Rule 21AGA Introduced: Form 10-IEA Mandatory for Switching Tax Regimes from AY 2024-25

Vide CBDT Notification No. 43/2023 dated 21.06.2023, a new Rule 21AGA has been inserted to implement changes announced in the FY24 budget and to set out the modalities for taxpayers who wish to switch between the old and new regimes. From AY 2024-25 and onwards, the option to be exercised shall be, -

(a) in Form No. 10-IEA on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for such assessment year, in the case of a person having income from business or profession;

(b) in the return of income to be furnished under sub-section (1) of section 139 for such assessment year, in the case of a person not having income from business or profession as referred to in clause (i).

The withdrawal of the option under the proviso to sub-section (6) of section 115BAC shall also be in Form No. 10-IEA. Form No. 10-IEA shall be furnished electronically either under a digital signature or an electronic verification code (EVC).

Further, Rule 2BB and Rule 3 pertain to the exempt allowance and the valuation of perquisites have also been amended.

Previously, it was stated that a person who exercised the option under section (5) of section 115BAC would not be eligible for the benefits available under these rules (subject to certain conditions). However, as the new tax regime under section 115BAC is now the default tax regime for taxpayers, the rules have been amended to specify that a person whose income is taxable under section 115BAC(1A); the benefits of these rules will not be available. Further, Rule 5, which talks about depreciation, has been amended to provide a ceiling limit on depreciation allowance. It has been provided that the rate of depreciation of any block of assets entitled to more than 40% is restricted to 40%.

Furthermore, if the income of an assessee is chargeable to tax under section 115BAC(1A), the unabsorbed depreciation (attributable to the additional depreciation) would be allowed to be added to the written down value (WDV) of the block of assets as on 01-04-2023.