Tag: Old regime

Old or New Tax Regime: How and When to Choose It in Your Return (Section 202, Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 16 August 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • The new regime in section 202(1) applies to individuals and HUFs by default. To use the old regime you must exercise an option under section 202(4).
  • A person with no business or professional income exercises the option with the return furnished under section 263(1) for that tax year, so the choice can be made afresh each year.
  • A person with business or professional income must exercise it on or before the due date; once exercised it continues, and it can be withdrawn only once.
  • The option rides on the return filed by the due date; do not assume a belated return can opt out of the new regime.
  • Your employer’s TDS follows the regime you tell it, but the return decides the final regime.

For tax year 2026-27, an individual is taxed under the new regime unless he chooses otherwise. The choice is made in the return, and the rules on how and when depend on whether you have business income. This post sets out section 202 of the Income-tax Act, 2025.

The default and the option

  • Section 202(1) states the slabs of the new regime: nil up to ₹4,00,000, then 5%, 10%, 15%, 20%, 25% and 30% above ₹24,00,000, and it applies to an individual, a HUF, an association of persons (other than a co-operative society), a body of individuals and an artificial juridical person, unless the person exercises the option in section 202(4).
  • Section 202(4) says that section 202(1) does not apply to a person who has exercised an option, in the prescribed manner, for the tax year. That person is taxed under the old slabs, with the old regime deductions and exemptions. Form 125 uses the same words: “opting out of the new tax regime under section 202”.

When to exercise the option (section 202(4))

Your income When and how
No income from business or profession (for example a salaried person, pensioner or investor) Along with the return of income furnished under section 263(1) for the tax year. The option applies to that year, so you can choose again next year
Income from business or profession On or before the due date for furnishing the return under section 263(1). Once exercised it applies to later tax years. It may be withdrawn only once for a tax year other than the year of the first exercise; after that you can never exercise it again, unless you cease to have business or professional income, in which case the option for persons without such income is open

What the new regime does not allow (section 202(2))

If you stay in the new regime, your total income is computed without:

  • Exemptions in Schedule III at serial numbers 5, 6, 7, 8, 11 and 17 (this includes the HRA exemption at serial 11), and serial numbers 12 and 13 other than those prescribed;
  • Professional tax under section 19(1) Table serial 1;
  • Interest under section 22(1)(b) on self-occupied houses (section 21(6));
  • Chapter VIII deductions, except the employer’s contribution to the notified pension scheme (section 124(1) and (2)), section 125(2) and section 146;
  • certain business deductions (sections 33(8), 45(3), 46, 47(1)(a), 48 and 49);
  • set-off of house property loss against other heads, and set-off of carried-forward losses or depreciation attributable to these deductions; and
  • any exemption or deduction for allowances or perquisites provided under any other law.

The standard deduction of ₹75,000 under section 19(1) and the retirement exemptions such as gratuity and leave encashment remain available.

The late return trap

The option is exercised “along with the return of income to be furnished under section 263(1)”. A belated return is furnished under section 263(4). Advisers read this to mean that a person who files after the due date cannot opt out of the new regime for that year. We have not found a ruling or circular that says otherwise, so file on time if you want the old regime.

Your employer and the regime

At the start of the year, tell your employer which regime to use for TDS. You may change your mind before the return; the employer’s deduction is only an estimate. At filing, you choose the regime that gives you the lower tax, on the evidence of your HRA, home loan, section 123 and other claims (Form 124 evidence, Rule 205). Any excess TDS comes back as refund.

How to decide

  1. Add up your actual old regime deductions: standard deduction ₹50,000, HRA exemption, section 123, own NPS, health insurance, home loan interest and others.
  2. Compare with the break-even for your salary in our post on saving tax by salary level. For example, at a salary of ₹20 lakh the old regime needs roughly ₹7.6 lakh of total deductions to match the new regime.
  3. If the old regime is better, exercise the option in the return and file by the due date.
  4. If you have business income, remember that the choice can be changed only once, and plan with a professional.

Frequently asked questions

Which regime applies if I do nothing?

The new regime in section 202(1) applies by default to an individual, HUF, AOP, BOI or artificial juridical person. To be taxed under the old regime you must exercise the option under section 202(4).

When must a salaried person choose the regime?

A person who has no income from business or profession exercises the option along with the return furnished under section 263(1) for that tax year (section 202(4)(b)). The choice is for the tax year, so it can differ from year to year.

What if I have business or professional income?

The option must be exercised on or before the due date for the return. Once exercised it applies to later tax years. It can be withdrawn only once, for a year other than the year it was exercised, and after that you can never opt out of the new regime again, unless you stop having business or professional income, when the salaried-type option becomes available (section 202(4)(a)).

Can I change the regime in a revised return?

The option is tied to the return furnished under section 263(1) for the year. The Act does not say that it can be exercised or changed through a revised or belated return. If you filed on time and made a different choice, take advice before relying on a revised return to change it.

What if I file late?

The section ties the option to the return under section 263(1). A belated return is furnished under section 263(4), so you should assume the new regime applies. Check with a professional before you claim old regime deductions in a belated return.

Does my employer’s choice bind me?

No. The employer deducts TDS on the regime you declare to it, but you decide the final regime when you file the return, and any excess TDS comes back as a refund.

