New Income Tax Regime

To bring a revolutionary change in Direct Tax Rates or to bring down the burden of taxes on small taxpayers, Hon’ble Finance Minister has proposed a new tax regime by insertion of Sec. 115BAC in which New Slabs are introduced with some restriction.

Sec. 115BAC is proposed in Finance Budget, 2020 from Assessment Year 2021-22 (FY 2020-21) onwards and Individuals & HUF who have opt for taxation under Sec. 115BAC of the Income Tax Act has to forego the specified deductions and exemptions.

List of Deductions and Exemptions can’t be claimed while calculating Tax U/S 115BAC:

> Under Income from Salary:

1. Leave Travel concession

2. House Rent Allowance

3. Official and personal allowances

4. Allowances to MPs/MLAs

5. Allowances for the income of minor

6. Standard Deduction

7. Entertainment Allowance

8. Professional Tax

> Under Income from House Property:

1. Interest on housing loan

> Under Income from Business Income:

1. Additional depreciation in respect of new plant and machinery

2. Deduction for investment in new plant and machinery in notified backward areas

3. Deduction in respect of tea, coffee or rubber business

4. Deduction in respect of business consisting of prospecting or extraction or production of petroleum or natural gas in India

5. Deduction for donation made to approved scientific research association, university college or other institutes for doing scientific research which may or may not be related to business

6. Deduction for payment made to an Indian company for doing scientific -research which may or may not be related to business

7. Deduction for donation made to the university, college, or other institution for doing research in social science or statistical research

8. Deduction for donation made for or expenditure on scientific research

9. Deduction for units established in Special Economic Zones (SEZ)

10. Deduction in respect of capital expenditure incurred in respect of certain specified businesses, i.e., cold chain facility, warehousing facility, etc.

11. Deduction for expenditure on an agriculture extension project

12. Deduction for family Pension

> Under Chapter VI-A (Deductions):

1. Deduction in respect of certain incomes other than specified under Section 80JJAA.

2. Deduction under Chapter VI-A except for 80CCD(2)

Optional Tax slab Rate Available to the Taxpayers:

OPTION 1 OPTION 2
Old Income Tax Slab New Income Tax Slab
Upto Rs. 250000 NIL Upto Rs. 250000 NIL
Rs. 250001 – Rs. 500000 5% Rs. 250001 – Rs. 500000 5%
Rs. 500001 – Rs. 1000000 20% Rs 5,00,001 – Rs 7,50,000 10%
Rs 7,50,001 – Rs 10,00,000 15%
Above Rs. 1000000 30% Rs 10,00,001 – Rs 12,50,000 20%
Rs 12,50,001 – Rs 15,00,000 25%
Above Rs 15,00,000 30%

 Surcharge Rate Applicable:

Total Income Rate Applicable
Upto Rs. 50 Lakhs NIL
From Rs. 50Lakhs – Rs. 1 Cr 10% of Income Tax
Above Rs. 1 Cr. – Rs. 2 Cr. 15% of Income Tax
Above Rs. 2 Cr. – Rs. 5 Cr. 25% of Income Tax
Above Rs. 5 Cr. 37% of Income Tax

 Period for Opting Taxation Under Sec. 115BAC:

1. An individual/HUF, having no business or professional income, can exercise his option of choosing tax regime, every year, based on his deductions.

So, an individual/HUF, having income from Salary, House Property, Capital Gains and from Other Sources, can opt for the new tax regime in one financial year, and can again choose to opt for old tax regime in subsequent financial year, based on your deductions.

The option shall be exercised along with the return of Income for every previous year.

Furthermore, clarification has been issued by the CBDT that “an employee having income other than the income from business or profession and intending to opt for the concessional rate under Section 115 BAC of the Act, may intimate the deductor, being his employer, of such intention for each previous year and upon such intimation, the deductor shall compute his total income, and make TDS thereon in accordance with the provisions of Section 115 BAC of the Act. If such intimation is not made by the employee, the employer shall make TDS without considering the provisions under Section 115BAC of the Act.”

