Think you can switch between new and old tax regimes anytime? Not if you trade F&O or freelance
This rule, as laid out under the Income Tax Act and clarified for AY 2024–25 onward, does not apply to salaried taxpayers without business income, who are still free to choose between the two regimes each year while filing returns.
Freelancers, F&O traders, and intraday investors, think twice before ditching the new tax regime. A single switch back to the old regime could lock you out of flexibility forever, warns CA Kanan Bahl in a viral LinkedIn post.
While 95–97% of taxpayers are expected to benefit from the new tax regime, those earning business income — like from futures & options (F&O), intraday trading, or freelance work—face a critical limitation: you can switch from the new regime to the old regime only once in your lifetime.
And if you return to the new regime after that? You’re stuck with it. There’s no going back to the old regime in future years.
This rule, as laid out under the Income Tax Act and clarified for AY 2024–25 onward, does not apply to salaried taxpayers without business income, who are still free to choose between the two regimes each year while filing returns.
However, for those whose income is classified as business or professional—including F&O traders, day traders, and freelancers—Form 10-IEA must be filed to opt for the old regime. Once this switch is made and then reversed, you’re permanently locked into the new regime for all future filings.
Tax experts say this regulation is aimed at streamlining compliance and reducing regime-hopping by business income earners. But it could also leave some taxpayers unable to adapt to future financial shifts.
Given that the new regime is now the default for most individuals, it’s crucial to evaluate long-term implications—not just current tax liability.
For business income earners, the flexibility to change tax regimes doesn’t last forever. One switch—and you’re stuck with your choice. Make it wisely.