How to Switch from Old to New Tax Regime as a Business Owner in India

Business owners with income from business or profession switch from the old to the new tax regime by filing Form 10-IEA on incometax.gov.in before the ITR due date for the relevant assessment year. From FY 2023-24 onwards, the new tax regime under Section 115BAC is the default for all individuals and HUFs. Business owners who previously opted for the old regime via Form 10-IE can switch back to the new regime, but this switch-back is allowed only once in their lifetime. The process takes 15 to 30 minutes, costs nothing in government fees, and applies from the assessment year for which the form is filed. This guide covers the complete switching process, eligibility rules, tax slab comparison for FY 2025-26, the one-time switch restriction, deduction trade-offs, and regime comparison scenarios for different income levels.

What is the Tax Regime Switch for Business Owners?

Tax regime switching is the process by which a taxpayer with income from business or profession changes their income tax computation framework between the old regime (with full deductions and exemptions) and the new regime under Section 115BAC (with lower slab rates but restricted deductions). For business owners, this involves filing a formal declaration (Form 10-IEA) on the Income Tax e-filing portal before filing the ITR for that assessment year.

The Income Tax Act provides two parallel tax computation systems. The old regime allows taxpayers to claim over 70 deductions and exemptions, including Section 80C (investments up to ₹1.5 Lakh), Section 80D (health insurance up to ₹1 Lakh for senior citizens), HRA exemption, home loan interest deduction under Section 24(b), LTA, and professional tax. The new regime under Section 115BAC provides lower slab rates ranging from 0% to 30% across seven slabs but restricts deductions to the standard deduction of ₹75,000 (for salaried income), employer NPS contribution under Section 80CCD(2), and Agniveer corpus under Section 80CCH. From FY 2023-24, the new regime became the default, meaning all taxpayers are automatically on the new regime unless they actively opt out.

For salaried individuals without business income, the regime choice can be changed every year simply by selecting the preferred regime while filing the ITR. Business owners face a stricter rule. Taxpayers with income from business or profession under Section 44AA who opt out of the new regime (choose the old regime) by filing Form 10-IEA can switch back to the new regime only once in their lifetime. This one-time restriction makes the decision far more consequential for business owners than for salaried individuals.

Who Does the One-Time Switch Rule Apply To?

The one-time switching restriction does not apply to all taxpayers. It targets a specific category: individuals and HUFs who have income from business or profession that requires maintenance of books of accounts under Section 44AA. Understanding whether you fall under this rule is the first step before planning a regime change.

Taxpayers Subject to the One-Time Switch Restriction

When the Default Regime Applies Without Any Form

If you are a business owner who has never filed Form 10-IE or Form 10-IEA, you are already on the new regime by default from FY 2023-24 onwards. No form filing is needed to be on the new regime. The form is required only when you want to opt out (choose old regime) or when you want to switch back after previously opting out. First-time filers with business income are automatically placed on the new regime unless they explicitly opt out before the ITR due date.

New Tax Regime Slab Rates for FY 2025-26 (AY 2026-27)

The revised Section 115BAC slab rates applicable from FY 2025-26 provide a graduated tax structure with seven slabs. These rates apply to individuals and HUFs who are on the new regime, whether by default or by switching from the old regime.

Under the new regime, a taxpayer with a net taxable income of ₹12 Lakh pays ₹60,000 in tax before cess. The same income under the old regime without any deductions would attract ₹1,72,500 tax (using old slab rates of 5% up to ₹5 Lakh, 20% for ₹5 to ₹10 Lakh, and 30% above ₹10 Lakh). The difference of ₹1,12,500 illustrates why the new regime is attractive for taxpayers with low deduction claims. However, once old regime deductions exceed approximately ₹3.75 Lakh, the old regime closes the gap and may produce lower tax.

Old Regime Deductions You Forfeit When Switching

Switching from the old regime to the new regime means giving up access to over 70 deductions and exemptions. The table below lists the most impactful deductions business owners typically claim, along with the maximum amount lost. Review this list against your actual deduction claims to quantify the trade-off.

The combined maximum deduction a business owner could claim under the old regime, if all categories applied, exceeds ₹7 Lakh. In practice, most business owners claim between ₹2 Lakh and ₹5 Lakh in total deductions. The key deductions that drive the old regime advantage are Section 80C (nearly universal at ₹1.5 Lakh), home loan interest under Section 24(b) (up to ₹2 Lakh), and health insurance under Section 80D (₹25,000 to ₹1 Lakh depending on family and senior citizen coverage). If your combined claim across these three sections alone exceeds ₹3.75 Lakh, the old regime is likely more tax-efficient.

