A New section, 115BAC has been introduced vide clause 53 of the Finance Act, 2020 with respect to tax on Individuals and HUF. The said section will apply from AY 21-22 and subsequent AY’s.
The said scheme provides for concessional rate of tax as follows:
| Sl. No | Income | New Rate – 115BAC | Existing Rates |
| 1 | Upto Rs. 2,50,000 | Nil | Nil |
| 2 | From 2,50,001 to Rs. 5,00,000 | 5% | 5% |
| 3 | From 5,00,001 to Rs. 7,50,000 | 10% | 20% |
| 4 | From 7,50,001 to Rs.10,00,000 | 15% | 20% |
| 5 | From 10,00,000 to Rs. 12,50,000 | 20% | 30% |
| 6 | From 12,50,001 to Rs. 15,00,000 | 25% | 30% |
| 7 | Above Rs. 15,00,000 | 30% | 30% |
The Assessee has a right to choose the option of whether to go with the old scheme or the concessional rate u/s 115BAC (new scheme).
Provided, Concessional rate u/s 115BAC can be availed only if the conditions specified in sub section (2) of the said section are satisfied.
If any person fails to satisfy the prescribed conditions, the option of concessional rate of tax u/s 115BAC can’t be applied.
The Assessee can exercise the said option at the time of filing of his Return of Income u/s 139(1). An Assessee having income from business or profession can avail this option for any AY commencing on or after 1st April 2021 and the option once exercised shall apply to subsequent assessment years. Such assessee, after opting for the new scheme and decides to opt-out of the said scheme, he can never avail the said option unless he ceases to have income from business or profession.
Assessees having income other than income from business or profession has the right to choose between the old scheme and the new scheme for any previous year at the time of filing of his return of income u/s 139(1).
Thus, it is clear that the choice of availing the scheme is at the time of filing the return of income.
This posted confusion in the minds of the employer with respect to TDS on salary paid to the employees. The employer may not be in a position to know whether which employee opts for which scheme while making the TDS. As a result, the Employers were in complete chaos about the deduction of TDS on salaries.
On various representations received expressing the said concern, CBDT has issued a circular vide F.No.370142/13/2020-TPL dated April 13, 2020. The said circular has provided the following clarification:
“In case of an employee having income other than income from Business or Profession, who intends to avail concessional rate of tax u/s 115BAC shall intimate the deductor (the employer) for each previous year. Upon such intimation, the deductor shall make TDS as per the concessional rate. If such intimation is not made by the employee, the employer shall make TDS without considering the provisions of Sec 115BAC.
The intimation so made to the deductor shall be only for the purposes of TDS during the previous year and cannot be modified during that year. But, this doesn’t mean the exercising the option u/s 115BAC. The option to choose the scheme is always at the time of filing of return of income u/s 139(1). Thus, the option at the time of filing of return of income and intimation made to the employer could be different.”
As such, the Employer can deduct TDS as per the scheme intimated by the employee and the employee has the right to change the scheme at the time of filing the return of income. Any short deduction of TDS, self-assessment tax can be made while filing the return of income.
Note: This is as per the understanding of the Author.
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