ITR Filing FY 2025-26: It is important to choose between the old and new income tax regimes – which one saves you more tax? But the answer may change every year.
You may have just purchased a house, making the deductions and exemption benefits available in the old income tax regime more attractive.
Your home loan may have been repaid, reducing the need for higher deductions and exemptions, making the new tax regime better for you. But the question that needs to be answered is this:
If your choice of tax regime can change every year depending on your financial situation and lifestyle, can you also change between tax regimes every year?
filing ITR: Can a person switch between the new and old tax regime every year?
The new income tax regime is the default regime for individual taxpayers. Taxpayers retain the flexibility to opt for the old tax regime, but the frequency depends on the nature of the taxpayer’s income. Read this also: ITR Filing FY 2025-26.
What documents are required to file your income tax return?
Quick checklist: Richa Sahni, partner in tax at Grant Thornton Bharat LLP, explains that for individuals with business or professional income, the decision to opt for the old tax regime once implemented is binding for subsequent years.
There is a provision to withdraw this option; however, the withdrawal can be done only once. The exception applies when the individual’s business or professional income ceases to exist.
In contrast, individuals who do not have business or professional income enjoy greater flexibility, as they can choose between the new and old tax regimes each year.
This effectively allows them to change governance annually. “Given these considerations, it is advisable for taxpayers to carefully evaluate the potential tax benefits and savings under each arrangement before making a choice,” says Richa Sawhney.
ITR Filing: Document Checklist
Another factor to remember is that you can opt for the old income tax regime only if you file your tax return within the deadline of July 31, 2026. Any delayed tax return will automatically switch you to the old tax regime. Richa Sawhney, Partner Tax, Grant Thornton Bharat LLP, says,
“The distinction between the two categories of taxpayers reflects a considered policy choice.
While individuals without business or professional income can revisit the choice between the old and new tax regime every year, those with business or professional income are subject to a far more stringent framework.
This makes sense because, in business cases, the tax situation is rarely limited to one year; several factors such as depreciation and carried-forward losses often have a continuing impact.”
“Looked at in that context, the intention of the restriction appears to be to ensure continuity and certainty while discouraging frequent switching to year-specific tax benefits.
In short, for taxpayers with business income, it becomes a more strategic and long-term choice rather than a year-to-year decision,” she tells TOI. Note – While the provisions of the old and new acts relating to the new tax regime are the same, Section 115BAC will apply to the upcoming return of income for the financial year 2025-26, which will be filed in July/August 2026.
Read this also for the FY 2025-26 ITR filing: What is Form 26AS and what if it has errors? What should taxpayers do to avoid receiving tax notices
