Choosing between the old and new income tax regimes is no longer a one-time decision. Your tax-saving requirements may evolve every year depending on your life stage, investments and financial commitments.
A newly purchased house, higher insurance premiums or fresh investments could make the old regime more attractive because of the deductions it offers. On the other hand, if major loans have been repaid and deductions have been reduced, the simplified new tax regime could become a better option.
This naturally raises an important question ahead of ITR filing for FY 2025-26: Can taxpayers switch between the old and new tax regimes every year?
Salary earners can change tax regimes annually
The new income tax regime continues to remain the default tax regime for individual taxpayers.
However, individuals who do not have business or professional income can freely choose between the old and new tax regimes every financial year. This means salary earners can assess their tax liabilities annually and switch regimes depending on which one offers greater savings.
Tax experts advise taxpayers to compare exemptions, deductions and overall tax outgo before making a decision each year.
According to The Times of India, the flexibility allows salaried taxpayers to adapt their tax planning according to changing financial circumstances without any long-term restrictions.
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Business income taxpayers face stricter rules
The situation is different for individuals earning business or professional income.
According to Richa Sawhney, Partner Tax at Grant Thornton Bharat LLP, once such taxpayers opt for the old tax regime, the decision becomes binding for subsequent years.
There is a provision to withdraw this option, but it can only be exercised once.
An exception exists if the taxpayer ceases to have business or professional income.
According to The Times of India, experts say the restriction has been designed intentionally because business taxation often involves long-term components such as depreciation, carried-forward losses and other financial considerations that extend beyond a single assessment year.
As a result, taxpayers with business income are expected to take a strategic long-term view instead of changing tax regimes every year for short-term benefits.
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Filing deadlines also play an important role
According to The Times of India, taxpayers should remember that the option to choose the old tax regime is available only if the income tax return is filed within the prescribed deadline of July 31, 2026.
A delayed or belated return may affect the ability to exercise this choice.
Experts recommend evaluating both regimes carefully before filing the return instead of making a last-minute decision.
For FY 2025-26, Section 115BAC will continue to govern the new tax regime provisions when taxpayers file their returns during July or August 2026.
