Can you change tax regime during financial year 2023-24? CBDT issues circular on TDS on salaries


The Central Board of Direct Taxes (CBDT) has issued a circular dated April 5, 2023, clarifying how employers will be deducting tax on salaries for the current financial year 2023-24. As per the circular issued, an employee is required to inform the income tax regime that he/she intends to choose for the purpose of TDS on salaries. Once the intimation is received by an employer, then tax on salary will be deducted accordingly. The employee can choose either the new or an old tax regime, at his convenience.
If an employee does not inform the employer of the same, then it will be assumed that the employee has opted for the new regime. The TDS on salary will be deducted on the basis of the income tax rates applicable under the new tax regime.

The new circular has been issued by the income tax department after changes in the Income-tax Act, 1961 were announced in the Budget 2023. One of the announcements was the new tax regime becoming the default option. Till FY 2022-23 (i.e., March 31, 2023), the old tax regime was the default option and an individual was specifically required to opt for the new tax regime. However, from April 1, 2023 onwards, the new tax regime has become the default tax regime. This means that if an individual wants to claim the benefit of tax deductions and exemptions, he/she is specifically required to opt for the old tax regime.

Sujit Bangar, Ex-IRS officer and founder of TaxBuddy.com: The latest CBDT circular allows an individual to switch income tax regimes during the financial year. This was not allowed by the tax department in the old circular of April 2020. There is no restriction under the law that does not allow an individual to switch the tax regime during the financial year. Do note that an individual can opt for any tax regime at the time of filing tax return irrespective of what is opted for TDS on salary.

Source Link: https://m.economictimes.com/wealth/tax/can-you-change-tax-regime-during-financial-year-cbdt-issues-circular-on-tds-on-salaries/amp_articleshow/99289218.cms

Website Link: https://www.taxbuddy.com/

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