Can a freelancer switch between the old and new tax regime every year?
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Short answer
No. The new regime in section 202(1) of the Income-tax Act, 2025 is the default, and a person with business or professional income who opts out must do so by the return due date; the option then continues for later years and can be withdrawn only once.1 After that withdrawal the person cannot opt out again unless they stop having business or professional income.1 Salaried people without such income can choose afresh each year with the return.1
A salaried employee can usually pick the cheaper regime each year. A freelancer, consultant or agency owner with income from business or profession cannot. Section 202 of the Income-tax Act, 2025, which applies from tax year 2026-27, sets stricter rules for anyone with business or professional income.1
Which regime applies by default?
The new regime applies by default. Section 202(1) says tax for an individual, Hindu undivided family and certain others is computed at the rates in its Table "unless the person exercises the option" under section 202(4).1 The rates are nil up to ₹4 lakh, 5% to ₹8 lakh, 10% to ₹12 lakh, 15% to ₹16 lakh, 20% to ₹20 lakh, 25% to ₹24 lakh and 30% above.1
What are the opt-out rules for freelancers?
Section 202(4)(a) sets four rules for a person having income from business or profession:1
- The option must be exercised on or before the due date under section 263(1) for that tax year.1
- Once exercised, it applies to subsequent tax years.1
- It may be withdrawn only once, for a tax year other than the year it was exercised.1
- After withdrawal, the person can never exercise it again, unless they cease to have business or professional income, when the salaried-person option becomes available.1
For a person without business or professional income, section 202(4)(b) allows the option along with the return for each tax year.1
What does this mean in practice?
The table applies section 202(4) and the section 263(1) due date for a freelancer without an audit.13
| Freelancer | Choice | Result |
|---|---|---|
| Tutor, tax year 2026-27 | Stays in the new regime | Can opt out in a later year by that year's due date |
| Consultant, tax year 2026-27 | Opts out by 31 August 2027 | Old regime continues for tax year 2027-28 onwards until withdrawn |
| Same consultant, tax year 2029-30 | Withdraws the option | Back in the new regime with no further opt-out while business income continues |
Which regime suits most freelancers?
The new regime's rebate in section 156(2) removes tax entirely for income up to ₹12 lakh, with marginal relief just above it, and is available only for income chargeable under section 202(1).2 The old regime's appeal depends on the deductions you can actually claim, which differ for each person. Because the choice is hard to reverse, model both with a chartered accountant (CA) before the return due date. The ₹12 lakh rebate answer explains how the rebate works on presumptive income.
How did we verify this?
We checked this page against the sources below on 28 October 2026. Read our methodology or report an error.
Frequently asked questions
What is the deadline to opt out for tax year 2026-27?+
For a person with business or professional income, on or before the due date under section 263(1), which is 31 August 2027 for a freelancer without an audit.13
What happens if I opt out and later withdraw?+
The withdrawal can be made only once, for a tax year other than the one in which you opted out, and after that you cannot opt out again unless you cease to have business or professional income.1
Do I lose the ₹60,000 rebate if I opt out?+
The ₹60,000 rebate in section 156(2) applies to income chargeable under section 202(1). Section 156(1) has a separate rebate of up to ₹12,500 for total income up to ₹5 lakh.2
What are the new regime slab rates?+
Nil up to ₹4 lakh, then 5%, 10%, 15%, 20% and 25% in ₹4 lakh steps up to ₹24 lakh, and 30% above ₹24 lakh.1
This page is general information for Indian service exporters, not tax or legal advice. Rules change and outcomes depend on your facts, so confirm with a chartered accountant before acting.
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