The evolution of tax regulations witnessed a significant milestone with the amendments to Section 115BAC of the Income Tax Act, 1961, brought forth by the Finance Act of 2023. This watershed moment in tax legislation not only aimed at simplifying tax filing procedures but also sought to enhance transparency and accountability in the tax ecosystem, marking a pivotal juncture in the journey towards a more taxpayer-centric tax regime. Section 115BAC of the Income Tax Act, 1961 underwent significant changes with the Finance Act of 2023, making the new tax regime the default option from the assessment year 2024-25 onwards.
Old Regime Slab Rates:-
| Net Income Range | Rate |
| Up to Rs. 2,50,000 | – |
| Rs. 2,50,000 to Rs. 5,00,000 | 5% |
| Rs. 5,00,000 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
New Regime Slab Rates:-
| Total Income (Rs) | Rate |
| Up to 3,00,000 | Nil |
| From 3,00,001 to 6,00,000 | 5% |
| From 6,00,001 to 9,00,000 | 10% |
| From 9,00,001 to 12,00,000 | 15% |
| From 12,00,001 to 15,00,000 | 20% |
| Above 15,00,000 | 30% |
Note: All eligible deductions and exemptions available in old regime only
Following chart explains difference between New Tax Regime from AY 2024-25 V/s. New Tax Regime for AY 2021-22 to AY 2023-24.
| Particulars | New Tax Regime for AY 2021-22 to AY 2023-24 | New Tax Regime for AY 2024-25 and onwards |
| No. of Slabs Rates | Six | Five |
| Basic Tax Exemption | Upto 2,50,000 | Upto 3,00,000 |
| Applicability | Individuals, HUF | Individuals, HUF, AOP – other than co-operative society, BOI , AJP |
| Default Regime | Old Regime | New Regime |
| Standard Deduction of 50,000 | Not available | Available |
| Deduction upto 15,000 u/s.57 (iia) for Family Pension | Not available | Available |
| Rebate u/s.87A | Upto 5,00,000 | Upto 7,00,000 |
| Maximum Rebate u/s.87A | 12,500 | 25,000 |
| Highest Surcharge Rate | 37 percent | 25 percent |
Here’s a breakdown of the key points:
1. Default Tax Regime: Starting from the assessment year 2024-25, Section 115BAC of the Income Tax Act establishes the new tax regime as the default option, applicable to individuals, HUFs, AOPs, BOIs, and artificial juridical persons, excluding partnership firms, companies, and cooperative societies.
2. Option to Opt Out: Taxpayers, those with income from business or profession, who wish to opt out of the new regime and choose the old one must file Form 10-IEA within the specified due date under Section 139(1) of the Act.
3. Flexibility for Non-Business Taxpayers: Taxpayer without income from business or profession can select their preferred regime while filing their return of income under Section 139(1) of the Act, with the option to switch each assessment year.
4. Impact of Previous Year’s Regime: The decision made for the assessment year 2023-24 regarding the tax regime does not affect the decision or procedure for the assessment year 2024-25.It means, irrespective of whether such taxpayer had filed ITR for AY2023-24 under the Old Regime or the New Regime, Income under PGBP or not, Default would be New regime for the assessment year 2024-25.
5. Consequences of Failure to opt out of New Regime: If a taxpayer with PGBP income, fails to file Form 10-IEA or taxpayer without PGBP Income fails to select their preferred regime in ITR within the due date specified under Section 139(1) of the Act for opting out of the default new tax regime, they become ineligible to switch to the old regime in the assessment year, and taxes will be applicable as per the default new tax regime.
For persons having income from business / profession, there is no requirement that the return of income should also be filed within due date specified u/s.139(1). Thus, if an assessee has filed Form No. 10-IEA for opting out from default New Tax Regime (i.e. to opt out from Section 115BAC), but fails to furnish his ITR u/s. 139(1) of the Act and furnishes belated ITR or updated ITR under section 139(4) or Section 139(8A) of the Act respectively, the assessee shall be eligible to pay tax as per the Old Regime on the basis of Form 10-IEA filed within due date specified u/s. 139(1) of the Act.
6. Changing Option in Revised Return: Once the option is exercised, it cannot be changed for the same assessment year, as per the provisions of Section 115BAC(6) of the Act. Even filing a revised return of income under Section 139(5) of the Act does not allow changing the option.
7. Changing Option in Subsequent assessment year: The decision to opt out of Section 115BAC in the assessment year 2024-25 does not impact subsequent assessment years for certain taxpayers. For those with income from business or profession, once opting for the old regime, they cannot switch back within the same year. However, such person can opt out from Old Regime in subsequent AY (say AY 2025-26) by again filing Form 10-IEA, but then such person shall never be eligible to opt for Old Regime again. However, for taxpayers without business or professional income, each year’s decision remains independent of prior selections, allowing flexibility in choosing between Section 115BAC and the old regime in ITR Form itself.
These provisions aim to streamline the tax filing process and provide clarity to taxpayers regarding their tax regime choices.
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Article by: CA. Sagar Gambhir | FCA, DISA (ICAI), DIRM (ICAI), AIII, B.COM | casagargambhir@gmail.com
Author can be reached at casagargambhir@gmail.com for any queries, issues & recommendations relating to article. Any feedback for improvement would be really appreciated.
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