Tax Comparison: Old vs New Regime at Different Income Levels

The following scenarios compare tax liability under both regimes for business owners at different income levels. Each scenario assumes specific deduction amounts typical for that income bracket. Use these as reference points, then calculate your own comparison using actual deduction figures.

Scenario 1: Business Income of ₹10 Lakh

At ₹10 Lakh business income with ₹1.75 Lakh in deductions, the new regime saves ₹44,200. The deduction amount is below the ₹3.75 Lakh breakeven threshold, making the new regime the clear winner for this scenario.

Scenario 2: Business Income of ₹20 Lakh

Even with ₹4.5 Lakh in deductions (above the rough breakeven of ₹3.75 Lakh), the new regime still saves ₹80,600 at the ₹20 Lakh income level. This happens because the new regime slab rates at higher income levels are substantially lower than the old regime's 30% slab, which kicks in at ₹10 Lakh. The breakeven point shifts upward as income increases. At ₹20 Lakh income, you would need approximately ₹5.5 Lakh to ₹6 Lakh in deductions for the old regime to become better.

Scenario 3: Business Income of ₹30 Lakh With Heavy Deductions

At ₹30 Lakh income with ₹7.65 Lakh in deductions, the new regime still saves ₹21,320, though the gap narrows significantly. If deductions exceeded ₹8 Lakh (which is uncommon for most business owners), the old regime would become slightly cheaper. The practical takeaway: even heavy-deduction business owners at higher income levels often find the new regime more efficient due to the wider slab brackets.

Step-by-Step: How to Switch from Old to New Tax Regime

The switching process involves filing Form 10-IEA on the Income Tax e-filing portal, followed by filing your ITR under the new regime. The entire process takes 15 to 30 minutes and costs nothing in government fees. Complete these 7 steps in sequence.

Step 1: Compare Tax Liability Under Both Regimes

Before filing any form, calculate your exact tax under both regimes to confirm the switch is beneficial. Gather your Profit and Loss statement for the financial year, all investment proofs (80C, 80D documents), home loan interest certificate, HRA computation, and any other deduction documentation. Calculate your taxable income under the old regime by subtracting all eligible deductions from gross total income. Then calculate tax on gross total income under the new regime slab rates without those deductions. Compare the final tax amounts including cess at 4%.

Use the IncorpX income tax calculator for a side-by-side comparison. Enter your gross income, select each deduction you claim, and the calculator shows the tax difference. If the new regime saves ₹25,000 or more after accounting for lost deductions, switching is worthwhile. If the saving is below ₹10,000, consider the permanence of the decision; the one-time switch rule means you cannot return to the old regime after switching back to the new regime.

Step 2: Verify Your Switching Eligibility

Log in to incometax.gov.in and check your Form 10-IE and Form 10-IEA history. Navigate to e-File, then Income Tax Forms, and search for Form 10-IE or 10-IEA. If you have previously filed this form to opt out of the new regime (chose old regime), you are eligible to switch back to the new regime by filing a new Form 10-IEA. If you have never filed this form, you are already on the new regime by default and do not need to take any action to switch. If you previously opted out and then switched back once, you cannot opt out again; the new regime applies permanently.

Also verify whether you have income from business or profession that is assessable under Section 44AA. If your only non-salary income is rental income, capital gains, or income from other sources, the one-time restriction does not apply, and you can switch freely each year. The restriction triggers only when your total income includes business or professional income requiring maintenance of books of accounts.

Step 3: Log In and Navigate to Form 10-IEA

Visit incometax.gov.in and log in using your PAN and password. On the dashboard, click e-File in the top navigation menu. Select Income Tax Forms from the dropdown. In the forms list, search for Form 10-IEA (the new Act equivalent) or Form 10-IE (under the old Act). The portal displays the relevant form based on the assessment year. Select the assessment year for which you want the switch to apply (e.g., AY 2026-27 for income earned in FY 2025-26).

Step 4: Complete and File Form 10-IEA

In the form, select the option indicating you want to opt for the new tax regime under Section 115BAC. The form captures your PAN, name, address, assessment year, and the nature of your business or profession. It includes a declaration that you understand the switching restriction applicable to business income under Section 44AA. Confirm the declaration, review all fields, and submit the form.

