Section 115BAC Concessional Tax Slab Rates W.E.F. AY 2021-22

SECTION 115BAC – CONCESSIONAL TAX SLAB RATES
APPLICABLE W.E.F. AY 2021-22

As per section 115BAC, individuals or HUFs have an option to pay tax in respect of their total income (other than income chargeable to tax at special rates under Chapter XII such as section 111A, 112, 112A, 115BB etc.) at the following concessional rates, subject to satisfaction of certain conditions specified under section 115BAC :

Conditions to be satisfied for availing concessional rates of tax:

1. If an individual or HUF opts for concessional rates of taxes under section 115BAC, the following deductions/exemptions would not be allowed while computing total income:

♦ Section 10(5) –  Leave travel concession

♦ Section 10(14) – Exemption in respect of special allowances or benefit to meet expenses relating to duties or personal expenses (other than those as may be prescribed for this purpose)

Following allowances specified under Section 10(14) are allowed to assessee opting for Section 115BAC:

√ Travelling Allowance:  Any allowance granted to meet the cost of travel on tour or on transfer. It also includes  any allowance, whether granted on tour or for the period of journey in connection with transfer, packing and transportation of personal effects on such transfer.

√ Daily Allowances: Any allowance whether granted on tour or for the period of journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.

√ Conveyance Allowance: Any allowance granted to meet the expenditure incurred on conveyance in performance of duties of an office or employment of profit.

√ Transport Allowance: 3200 per month for any transport allowance granted to an employee who is blind or deaf and dumb or orthopedically handicapped with disability of the lower extremities of the body, to meet his expenditure for commuting between his residence and place of duty.

♦ Section 10(13A) – House rent allowance

♦ Section 10(17) –  Daily allowance or constituency allowance of MPs and MLAs.

♦ Section 10(32) –  Exemption in respect of income of minor child included in the income of parent.

♦ Section 10AA – Tax holiday for units established in SEZ

♦ Section 16(i)–  Standard deduction under the head “Salaries”

♦ Section 16(ii) – Entertainment allowance

♦ Section 16(iii) – Professional tax.

♦ Section 24(b) – Interest on loan in respect of self-occupied property.

♦ Section 32(1)(iia) – Additional depreciation

♦ Section 35(1)(ii)– Deduction in respect of contribution to notified approved research association/ university/college/other institutions for scientific research.

♦ Section 35(1)(iia)- Deduction in respect of contribution to approved Indian company for scientific research

♦ Section 35(1)(iii)- Deduction in respect of contribution to notified approved research association/ university/college/other institutions for research in social science or statistical research

♦ Section 35(2AA)-Deduction in respect of contribution to an approved National laboratory/university/ IIT/ specified person for scientific research undertaken under an approved program.

♦ Section 35AD – Investment linked tax incentives for specified businesses.

♦ Section 35CCC – Deduction in respect of expenditure incurred on Notified Agricultural Project.

♦ Section 57(iia) – Deduction in respect of family Pension.

♦ Section 80C to 80U – Deductions under Chapter VI-A (other than employers contribution towards NPS under section 80CCD(2) and deduction in respect of employment of new employees under section 80JJAA).

2. Set-Off of Losses:

♦ If any brought forward losses or Depreciation from any earlier assessment year is attributable to any of the deductions referred to in Point 1 above, then such brought forward losses or depreciation of earlier assessment years cannot be set off while computing Total Income as per Section 115BAC.

♦ Any Loss under the head House Property cannot be set off against any other head of Income while computing Total Income as per Section 115BAC.

3. Depreciation :

♦ Depreciation in respect of any block of assets entitled to more than 40%, would be restricted to 40% on the written down value of such block of assets. Additional depreciation u/s 32(1)(iia), however, cannot be claimed.

♦ Where there is a depreciation allowance in respect of a block of asset from an earlier assessment year attributable to additional depreciation u/s 32(1)(iia), which has not been given full effect to prior to A.Y. 2021-22 and which is not allowed to be set-off in the A.Y.2021-22 due to exercise of option u/s 115BAC from that year, corresponding adjustment shall be made to the WDV of such block of assets as on 1.4.2020  i.e., the WDV as on 1.4.2020 will be increased by the unabsorbed additional depreciation not allowed to be set-off.

