Taxpayers were given the option of choosing between the old and new tax systems in Budget 2020. Under the new tax regime on Form 10 IE, taxpayers may pay a lower tax rate on their entire income. If the new tax system is adopted, taxpayers will be unable to claim deductions and tax benefits previously available under the old tax system on Form 10 IE Income Tax. The taxpayer must decide before filing Income Tax Returns. Individuals and Hindu Undivided Families are the only ones who can benefit from the new tax policy (HUF).
As previously noted, taxpayers must choose their choice in Form 10 IE before completing the necessary ITR. Let's take a closer look at Form 10 IE.
Did you know?
You can choose to use the old income tax system instead of the new one. You cannot choose the new regime if you have any business income in the previous fiscal year. The surcharge and cess rates in the new income tax regime are identical to those in the old (current) scheme.
The prior tax regime helps taxpayers because their taxes are decreased by ₹37,440. The new tax structure is ₹15,600 more favourable for taxpayers because HRA and LTA deductions are not available.
What Is The Old Tax Regime Or the Current Tax Regime?
The old tax system levied income tax based on prior tax brackets. As per the Income Tax Act 1961, various income levels are taxed based on the available income tax slabs (such as HRA, LTA, and many others). The existing system levies a 5% tax on profits between ₹2.5 lakhs and ₹5 lakhs, a 20% tax on earnings between ₹5 lakhs and ₹10 lakhs, and a 30% tax on earnings beyond ₹10 lakhs. In two respects, the new tax system varies from the previous one. For starters, it creates new tax brackets with reduced rates. Later, if one picks the new tax regime, taxpayers will lose all important exemptions and deductions provided under the existing tax. As a result, if the benefits of the old tax system's exemptions and deductions outweigh the benefits of the new tax system's lower rates, the taxpayer may choose the new tax system.
Also Read: ITR-2 Form- File ITR-2 Online
What Is The New Tax Regime?
The new tax structure lowers tax rates while eliminating most tax deductions and benefits previously accessible. The tax regime must be chosen before the income tax return for the relevant financial year can be filed. Before filing an ITR, the taxpayer must use income tax Form 10 IE to advise the IRS of their preferred tax regime. The new tax regime enables reductions in the total taxable income of up to ₹15 lakhs, with tax slabs of 5%, 10%, 15%, 20%, and 25% on income slabs increasing by ₹2.50 lakhs starting with the baseline exemption of ₹2.50 lakhs. In two respects, the new tax system varies from the previous one. For starters, it creates new tax brackets with reduced rates, and later, it is almost the same as already mentioned.
Applicability Of New Tax Regime
From 2021-22, this new tax regime will be in effect where one can use Form 10 IE. Individuals and HUFs can choose between the 'new tax system' and the 'old tax regime,' which they can do by filing Form 10 IE.
How Do They Provide The Declaration Of Choice Between Both Regimes?
If you are employed, your company may request a statement indicating whether you prefer the old or new tax scheme.
Case 1: An enterprise has requested a statement to select a regime
In this instance, you must declare your preference for the regime by the deadline set by the company. Your company will compute your TDS responsibility based on your specified TDS scheme.
However, if you don't provide the statement, the company will compute the baseline TDS due under the old taxation system.
Case 2: No statement was requested by the company
The employer will compute the baseline TDS obligation under the former tax scheme in this instance. Also, If you are a permanent employee, the company will specify the TDS deduction regime in Form 16 provided to the worker.
How Should The IT Department Be Notified Of The Tax Regime Choice?
The Central Board of Direct Taxes, abbreviated widely as CBDT, had produced Form 10IE of Income Tax. In other words, anyone who desires to pay any income tax under the new tax system must notify the IRS using Form 10 IE income tax. If a client demands to choose the new tax system, they must complete the identical Form (10IE) before completing their tax returns again for the corresponding Fiscal Year (FY).
Time Limit for Filing Form 10 IE
Individuals who have business income may file An application 10IE well before the ITR filing deadline, which is July 31 or another date in special cases if the government allows
Individuals receiving salary income can file Form 10 IE earlier or simultaneously as their ITR.
Contents of Form 10 IE
- The person's name/HUF
- Verification of revenue within 'Profit or benefits from purposes of the business' for the person or entity.
- PAN Card Number (Personal Identification Number)
- Location
- Date of incorporation/date of birth
- Industry aspect (necessary if it is business income)
- Verification as to whether the taxpayers own any IFSC (International Financial Service Center) component as indicated in sub-section (1A) of paragraph 80LA in the Form of a multiple-choice answer. If the response is affirmative, the unit's specifications must be supplied.
- Contents of an originally submitted Form 10 IE.
- Proclamation
How To Choose Between The Old And New Tax Regime?
The technique for moving between old and new tax regimes differs depending on whether you have a business or non-business income. Here's a look at both options:-
- For Business Profits: You will not be able to pick between old and new tax regimes every year if you generate business revenue. After choosing the new tax regime, you only have one chance to return to the old one. You won't be able to choose the new regime once you've switched back. This implies you'll have to file Form 10 IE twice if you have business income. When you want to switch to the new tax system and when you want to go back to the old.
- Other than business income: You can pick between the old and new tax regimes every year if you are a paid individual with no corporate income. As a result, to transition to the new tax system, you'll need to fill out Form 10 IE every year.
Also Read: What is the Best Way to Download My Income Tax Certificate?
E-filing of Form 10-IE
- A taxpayer's choice to pay tax under the new tax regime in the previous year cannot be revoked for the next year. When a taxpayer is no longer eligible to use the option, they can only use it once in any preceding year.
- Only the individual/Karta of the HUF/Authorized Representative may sign this Form.
- A virtual sign as a proof or an EVC, widely known as Electronic Verification Code
- must be used to submit Form 10 IE online.
- In Form 10 IE of the Income Tax Act, the decision authority is either the Principal Director General of Income-tax (Systems) or the Director-General of Income-tax (Systems).
- From FY 2020-21, this Form will be used.
- If the person fails to file this form, income tax will be calculated using the old tax rates.
Step 1: Go to the Income Tax Portal and login.
Step 2: Select 'Income Tax Form' from the 'e-File' menu.
Step 3: Choose 'File Income Tax Forms' from the drop-down menu.
Step 4: Many different forms will display. Select 'File Now' from the Form 10IE menu.
Step 5: Pick a year for the assessment. Continue by pressing the enter key.
Step 6: Fill in the mandatory details.
Step 7: Use a digital signature or an electronic verification code to submit the form.
How To Download The Paper Copy Of Form 10 IE?
Form 10 IE can be downloaded at the Income Tax Department of India's official website, www.incometaxindia.gov.in, by going to the 'Forms' section. For Form 10 IE, select the appropriate link.
Conclusion
The Form 10 IE of the Income Tax Act was discussed in this article. In Budget 2020, taxpayers were given the option of choosing between the old and new tax systems. Taxpayers might pay a lower tax rate on their full income under the new tax regime on Form 10 IE. If the new tax system is chosen, taxpayers will be unable to claim deductions and tax benefits previously available under the old tax system on 10 IE Income Tax.
We also looked at the distinctions between the old and new administrations. Before filling out Form 10 IE, you should thoroughly research both the old and new tax regimes. Knowing the differences between the two tax systems will help you decide based on your financial goals and interests. Read all of the information above carefully before Form 10 IE filing the declaration.
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