Tax Season is here, and we are all set to file Income Tax Returns for the FY 2023-24!! Here are some of the changes that are introduced for the current Return year, i.e., FY 2023-24, which one must be aware of- all peculiarities of New Tax regime compiled at one place!!
Section 115BAC (New Tax Regime) of Income Tax Act, 1961 was introduced in Budget 2020 for Individuals and HUF Taxpayers, effective from financial year 2020-21- A scheme introduced with an option to pay Income Tax at lower rates with fewer exemptions and deductions to claim under the Act.
Section 115BAC was further amended in Budget 2023, and the New Tax Regime was made the default regime w.e.f. FY 2023-24.
Page Contents
What is exactly Section 115BAC- The New Tax Regime!!
The New Tax Regime was applicable was applicable from FY 2020-21, the key features of the New Tax Regime are as under:
(i) The New Tax Regime shall be applicable to Individual and HUF Taxpayers only.
(ii) The Income Tax payable in respect of Total Income of a person, being an Individual or HUF (w.e.f. FY 2023-24) shall be computed at the rate of Tax given in following table-
| Total Income | Rate of Tax |
| Upto Rs. 3,00,000 | Nil |
| From Rs. 3,00,001 to Rs. 6,00,000 | 5% |
| From Rs. 6,00,001 to Rs. 9,00,000 | 10% |
| From Rs. 9,00,001 to Rs. 12,00,000 | 15% |
| From Rs. 12,00,001 to Rs. 15,00,000 | 20% |
| Above Rs. 15,00,000 | 30% |
(iii) In Budget 2023, a tax rebate on an Income upto Rs.7,00,000/- was introduced under the New Tax Regime, meaning that Taxpayers will not have to pay any Tax if Income is up to Rs. 7,00,000/- under the New Tax regime. In Budget 2023, Standard deduction of Rs.50,000/- is also re-introduced under New Tax Regime.
(iv) The Tax Rates in the New Tax regime is same for all the Categories of Individual, i.e. Individuals, Senior Citizen, and Super Senior Citizen, Unlike Old Tax Regime which has different slab rates for different categories of Individual.
(v) Reduced Surcharge for High-Net-Worth Individuals- In Budget 2023, the highest surcharge rate on Income over Rs. 5 Crores, has been reduced from 37% to 25% under the new tax regime. (Applicable w.e.f. 1st April 2023). This move will bring down their effective tax rate from 42.74% to 39%.
(vi) Surcharge rates of 25% will not apply to the income from dividends and capital gains taxable under sections 111A (Short Term Capital Gain on Shares), 112A (Long Term Capital Gain on Shares), and 115AD (Tax on the income of Foreign Institutional Investors). Therefore, the highest surcharge rate on the tax payable for such incomes will be 15%.
(vii) Higher Leave Encashment Exemption- In Budget 2023, the exemption threshold for leave encashment was increased 8-fold from ₹3 lakhs to ₹25 lakhs for non-government employees. Thus, at the time of retirement, leave encashment of up to ₹25 lakhs is tax-free under Section 10(10AA).
(viii) No exemption or deduction shall be provided under the following provisions-
(a) Section 10(5)- Exemption for Leave Travel Allowance
(b) Section 10(13A)- Exemption of House Rent Allowance (HRA)
(c) Section 10(14)- Exemption of Conveyance Allowance
(d) Section 10(17)- Exemption to MLAs and State legislators in respect of their Daily allowances
(e) Section 10(32)- Deduction of Minor Child’s income upto Rs.1500/-
(f) Section 10AA- For Newly established units in SEZ
(g) Section 16(ii)- Deduction of Entertainment allowance
(h) Section 16(iii)- Deduction of Professional Tax
(i) Section 24(b)- Interest on housing loan on the self-occupied property or vacant property
(Important to note that Deduction for Interest of Home Loan on Let out property is still allowed in New Tax regime also)
(j) Section 57(iia)- family pension (Upto 1/3rd of Such income or Rs.15,000/-, whichever is less)
(k) Section 35(2AA) or 35(1)(ii)/ (iia)/ (iii)- Deductions for donation for or expenditure on scientific research
(l) Section 35AD- Deductions applicable to Tax incentives for Specified businesses- Cold Chain Facilities, Warehousing Facilities, Cross country Natural Gas or Petroleum pipelines, Hotels, Hospitals, Affordable Housing Schemes Projects, Slum redevelopment or rehabilitation, Fertilizer Production etc.
