Detailed Analysis on Incentive to Individuals and HUF by insertion of New Section 115BAC under Finance Bill 2020
Dear all, all we new that new finance bill has been brought up by finance minister in last week of January 2020 in which they have inserted a new section 115BAC of Income tax act to called it as concessional Tax rate for Individual and HUF having the source of income except the business income. In other words if you have business income then the above said new inserted section having concessional rate of tax will not be applicable for you. Further the new option can be choosen once will continue to be in force till the time assessee have business income or concessional rate once opted out can be choosen again once assessee ceases to have business income. Before going further to discuss in details lets take a view on the provision mentioned regarding tax rate in finance bill for new as well as old tax regime is mentioned as under :-
Slab rate for as per finance bill 2020 is mentioned as under
A) Paragraph A of part – III of first schedule to the bill provides the following rates of income tax for Individual or HUF or every AOP or BOI, whether incorporated or not, or every AJP other than mentioned in (B) or (C) :-
| Taxable Income | Rate of Tax |
| Upto Rs. 2,50,000 | NIL |
| Rs. 2,50,001 to Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
B) In case of every individual, being resident in India, who is of the age of Sixty years or more but less than eighty years at any time during the previous year:-
| Taxable Income | Rate of Tax |
| Upto Rs. 3,00,000 | NIL |
| Rs. 3,00,001 to Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
C) In the case of every individual, being a resident in India, who is of the age of eighty year or more at the any time during the previous year:-
| Taxable Income | Rate of Tax |
| Upto Rs. 5,00,000 | NIL |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
Further the income tax computed above will be increased by surcharge at the rate of following as mentioned below:
| Taxable Income | Rate of Surcharge | |
| Including Income under provision of Sec 111A and 112A | Excluding income under provision of Sec 111A and 112A | |
| Exceeding Rs. 50 Lakh but not exceeding Rs. 1 crore | 10% | – |
| Exceeding Rs. 1 Crore | 15% | – |
| Exceeding Rs. 2 Crore but not exceeding Rs. 5 Crore | 15% | 25% |
| Exceeding Rs. 5 Crore | 15% | 30% |
And Cess will be applicable @ 4%.
New Tax Regime : Incentive to Individual and HUF Sec 115BAC
On satisfaction of certain conditions, an individual or HUF shall , from assessment year 2021-22 on wards have the option to pay tax in respect of Total Income (except Business Income) at the following rates :
| Taxable Income | Rate of Tax |
| Upto Rs. 2,50,000 | NIL |
| Rs. 2,500,001 to Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 7,50,000 | 10% |
| Rs. 7,50,001 to Rs. 10,00,000 | 15% |
| Rs. 10,00,001 to Rs. 12,50,000 | 20% |
| Rs. 12,50,001 to Rs, 15,00,000 | 25% |
| Above Rs. 15,00,000 | 30% |
As mentioned earlier also that there are some conditions that certain deductions or exemptions will not be available to Individual or HUF for opting the concessional rate which in mentioned as below:
a) LTC/ assistance under section 10(5);
b) HRA under section 10(13A);
c) Specific allowances under section 10(14) to be prescribed;
d) Standard deduction, professional tax deduction under section 16;
e) Interest paid on housing loan under section 24(b) on self-occupied property and losses under the head house property;
f) Exemption not exceeding INR 1,500 in respect of income of minor child under section 10(32) ;
g) Specified expenditure or deductions that could be claimed while computing profits and gains from business and profession ;
h) Deduction from income from other source under section 57 for family pension;
i) Deductions under Chapter VIA other than deduction in respect of employers contribution to NPS under section 80CCD(2);
The option to pay tax between new tax regime i.e. concessional rate or old tax regime shall need to be exercised at the time of filling of return within due date as mentioned under section 139. Furthermore, such an option is available to individual o huf not having a business income and can be exercised from AY 2021-22. Individual or HUF can opt out in any subsequent assessment year from such new tax regime once they have business income.
Basically, if you do not have any investment or loss under the head of house property or you does not avail the benefit of HRA then the concessional rate would be beneficial for you.
Lets take an example to understand the provision in more clear way.
Salary Income Rs. 8,00,000 {(For HRA purpose Rs. 4,00,000) (HRA received Rs. 1,20,000)}
, House loan principal paid is Rs, 1,50,000 and Interest paid on Housing loan is 2,50,000.
Calculate the Total Income and Tax under the old as well new regime.
Taxability under the Old Regime Compuation of Total Income and TAX
| Particulars | Rs. | |
| Income Under the head salary | 8,00,000 | |
| Less :- Exemption under 10 (13A) | 0 | *Rent paid is Zero |
| Gross Income Under the head salary | 8,00,000 | |
| Less :- Standered Deduction | 50,000 | |
| Net Income Under the head salary | 7,50,000 | |
| Income Under the head House Property | -2,00,000 | |
| Gross Taxable Income | 5,50,000 | |
| Less :- Deduction under chapter VI | ||
| Principal paid on House property | 1,50,000 | |
| Net Taxable Income | 4,00,000 |
|
|
Tax on above |
||
| Upto Rs. 2,50,000 | – | |
| Balance @ 5% | 7,500 | |
| Less :- Rebate U/s 87A | 7,500 | |
| Tax payable | – | |
|
Taxability under New Regime U/s 115BAC Compuation of Total Income and TAX |
||
| Particulars | Rs. | |
| Income Under the head salary | 8,00,000 | |
| Less :- Exemption under 10 (13A) | 0 | Not Applicable |
| Gross Income Under the head salary | 8,00,000 | |
| Less :- Standered Deduction | 0 | Not Applicable |
| Net Income Under the head salary | 8,00,000 | |
| Income Under the head House Property | 0 | Not Applicable |
| Gross Taxable Income | 8,00,000 | |
| Less :- Deduction under chapter VI | ||
| Principal paid on House property | – | Not Applicable |
| Net Taxable Income | 8,00,000 | |
|
Tax on above |
||
| Upto Rs. 2,50,000 | – | |
| on Next Rs. 2,50,000 @ 5% | 12,500 | |
| on Next Rs. 2,50,000 @ 10% | 25,000 | |
| On Next Rs. 50,000 @ 15% | 7,500 | |
| Gross Tax payable | 45,000 | |
| Add :- Cess @ 4% | 1,800 | |
| Total Tax Payable | 46,800 | |
After comparing the above you can better analyze and opt for the scheme.
Thank You.
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