Yes, but only if you do not have business or professional income. Salaried individuals and taxpayers with only non-business income (interest, rent, capital gains) can generally choose between the old and new tax regimes each year while filing their income tax return.
However, if you have business or professional income, the rules are far more restrictive you can opt out of the new tax regime only once in a lifetime, and re-entry into the new regime is also limited.
The regime your employer selected for TDS purposes does not permanently lock you in.
Even if your employer deducted tax under the new regime, you can still choose the old regime while filing your ITR provided you file by the due date.
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Switch Between Old and New Tax Regime
Direct Answer: Can You Change Regimes Every Year?
The answer depends entirely on your income type:
| Taxpayer Category | Can You Switch Every Year? | Key Restriction |
|---|---|---|
| Salaried / Non-Business Income (ITR-1, ITR-2) | ✅ Yes | Must file ITR by the due date (31 July 2026 for AY 2026-27) |
| Business / Professional Income (ITR-3, ITR-4) | ❌ No | Form 10-IEA required; only one opt-out + one re-entry in lifetime |
For salaried taxpayers, the choice is made fresh each year when you file your return.
For business taxpayers, the decision has long-term consequences once you re-enter the new regime after opting out, you cannot go back to the old regime while business income continues.
Salaried and Non-Business Taxpayers: The Yearly Choice
If you earn salary, pension, rent, interest, or capital gains but have no business or professional income, you have significant flexibility.
Employer TDS Choice ≠ Final ITR Choice
At the start of each financial year, your employer asks you to declare your preferred tax regime for TDS calculation. If you do not respond, the employer defaults to the new tax regime.
However, the CBDT has clarified that this intimation to the employer is only for TDS purposes.
It does not amount to exercising your final option under Section 115BAC(6). You can select a different regime when filing your ITR.
Example: You told your employer to use the new regime for TDS. Later, you realize the old regime would be more beneficial because of your home loan interest and Section 80C investments.
You can select the old regime in your ITR and claim those deductions your employer’s TDS choice does not prevent this.
The Filing Deadline Matters
Your ability to opt for the old regime is tied to the ITR filing deadline under Section 139(1):
- Salaried / Non-Audit Taxpayers (ITR-1, ITR-2): Due date is 31 July 2026 for AY 2026-27
- Non-Audit Business Taxpayers (ITR-3, ITR-4): Due date is 31 August 2026 for AY 2026-27
If you file a belated return (after the due date), you lose the ability to opt for the old regime. The choice to switch regimes is only available if you file within the prescribed deadline.
Can We Switch Between Old and New Tax Regime Every Year?
For salaried and non-business taxpayers, yes. You can select a different regime each assessment year, and the choice you made in a previous year does not bind you.
How Yearly Switching Works
| Financial Year | Your Choice | Reason for Change |
|---|---|---|
| FY 2025-26 | Old Regime | High HRA exemption and home loan interest |
| FY 2026-27 | New Regime | Job change; no HRA or home loan benefits |
| FY 2027-28 | Old Regime | Resumed PPF investments and health insurance |
Each year stands independently. When you file your ITR, you simply tick the option under Section 115BAC(6) to opt out of the new regime (or stay in it). The ITR form asks:
“Do you wish to exercise the option under Section 115BAC(6) to opt out of the new tax regime?”—selecting Yes means you choose the old regime.
What If You Selected the Old Regime Last Year?
For non-business taxpayers, selecting the old regime in a prior year does not prevent you from choosing the new regime this year. You can switch freely based on your current income and deductions.
Business or Professional Income: Restricted Switching
Taxpayers with income from business or profession (filing ITR-3, ITR-4, or ITR-5) face a fundamentally different set of rules.
Why the Rules Are Different
For this category, the option to opt out of the new regime must be exercised through Form 10-IEA, filed before the ITR due date.
The Income Tax Department has designed the rules to prevent frequent back-and-forth switching, which would complicate tax administration.