After submission, e-verify the form using Aadhaar OTP (most common), Digital Signature Certificate, or net banking. The portal generates a Form 10-IEA acknowledgement with a unique transaction ID and the date of filing. Download this acknowledgement immediately. This document serves as proof that you filed the form before the ITR due date, which is a critical requirement for the regime switch to be valid.

Step 5: File Your ITR Under the New Regime

After Form 10-IEA is processed, file your income tax return for the same assessment year. Navigate to e-File, then Income Tax Returns, then File Income Tax Return. Select the correct assessment year and ITR form (ITR-3 for regular business income, or ITR-4 for presumptive taxation under Section 44AD or 44ADA). When the form asks for the tax regime, select New Regime (Section 115BAC). The portal validates that Form 10-IEA has been filed for this assessment year.

While filling the ITR, compute your income using new regime rules. Deduct legitimate business expenses from gross receipts to arrive at net business income. Do not claim any Chapter VI-A deductions (80C, 80D, etc.) or exemptions (HRA, LTA) in the ITR, as these are not available under the new regime. The portal automatically blocks these fields when the new regime is selected. Submit the ITR and e-verify within 30 days.

Step 6: Download and Verify the ITR Acknowledgement

After successful e-verification, download the ITR-V (acknowledgement). Check the following fields: the regime indicated should be "New Regime / Section 115BAC," the tax computation should use new regime slab rates, and no Chapter VI-A deductions should appear. If any field is incorrect, file a revised return before the due date to correct it. Revised returns can change the regime as long as the revision is filed before the ITR due date for that assessment year.

Step 7: Update Advance Tax Payments for the Next Quarter

If you pay advance tax in instalments (15 June, 15 September, 15 December, 15 March), recalculate the remaining instalments using new regime slab rates. Overpayment of advance tax (computed under old regime rates) can be adjusted against the total tax liability. Underpayment attracts interest under Section 234B (general shortfall) and Section 234C (deferment of specific instalments). Adjust your calculations from the next instalment date following the regime switch.

Impact on Brought Forward Losses and Depreciation

One of the most overlooked consequences of switching to the new regime is the impact on brought forward business losses and unabsorbed depreciation from previous years. Business owners with accumulated losses must carefully evaluate this before making the switch.

Loss Set-Off Rules When Switching Regimes

Under the old regime, business losses can be carried forward for up to 8 assessment years and set off against future business income. Speculative business losses can be set off only against speculative business income. Unabsorbed depreciation can be carried forward indefinitely. When you switch to the new regime under Section 115BAC, brought forward losses and unabsorbed depreciation attributable to old regime deductions and exemptions cannot be set off against income computed under the new regime. These losses effectively lapse.

The specific provision restricts set-off of losses attributable to deductions not available under the new regime. For example, if a business loss was partly caused by additional depreciation (which is an old regime benefit), that portion cannot be carried forward into the new regime. However, regular depreciation (available under both regimes) continues to be available. The computation becomes complex when losses are a mix of regular and additional depreciation components.

Regime Rules for Companies, LLPs, and Firms

The Section 115BAC new tax regime applies exclusively to individuals and HUFs. Other business entities have separate tax provisions that operate differently. Understanding these distinctions prevents incorrect filings and misplaced regime switch decisions.

Private Limited Companies

Section 115BAA allows domestic companies to pay tax at a flat rate of 22% (effective 25.17% including surcharge and cess) if they forgo all exemptions, incentives, and deductions under Chapter VI-A (except Section 80JJAA for new employees). This option is irrevocable: once a company opts for Section 115BAA by filing Form 10-IC, it cannot switch back to the regular 25%/30% corporate tax rate with exemptions. Section 115BAB offers a 15% rate (effective 17.16%) for new manufacturing companies incorporated after 1 October 2019 that start manufacturing before 31 March 2024.

LLPs and Partnership Firms

LLPs and partnership firms are taxed at a flat 30% (plus surcharge and cess) on their total income. There is no "old vs new regime" option for LLPs and firms as entities. Section 115BAC does not apply to them. However, individual partners who receive salary, interest, or profit share from the LLP or firm report this income in their personal ITR, where the Section 115BAC regime choice applies to their individual total income. The firm's tax rate remains at 30% irrespective of the partner's personal regime choice.

Entity-Wise Tax Rate Summary

Common Mistakes When Switching Tax Regimes

Mistakes in regime switching can result in higher tax, lost deductions, or permanent forfeiture of the old regime option. These are the most frequent errors observed during ITR filing season, based on returns processed at our practice.

