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The Government of India introduced Section 115BAC in the Income Tax Act  in tax year 2020-21, which allows you to opt for lower tax rates at which your salary can be taxed. The lower tax rates are specified under what is referred to as the “Simplified Tax Regime”. The below table presents the tax rates in effect for FY 2025-26 for your information.

You can choose either the “Simplified Regime” or the “Old Regime” for FY 20232025-2426. If you opt for lower tax rates (Simplified Regime) you will have to forego pretty much all the exemptions/losses/deductions available otherwise. For example, under the Simplified Regime, no benefits are available under Section 80C (Life insurance, etc.), Section 80D (Mediclaim), Section 80E (Interest on education loan), House Rent Allowance, Leave Travel Allowance, other allowances, Standard Deduction, losses on house property on account of home loan interest, etc. This means that you would lose almost all the tax benefits which are available by way of exemptions/deductions if you opt for lower tax rates (Simplified Regime).

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The tax regime, once chosen, cannot be modified during the year

As per a circular issued by the Income Tax Department, an employee cannot change the tax regime for the year once they make a choice and inform the employer of the same. Hence, you cannot change the tax regime in subsequent declarations once you make the choice the first time. Hence, please choose the tax regime carefully. For example, in the above screenshot, if the employee, by mistake, chooses "Simplified Regime" (higher tax option) the first time, HRWorks will continue to calculate tax as per the "Simplified Regime" until the end of the year.

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