The April Declaration vs. The July Reality
At the start of the financial year, your HR department asked you to choose between the old and new tax regimes. Based on your choice, they deducted TDS every month.
But what if you chose the new regime in April, and then made a last-minute PPF investment or started paying high rent? Can you switch to the old regime while filing your ITR in July?
Yes, absolutely.
Salaried Employees Have the Freedom to Choose
For salaried individuals (with no business income), the choice made to the employer is not final. The Income Tax Act allows you to evaluate your actual income and investments at the end of the year and choose the regime that results in the lowest tax liability when filing your return.
Scenario A: Employer used New Regime, you want Old Regime If your employer deducted TDS under the new regime, they didn't consider your 80C investments or HRA. When you file your ITR under the old regime, you will manually enter these deductions. Your tax liability will drop, and you can claim a **refund** of the excess TDS deducted by your employer.
Scenario B: Employer used Old Regime, you want New Regime If you declared investments to your employer but failed to actually make them, the old regime might now cost you more. You can switch to the new regime while filing. Since the new regime has lower slab rates, you might still get a refund, or you might have to pay a little extra tax depending on your exact numbers.
Why the regime matters: the two menus
The "regime" is just which set of tax rules you pick. New regime has lower slab rates and a bigger standard deduction but almost no other deductions. Old regime has higher slabs but lets you subtract 80C, HRA and home-loan interest.
| Feature | New regime | Old regime |
|---|---|---|
| Standard deduction | Rs 75,000 | Rs 50,000 |
| 80C, 80D, HRA | Not allowed | Allowed |
| 87A rebate covers income up to | Rs 12,00,000 | Rs 5,00,000 |
Since AY 2024-25 the new regime is the default; the Income Tax Department reported the large majority of filers now choose it. Source: Income Tax Dept / CBDT filing statistics, AY 2024-25.
How to Make the Switch on the Portal
When filing on incometax.gov.in, the system defaults to the new tax regime. If you want to switch to the old regime, you must explicitly select the option to "Opt out of the new tax regime" in the personal information section.
Note: If you have business or professional income (including freelance income under Section 44ADA), the rules for switching regimes are much stricter and require filing Form 10-IEA.
What you should do
- List the deductions you actually have proof for (rent receipts, 80C, 80D), not what you planned to invest
- Compute your tax under both regimes on your real numbers, including any AIS interest
- If the old regime wins, select "Opt out of the new tax regime" before you submit
- Keep rent and investment proofs safe for seven years
Common mistake
Assuming your employer's TDS regime is final. Payroll may have deducted under the new regime, but your filing choice can differ. Just remember to pay any balance tax if the old regime leaves a shortfall.
Let LastMinute ITR Do the Math
Figuring out which regime is better requires calculating your taxes twice.
When you upload your Form 16 on LastMinute ITR, our system automatically runs your numbers through both the old and new regime tax slabs. We instantly show you which option saves you more money, taking the guesswork out of your filing.
Compare your tax regimes automatically before you file.