How to Switch Between Old and New Tax Regime While Filing ITR

Can I switch between old and new tax regime while filing ITR for AY 2026-27? Yes. Salaried taxpayers without business income can switch every year by selecting the option in their ITR form before the due date. Business income earners must file Form 10-IEA separately on the e-filing portal to opt for the old regime, and face a lifetime one-time switch restriction. Filing after the due date means the new regime applies by default with no option to change.

The new tax regime under Section 115BAC is the default for every individual, HUF, AOP, BOI, and artificial juridical person filing returns for AY 2026-27 (FY 2025-26). If you do nothing, your tax is computed under the new regime slabs. The question most taxpayers face around the July 31 deadline is whether switching to the old regime would save more tax, and if so, how exactly to switch.

The answer depends on one factor: whether you have income under the head "Profits and Gains of Business or Profession." That single distinction creates two entirely different switching processes with different deadlines, forms, and permanence rules.

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Default Regime for AY 2026-27: Section 115BAC

Section 115BAC of the Income Tax Act, 1961 makes the new tax regime the default for AY 2026-27 onwards. This means:

• If you file your ITR without explicitly opting out, the new regime slab rates apply.
• The e-filing portal pre-selects the new regime when you open any ITR form.
• Any previous year's regime choice does not carry over. You must actively opt out each year if you want the old regime.

The new regime offers lower slab rates (nil up to Rs 4 lakh, 5% for Rs 4-8 lakh, 10% for Rs 8-12 lakh, and so on up to 30% above Rs 24 lakh) but disallows most deductions and exemptions under Chapter VI-A. The old regime allows deductions under Section 80C, 80D, HRA exemption under Section 10(13A), home loan interest under Section 24(b), NPS under 80CCD(1B), and others, but has higher slab rates starting at 5% above Rs 2.5 lakh and reaching 30% above Rs 10 lakh.

The breakeven point is roughly Rs 3.75-4 lakh in total deductions. Below that, the new regime almost always wins. Above that, the old regime may save more tax. If you claim HRA, 80C, 80D, home loan interest, and NPS together, the old regime is often better for incomes between Rs 10-25 lakh.

How Salaried Filers Switch Regime (No Business Income)

If you are a salaried individual, pensioner, or HUF with no income under "Profits and Gains of Business or Profession," you can switch between regimes every year. There is no Form 10-IEA requirement. The process is built into ITR-1 (Sahaj) and ITR-2.

Step-by-Step Process

Step 1: Log in to the e-filing portal Go to incometax.gov.in and log in with your PAN and password.

Step 2: Start filing your return Navigate to e-File > Income Tax Returns > File Income Tax Return. Select AY 2026-27 and the appropriate ITR form (ITR-1 for salary/pension income up to Rs 50 lakh, or ITR-2 for higher income, capital gains, or foreign assets).

Step 3: Select your regime The form will display a question: "Are you opting out of the new tax regime under Section 115BAC(1A)?" Select Yes to use the old regime. Select No or leave the default to stay in the new regime.

Step 4: Complete and file the return Fill in your income details, deductions (if opting for old regime), and tax computation. Verify and submit before the due date under Section 139(1), which is July 31, 2026 for non-audit cases.

Key Points for Salaried Filers

• You can switch every single year. There is no restriction on how many times you switch.
• The decision is final for that assessment year once the return is filed. You cannot change regime in a revised return if the original return was filed within the due date.
• If you informed your employer to deduct TDS under the old regime during the year (via Form 12BAA or declaration), that does not bind you at filing time. You can still choose either regime in the ITR.
• Switching regime in a belated return is not allowed. If you miss the July 31 deadline, you are locked into the new regime.

How Business/Professional Income Filers Switch Regime

If you have any income under "Profits and Gains of Business or Profession," whether it is business income under Section 44AD, professional income under Section 44ADA, or regular business income requiring books of account, you must file Form 10-IEA to opt for the old regime. This applies to filers using ITR-3, ITR-4, and ITR-5.

What is Form 10-IEA?

Form 10-IEA is a declaration filed on the income tax e-filing portal that formally opts you out of the new tax regime under Section 115BAC(1A). Without this form, the portal will not allow you to compute tax under the old regime in ITR-3 or ITR-4.

