ITR Filing 2025 Guide: Can Salaried Employees Change Between Old & New Tax Regimes Before 15 September?
Share this article:
As the 15 September deadline for filing Income Tax Returns (ITR) 2025 approaches, many salaried individuals in India are wondering if they can change their tax regime at the time of filing. While employees select a regime during the financial year for TDS (tax deducted at source) purposes, the final ITR filing offers flexibility to choose what suits them best.
Old Tax Regime vs New Tax Regime
The old tax regime allows taxpayers to claim a wide range of deductions, including contributions to provident funds, life insurance premiums, and home loan principal repayments. Additional exemptions like House Rent Allowance (HRA) and Leave Travel Allowance (LTA) can further reduce taxable income. Although the tax rates increase with higher income, these deductions can make a big difference in total tax liability.
The new tax regime, introduced in FY 2020-21, provides lower tax rates but removes most deductions and exemptions. From FY 2023-24, it has become the default choice for salaried individuals. It’s simpler but may not always result in the lowest tax payable for those with multiple eligible deductions.
Can You Switch Tax Regimes While Filing ITR ?
Yes. Salaried taxpayers can opt for a different tax regime while filing ITR, even if they declared another regime to their employer.
“The employer calculates and deducts tax based on the regime selected by the employee during the year, but the final choice of regime is made at the time of filing the ITR,” said Chandni Anandan, tax expert at ClearTax.
“The taxpayer is legally allowed to switch regimes while filing, provided the correct deductions, exemptions, and other adjustments are considered,” she added.
How to Switch Tax Regimes
To change your tax regime during ITR filing:
1. Log in to the income tax e-filing portal.
2. Start filling the relevant ITR form. Salaried individuals usually use ITR 1 or ITR 2, depending on income. Those earning above ₹50 lakh annually must use ITR 2.
3. In the form, find the section to choose between the old and new tax regimes. Select your preferred option and provide the necessary details.
Should You Switch?
Deciding the right tax regime requires comparing your total tax liability under both options.
“The old tax regime tends to be more beneficial for individuals who have high taxable income and can avail multiple deductions as it reduces their taxable income significantly,” Anandan said.
Key deductions in the old regime include Section 80C (investments), 80D (health insurance), and HRA, among others.
“For those with simpler income structures or minimal deductions, the new regime may offer a lower tax liability due to its reduced tax rates, but without the benefit of deductions,” she added.
Common Mistakes to Avoid
While switching regimes is allowed, errors can attract scrutiny from the Income Tax Department.
“The most common mistake is not properly evaluating the total tax liability under both regimes before making a switch, leading to suboptimal tax savings,” Anandan said.
Another frequent error is incorrectly claiming deductions under the old regime, such as forgetting HRA, education loan repayments, or 80C investments.
Making an informed choice between the old and new tax regimes can save you money and prevent unnecessary complications at the time of filing. Always evaluate your deductions and taxable income carefully before finalising your decision.
Old Tax Regime vs New Tax Regime
The old tax regime allows taxpayers to claim a wide range of deductions, including contributions to provident funds, life insurance premiums, and home loan principal repayments. Additional exemptions like House Rent Allowance (HRA) and Leave Travel Allowance (LTA) can further reduce taxable income. Although the tax rates increase with higher income, these deductions can make a big difference in total tax liability.
The new tax regime, introduced in FY 2020-21, provides lower tax rates but removes most deductions and exemptions. From FY 2023-24, it has become the default choice for salaried individuals. It’s simpler but may not always result in the lowest tax payable for those with multiple eligible deductions.
Can You Switch Tax Regimes While Filing ITR ?
Yes. Salaried taxpayers can opt for a different tax regime while filing ITR, even if they declared another regime to their employer.
“The employer calculates and deducts tax based on the regime selected by the employee during the year, but the final choice of regime is made at the time of filing the ITR,” said Chandni Anandan, tax expert at ClearTax.
“The taxpayer is legally allowed to switch regimes while filing, provided the correct deductions, exemptions, and other adjustments are considered,” she added.
How to Switch Tax Regimes
To change your tax regime during ITR filing:
1. Log in to the income tax e-filing portal.
2. Start filling the relevant ITR form. Salaried individuals usually use ITR 1 or ITR 2, depending on income. Those earning above ₹50 lakh annually must use ITR 2.
3. In the form, find the section to choose between the old and new tax regimes. Select your preferred option and provide the necessary details.
Should You Switch?
Deciding the right tax regime requires comparing your total tax liability under both options.
“The old tax regime tends to be more beneficial for individuals who have high taxable income and can avail multiple deductions as it reduces their taxable income significantly,” Anandan said.
Key deductions in the old regime include Section 80C (investments), 80D (health insurance), and HRA, among others.
“For those with simpler income structures or minimal deductions, the new regime may offer a lower tax liability due to its reduced tax rates, but without the benefit of deductions,” she added.
Common Mistakes to Avoid
While switching regimes is allowed, errors can attract scrutiny from the Income Tax Department.
“The most common mistake is not properly evaluating the total tax liability under both regimes before making a switch, leading to suboptimal tax savings,” Anandan said.
Another frequent error is incorrectly claiming deductions under the old regime, such as forgetting HRA, education loan repayments, or 80C investments.
Making an informed choice between the old and new tax regimes can save you money and prevent unnecessary complications at the time of filing. Always evaluate your deductions and taxable income carefully before finalising your decision.
Next Story