Told your employer one tax regime, but want to switch? Here's the rulebook

Business Standard

11-06-2025

You selected a tax regime in April but now want to change while filing your Income Tax return (ITR) With the new tax regime being the default from FY24, many taxpayers are reconsidering their earlier choice. Are you allowed to change regimes? What are the consequences? We asked experts to explain.
You can switch regimes while filing ITR
'Even if a salaried individual opted for a particular regime at the start of the financial year and the employer deducted TDS accordingly, they [individuals] are free to choose a different regime at the time of filing the return,' said Kunal Savani, partner, Cyril Amarchand Mangaldas. While the employer collects regime preference for TDS purposes, this doesn't lock the employee into that choice for return filing.
'The regime option is merely for calculating monthly TDS. Taxpayers have the flexibility to change the regime at the time of filing their ITR depending on which one gives them a lower final tax liability,' said Ritika Nayyar, partner at Singhania & Co.
What if tax was already deducted?
There's no penalty for switching, but there may be financial adjustments. 'If more tax was deducted under the regime declared to the employer, the individual can claim a refund,' Savani said. 'If less was deducted, they may have to pay the balance tax along with applicable interest.'
Vivek Jalan, partner at Tax Connect Advisory Services LLP, noted a possible mismatch. 'The Form 16 issued by the employer may not align with the final ITR, which could trigger a verification notice from the tax department.'
Can you switch regimes every year?
Salaried individuals can switch between the old and new regimes every year. 'This flexibility is available only if such taxpayers do not have any business or professional income,' said Savani.
'For non-salaried taxpayers like freelancers or business owners, the choice is more rigid,' Jalan pointed out. 'They can opt out of the default new regime only once. After switching back to the new regime, they cannot opt for the old regime again, unless they no longer have business income.'
Finalising your ITR
Nayyar advised taxpayers to calculate income under both regimes and then choose one. 'The system will automatically adjust TDS and show the final liability or refund while filing the return,' she said.
Jalan summed it up best: 'The date of filing one's ITR is practically the date when a salaried employee can make a final call on the tax regime.'
Bottom line: If you initially told your employer one tax regime but want to pick another while filing ITR, you can. Just be ready to handle any refund or additional tax, and keep documentation ready if there's a mismatch.