City ITAT: Taxpayer opting for old regime must get eligible deductions

Mumbai: The city bench of the Income Tax Appellate Tribunal (ITAT) has held that when the tax department treats a taxpayer as having opted for the old income-tax regime by virtue of his having filed Form 10-IEA, eligible deductions under the old regime must be allowed to this taxpayer.

The new tax regime is now the default tax regime. While the tax rates are lower under this regime, several deductions, such as those for various investments, insurance premiums or bank interest, which is available to senior citizens, are not allowed. Owing to the lower tax rates, many taxpayers benefit by opting for the new regime. While others who have various deductions to claim stand to benefit by opting out of the new tax regime and filing the tax return under the old regime.

Taxpayers having business or professional income who wish to opt out of the default new tax regime and chose the old tax regime have to file Form 10-IEA.

In the case before the ITAT, the taxpayer filed Form 10-IEA on Aug 31, 2025, opting out of the new tax regime for financial year ended March 31, 2025. However, in his I-T return filed on Sept 16, 2025, he indicated that he did not wish to opt out of the new regime by checking a box in the I-T return, contradicting the choice recorded in the form.

The Centralised Processing Centre (CPC) relied on Form 10-IEA while processing his I-T return and raised a tax demand of Rs 1.4 lakh. His rectification request was rejected, and the appellate commissioner upheld the adjustment.

The taxpayer then approached the ITAT, contending that the I-T return and the form filed by him had created a conflict. As the CPC had processed his return based on the old regime, he sought deductions under Sections 80C (available for eligible investments), 80D (available for eligible health insurance premium) and 80TTB (available to senior citizens against bank interest), which are available under the old tax regime, subject to the applicable ceilings and conditions.

While the ITAT rejected his contention that the regime could be changed merely by ticking a different option in the return after having filed the prescribed form, it accepted his contention as regards grant of deductions. It held that if the tax department treated him as having opted for the old regime on the basis of Form 10-IEA, the deductions permissible under that regime should also be considered. The matter was remitted to the assessing officer for this limited purpose.

Sometimes taxpayers do make mistakes in checking the option box in their I-T return. Ketan Vajani, chartered accountant, said, “The decision holds that Form 10-IEA overrides the I-T return in selection of the tax regime. This decision can also be helpful to taxpayers in cases where though Form 10-IEA is filed, there is an unintentional human error in selection of option while filing the tax return.”

It should be noted that the new I-T Act, which applies from April 1, 2026, the choice of selecting a tax regime is via an I-T return itself. No separate form, such as Form 10-IEA is required to be filed.