By insertion of section 115BAC in the Act, on satisfaction of certain conditions, an individual or HUF shall, from assessment year 2021-22 onwards, have the option to pay tax in respect of the total income at following rates:-
|Total Income (Rs)||Rate|
|From 2,50,001 to 5,00,000||5 %|
|From 5,00,001 to 7,50,000||10 %|
|From 7,50,001 to 10,00,000||15 %|
|From 10,00,001 to 12,50,000||20 %|
|From 12,50,001 to 15,00,000||25 %|
|Above 15,00,000||30 %|
1. The option shall be exercised for every previous year where the individual or the HUF who has no business income.
2. In other cases the option once exercised for a previous year shall be valid for that previous year and all subsequent years.
3. The option shall become invalid for a previous year or previous years, as the case may be, if the Individual or HUF fails to satisfy the prescribed conditions and provisions.
4. The condition for concessional rate shall be that the total income of the individual or HUF is computed without any exemption or deduction given below :-
(a) Leave travel concession as contained in clause (5) of section 10;
(b) House rent allowance as contained in clause (13A) of section 10;
(c) Some of the allowance as contained in clause (14) of section 10;
(d) Allowances to MPs/MLAs as contained in clause (17) of section 10;
(e) Allowance for income of minor as contained in clause (32) of section 10;
(f) Exemption for SEZ unit contained in section 10AA;
(g) Standard deduction, deduction for entertainment allowance and employment/professional tax as contained in section 16;
(h) Interest under section 24 in respect of self-occupied or vacant property referred to in sub-section (2) of section 23.(Loss under the head income from house property for rented house shall not be allowed to be set off under any other head and would be allowed to be carried forward as per extant law);
(i) Additional deprecation under clause (iia) of sub-section (1) of section 32;
(j) Deductions under section 32AD, 33AB, 33ABA;
(k) Various deduction for donation for or expenditure on scientific research contained in sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35;
(l) Deduction under section 35AD or section 35CCC;
(m) Deduction from family pension under clause (iia) of section 57;
(n) Any deduction under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc).
However, deduction under sub-section (2) of section 80CCD (employer contribution on account of employee in notified pension scheme) and section 80JJAA (for new employment) can be claimed.
5. without set off of any loss,-
(i) carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in (a) above; or
(ii) under the head house property with any other head of income;
6. by claiming the depreciation, if any, under section 32, except clause (iia) of sub-section (1) thereof,
Determined in such manner as may be prescribed; and
7. Without any exemption or deduction for allowances or perquisite, by whatever name called, provided under any other law for the time being in force.
8. the loss and depreciation referred to in (ii)(b) above 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 so however, that where there is a depreciation allowance in respect of a block of asset which has not been given full effect to prior to the assessment year beginning on 1st April, 2021, corresponding adjustment shall be made to the written down value of such block of assets as on 1st April, 2020 in the prescribed manner, if the option is exercised for a previous year relevant to the assessment year beginning on 1st April, 2021;
9. the concessional rate shall not apply unless option is exercised by the individual or HUF in the form and manner as may be prescribed,-
a. where such individual or HUF has no business income, along with the return of income to be furnished under sub-section (1) of section 139 of the Act; and
b. in any other case, on or before the due date specified under sub-section (1) of section 139 of the Act for furnishing the return of income for any previous year relevant to the assessment year commencing on or after 1st April, 2021 and such option once exercised shall apply to subsequent assessment years;
10. if the individual or HUF has a Unit in the International Financial Services Centre [clause (zc) of section 2 of the Special Economic Zones Act, 2005], as referred to in sub-section (1A) of section 80LA, the deduction under section 80LA shall be available to such Unit subject to fulfillment of the conditions contained in that section; and
11. the option can be withdrawn only once where it was exercised by the individual or HUF having business income for a previous year other than the year in which it was exercised and thereafter, the individual or HUF shall never be eligible to exercise option under this section, except where such individual or HUF ceases to have any business income in which case, option under para (vi)(a) above shall be available.
12. It is further proposed to amend section 115JC of the Act so as to provide that the provisions relating to AMT shall not apply to such individual or HUF having business income. It is also proposed to amend section 115JD of the Act so as to provide that the provisions relating to carry forward and set off of AMT credit, if any, shall not apply to such individual or HUF having business income.
13. As many allowances have been provided through notification of rules, it is proposed to carry out amendment of the Income-tax Rules, 1962 (the Rules) subsequently, so as to allow only following allowances notified under section 10(14) of the Act to the Individual or HUF exercising option under the proposed section:
(a) Transport Allowance granted to a divyang employee to meet expenditure for the purpose of commuting between Place of residence and place of duty
(b) Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office;
(c) Any Allowance granted to meet the cost of travel on tour or on transfer;
(d) Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.
14. It is also proposed to amend rule 3 of the Rules subsequently, so as to remove exemption in respect of free food and beverage through vouchers provided to the employee, being the person exercising option under the proposed section, by the employer.
Source:- Memorandum to Finance Bill 2020
B.com(H), ACA, Member of ICAI