Old vs new income tax regime: What is Form 10-IEA and who should use it while ITR filing?

The Central Board of Direct Taxes (CBDT) has introduced Form 10-IEA, aimed at facilitating the continuation of the old income tax regime for the current financial year. This move comes as the default tax option has shifted to the new regime starting from the financial year 2023-24, as mandated by changes in Section 115BAC under the Finance Act 2023.

Previously, individuals expressed their preference for the new tax regime using Form 10-IE.

However, starting from the financial year 2023-24, the new regime has automatically become the default option.

Form 10-IEA is crafted in alignment with the recent amendments, making it mandatory for individuals with income from business or profession to submit the form within the specified timeframe under Section 139(1) of the Income-tax Act, 1961.

Sujit Bangar, Founder of Taxbuddy.com, emphasised the significance of Form 10-IEA, stating, "Understanding the process and requirements associated with Form 10-IEA is crucial. Submitting this form before the specified deadline allows individuals to express their tax regime preference."

Form 10-IEA demands essential information such as name, Permanent Account Number (PAN), assessment year, and current status.

"It is to be filed separately from the Income Tax Return (ITR) forms, serving as a standalone document. The form requires individuals to indicate whether they intend to opt out of or re-enter the default new tax regime. Additionally, relevant dates for opting out or re-entering the new tax regime must be specified," Bangar told CNBC-TV18.com.

Yeeshu Sehgal, Head of Tax Market at AKM Global, a tax and consulting firm, explained, "Form No. 10-IEA shall be furnished electronically either under digital signature or electronic verification code. The Form No. 10-IEA is to be filed on or before the return filing due dates, in the case of a person having income from business or profession."

Notably, ITR-4, also known as SUGAM, is available for individuals, HUFs and firms (other than LLP) being a resident having a total income of up to ₹50 lakh and having income from business and profession which is computed under sections 44AD, 44ADA or 44AE under Income Tax Act.

This means taxpayers opting for ITR 4 will now need to file Form 10-IEA to opt out of the new tax regime.

Individuals without business income can opt out of the new tax regime directly during their tax return filing, eliminating the need for Form 10-IEA.

However, those wishing to re-enter the new tax regime after opting out must submit Form 10-IEA.

Sehgal added, "It effectively means that the taxpayers with business income have the option to opt-out and stay with the old regime by filing Form 10-IEA while filing ITR-4, and taxpayers with no business income can exercise such option in the return form itself."

Proper validation of Form 10-IEA during submission is crucial, and a digital signature or electronic verification code ensures accurate and valid verification.