tax regime
Calculate taxes in Old Vs New tax regime

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