Mistake 1: Filing Form 10-IEA After the ITR Due Date

Form 10-IEA must be filed before the due date for filing the ITR for that assessment year. For FY 2025-26 (AY 2026-27), the ITR due date for business owners under audit is 31 October 2026, and for others it is 31 July 2026. If you file Form 10-IEA after the deadline, the portal defaults to the new regime, but any opt-out request is invalid. This is particularly problematic for business owners who wanted to choose the old regime for that year but missed the deadline.

Mistake 2: Switching Without Checking Brought Forward Losses

Business owners with brought forward losses from prior years forget that switching to the new regime can cause those losses to lapse. A taxpayer with ₹8 Lakh in carried forward business losses who switches to the new regime loses the ability to set off those losses, resulting in a net loss that far exceeds the slab rate savings. Always check your brought forward loss balance in the last filed ITR before switching.

Mistake 3: Assuming the Switch Can Be Reversed

The one-time switch rule is permanent. A business owner who opts out of the new regime (chooses old) and then switches back to the new regime cannot opt out again. Several taxpayers have switched to the new regime during a low-deduction year, only to find they cannot access the old regime when they take a home loan or increase insurance coverage in subsequent years. Treat this as a multi-year commitment, not a year-by-year optimisation.

Mistake 4: Confusing Business Income With Salary for Switching Rules

The one-time restriction applies specifically to income under Section 44AA (business or profession). Taxpayers with both salary and business income are subject to the one-time rule because of the business income component. Some taxpayers assume that because they earn mostly salary, they can switch annually; this is incorrect if any part of their income is from business or profession assessable under Section 44AA.

Mistake 5: Not Adjusting Advance Tax After Switching

Business owners who decide to switch regimes mid-year after paying advance tax under old regime rates end up with either excess payments (if new regime tax is lower) or shortfalls (if they miscalculate). Advance tax interest under Sections 234B and 234C applies to any shortfall. Recalculate advance tax instalments immediately after deciding to switch, and adjust the remaining payments accordingly.

Presumptive Taxation and the New Regime

Presumptive taxation is an income computation method under Sections 44AD (for businesses) and 44ADA (for professionals) that allows declaring income at a prescribed percentage of gross receipts without maintaining detailed books of accounts. This scheme works under both old and new regimes, making it a significant consideration for business owners evaluating the switch.

How Presumptive Taxation Works

Under Section 44AD, businesses with turnover up to ₹3 Crore (if digital receipts exceed 95% of total receipts; ₹2 Crore otherwise) can declare 6% of digital receipts and 8% of cash receipts as their taxable income. Under Section 44ADA, professionals (doctors, lawyers, architects, engineers, chartered accountants, etc.) with gross receipts up to ₹75 Lakh can declare 50% of receipts as income. These deemed income figures are then taxed under the applicable slab rates of whichever regime the taxpayer has chosen.

The presumptive scheme eliminates the need and overhead of maintaining detailed books of accounts, preparing a P&L statement, and getting the accounts audited (below the turnover threshold). It works independently of the old vs new regime choice. A business owner on the new regime using Section 44AD still declares 6% to 8% of turnover as income; the only difference is that this income is taxed at new regime slab rates instead of old regime rates. No Chapter VI-A deductions apply under the new regime, so the entire deemed income is taxable after the standard deduction (if salary income exists).

Advance Tax Implications of Switching Regimes

Business owners who pay advance tax in quarterly instalments must recalculate their payments when switching regimes. Advance tax is computed based on the estimated tax liability for the full financial year, so a regime change affects all four instalments.

Advance Tax Instalment Schedule

If you decide to switch to the new regime before the first instalment (15 June), compute all four advance tax payments using new regime slab rates. If the decision is made mid-year, for example in October, the first two instalments were paid at old regime rates. Recalculate the total annual tax under the new regime, subtract what you have already paid, and adjust the December and March instalments accordingly. The total advance tax paid must equal at least 90% of the assessed tax to avoid interest under Section 234B.

Interest under Section 234C applies if any individual instalment falls short of the required cumulative percentage. If you paid higher advance tax under the old regime and the new regime tax is lower, the excess payment is refundable after ITR processing. However, refund processing takes 3 to 6 months, so it is better to adjust the remaining instalments downward rather than overpaying and waiting for a refund.

Filing Form 10-IEA: Portal Walkthrough

This section provides a screen-by-screen walkthrough for filing Form 10-IEA on the Income Tax e-filing portal. The form is straightforward but has specific fields that must be filled correctly to ensure the regime switch is recorded.

