How to switch tax regime

How a salaried government employee or pensioner switches between the old and new tax regimes: choose in the ITR each year, file Form 10-IEA for business income, and file on time.

Updated 17 July 2026 · Reviewed by Salary-Calculator.in

Switching between the old and new tax regimes is something a salaried central government employee or pensioner can do at the time of filing the income-tax return, and for most people it takes only a few minutes and needs no separate form. This guide walks through exactly how to do it: how a salaried person chooses the regime in the return, when Form 10-IEA is required, and the one deadline that must not be missed. For the choice itself, which regime is cheaper, see the old versus new tax regime comparison; this guide is about the mechanics of switching once you have decided.

The essential facts are three. The new tax regime is the default, so doing nothing means being taxed under it. A salaried person or pensioner with no business income can switch freely every year, just by choosing in the return. And the old regime can be claimed only in a return filed on time, so a late return loses the option.

Conflict-of-interest disclosure. Salary-Calculator.in has no affiliate, referral, or paid arrangement with any tax-filing service, and this guide is written independently to inform the reader. It reflects the position for the assessment year 2026-27 (financial year 2025-26); tax rules and the notified due dates change, so confirm the current dates on the income-tax e-filing portal, and for a complex situation consult a Chartered Accountant before filing.

Step-by-step procedure

The switch is eight short steps, summarised here and expanded below.

Compare the two regimes on your numbers.
Check whether you have business or professional income.
Tell your DDO your choice at the start of the year.
Open the correct income-tax return.
Select the regime in the return.
File Form 10-IEA first if you have business income.
File the return on or before the Section 139(1) due date.
Verify the return.

1. Compare the two regimes on your numbers

Before switching, work out the tax both ways on your actual figures. The new regime gives lower rates and a rebate that makes income up to Rs. 12 lakh tax-free, but allows only the standard deduction and the employer’s NPS contribution; the old regime taxes at higher rates but allows the full set of deductions such as Section 80C , health insurance, house rent allowance , and home-loan interest. The old regime is worth the switch only where your deductions are large enough to make it cheaper, so run the comparison or a calculator first.

2. Check whether you have business or professional income

This is the fork in the road. If your income is only salary or pension, and perhaps interest, house property, or capital gains, you have no business income and take the simple route: you choose in the return with no form. If you have any business or professional income, even a small freelance or consultancy receipt reported as business income, you must use Form 10-IEA to opt for the old regime. A pensioner who also runs a business or profession falls into this second category.

3. Tell your DDO your choice at the start of the year

At the beginning of the financial year the employer asks each employee which regime they want, so that the tax deducted at source from the monthly salary is computed under the right regime. Give the drawing and disbursing officer your choice. This is only an intimation for the withholding; it does not bind your final choice, which is made in the return. If you tell the employer nothing, the employer deducts under the new regime, because it is the default, and you may then have too little or too much tax deducted for the regime you finally pick.

4. Open the correct income-tax return

At filing time, use the right form. A salaried person or pensioner with only salary, pension, one house property, and modest interest files ITR-1; one with capital gains, more than one house property, or income above Rs. 50 lakh files ITR-2. A person with business or professional income files ITR-3 or ITR-4. The regime option appears inside the return.

5. Select the regime in the return

In the return there is a question asking whether you wish to opt out of the new tax regime. To be taxed under the old regime, choose to opt out; to stay in the new regime, leave it as it is, since the new regime is pre-selected. For a salaried person or pensioner without business income, this single choice is the whole of the switch, and it can be made afresh every year with no separate form and no lock-in.

6. File Form 10-IEA first if you have business income

If you have business or professional income and want the old regime, you must file Form 10-IEA on the e-filing portal before you file the return, and quote its acknowledgement number and date in the return. The form need not be filed every year once you have opted for the old regime; it continues until you withdraw it. But remember the once-in-a-lifetime rule: having moved to the old regime and then back to the new regime, you cannot return to the old regime again while the business income continues.

7. File the return on or before the due date

This is the step that most often goes wrong. The old regime can be claimed only in a return filed within the Section 139(1) due date, which for the assessment year 2026-27 is 31 July 2026 for a non-audit taxpayer and 31 October 2026 for an audit case. A belated return, filed after the due date, is locked into the default new regime and cannot claim the old regime or any of its deductions. Filing on time is therefore not just good practice; it is what preserves the option to be taxed under the old regime.

