The Finance Act, 2020 came up with a number of amendments and introductions. One of such being the introduction of a new tax regime, which in essence is the biggest development and point of confusion for taxpayers. The Finance Minister announced a new set of tax slab rates for individuals, HUF and co-operative societies.
For the purpose of bringing the new tax regime into action, 2 new sections were inserted by the Ministry:
Both the sections have their effect from the Assessment Year (A.Y.) beginning on or after 1st April, 2021 i.e., from A.Y. 2021-22 onwards.
In this write-up we are going to discuss about Section 115BAC only.
Important points to bear in mind before choosing new tax regime:
|Total Income||Rate of tax|
|Up to Rs. 2,50,000||NIL|
|From Rs. 2,50,001 to Rs. 5,00,000||5%|
|From Rs. 5,00,001 to Rs. 7,50,000||10%|
|From Rs. 7,50,001 to Rs. 10,00,000||15%|
|From Rs. 10,00,001 to Rs. 12,50,000||20%|
|From Rs. 12,50,001 to Rs. 15,00,000||25%|
|Above Rs. 15,00,000||30%|
i. Standard deduction to salaried taxpayers;
ii. Leave Travel Allowance (LTA);
iv. Children education allowance;
v. Other special allowances [Section10(14)];
vi. Deduction from family pension income;
vii. Interest on housing loan on the self-occupied property or vacant property (Section 24);
viii. Chapter VI-A deductions;
ix. Exemption or deduction for any other perquisites or allowances;
x. Without setting off any loss carried forward or unabsorbed depreciation of earlier year;
xi. No Depreciation u/s 32 [except clause (iia) of sub-section (1)] allowed;
xii. Exemption for SEZ unit u/s 10AA;
xiii. Deductions u/s 32AD, 33AB, 33ABA, 35, 35AD, 35CCC;
xiv. In case of a Self-occupied property, you cannot claim a deduction on interest for a housing loan.
i. Deduction u/s 80CCD(2) (employer’s contribution to your pension account);
ii. Deduction u/s 80JJAA (additional employee cost);
iii. Transport Allowance for Differently Abled Employees (Divyang);
iv. Conveyance Allowance for performance of office duties;
v. Any Allowance for the cost of Travel/ Tour/ Transfer;
vi. Daily Allowance given to employees under certain conditions.
i. An individual having salaried income and no business income has the option to choose between the old and new tax regimes every year i.e., he/she can switch regimes from year to year. Therefore, such individuals will have to exercise the option of choosing the new tax regime, if they want to, for every financial year from 2020-21 onwards.
ii. Individuals having business incomeare not eligible to choose between the new and old tax regime every year. Once they have opted for the new tax regime, they only have a one-time option of switching back to the old tax regime in their lifetime. Once they switch back, they will not be allowed to opt for new tax regime again except where such person ceases to have any income from business or profession.
Application for exercise/ withdrawal of option under clause (i) of sub-section (5) of section 115BAC of the Income-tax Act, 1961
The Ministry of Finance vide its Notification No. 82/2020-Income Tax dtd: 1st October, 2020 inserted two new rules in the existing Income Tax Rules to prescribe manner to exercise option under Section 115BAC and 115BAD.
Rule 21AG states that, every individual and HUF which wishes to exercise the option under Section 115BAC (new tax regime) has to file an application in Form 10-IE electronically on the Income
Tax Portal by using either digital signature or electronic verification code (EVC).
Due date of filing:
Frequency of filing 10-IE:
Non-filing of form 10-IE: If the taxpayers does not file Form 10-IE by the due date, the taxpayer shall be disallowed to use the benefit of the concessional tax rates of the new tax regime. The income tax department will calculate tax based on the old/ existing tax regime.
Divergence from what was chosen earlier: As per the CBDT Circular dtd. 13th April, 2020, for TDS on salary, once the choice of tax regime is communicated to the employer, then the employee cannot change the choice of tax regime during the financial year. However, at the time of filing income tax return, an individual will have an option to switch to any tax regime of his/her choice, irrespective of what has been communicated to the employer.
Content of form:
Disclaimer: The author is based in Jabalpur and is a Practicing Company Secretary dealing in Corporate, Legal & Taxation services. The information contained in this write up, as provided by the author, is to provide a general guidance to the intended user. The information should not be used as a substitute for specific consultations. Author recommends that professional advice is sought before taking any action on specific issues.
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