Forgot to declare your tax regime choice to employer? Here's what happens

India Today

23-04-2025

If you're a salaried employee, your employer must have asked you to choose between the old and new tax regimes for the current financial year (2025-26) for TDS purposes.Selecting the right regime according to your income and eligible deductions, can help you save a fair bit of money during the year. However, forgetting to inform your employer or being late with a deadline can happen.advertisementLet's understand in this article what happens if you miss informing your employers about your preferred tax regime.WHY TELL THE EMPLOYER ABOUT TAX REGIME?
Your employer deducts tax from your salary every month. This is called TDS (Tax Deducted at Source). To calculate the correct amount, your employer needs to know which tax regime you've chosen. If you don't inform them, they'll go with the default option, which is the new tax regime.The government made the new tax regime the default one from April 1, 2023. So, if you say nothing, tax will be deducted as per the new regime, even if the old regime would've saved you more money.WHAT COULD GO WRONG?If the old regime is better for you, and you have invested heavily under Section 80C, but don't inform your employer, more tax might be deducted from your salary during the year. You'll have to wait till next year to claim a refund when you file your income tax return (ITR). That means your money will stay stuck with the tax department for months.advertisementOn the other hand, if the new regime suits you anyway, there's no loss. But it's still a good idea to confirm your choice with your employer.CAN YOU CHANGE THE REGIME MIDWAY?The tax rules don't say if you can switch regimes halfway through the year for TDS purposes. Usually, employers don't allow it, because switching mid-year makes tax calculations tricky. So, it's best to make an informed choice early on and stick to it.WHAT IF YOU CHANGE JOBS DURING THE YEAR?You can choose a different regime with your new employer. The declaration you make is only for that employer's TDS calculation. When you join a new job, you'll need to tell them which regime you want for salary processing."You can switch tax regimes when changing employers. Each employer uses your declaration to deduct TDS based on your preferred tax regime at that point in time. There is no restriction on informing your new employer of a different regime, even within the same financial year. The declaration to employers is solely for TDS purposes. When you join a new company, you are required to fill out a declaration form to indicate your preferred tax regime for salary processing and TDS calculations. This choice is independent of what you selected with your previous employer," said Tarun Kumar Madaan, CA, while speaking to The Economic Times.advertisementHe added, 'When filing your ITR, you have the flexibility to choose either the old or new regime, regardless of what you declared to one or more employers during the year.'Hence, informing your employer early can help you avoid delays, confusion, and unexpected deductions, thereby ensuring that the right amount of tax is deducted from your salary throughout the year.Must Watch