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As soon as the season of filing Income Tax Returns (ITR) begins, there is confusion among salaried employees regarding the tax regime. It is often seen that due to their busyness or lack of information, many employees are not able to give the declaration within the time limit set by the company (employer) that they want to choose the Old Tax Regime.
In such a situation, companies start deducting TDS from the employee’s salary by default as per the rules on the basis of New Tax Regime. But, if this has happened to you too, then do not worry at all. Your opportunity to save tax is not over yet.
According to Balwant Jain, a well-known Chartered Accountant (CA) and Certified Financial Planner (CFP) from Mumbai, the TDS deducted by the company is not final. Taxpayers have every legal right to choose the tax regime of their choice while filing their Income Tax Return (ITR).
The biggest concern of the salaried class: What will happen to HRA and 80C exemption?
An upset taxpayer recently raised a question that due to not giving the declaration on time, the company considered it to be in the new tax regime and deducted huge TDS. Because of this, he gets many big tax benefits like house rent allowance (HRA), Leave Travel Allowance (lta), Stream 80C Rebate of ₹1.5 lakh under (PPF, LIC, ELSS etc.) and Section 80D Under this, the benefit of medical insurance premium could not be included in the payroll system of the company. The employee feared that due to this mistake he would have to suffer huge financial loss.
Why did the company do this?
CA Balwant Jain clarifies that as per income tax rules, it is mandatory for any company to deduct TDS based on estimated tax before paying salary to the employee. Since the government has now made the New Tax Regime the ‘default’ system, if an employee does not indicate his choice on time, the company is bound under the rules to deduct tax as per the New Tax Regime slab. Therefore this action of the company was completely legal.
There is a chance to change the dice at the time of return filing; This is how you will get refund
According to Balwant Jain, the tax regime informed to the company at the beginning of the year is only for calculating temporary TDS. The final and sovereign decision to choose a tax regime is taken when you file your final return (ITR) on the Income Tax Department portal.
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Claim and get a refund: When you fill ITR for financial year 2025-26, there you will manually ‘Old Tax Regime’ You can choose the option. As soon as you choose the old regime, you will be able to enter complete details of all your investments, such as exemptions under Section 80C, 80D, home loan interest and HRA.
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Refund Credit: When your actual tax liability is calculated after all these deductions & exemptions, it will be much less than the TDS deducted by the company. In such a situation, whatever additional tax was deducted by the company will be refunded by the Income Tax Department. Tax Refund will be sent back with interest directly to your registered bank account.
Who can change the regime every year? Different rules for salary and business class
The Income Tax Department has divided taxpayers into two different categories regarding the exemption from changing the tax regime:
1. Employed and Pensioners (No Business Income)
Taxpayers whose source of income is only from salary, pension, house property or other sources (like interest and dividends) and their No income from any business or profession,The rules for them are very flexible. Such people can switch between the old and new tax regime every year as per their convenience. That means, it is completely in their hands to choose the old regime this year and the new regime next year.
2. Businessmen and Professionals (With Business Income)
If your earnings fall within the scope of “Profits from business or profession” (PGBP), the rules are stricter. Such taxpayers get a chance to leave the old tax regime and switch to the new tax regime only once in their life. But once they choose the new tax regime, they cannot go back to the old tax regime until their business income stops completely.
Attention If you miss the deadline of 31 July 2026, the option will expire.
CA Balwant Jain has given a very important warning to taxpayers without business income. If you want to take advantage of the old tax regime by rectifying the defaults of your company and claim your refund, then you must file your ITR for the financial year 2025-26. 31 July 2026 Must be filed before the deadline.
Disadvantages of missing deadlines: If you are not able to file your return by July 31, 2026 and file a belated return (Belated ITR), then the Income Tax Department will not allow you to choose the old tax regime at all. In that case, you will essentially have to pay tax under the default new tax regime and all your investments (80C, HRA etc.) will become worthless. Therefore, collect your Form 16 and investment documents in time and do tax planning wisely.