Yes, salaried employees can change the tax regime at the time of filing their Income Tax Return (ITR). However, currently, they are required to intimate their employers about the tax regime they want to opt for FY 2023-24. This, according to CBDT and tax experts, is important as it will help the employers deduct TDS on salary as per the tax regime chosen by the employee.
“The Finance Act 2023 has made the new tax regime as default tax regime. However, individual taxpayers can switch between old and new tax regime on a year-on-year basis whereas those individual taxpayers deriving any income from business or profession, who has exercised the option of opting out of the new tax regime u/s 115BAC could exercise the option of opting back to the said new tax regime only once,”
“It is pertinent to note that though salaried individuals can switch between old and new tax regime on a year-on-year basis, such salaried employees are required to provide intimation regarding their choice of tax regime to employers in the beginning of the financial year. Failure of the same will result in deduction of TDS u/s 192 of IT Act according to the default tax regime i.e. new tax regime u/s 115BAC of the IT Act. Nevertheless, the final choice of tax regime can be made at the time of furnishing of tax return u/s 139(1) of the IT Act,”
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The exercise of selecting a tax regime has to be completed by salaried employees in April, failing which the employer will deduct taxes on salary as per the New Tax Regime rates.