8. Verify the return

Filing is not complete until the return is verified. Complete the e-verification within 30 days of filing, by Aadhaar OTP, net banking, or another available method. An unverified return is treated as not filed, which would also lose the regime choice.

Switching back the next year

For a salaried person or pensioner without business income there is nothing special about switching back. Each year is independent: you compare the two regimes on that year’s figures and choose again in that year’s return. You may be in the old regime one year and the new regime the next, as your deductions change, for instance when a home loan is repaid or a large Section 80C investment matures. Only a taxpayer with business income faces the once-in-a-lifetime restriction described above.

The position under the Income-tax Act 2025

The Income-tax Act 2025 , in force from 1 April 2026, keeps both regimes and the same switching mechanics, with the provisions renumbered. For the assessment year 2026-27 (financial year 2025-26), whose returns are filed from mid-2026, the switch is governed by the 1961 Act and the forms in use today, including Form 10-IEA. The 2025 Act first applies to the tax year 2026-27, and any change to the form or its number will be reflected on the e-filing portal.

What can go wrong

Filing late. A belated return is locked into the new regime, so a taxpayer who wanted the old regime and its deductions loses them. File by the Section 139(1) due date.
Forgetting Form 10-IEA. A person with business income who ticks the old-regime option in the return but does not file Form 10-IEA before the due date can have the old-regime claim rejected and the tax recomputed under the new regime.
Relying on the employer declaration. The regime you told your DDO governs only the tax deducted at source; you must still choose in the return, and a mismatch can leave a balance to pay or a refund to claim.
Assuming a small freelance receipt is exempt from the rule. Once professional or business income is reported, the old regime is available only through Form 10-IEA, not the simple ITR tick.

Frequently Asked Questions (FAQs)

Can a salaried person change tax regime every year?

Yes. A salaried employee or a pensioner with no business or professional income can switch between the old and new regimes every year, simply by choosing in the income-tax return each time. There is no annual restriction and no separate form; you tick the option to opt out of the new regime for the old regime, or leave it for the new regime, when you file.

Do salaried employees need Form 10-IEA to switch regime?

No. A salaried person or pensioner with no business or professional income does not file Form 10-IEA; they choose the regime directly in the ITR. Form 10-IEA is required only for a taxpayer with business or professional income who wants to opt out of the new regime, and it must be filed before the return by the due date.

Can I switch to the old regime in a belated return?

No. To claim the old regime you must file the return on or before the Section 139(1) due date. A belated return, filed after the due date, is locked into the new regime, which is the default, and cannot claim the old regime or its deductions. Filing on time is what preserves your ability to choose the old regime.

How many times can a person with business income switch regime?

A taxpayer with business or professional income can move from the new regime to the old regime once, and if they later return to the new regime they cannot go back to the old regime again while the business income continues. A salaried person without business income has no such lock-in and can switch every year.

Does the regime I tell my employer bind me?

No. The regime you declare to your drawing and disbursing officer at the start of the year only governs the tax deducted at source from your salary during the year. The binding choice is made in the income-tax return, and it can differ from what you told the employer. If you make no declaration, the employer deducts under the new regime.

What happens if I do not choose a regime?

The new regime is the default. If you make no choice, either in the declaration to your employer or in the return, your tax is computed under the new regime. To be taxed under the old regime you must positively opt for it, and, if you have business income, file Form 10-IEA.

External references

References

Income-tax Act, Section 115BAC (the new regime as the default from the financial year 2023-24, renumbered as Section 202 of the Income-tax Act, 2025), and the requirement that a taxpayer with business or professional income file Form 10-IEA to opt out of the new regime.
Income-tax Act, Section 139(1) (the return-filing due dates, 31 July 2026 for a non-audit taxpayer and 31 October 2026 for an audit case for the assessment year 2026-27) and the rule that a belated return under Section 139(4) is confined to the default new regime.
Central Board of Direct Taxes rules on the exercise of the option under Section 115BAC, including that a salaried person without business income exercises the option in the return each year without Form 10-IEA, and that a taxpayer with business income may switch from the new regime to the old regime and back only once.
Income-tax Act, Chapter XVII-B (deduction of tax at source on salary), under which the employer computes the tax deducted at source on the regime intimated by the employee, defaulting to the new regime where no intimation is given.
The provisions carry forward under the Income-tax Act, 2025 (in force from 1 April 2026); for the assessment year 2026-27 the switch is governed by the Income-tax Act, 1961 and the forms in use on the e-filing portal.