The Lifetime Limit
The restriction works like this:
- First Opt-Out: You can move from the new regime to the old regime once by filing Form 10-IEA
- Re-Entry: You can subsequently return to the new regime once by filing Form 10-IEA again
- After Re-Entry: You cannot choose the old regime again as long as business or professional income continues
In other words, business taxpayers get one opt-out and one re-entry in their lifetime. This is not a yearly decision.
Form 10-IEA: Who Needs It?
Form 10-IEA is relevant only for:
- Individuals, HUFs, AOPs, BOIs, and artificial juridical persons with business or professional income
- Who want to opt out of the new regime (or re-enter it)
Form 10-IEA is NOT required for:
- Salaried taxpayers filing ITR-1 or ITR-2
- Pensioners without business income
- Anyone without business/professional income
For salaried taxpayers, the regime selection is handled directly within the ITR form. There is no separate form to file.
Form 10-IEA and ITR Filing: The Connection
For business taxpayers, Form 10-IEA and the ITR serve different but connected purposes:
| Step | What You Do | Timing |
|---|---|---|
| 1 | File Form 10-IEA on incometax.gov.in | Before the Section 139(1) due date |
| 2 | Note the acknowledgement number | Generated after successful filing |
| 3 | File your ITR (ITR-3/ITR-4) | By the due date |
| 4 | Quote the Form 10-IEA acknowledgement number in the ITR | During ITR preparation |
Critical Point: If you fail to file Form 10-IEA by the due date, your opt-out is invalid. You will be taxed under the default new regime for that year, regardless of what you intended.
What If You Want to Re-Enter the New Regime?
If you previously opted out (filed Form 10-IEA for the old regime) and now want to return to the new regime, you must file Form 10-IEA again this time selecting the “re-entering” option.
After this, you cannot go back to the old regime while business income continues.
Old vs New Tax Regime: What to Check Before Switching
Before deciding whether to opt out of the new regime, compare these factors:
1. Standard Deduction
| Regime | Standard Deduction (FY 2025-26) |
|---|---|
| Old Regime | ₹50,000 |
| New Regime | ₹75,000 |
The higher standard deduction under the new regime is available to salaried individuals and pensioners automatically, without any proof or investment requirement.
2. Deductions Available Under the Old Regime
The old regime allows several deductions that are not available under the new regime:
- Section 80C: Up to ₹1,50,000 (PPF, ELSS, LIC, principal repayment on home loan)
- Section 80D: Health insurance premiums
- HRA Exemption: House Rent Allowance
- Section 24(b): Home loan interest (up to ₹2,00,000 for self-occupied property)
- Section 80CCD(1B): Additional NPS contribution (up to ₹50,000)
3. Deductions Still Available Under the New Regime
The new regime still permits some benefits:
- Standard Deduction: ₹75,000
- Employer NPS Contribution: Under Section 80CCD(2), subject to limits
- Section 87A Rebate: Enhanced rebate framework (see below)
4. Section 87A Rebate Eligibility
| Regime | Rebate Limit | Maximum Rebate |
|---|---|---|
| Old Regime | Taxable income ≤ ₹5,00,000 | ₹12,500 |
| New Regime | Taxable income ≤ ₹12,00,000 | ₹60,000 |
Under the new regime, a resident individual with taxable income up to ₹12,00,000 can effectively pay zero tax after the Section 87A rebate. This significantly changes the comparison for middle-income taxpayers.
5. Total Tax Liability
The final comparison must include:
- Applicable slab rates
- Section 87A rebate (if eligible)
- Surcharge (if income exceeds ₹50 lakh)
- Health and Education Cess (4%)
Worked Example: Should a Salaried Taxpayer Switch?
Consider Ms. Sharma, a salaried taxpayer with the following profile for FY 2025-26:
| Particular | Amount |
|---|---|
| Gross Salary | ₹15,00,000 |
| Standard Deduction (New) | ₹75,000 |
| Standard Deduction (Old) | ₹50,000 |
| Section 80C (PPF, ELSS) | ₹1,50,000 |
| Section 80D (Health Insurance) | ₹25,000 |
| HRA Exemption | ₹1,80,000 |
| Home Loan Interest (Self-Occupied) | ₹2,00,000 |
Taxable Income Calculation
| Regime | Calculation | Taxable Income |
|---|---|---|
| New Regime | ₹15,00,000 − ₹75,000 | ₹14,25,000 |
| Old Regime | ₹15,00,000 − ₹50,000 − ₹1,50,000 − ₹25,000 − ₹1,80,000 − ₹2,00,000 | ₹8,95,000 |
Analysis
Ms. Sharma’s old regime taxable income is significantly lower (₹8,95,000 vs ₹14,25,000). With substantial deductions, the old regime may result in lower tax.
