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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Qualification: Student - CA/CS/CMA
Company: NLMK India Service Center Pvt Ltd
Location: SOUTH DELHI, New Delhi, IN
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