Last updated: February 23rd, 2024 1:01 PM

New Form 10-IEA for Opting & Withdrawing from New Tax Regime for FY 23-24

The Central Board of Direct Taxes has introduced Form 10-IEA for business owners and professionals who wish to continue using the old income tax regime in the current financial year. Starting from FY 2023-24, the new tax regime will become the default option, and individuals with business or professional income must explicitly select the old regime by filling out Form 10-IEA. This article provides a comprehensive overview of Form 10-IEA, its purpose, requirements, and implications for taxpayers.

Amendments Made

In the past, individuals were required to fill out Form 10-IE to select the new tax regime. This form allowed them to indicate their preference for the new tax system. However, starting from the financial year 2023-24, the new tax regime will automatically be set as the default option for taxpayers. This means that unless individuals take specific action to choose the old tax regime, they will be automatically enrolled in the new system. The default nature of the new tax regime implies that individuals without any business or professional income can opt out of the new regime directly when they file their tax returns. In other words, they can indicate their preference for the old tax regime in their tax forms, and they will not be subject to the rules and regulations of the new system. This change provides a streamlined process for individuals who do not have a business or professional income and wish to continue with the old tax regime. They no longer need to complete the additional step of filling out a separate form like Form 10-IE. Instead, they can exercise their choice directly in their tax return filing by selecting the appropriate option.

Aligning with the Finance Act, 2023

The changes brought about by the Finance Act 2023 include changes to the new tax section 115BAC. These amendments modify and update the regulations related to the new tax regime. Form 10-IEA is designed as per these changes to ensure that individuals comply with the updated rules and that their tax preferences align with the changes introduced by the Finance Act 2023. By aligning with the Act, Form 10-IEA ensures taxpayers follow the latest legal requirements and provisions related to the new tax regime.

Discontinuation of Form 10-IE

Form 10-IE, previously utilised for opting into the new tax regime, has been phased out. It was in use until the financial year 2022-23. However, its discontinuation aligns with the new default setting of the tax regime starting from FY 2023-24. Going forward, the new tax regime will be automatically applicable unless specific action is taken to choose the old regime. Business owners and professionals have a one-time opportunity to transition to the new tax regime. However, post-switching, it is not possible to revert to the old regime. This emphasises the importance of carefully considering the decision to switch tax regimes, which will have long-term implications.

Purpose of New Form 10-IEA

For individuals who have income from business or profession, it is mandatory to submit Form 10-IEA within the time frame specified under Section 139(1) of the Income-tax Act, 1961. This ensures that individuals in this category adhere to the requirements and deadlines set by the tax authorities. When filling out Form 10-IEA, individuals must provide the necessary information. This includes their name, PAN, assessment year, and current status. These details help accurately identify and categorise taxpayer information and records. One of the crucial aspects of Form 10-IEA is indicating whether the individual intends to opt out of or re-enter the default new tax regime. This selection is vital as it determines the tax rules and regulations that will apply to the taxpayer. Additionally, Form 10-IEA requires individuals to specify the relevant dates for opting out or re-entering the new tax regime. These dates may include when they decide to opt-out and when they exercise the option to return to the new tax regime, if applicable. By collecting this information and documenting the taxpayer's choices and relevant dates, Form 10-IEA ensures transparency. It records the taxpayer's decision-making process regarding their tax regime preference. This helps taxpayers and tax authorities maintain accurate and up-to-date tax records.

Opting Out of the New Tax Regime

Individuals who do not have business income have the option to directly opt out of the new tax regime when filing their tax returns. They no longer have to go through the process of submitting Form 10-IEA. This simplifies the procedure for individuals in this category, as they can directly indicate their preference for the old tax regime in their tax return forms.

Re-entering the New Tax Regime

If individuals with business or professional income wish to re-enter the new tax regime after opting out, they must submit Form 10-IEA. This form serves as a means to express their intention to return to the new tax regime. On the other hand, individuals without business or professional income can re-enter the new tax regime. They must simply file their income tax return without the need to submit Form 10-IEA.

Verification and Submission

Individuals should ensure proper validation of the form at the time of submission of Form 10-IEA. A digital signature or electronic verification code is the way to do this. This signifies accurate and valid verification and helps maintain the integrity of the submitted tax information. By implementing the verification process, the tax authorities ensure that the information in Form 10-IEA is legitimate and authenticated. This helps prevent fraudulent activities and promotes the accuracy of the taxpayer's details within the tax system. Form 10-IEA is crucial for business owners and professionals who wish to continue using the old income tax regime. By submitting this form before the specified deadline, individuals can indicate their tax regime preference and provide the necessary details. Understanding the process and requirements associated with Form 10-IEA is essential to ensure compliance with the new tax regulations. These changes reflect the evolving landscape of income tax and aim to streamline the tax regime selection process for taxpayers.