Step-by-Step: Filing Form 10-IEA

Step 1: Log in to incometax.gov.in Use your PAN credentials to access the e-filing portal.

Step 2: Navigate to the form Go to e-File > Income Tax Forms > File Income Tax Forms. Search for "Form 10-IEA" in the search bar and click "File Now."

Step 3: Select Assessment Year Choose AY 2026-27 and click "Let's Get Started."

Step 4: Fill in details PAN and name are pre-filled. Indicate that you are opting out of the new tax regime for this assessment year. Select the nature of income (business or profession).

Step 5: Verify and submit Verify using Aadhaar OTP, EVC, or digital signature certificate (DSC). Note the acknowledgement number. You will need this number while filing your ITR.

Step 6: File your ITR After Form 10-IEA is successfully submitted, file your ITR-3 or ITR-4. The form will now allow old regime computation. Enter the Form 10-IEA acknowledgement number where asked.

Filing Deadline for Form 10-IEA

Form 10-IEA must be filed on or before the due date of filing return under Section 139(1):

If Form 10-IEA is filed after the due date, the portal marks it as "Invalid Form" and you lose the option to use the old regime for that year.

Important Restrictions

• No revision: Once Form 10-IEA is filed and verified, it cannot be revised for the same assessment year.
• No withdrawal: You cannot withdraw a submitted Form 10-IEA. If you change your mind after filing, you are bound to the old regime for AY 2026-27.
• File before ITR: Submit Form 10-IEA before filing your ITR. The acknowledgement number is required in the return form.

The One-Time Switch Rule (Business Income Only)

This is the most misunderstood aspect of regime switching. The one-time switch rule applies exclusively to taxpayers with business or professional income.

How It Works

1. Year 1: You are in the new regime (default). You decide old regime is better. You file Form 10-IEA and opt for the old regime.
2. Year 2-N: You continue in the old regime as long as you want.
3. Year X: You decide to switch back to the new regime. You file Form 10-IEA again, this time to re-enter the new regime.
4. After Year X: You are permanently locked into the new regime. You cannot file Form 10-IEA to go back to the old regime ever again, for any future year.

The only exception: if you cease to have business or professional income entirely in a future year (and file ITR-1 or ITR-2 instead), the annual switching flexibility of salaried filers applies to you for that year.

Practical Impact

Most business owners and professionals should decide their regime carefully before filing the first Form 10-IEA. Once you have used both exits (out of new, then back into new), the door closes permanently.

If you are a freelancer or consultant who sometimes has business income and sometimes only salary income, the restriction applies only in years when you have business income and file ITR-3 or ITR-4. In years when you have only salary income and file ITR-1, you can switch freely.

When the Old Regime Makes Sense

Consider opting for the old regime if all of the following are true:

• Your total deductions and exemptions exceed Rs 3.75 lakh (this is the approximate breakeven)
• You claim HRA exemption (Section 10(13A)) on rent exceeding Rs 15,000-20,000 per month
• You invest the full Rs 1.5 lakh under Section 80C
• You claim health insurance premium under Section 80D (Rs 25,000 self + Rs 50,000 for senior citizen parents)
• You have a home loan with interest exceeding Rs 2 lakh per year under Section 24(b)
• You contribute to NPS and claim Rs 50,000 under Section 80CCD(1B)

For someone claiming Rs 1.5 lakh (80C) + Rs 75,000 (80D) + Rs 2 lakh (Section 24b) + Rs 50,000 (NPS 80CCD(1B)) + Rs 1.2 lakh (HRA), total deductions are Rs 5.95 lakh, well above the breakeven. The old regime saves significantly more.

When the New Regime Wins

Stay with the new regime if:

• Your total deductions are below Rs 3.75 lakh
• Your taxable income is below Rs 12 lakh (zero tax under new regime due to Section 87A rebate of Rs 60,000)
• You do not pay rent or your HRA exemption is small
• You have no home loan
• You prefer simplicity with no investment tracking or proof submission

For income up to Rs 12.75 lakh (Rs 12 lakh + Rs 75,000 standard deduction), there is zero tax under the new regime. The old regime cannot match this unless your income is below Rs 5 lakh.

