Tax in FY2026: How often can you switch between Old and New Tax Regimes? Here's what the rules say

Indian taxpayers have the option to switch between the new and old income tax regimes annually, following the changes introduced from the financial year 2023-24. The new tax regime is now the default option, meaning taxpayers need to choose the old regime if they prefer actively.

This flexibility, however, is primarily available to salaried individuals, who can choose between the two regimes each year without restriction, provided the choice is made before the due date for filing tax returns, as outlined under Section 139(1) of the Income Tax Act.

For those with income from business or professional sources, the rules are more stringent. Once they opt out of the new tax regime, they have only one opportunity to switch back to the old regime, and this choice must also be finalised before the filing deadline under Section 139(1). This restriction underscores the need for careful planning among these individuals, as a return to the new tax regime is not permitted once they have reverted to the old regime. 

According to the Income-tax department, "An individual with non-business income can switch between the new and old tax regimes yearly. Within the same year, again it is emphasised that the choice of old tax regime can be made only before the due date of filing the return u/s 139(1) of I-T Act." 

The move to make the new tax regime the default is a significant shift in India's tax policy, aimed at simplifying the tax system. The new regime offers lower tax rates but eliminates most deductions and exemptions, contrasting with the old regime, which allows for various deductions under sections like 80C and 80D, covering investments and insurance premiums, respectively. These changes are part of broader efforts to streamline tax compliance and reduce administrative burdens for taxpayers. 

As the financial landscape evolves, the choice between tax regimes remains a critical decision for taxpayers, impacting their overall tax liability. While the new regime may be attractive for those seeking lower rates, the loss of deductions could be a disadvantage for others, depending on individual financial circumstances. This dynamic necessitates that taxpayers assess their financial situations carefully to optimise their tax liabilities. 

The introduction of annual flexibility for salaried taxpayers and the one-time switching opportunity for business income earners reflect India's efforts to balance tax simplification with fairness. As taxpayers navigate these changes, the ability to select the most suitable tax regime each year can offer strategic advantages, helping them to minimise tax burdens and maximise financial outcomes. This flexibility is particularly beneficial in an environment where financial conditions and personal circumstances can vary significantly year on year. 

ITR filing 2025

Filing your Income Tax Return (ITR) is an essential part of managing your tax obligations. The last date for non-audit taxpayers to file their ITRs for the Financial Year 2024-25 (AY 2025-26) is July 31, 2025. However, if you miss filing within the due date, you can still file a belated return before December 31, 2025.

ITR filing 2025: Which tax regime should you choose- new or old?

When completing your 2025 Income Tax Return (ITR), a crucial decision to make is whether to opt for the old or new tax regimes. This choice will have a significant impact on your tax liability, making it imperative to fully comprehend the disparities.

Under the Old Tax Regime, you have the opportunity to avail of various deductions and exemptions, such as those outlined in Section 80C (for investments), 80D (for medical insurance), and HRA (for house rent allowance).

On the other hand, the New Tax Regime offers lower tax rates but requires you to forgo most deductions and exemptions.

New Tax Regime

The income tax slabs under the new tax regime applicable from April 1, 2025, are as follows:
 
Income up to Rs 4 lakh: Nil
 
Income from Rs 4 lakh to Rs 8 lakh: 5 per cent
 
Income from Rs 8 lakh to Rs 12 lakh: 10 per cent
 
Income from Rs 12 lakh to Rs 16 lakh: 15 per cent
 
Income from Rs 16 lakh to Rs 20 lakh: 20 per cent
 
Income from Rs 20 lakh to Rs 24 lakh: 25 per cent
 
Income above Rs 24 lakh: 30 per cent
 
Deduction in the new tax regime:
 
Section 24(b): Deduction for interest on housing loan for rental property
 
Section 80CCD (2): Deduction for employer’s contribution to the national pension scheme (NPS), limited to 14 per cent of salary
 
Old Tax Regime

Budget 2025 has retained the existing income tax slabs under the old tax regime, with no changes announced for the FY 2025-2026. 

Income up to Rs 2,50,000: Nil
 
Income from Rs 2,50,001 to Rs 5,00,000: 5 per cent
 
Income from Rs 5,00,001 to Rs 10,00,000: 20 per cent
 
Income above Rs 10,00,000: 30 per cent
 
The old tax regime also allows for various deductions, including:
 
Section 80C: Deductions up to Rs 150,000 for investments in PPF, ELSS, and LIC premiums.
 
Section 80D: Deductions for health insurance premiums.
 
Section 24(b): Deductions for home loan interest up to Rs 2,00,000.
 
Additional exemptions, such as benefits like HRA and LTA.