4. Time limit for exercise of option:

♦ In case of an individual or HUF having NO income from business or profession:Where such individual or HUF has no business income, the option has to be exercised along with the return of income to be furnished under section 139(1) for an assessment year.

In other words, such individual or HUF can choose whether or not to exercise the option in each previous year.

He may choose to exercise the option in one year and not to exercise the option in another year.

In this case, the total income and tax liability (including provisions relating to AMT, if applicable under normal provisions) may be computed every year both in accordance with normal provisions of the Income-tax Act, 1961 and in accordance with the provisions of section 115BAC, in order to determine which is more beneficial and accordingly decide whether or not to opt for section 115BAC for that year.

♦ In case of an individual or HUF having income from business or profession:The option has to be exercised on or before the due date specified under section 139(1) for furnishing the return of income for assessment year 2021-22 or any later assessment year and once such option is exercised, it would apply to subsequent assessment years.

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.

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 as specified in First point shall be available.

5. Consequences for failure to satisfy conditions mentioned in section 115BAC:

♦ In case of an individual or HUF having NO income from business or profession:

On failure to satisfy the conditions mentioned in point no.(1), (2) and (3) above in any previous year, the option exercised would be invalid in respect of the assessment year relevant to that previous year.

Consequently, the other provisions of the Income-tax Act, 1961 would apply as if the option had not been exercised for the assessment year relevant to that previous year.

♦ In case of an individual or HUF having income from business or profession:

On failure to satisfy the conditions mentioned in point no.(1),(2) and (3) above in any previous year, the option exercised would be invalid in respect of the assessment year relevant to that previous year and subsequent assessment years.

Consequently, the other provisions of the Income-tax Act, 1961 would apply as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years.

6. Alternate Minimum Tax Under Section 115JC :Eligible Assessees (Individual and HUF) opting for payment of Tax under Section 115BAC are not liable to Alternate Minimum Tax u/s 115JC.

7. Circular No. C1 of 2020, dated 13th April, 2020 to clarify deduction of TDS by Employer in case of Section 115BAC :  

♦ In case of an individual or HUF having NO income from business or profession:(Explained in Q/A format by author in this article)

1. Whether Deductor is also required to deduct TDS in accordance with provisions of Section 115BAC or he shall continue to deduct TDS as per Normal Provisions ?

Answer : An employee, having income other than income under the head “Profits and gains of business or profession” and intending to opt for the concessional rate under section 115BAC, is required to intimate to the his employer (deductor), 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 115BAC.

2. What happens if no such intimation is given by the Employee ?

Answer : If such intimation is not made by the employee, the employer shall make TDS without considering the provisions of section 115BAC.

3. Whether intimation given by the employee modified each year?

Answer : In case of an individual or HUF having NO income from business or profession, they can choose whether or not to exercise the option under Section 115BAC in each previous year. Accordingly, it implies that can modify the same and intimate to their employer every year.

4. Whether intimation given by the employee modified during the same Previous Year?

Answer :  It is also clarified that the intimation so made to the deductor shall be only for the purposes of TDS during the previous year and cannot be modified during that year.

5. Whether intimation given by the employee amounts to exercise of Option in terms of Section 115BAC ?

Answer :  The intimation would not amount to exercising option in terms of section 115BAC and the person shall be required to do so along with the return to be furnished under section 139(1) for that previous year.  Thus, option at the time of filing of return of income under section 139(1) could be different from the intimation made by such employee to the employer for that previous year.

♦ In case of an individual or HUF having income from business or profession:

In case of a employee who has income under the head ‘Profit and gains of business or profession’ the option for taxation under section 115BAC once exercised for a previous year at the time of filing of return of income under section 139(1) cannot be changed for subsequent previous years except in certain circumstances.

Accordingly, a person having income under the head “Profits and gains from business or profession” also shall also intimate to his employer. However, the intimation to the employer in his case for subsequent previous years must not deviate from the option under section 115BAC once exercised in a previous year.