Filing a Belated Return: No Regime Choice

If you miss the due date under Section 139(1) and file a belated return under Section 139(4), you are locked into the new tax regime. The e-filing portal does not offer the opt-out option in a belated return.

This has three consequences:

1. All Chapter VI-A deductions (80C, 80D, 80CCD, etc.) are disallowed.
2. HRA exemption, home loan interest deduction under Section 24(b) beyond Rs 2 lakh (allowed as standard in new regime for let-out property), and Leave Travel Allowance exemption are denied.
3. For business income earners, even a previously filed Form 10-IEA becomes irrelevant if the ITR itself is filed after the due date.

The July 31 deadline (or October 31/November 30 for audit/transfer pricing cases) is therefore not just a penalty deadline. It is a regime-choice deadline.

Regime Selection Under the New Income Tax Act 2025

The Income Tax Act, 2025 takes effect from April 1, 2026 for Tax Year 2026-27 (income earned from April 2026 to March 2027). Section 115BAC of the 1961 Act corresponds to Section 202 of the 2025 Act.

For the returns being filed now in July 2026 (for income earned in FY 2025-26), the 1961 Act still applies. Section 115BAC and Form 10-IEA remain the operative provisions. When you file returns in 2027 for TY 2026-27 under the new act, Section 202 will govern regime selection. The switching rules and one-time restriction remain substantially unchanged under the new act.

Checklist Before Switching Regime

Before opting for the old regime, verify each of these:

• Calculate total deductions: 80C + 80D + 80CCD(1B) + HRA + Section 24(b) + any others
• Compare tax under both regimes using the Income Tax Department's calculator
• Confirm your return will be filed before the due date (belated return = new regime mandatory)
• If you have business income: file Form 10-IEA first on the e-filing portal
• Keep investment proofs (80C receipts, insurance premiums, rent receipts, home loan certificate) ready
• Note the Form 10-IEA acknowledgement number for use in your ITR

Frequently Asked Questions

Can I change tax regime after filing my ITR for AY 2026-27?

No. Once you file your original return, the regime choice is locked for that assessment year. You cannot switch regime in a revised return. If you filed under the new regime and later realise the old regime would have saved more tax, you cannot revise the return to change the regime selection.

I am salaried but also have freelance income. Do I need Form 10-IEA?

Yes. If you have any income under Profits and Gains of Business or Profession, even a small freelance consulting receipt, you must file Form 10-IEA to opt for the old regime. You would file ITR-3 or ITR-4 (if eligible for presumptive taxation), and both require the Form 10-IEA acknowledgement to allow old regime computation.

What if I filed Form 10-IEA but want to stay in the new regime now?

Once Form 10-IEA is submitted and verified, it cannot be withdrawn or revised for the same assessment year. You must file your ITR under the old regime for AY 2026-27. You can switch back to the new regime from the next assessment year by filing Form 10-IEA again, but this uses up your one re-entry, making the new regime permanent thereafter.

I told my employer to deduct TDS under the old regime. Am I bound to it?

No. The employer's TDS regime choice is for withholding purposes during the year. At the time of filing ITR, you can choose either regime regardless of what you told your employer. If you switch, the difference in TDS will be adjusted in your final tax computation as refund or additional tax payable.

Is Form 10-IEA needed for ITR-1 or ITR-2 filers?

No. Form 10-IEA is required only for taxpayers with business or professional income filing ITR-3, ITR-4, or ITR-5. ITR-1 and ITR-2 filers can opt out of the new regime directly within the return form by selecting the appropriate option.

What happens if I file Form 10-IEA after the July 31 deadline?

The portal marks the form as Invalid. You lose the option to use the old regime for AY 2026-27 and must file under the new regime. The July 31 deadline (or October 31 for audit cases) is absolute for Form 10-IEA validity.

Information in this article is based on Section 115BAC of the Income Tax Act, 1961, Form 10-IEA user manual and FAQs published by the Income Tax Department at incometax.gov.in, and the FAQs on New Tax vs Old Tax Regime on the e-filing portal. The one-time switch restriction for business income earners is specified in Section 115BAC(6). Taxpayers should verify current rules on the e-filing portal before filing, as CBDT may issue clarifications during the filing season.