However, an employee may change the option at the time of return filing.

2. An individual/HUF, having Income from business or professional, can exercise his option opt for the new tax regime of reduced taxes with no deductions, u/s 115BAC, only once and the option once exercised, for a previous year shall be valid for that previous year and all subsequent years.

Option shall be exercised on or before the due date u/s 139(1) for furnishing the return of Income.

3. The option can be withdrawn once in lifetime where it was exercised by the Individual/HUF having business Income in the previous year other than the year in which it was exercised except where Individual/HUF ceases to have any Business Income.

Comparison table between Tax Slabs:

Table 1:-

PARTICULARS
Income: 300000
PARTICULARS
Income: 500000
 
OLD REGIME
NEW REGIME
OLD REGIME
NEW REGIME
Basic Salary
300000.00
300000.00
Basic Salary
250000.00
250000.00
Add: Allowance
Add: Allowance
HRA
HRA
100000.00
100000.00
LTA
LTA
50000.00
50000.00
Other Allowance
Other Allowance
100000.00
100000.00
Total Salary
300000.00
300000.00
Total Salary
500000.00
500000.00
Less: Deduction
Less: Deduction
Standard Deduction
50000.00
Standard Deduction
50000.00
LTA
LTA
50000.00
HRA
HRA (Rent P/M: 20000)
100000.00
Income from Salary
250000.00
300000.00
Income from Salary
300000.00
500000.00
Loss under House Property
-200000.00
Loss under House Property
-200000.00
Gross Total Income
50000.00
300000.00
Gross Total Income
100000.00
500000.00
Less : Deduction under Chapter VI-A
Less : Deduction under Chapter VI-A
Section 80C
Section 80C
Section 80CCD(1B)
Section 80CCD(1B)
Section 80CCD(2)
Section 80CCD(2)
Section 80D
Section 80D
Taxable Income
50000.00
300000.00
Taxable Income
100000.00
500000.00
Income Tax
2500.00
Income Tax
12500.00
Rebate U/S 87A
2500.00
Rebate U/S 87A
12500.00
Surcharge
Surcharge
Edu. Cess
Edu. Cess
Net Tax Payable
Net Tax Payable
 
 
Net Tax Saving/(Loss)
Net Tax Saving/(Loss)
In New Tax Regime
In New Tax Regime

 Table 2:-

PARTICULARS
Income: 750000
PARTICULARS
Income: 1100000
 
OLD REGIME
NEW REGIME
OLD REGIME
NEW REGIME
Basic Salary
375000.00
375000.00
Basic Salary
550000.00
550000.00
Add: Allowance
Add: Allowance
HRA
150000.00
150000.00
HRA
220000.00
220000.00
LTA
75000.00
75000.00
LTA
110000.00
110000.00
Other Allowance
150000.00
150000.00
Other Allowance
220000.00
220000.00
Total Salary
750000.00
750000.00
Total Salary
1100000.00
1100000.00
Less: Deduction
Less: Deduction
Standard Deduction
50000.00
Standard Deduction
50000.00
LTA
50000.00
LTA
50000.00
HRA (Rent P/M: 20000)
150000.00
HRA (Rent P/M: 20000)
185000.00
Income from Salary
500000.00
750000.00
Income from Salary
815000.00
1100000.00
Loss under House Property
-200000.00
Loss under House Property
-200000.00
Gross Total Income
300000.00
750000.00
Gross Total Income
615000.00
1100000.00
Less : Deduction under Chapter VI-A
Less : Deduction under Chapter VI-A
Section 80C
100000.00
Section 80C
150000.00
Section 80CCD(1B)
Section 80CCD(1B)
50000.00
Section 80CCD(2)
Section 80CCD(2)
50000.00
50000.00
Section 80D
25000.00
Section 80D
25000.00
Taxable Income
175000.00
750000.00
Taxable Income
340000.00
1050000.00
Income Tax
37500.00
Income Tax
4500.00
85000.00
Rebate U/S 87A
Rebate U/S 87A
-4500.00
Surcharge
Surcharge
Edu. Cess
1500.00
Edu. Cess
3400.00
Net Tax Payable
39000.00
Net Tax Payable
88400.00
 