However, she must also check the Section 87A rebate. Under the new regime, her taxable income exceeds ₹12,00,000, so she would not qualify for the full rebate.
She would need to calculate the actual tax under both regimes, including slab rates and cess, to confirm which is better.
Next Year: If Ms. Sharma changes jobs and loses HRA benefits, or pays off her home loan, her deductions may drop.
She can then evaluate again and switch to the new regime if it becomes more beneficial since she is a non-business taxpayer with yearly switching rights.
This example is illustrative. Actual tax liability depends on your specific income and eligible deductions.
Edge Cases to Understand
Employer Selected the New Regime for TDS
This does not prevent you from choosing the old regime in your ITR. The employer’s TDS calculation is only an estimate; your final tax liability is determined at ITR filing.
If you are eligible, you can opt for the old regime and claim deductions, potentially resulting in a refund if excess TDS was deducted.
You Selected the Old Regime Last Year
For non-business taxpayers, this creates no binding commitment. You can choose the new regime this year without any formality beyond ticking the option in your ITR.
You Have Business or Professional Income
You cannot treat the switching rules the same as a salaried person. Your opt-out is limited to one lifetime opportunity (plus one re-entry).
If you are considering switching, evaluate the long-term consequences carefully, as you may not be able to return to the old regime later.
You File Your Return Late
If you miss the ITR due date, you lose the ability to opt for the old regime for that year.
For salaried taxpayers, the deadline is 31 July 2026; for non-audit business taxpayers, it is 31 August 2026. Belated returns do not allow regime switching.
Key Takeaways
- Salaried and non-business taxpayers can generally choose between the old and new regimes every year while filing their ITR by the due date.
- Business and professional taxpayers must file Form 10-IEA to opt out of the new regime and face a one opt-out, one re-entry lifetime restriction.
- Employer TDS selection does not permanently determine your final tax regime—you can change it in the ITR if eligible.
- Form 10-IEA is only for business/professional income taxpayers; salaried taxpayers select their regime directly in ITR-1 or ITR-2.
- The ₹75,000 standard deduction under the new regime and the ₹60,000 Section 87A rebate (for income up to ₹12 lakh) significantly impact the switching decision.
- Filing by the due date is essential—belated returns do not allow regime switching.
Frequently Asked Questions
Can I switch from the new tax regime to the old tax regime every year?
If you are a salaried or non-business taxpayer, yes. You can choose the old regime each year while filing your ITR by the due date.
If you have business or professional income, you can opt out of the new regime only once in your lifetime by filing Form 10-IEA.
Can salaried employees change their tax regime every year?
Yes. Salaried employees without business income have the flexibility to choose their regime each financial year. The choice is exercised when filing the ITR, not when intimating the employer for TDS.
Can I opt out of the new tax regime while filing ITR?
For salaried and non-business taxpayers, yes—you simply select the old regime option within your ITR form.
For business taxpayers, you must file Form 10-IEA before the ITR due date; you cannot opt out only through the ITR itself.
Is Form 10-IEA required to switch from the new regime to the old regime?
Form 10-IEA is required only for taxpayers with business or professional income. Salaried taxpayers filing ITR-1 or ITR-2 do not file this form; they select their regime directly in the ITR.
Can a person with business income switch between old and new tax regimes?
No, not freely. A business taxpayer can opt out of the new regime once and re-enter the new regime once.
After re-entering, they cannot choose the old regime again while business income continues.
Disclaimer: This article is for general informational purposes only and should not be treated as professional tax, legal, or financial advice.
Tax treatment can vary based on individual facts and the rules applicable for the relevant assessment year.
