ITR filing FY 2024-25: Don’t miss filing Form 10-IEA if switching tax regimes - here’s why

NEW DELHI: Noida-based self-employed professional Alka Sharma was among the early tax return filers last year because she was expecting a fat tax refund. “The 10% TDS deduction on my professional income and fixed deposit interest added up to nearly Rs 85,000, but the tax deductions I was claiming would have reduced the tax to around Rs 28,000,” she says.

But when the expected refund didn’t come for several months, Sharma consulted a tax professional who pointed out that she had not filed the Form 10-IEA to opt out of the new tax regime. She promptly filed the Form 10-IEA, but it was already too late. The deadline for filing the return had passed and therefore her return was by default assessed under the new tax regime. “My tax saving investments under Sec 80C, NPS contribution, home loan interest and medical insurance deduction were not taken into account under the new regime,” she says.

It was a costly mistake. Instead of the Rs 57,000 refund she had expected, Sharma got back only Rs 42,000. The Form-IEA is required to be filed if a taxpayer with business or professional income wants to opt out of the new tax regime. Taxpayers who want to shift to the new tax regime this year should also be mindful of the requirement to file the Form 10-IEA. For some taxpayers, it is mandatory to file this form otherwise their switch in tax regime will not be considered by the tax authorities.

Taxpayers filing their returns using the ITR1 or ITR2 don’t have to bother about this additional form. They can seamlessly shift from one regime to another. The requirement to file Form 10-IEA kicks in only if you have business income and use ITR3 or ITR4. “If you have income from business or profession, it is mandatory to file the Form 10-IEA with your tax return to enable switching from one tax regime to the other,” says Umesh Jethani, Chartered Accountant and Founder of Apki Return.You don’t need to file the Form 10-IEA if you had chosen the old tax regime last year and will continue with it this year as well. But if you had chosen the old regime and now want to shift to the new regime, you must file the form. So, though it is mandatory for those going for the old tax regime, even those going for the new regime must file it.The various permutations and combinations are confusing to say the least. DIY taxpayers, who file their tax returns on their own, will find it very challenging.

“The form itself is very easy to fill and requires just 3-4 clicks. It’s the lack of knowledge about it that is challenging,” says Nishant Khemani, Managing Partner of the Saturn Consulting Group.This is why our guide (see graphic) can tell you whether you need to file the form or not.Do you need to file Form 10-IEA?

Source: Saturn Consulting GroupIncidentally, the Form 10-IEA has to be filed within the due date. If not filed by the due date, the form will be considered invalid.

“If he has opted for the old regime but not filed the Form-IEA by the due date, the taxpayer will be put under the new tax regime by default and taxed accordingly,” warns Nishant Khemani, Managing Partner of the Saturn Consulting Group.There’s more to this. While mistakes in the tax return can be rectified by filing a revised return, there is no recourse for missing the deadline to file the Form 10-IEA. Like in the case of Alka Sharma, once the last date is missed, you have no choice but to go with the new regime.Till two years ago, the option to choose the tax regime was included in the tax return form itself. Then it was taken out and made into a separate form that needed to be filed when opting for the new regime. Last year, the rule was changed again. The form was to be used for opting out of the new regime. “These frequent changes have created a lot of confusion in the minds of taxpayers. This goes against the intent to simplify tax filing and ease compliance,” says chartered accountant Pradeep Sharma.