 
Net Tax Saving/(Loss)
-39000.00
Net Tax Saving/(Loss)
-88400.00
In New Tax Regime
In New Tax Regime

Table 3:-

PARTICULARS
Income: 2000000
PARTICULARS
Income: 2000000
 
OLD REGIME
NEW REGIME
OLD REGIME
NEW REGIME
Basic Salary
1000000.00
1000000.00
Basic Salary
1000000.00
1000000.00
Add: Allowance
Add: Allowance
HRA
400000.00
400000.00
HRA
400000.00
400000.00
LTA
200000.00
200000.00
LTA
200000.00
200000.00
Other Allowance
400000.00
400000.00
Other Allowance
400000.00
400000.00
Total Salary
2000000.00
2000000.00
Total Salary
2000000.00
2000000.00
Less: Deduction
Less: Deduction
Standard Deduction
50000.00
Standard Deduction
50000.00
LTA
50000.00
LTA
50000.00
HRA (Rent P/M: 20000)
140000.00
HRA (Rent P/M: 20000)
140000.00
Income from Salary
1760000.00
2000000.00
Income from Salary
1760000.00
2000000.00
Loss under House Property
-200000.00
Loss under House Property
-200000.00
Gross Total Income
1560000.00
2000000.00
Gross Total Income
1560000.00
2000000.00
Less : Deduction under Chapter VI-A
Less : Deduction under Chapter VI-A
Section 80C
150000.00
Section 80C
Section 80CCD(1B)
50000.00
Section 80CCD(1B)
Section 80CCD(2)
50000.00
50000.00
Section 80CCD(2)
Section 80D
25000.00
Section 80D
Taxable Income
1285000.00
1950000.00
Taxable Income
1560000.00
2000000.00
Income Tax
198000.00
322500.00
Income Tax
280500.00
337500.00
Rebate U/S 87A
Rebate U/S 87A
Surcharge
Surcharge
Edu. Cess
7920.00
12900.00
Edu. Cess
11220.00
13500.00
Net Tax Payable
205920.00
335400.00
Net Tax Payable
291720.00
351000.00
 
 
Net Tax Saving/(Loss)
-129480.00
Net Tax Saving/(Loss)
-59280.00
In New Tax Regime
In New Tax Regime

Table 4:-

PARTICULARS Income: 1000000
  OLD REGIME NEW REGIME
Business Income 850000.00 850000.00
Loss under House Property -200000.00
Other Source 150000.00 150000.00
Gross Total Income 800000.00 1000000.00
Less : Deduction under Chapter VI-A
Section 80C 150000.00
Section 80D 25000.00
Taxable Income 625000.00 1000000.00
Income Tax 37500.00 75000.00
Rebate U/S 87A
Surcharge
Edu. Cess 1500.00 3000.00
Net Tax Payable 39000.00 78000.00
 
Net Tax Saving/(Loss) -39000.00
In New Tax Regime

Concluding words:

The above matter has been done sincerely updated up to the notifications till April 18th, 2020. And the income comparison has done with the all income level possible for both salaried and Business Income Taxpayers between Old and New Tax Regime.

Hope the above, will be useful in choosing appropriate Tax slab for your Tax Calculation.

As per my views New Tax Slab will more beneficial for those taxpayer who are not in a habit of investing (like in; LIC, PF, PPF, Mutual Funds, &/or Mediclaim Policy, etc)  for claiming deduction u/s 80C, 80D of the Income Tax Act, 1961

Happy Reading,

Stay Home & Stay Safe

Author Bio

Qualification: CA in Job / Business
Company: N/A
Location: Jaipur, Rajasthan, IN
Member Since: 26 Apr 2020 | Total Posts: 1

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