The Budget 2020 introduces a new regime under section 115BAC giving an option to individuals and HUFs to pay income tax at lower rates. From FY 2020-21, the assessee can choose to pay income tax under an optional new tax regime. The new tax regime is available for individuals and HUFs with lower tax rates and zero deductions and exemptions available under various provisions of the Income-tax Act, 1961.
- Exemptions and Deductions available under the Old Tax Regime and New Tax Regime
| Particulars | Old Tax Regime | New Tax Regime |
| Leave travel concession [Section 10(5)] | Yes | No |
| House rent allowance [Section 10(13A)] | Yes | No |
| Prescribed allowances or benefits [Section 10(14)] read with rule 2BB | Yes | No |
| Daily allowance to a Member of Parliament [Section 10(17)] | Yes | No |
| Special provisions in respect of newly established Units in Special Economic Zones [Section 10(AA)] | Yes | No |
| Deductions from salaries such as Standard Deduction, Entertainment Allowance, and Professional Tax [Section 16] | Yes | No |
| Deductions from income from house property [Section 24(b)] | Yes | No |
| Deductions to be made in computing total income [Chapter VI-A] except Section 80CCD (2) and 80 JJAA | Yes | No |
| Any Other Expenditure [Section 57 (iii)] | Yes | No |
| Deduction in respect of investment in new plant and machinery in the specified businesses [Section 32(1)(iia)] | Yes | No |
| Deduction in respect of investment in new plant or machinery in notified backward areas in certain States [Section 32AD] | Yes | No |
| Deduction in respect of Tea development account, coffee development account, and rubber development account [Section 33AB] | Yes | No |
| Deduction in respect of Site Restoration Fund [Section 33ABA] | Yes | No |
| Deduction in respect of expenditure on scientific research [Section 35] | Yes | No |
| Deduction in respect of expenditure on specified business [35AD] | Yes | No |
| Deduction in respect of expenditure on agricultural extension project [Section 35CCC] | Yes | No |
| Set-off and carry forward of loss or unabsorbed depreciation from any earlier assessment year | Yes | No |
| Any other exemption or deduction for allowances or perquisite, by whatever name called, provided under any other law for the time being in force. | Yes | No |
| Rebate u/s 87A | Yes | Yes |
| Benefits of Lower Tax Rates | No | Yes |
The taxpayers having income from salaries, income from house property, capital gains or income from other sources may select tax regime year on year basis. However, if taxpayers have profits and gains of business or profession and they opt for new tax regime, they can switch back to old tax regime but only once in a lifetime and they will not be able to opt for new tax regime again except they cease to have any income from business or profession.
Comparison between the Old Tax Regime and New Tax Regime
| Tax Slabs | Old Tax Regime | New Tax Regime |
| Up to 2,50,000 | 0% | 0% |
| From 2,50,001 to 5,00,000 | 5% | 5% |
| From 5,00,001 to 7,50,000 | 20% | 10% |
| From 7,50,001 to 10,00,000 | 20% | 15% |
| From 10,00,001 to 12,50,000 | 30% | 20% |
| From 12,50,001 to 15,00,000 | 30% | 25% |
| Above 15,00,000 | 30% | 30% |
The Percentage of Surcharge and Health and Education Cess in the New Tax Regime remains the same as the Old Tax Regime.
Author Bio
For AY 2021-22, I have capital gains, charitable contributions, and income from bank interests and NHAI bonds interests.
Should I file under old regime or new regime?
It totally depends on which types of income you earned and which types of deductions you are allowed to claim as per income tax law
it totally depends on which types of income you earned and which types of deductions you are allowed to claim