Pre-Filing Checklist

1. PAN and password for incometax.gov.in login
2. Aadhaar linked with PAN for OTP-based e-verification
3. Assessment year confirmed (AY 2026-27 for FY 2025-26 income)
4. Previous Form 10-IE/10-IEA status checked to confirm eligibility for the switch
5. Tax comparison completed confirming the new regime is more beneficial

Portal Navigation Steps

Log in to incometax.gov.in. From the top menu, select e-File, then Income Tax Forms. In the forms listing page, select Form 10-IEA. The portal asks for the assessment year. Select the relevant AY (e.g., AY 2026-27). The form opens with pre-filled PAN and taxpayer name.

Under the section for regime selection, choose the option to opt for the new regime under Section 115BAC. Enter the nature of your business or profession income (trading, consulting, manufacturing, etc.). The form includes a confirmation checkbox stating you understand the one-time switching restriction for business income. Check this box. Preview the form for accuracy, then submit.

After submission, select the e-verification method: Aadhaar OTP, DSC, or net banking. Complete verification. The portal generates the Form 10-IEA acknowledgement with submission date and transaction ID. Download the PDF acknowledgement. This document is your proof of filing and must be stored for at least 8 years from the end of the relevant assessment year.

When to Stay on the Old Regime: Decision Checklist

While the new regime is advantageous for most business owners, specific situations favour the old regime. Use this checklist to determine if staying on the old regime is the better choice for your circumstances.

Stay on Old Regime If

1. Total deductions exceed ₹5 Lakh to ₹6 Lakh: If your combined 80C, 80D, HRA, home loan interest, and other deductions cross this threshold at your income level, the old regime likely produces lower tax
2. Active home loan with interest exceeding ₹1.5 Lakh per year: The Section 24(b) deduction of up to ₹2 Lakh for self-occupied property is a significant benefit lost under the new regime
3. Maximum health insurance coverage (Section 80D): If you pay ₹75,000 to ₹1 Lakh in health insurance premiums covering yourself, family, and senior citizen parents, this deduction is substantial
4. Significant HRA exemption: Business owners who also receive salary with HRA in metro cities where rent is ₹30,000 or more per month may get HRA exemption exceeding ₹2 Lakh annually
5. Brought forward business losses exceeding ₹5 Lakh: Switching regimes causes these losses to lapse, costing the tax benefit of future set-off
6. Future deduction increase planned: If you intend to take a home loan, increase NPS contributions, or significantly expand insurance coverage within 2 to 3 years, the old regime preserves future flexibility

Switch to New Regime If

1. Total deductions below ₹3.75 Lakh: The new regime slab rates produce lower tax at virtually every income level when deductions are below this threshold
2. No home loan: Without the Section 24(b) deduction, the deduction total drops significantly, favouring the new regime
3. Minimal investment activity: Business owners who reinvest in their business rather than tax-saving instruments (PPF, ELSS, NPS) have low 80C claims
4. Presumptive taxation user: Business owners on Section 44AD or 44ADA with deemed income already optimised for their turnover level benefit from lower slab rates
5. Income above ₹15 Lakh: Higher income levels amplify the slab rate advantage of the new regime, requiring progressively larger deductions to make the old regime competitive
6. No brought forward losses: Clean slate without carried forward losses means no loss of set-off benefit from switching

Impact on Annual Compliances for Business Owners

Switching tax regimes does not alter your annual compliance obligations as a business owner. However, the computation method and filing requirements have minor differences based on the regime selected.

Compliance Obligations That Remain the Same

• ITR filing: Mandatory irrespective of regime, using ITR-3 (regular business income) or ITR-4 (presumptive taxation)
• Advance tax: Four quarterly instalments required if tax liability exceeds ₹10,000 in the financial year
• Tax audit under Section 44AB: Required if business turnover exceeds ₹1 Crore (₹10 Crore for digital receipts exceeding 95%) regardless of regime
• GST filings: Monthly or quarterly GSTR-1, GSTR-3B as applicable; unrelated to income tax regime
• TDS/TCS compliance: Withholding and depositing tax on applicable payments is independent of your regime choice

For Private Limited Company compliance or LLP compliance, the entity-level requirements (annual return, financial statements, board meetings) remain identical. The Director's personal ITR filing reflects the regime choice, but the company's or LLP's own filings are not affected.