Official sources

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Missed the Proof Submission Deadline? How to Claim HRA and Deductions in Your Return (2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 17 September 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • Your employer asks for evidence of HRA, LTA, home loan interest and Chapter VIII deductions in Form 124 (Rule 205) so that it deducts the right TDS; there is no legal cut-off date, only the employer’s payroll cut-off.
  • If you miss it, TDS is deducted without those claims, but you can still claim HRA exemption and section 123 deductions in your income-tax return and get the excess back as a refund.
  • Both HRA and section 123 deductions are available only in the old regime; the new regime allows neither.
  • Do not send the proofs with the return; keep them ready in case of a notice.

Every year, employers ask for rent receipts, investment proofs and loan certificates in the last months of the tax year. If you miss the date, your payslip shows more TDS than you expected. That money is not lost. Most claims can be made again, and the excess tax recovered, when you file your return.

Why the employer asks for proofs

Under section 392 of the Income-tax Act, 2025 the employer must deduct tax on salary at the average rate on your estimated income. To estimate your income, it gets evidence of your claims under section 392(5)(b), in Form 124 (Rule 205). The Rule lists what is needed:

Claim Evidence the employer asks for
House rent allowance Landlord’s name, address and PAN where yearly rent is above ₹1,00,000, and any relationship with the landlord
Leave travel concession or assistance Evidence of the expenditure
Interest on a house loan Lender’s name, address and PAN
Chapter VIII deductions Evidence of investment or expenditure

The date set by the employer is a payroll cut-off, not a date in the law. The employer may also adjust later deductions to correct any excess or deficiency in the year (section 392(5)(c)).

What happens if you miss it

The employer deducts tax as if you had no claims. Your TDS certificate (Form 130, due by 15 June after the year, Rule 215) shows that tax. You have paid more than you owe, but the excess is yours to recover, as a refund, when the return is processed.

What you can still claim in the return

Only in the old regime. Section 202(2) bars the HRA exemption (Schedule III, serial 11) and Chapter VIII deductions (other than a few such as the employer’s NPS contribution) in the new regime. If your claims are large, compare both regimes before you choose one when you file.

1. HRA exemption

You need the rent paid and, if yearly rent is above ₹1,00,000, the landlord’s PAN. The exempt amount is the least of the HRA received, rent paid less 10% of salary, and 50% of salary in Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru (40% elsewhere), with “salary” as defined in Rule 279. See our post on HRA. If you pay rent but do not get HRA, a separate Chapter VIII deduction for rent may apply (see our post on section 80GG).

2. Section 123 deductions (formerly 80C), up to ₹1,50,000

Schedule XV lists what qualifies. Several need no new investment, so you can claim them from expenses you already incurred:

  • your provident fund contribution (recognised provident fund) and contribution to an approved superannuation fund;
  • tuition fees for full-time education of any two children at an Indian institution, but not development fees or donations;
  • payments for buying or constructing a residential house, such as loan principal, subject to the conditions in paragraph 3 of Schedule XV;
  • life insurance premium, five-year term deposits with a scheduled bank or the post office, the Senior Citizen Savings Scheme and other listed items.

Investments made up to 31 March of the tax year count, even if you made them after your employer’s cut-off.

3. Interest on a housing loan

Where the property qualifies, the interest is claimed in the return under Income from house property. Keep the lender’s interest certificate.

What to do about leave travel concession

The exemption depends on actual travel and the block rules. Employers collect the evidence through Form 124 and apply it in payroll. Whether a claim can be made later in the return depends on the return form and the proof you hold, so if you missed the employer date, ask a professional before you rely on claiming it in the return.

Practical steps

  1. Collect rent receipts, the lender’s certificate, premium and fee receipts and PF statements.
  2. Read your Form 130 and the AIS and compare the salary and TDS with your own records.
  3. Choose the regime that gives the lower tax with your real claims.
  4. File the return and enter the claims in the relevant schedules. The refund is paid after processing.
  5. Do not upload the proofs. Keep them safe in case a notice asks for them.

Next year

Give your employer the Form 124 particulars early in the year and update them as soon as you pay fees or invest. The tax deducted each month then matches your real liability, and you do not have to wait for a refund.

Frequently asked questions

Is there a legal last date for submitting investment proofs to the employer?

No. The employer asks for evidence under section 392(5)(b) in Form 124 (Rule 205) so that it can estimate your income and deduct the right TDS. The date is set by your employer’s payroll, usually in the last quarter of the year.

What happens if I miss it?

The employer deducts TDS on your salary without those claims, so more tax is deducted than your actual liability. Your TDS certificate (Form 130) shows that higher tax.

Can I still get the benefit?

Yes, for most items. Claim the HRA exemption and section 123 deductions when you file the return. The excess TDS comes back as a refund.

Do the claims work in the new tax regime?

No. The new regime does not allow the HRA exemption or Chapter VIII deductions such as section 123 (section 202(2)). They are available only if you choose the old regime.

Do I attach proofs to the return?

No, but keep them. You may be asked for them if the department sends a notice.

When must the TDS certificate be issued?

Form 130 for salary is to be furnished by 15 June after the end of the tax year (Rule 215).

Official sources

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.