Know the category of Tax Payers who can’t choose between Old & New Tax regime every year – The Budget of FY 2020 proposes to provide option a taxpayer to choose between the existing income tax regime and a new tax regime every year as per their convenience. However, in order to be eligible to opt for the tax structure as per an individual’s convenience, there are certain conditions that must be fulfilled as per the finance bill.
New Vs Old Tax Regime : Who Can & Can’t ?
- Taxpayers having business income are not eligible to choose between the existing tax regime and new tax regime every year.
- This would mean that salaried individuals and pensioners would be eligible to switch between new tax regime and old tax regime as per their convenience every year provided they don’t have business income.
- However, a consultant’s income is charged as business income and not salary income.
- Therefore, individuals who work as consultants will not be eligible to switch between the new and old regime every year.
Salaried individuals who also earn income from freelancing activities?
Unlike salaried individuals and pensioners, who can choose between new tax regime and existing tax regime every year as per their convenience, the individuals having business income such as consultants or salaried individuals having income from their freelancing/business activities do not have this option of choosing between the two tax regimes every year.
Business Individuals with income and opt for the new tax regime ?
If a person having business income and opted for new income tax regime, then he will continue to pay income tax liability as per the new regime in the future financial years as well. In case an individual with business income wants to switch back to the old tax regime which has tax-exemptions and deductions, then he/she can do it but only once in a lifetime. Thus, once the above mentioned individual has switched back to the old tax regime, then he/she cannot switch back to the new tax regime again.
Individuals with business income who have opted for the new tax regime have once in a lifetime option to switch back to the old/existing tax regime and again continue availing deductions and tax exemptions. However, once this option of reverting back to the old tax regime is exercised, then the individual in future years cannot opt for the new tax regime again.
if business income ceases to exist in future years?
If an individual’s business income ceases to exist in the future years, then they have an option to switch back again to the new tax regime as per his/her convenience every year or they can continue with old tax regime as well. Once the individual ceases to have business income, the right to opt between the existing tax regime and new tax regime in every financial year is activated. This brings parity between such assessees and non-business income assesses.