If you need comprehensive compliance services covering both entity-level filings and personal tax return filing under the chosen regime, professional firms handle the entire calendar. This ensures no deadlines are missed, and the regime choice is correctly reflected across all filings.

Related Regulatory Changes in 2025-2026

The tax regime switching decision should consider recent legislative changes that affect business owners. These updates modify the financial calculus and may shift the breakeven point between regimes.

New Income Tax Act 2025

The new Income Tax Act 2025 replaces the 1961 Act with simplified language and renumbered sections. For regime switching, the core provisions remain the same; Form 10-IE becomes Form 10-IEA, and Section 115BAC is retained. The Act consolidates and clarifies the one-time switching rule for business owners. Business owners who had filed Form 10-IE under the old Act do not need to re-file under the new Act; the election carries forward.

Finance Bill 2026 Changes

The Finance Bill 2026 introduced revised slab rates under the new regime, increased the standard deduction to ₹75,000, and expanded the Section 87A rebate for income up to ₹12 Lakh. These changes make the new regime more attractive than in previous years. The widened slabs (₹4 Lakh per bracket instead of ₹3 Lakh earlier) and the higher rebate threshold shift the breakeven point, meaning more business owners now find the new regime beneficial.

Updated ITR Filing Under New Rules

If you have already filed an ITR under the wrong regime or did not file at all, the updated ITR (ITR-UN) filing process allows corrections within 60 months. However, an updated return cannot be used to change the regime retrospectively. The regime selected in the original or revised return remains final for that assessment year. Plan the regime choice correctly during the original filing to avoid complications.

Expert Recommendations by Business Type

The optimal regime differs significantly based on the nature and scale of your business. Here are data-backed recommendations for common business owner profiles.

Sole Proprietors With Turnover Under ₹50 Lakh

Small-scale sole proprietors typically claim ₹1.5 Lakh to ₹2.5 Lakh in deductions (80C and 80D). At this deduction level, the new regime is almost always better. With presumptive taxation under Section 44AD (6% to 8% deemed income), the taxable income is low enough that new regime slab rates produce minimal tax. A sole proprietor with ₹40 Lakh turnover declaring 8% income (₹3.2 Lakh) under Section 44AD pays zero tax under the new regime due to the ₹4 Lakh exemption slab and Section 87A rebate.

Freelancers and Consultants Earning ₹15 Lakh to ₹30 Lakh

High-earning freelancers without home loans and with moderate insurance premiums (₹25,000 to ₹50,000 under 80D) benefit from the new regime in most cases. The critical factor is whether they use presumptive taxation (Section 44ADA, 50% deemed income). If yes, the deemed income already reduces the taxable base, and new regime slab rates on that reduced income produce the lowest overall tax. If they opt out of presumptive taxation and declare actual income with business expenses, the comparison depends on whether their Chapter VI-A deductions exceed the breakeven threshold for their income level.

Partners in LLP/Firm Earning Remuneration and Profit Share

Partners receive salary (allowed deduction for the firm under Section 40(b)) and profit share (exempt in partner's hands but taxable in the firm). The partner's taxable income is the remuneration received from the firm plus any other personal income. If the partner also has freelance income or consulting income, the Section 44AA restriction applies. Partners with remuneration exceeding ₹15 Lakh and limited personal deductions (no HRA, no home loan) should consider the new regime. Partners with home loans and high insurance premiums may find the old regime more suitable.

Business Owners With Both Salary and Business Income

Individuals who earn a salary from one source and business income from another face the one-time switch restriction because of the business income component. The standard deduction of ₹75,000 on salary is available under the new regime, partially offsetting the lost deductions. Calculate the combined liability across all income heads under both regimes. If total salary is ₹10 Lakh and business income is ₹8 Lakh, with combined deductions of ₹3 Lakh (80C + 80D + standard deduction under old regime), the new regime typically saves ₹40,000 to ₹60,000.

Summary

Switching from the old to the new tax regime as a business owner requires filing Form 10-IEA on incometax.gov.in before the ITR due date, with the critical understanding that business owners can make this switch back to the new regime only once in their lifetime. For FY 2025-26, the new regime's Section 115BAC slab rates (0% to 30% across seven brackets) benefit approximately 70% of business owners, particularly those with total deductions below ₹3.75 Lakh to ₹5 Lakh. Calculate your exact tax under both regimes using actual income and deduction figures before committing, and factor in your 3 to 5 year income projection given the permanence of this choice. File your income tax return under the chosen regime after Form 10-IEA is processed, and recalculate advance tax instalments to avoid interest penalties.