Prefer the old tax regime? Opt out now, Finance Act 2023 requires explicit choice in ITR forms

Tax regime shift: In an alteration brought about by the Finance Act 2023, individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs), Bodies of Individuals (BOIs), and Artificial Judicial Persons (AJPs) now find themselves automatically enroled in the new tax regime. Under this alteration, adherence to the previous tax regime has become an explicit choice, as taxpayers are now required to actively opt out if they wish to continue under the old system.

With the default tax regime altered, taxpayers now find themselves at a crossroads, deciding whether to embrace the new tax regime or explicitly opt for the old one. This decision requires a clear indication in the return of income.

The Central Board of Direct Taxes (CBDT) has ushered in the holiday season by releasing the Income Tax Return (ITR) Forms 1 and 4 for the Assessment Year 2024-25 ahead of schedule. This development brings with it a series of key changes that taxpayers need to be aware of for a smoother filing process.

Revamped applicability criteria

The applicability criteria, as outlined in Rule 12 of the Income-tax Rules, 1962, remain unchanged. However, taxpayers will need to adapt to the ITR Forms for AY 2024-25, with ITR 1 catering to ordinarily resident individuals and ITR 4 designed for resident individuals, Hindu Undivided Families (HUFs), and resident firms.

New deduction column for Section 80CCH

The Finance Act 2023 brought forth Section 80CCH, offering a tax deduction to individuals enroled in the Agnipath Scheme subscribing to the Agniveer Corpus Fund. ITR Forms 1 and 4 have been updated to include a dedicated column for claiming deductions under Section 80CCH.

Enhanced turnover limit disclosure

For businesses opting for the presumptive taxation scheme under Section 44AD, the turnover threshold has been increased from Rs 2 crore to Rs 3 crore. ITR-4 now includes a crucial "Receipts in Cash" column, providing transparency in disclosing cash turnover under Schedule BP.

Extended preparation time for taxpayers

This early release of ITR Forms provides taxpayers with an extended window to comprehend these pivotal changes, gather necessary documentation, and file returns with heightened precision. As taxpayers gear up for the tax season, the CBDT's early unveiling of key changes ensures that individuals and businesses can plan and execute their tax filings for the Assessment Year 2024-25 with understanding of the revamped rules and procedures.