Is the new tax regime the default now, and can a salaried person switch back to the old regime every year?

Question

I'm salaried and confused about old vs new tax regime under Section 115BAC. If I don't choose anything, which regime applies? Can I change every year?

GradeHunt_Team · Answer

Yes. Under the Income-tax Act, 1961, the new tax regime in Section 115BAC became the default from Assessment Year 2024-25 for individuals, HUFs, AOPs (other than co-operative societies), BOIs and artificial juridical persons. The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026 (tax year 2026-27 onwards) and keeps the same rule in Section 202: the new regime applies unless you opt out under Section 202(4). If you do nothing, your tax is computed under the new regime.

Can you choose the old regime?
It depends on whether you have income from business or profession.

1. No business or professional income (for example, salaried persons, pensioners, those with only interest or rental income):
   You can choose between the old and the new regime every year in your return of income, but only if you file it on or before the due date (Section 139(1) of the 1961 Act; Section 263(1) of the 2025 Act from tax year 2026-27). If you file late, the new regime applies. Switching back and forth across years is allowed. You can also tell your employer which regime to use for TDS during the year; the final choice is made in your return.

2. With business or professional income:
   To opt out of the new regime, you must exercise the option on or before the due date of the return. For years under the 1961 Act (up to Assessment Year 2026-27) this is done in Form 10-IEA. From tax year 2026-27, under Section 202(4) of the 2025 Act and the Income-tax Rules, 2026, the option is exercised in the return of income itself, filed by the due date. Once you opt out, you can return to the new regime only once in your lifetime, and after returning you cannot opt for the old regime again (unless you stop having business income).

What changes between the regimes?
- The new regime has lower slab rates but does not allow most deductions and exemptions, such as Section 80C and 80D of the 1961 Act (Sections 123 and 126 of the 2025 Act), HRA and LTA. The standard deduction for salaried taxpayers is available in both.
- The old regime has higher slab rates but allows these deductions and exemptions.

How to decide:
Add up all the deductions and exemptions you can actually claim. Calculate tax under both regimes for the year and compare. If your deductions are small, the new regime is usually lower.

Slab rates, rebate limits and the standard deduction amount are revised by Finance Acts, so check the current figures on incometax.gov.in before calculating.

Is the new tax regime the default now, and can a salaried person switch back to the old regime every year?

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