(m) Section 35CCC – Deduction of Expenditure on agricultural extension project
(n) Any deductions of Chapter VI A except under noted deductions-
80CCD(2)- Employers Contribution to NPS Account on behalf of Employee
80CCH(2)- Contributions to Agniveer Corpus Fund
80JJAA- Deduction of Employee cost incurred by eligible employer while generating employment for new eligible workers.
(Above three deductions under Chapter VIA are allowed in New Tax regime as well)
(ix) No Setoff of any loss-
(a) carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in above.
(b) under the head “Income from house property” with any other head of income.
(c) by claiming the additional depreciation, if any, as per clause (iia) of Section 32
(d) without any exemption or deduction for allowances or perquisite, by whatever name called, provided under any other law for the time being in force.
The loss and depreciation referred to in clause (ii) of sub-section (2) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year
About Form 10IEA- Option to Choose Tax Regime!
Earlier in Budget 2020, when New Scheme was introduced with effect from FY 2020-21, the Old tax Regime used to be the default Scheme whereas, the New Tax regime was the optional one. Therefore, if you wish to opt for New Tax Regime- You must file Form 10IEA before filing your ITR!
Whereas, the Budget 2023 amended the relevant provisions and the New Tax regime was made the Default tax regime with effect from FY 2023-24 Therefore, if you wish to opt for Old Tax Regime (i.e., other than Default New Tax regime) – You must file Form 10IEA before filing your ITR!
Key features of Form 10IEA-
(i) The Form can be filed by Individual, Hindu Undivided Family (HUF), Association of persons (other than a co-operative society), Body of individuals (BOI), Artificial juridical person referred u/s 2(31)(vii) (AJP).
(ii) Form 10-IEA should be filed on or before the due date of filing of return as specified u/s 139(1) of the Income Tax Act, 1961.
(iii) Form 10IEA is a declaration to Income Tax Department, mandatory to be filed by Individual or HUF Taxpayers having business or Professional Income, if they wish to opt for Old Tax regime (w.e.f. FY 2023-24)
(iv) For business cases, form 10-IEA has been notified vide Notification No.43/2023 dated 21st June 2023 which can be used by taxpayers to exercise their right to choose between the old or the new regime. This form can be filed twice in lifetime i.e. one for opt out of new tax regime and one for re-entering into the new tax regime.
(v) Individual or HUF Taxpayers, who do not have Income from business or profession, can simply opt for New or Old Tax regime at the time of filing Income Tax Return.
(vi) This means that if the taxpayer does not specify their intent to choose the old regime, they will be automatically enrolled in the new regime.
When to Opt for Old Scheme Vs New Scheme??
| Taxpayer | Time of Selection |
| Taxpayers having Salary Income | At the start of the financial year, an employee has to select the tax regime and inform their employer, whereas the default regime shall be new tax regime. It cannot be modified during the year. However, the option can be modified when filing the Income Tax Return. |
| Taxpayers having Business or Professional Income | The choice between tax regimes can only be made once in a lifetime. |
Income Tax Rates for Companies for the FY 2023-24
| Particulars | Tax Rates under New Tax Regime |
| A Company which opts for section 115BAB (not covered in sections 115BA and 115BAA) & is registered on or after October 1, 2019, and has commenced manufacturing on or before 31st March 2024 and subject to the conditions specified in the relevant section.
(Applicable w.e.f. AY 2020-21 Onwards) |
15% |
| A Company which opts for Section 115BAA, wherein the total income of a company has been calculated without claiming specified deductions, incentives, or exemptions and additional depreciation as specified in the relevant section.
(Applicable w.e.f. AY 2020-21 Onwards) |
22% |
| The company opts for section 115BA registered on or after March 1, 2016 and engaged in the manufacture of any article or thing and does not claim the deduction as specified in the section.
(Applicable w.e.f. AY 2017-18 Onwards) |
25% |
| A Company having Turnover or gross receipt of the company less than Rs. 400 crores in the previous year 2020-21 | 25% |
| Any other Domestic Company | 30% |
| Applicable Surcharge Rate applicable for companies who opted for section 115BAA and 115BAB:
10% of income tax, irrespective of Income amount. Applicable Surcharge Rate applicable for Other companies: 7% of Income tax where total income > Rs 1 crore, and 12% of Income tax where total income > Rs.10 crore |
|
Conclusion:
There are significant changes introduced with effect from FY 2023-24 which revamps the strategies of Investment planning & Tax Saving options. This article aims to enable the readers to take an informed decision on selection of New Tax Regime V/s the Old Tax regime and to get benefitted with the most viable Scheme option which aligns with their Income & Deduction model.
Author Bio
