New Income Tax Regime under section 115BAC

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 18^th, 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,

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