Section 115BAC of Income tax act

In this article, we will tell you New Income Tax Slab Rates: As per Section 115BAC. Check CBDT Clarification on Section 115BAC of the Income Tax Act.

The Finance Act, 2000 has incorporated numerous amendments along with introductions. One such example is the introduction of the new tax regime. Though it seems chaotic, in essence, it is one of the revolutions in the area of tax. The Finance Minister has announced the new tax slab rates for the:

  • Individuals
  • Hindu Undivided Families
  • Co-operative societies

For the Finance Ministry, It was necessary to insert 2 new sections for the objective of bringing a new tax regime into execution. These 2 sections are as follows:

Section 115 BAC: This is a new tax rate for the income of

  • Individuals
  • Hindu Undivided Families

Section 115 BAD: The New Tax Rate for the Co-operative Societies.

Both of the aforesaid sections have their consequence from the Financial year 2020-21. In the forthcoming write-up, we shall have a discussion about section 115BAC only.

Important Attributes of the New Tax Regime Under Section 115BAC

  • The aforesaid new tax regime is applicable from Financial Year 2020-2021.
  • The new income tax regime is optional you may or may not opt for the new tax regime. In case of not opting for a new tax regime, the old tax regime shall be applicable.
  • The rates of cess and surcharge in a new income tax regime are the very same as prevalent in the existing/Old tax regime.
  • Even Senior Citizens and Senior Super Citizens can opt-in for a new tax regime.
  • In both the tax regimes, the rebate is available to the resident individuals having a total income of equal to or less than Rs 5 lakhs per annum.
  • New Tax Slab
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%

Non Availability of Benefits

However, if the taxpayer opts in for the new tax regime, then the following deductions and other benefits shall not be accessible to him:

  • Standard deduction to the salaried taxpayers
  • House Rent Allowance
  • Leave Travel Allowance
  • Children Education Allowance
  • Deduction from the family pension scheme
  • Other Special Allowances [Section10(14)]
  • Interest on the housing loan of the vacant property or self-occupied property
  • Deduction from Family Personal Income
  • Chapter VI-A deductions
  • Deduction or Exemption for any other allowance or other perquisite and so on

Deductions That are Allowed

Though many deductions are not allowed under the new income tax regime; however, there are certain exceptions to it.

  • Deduction under section 80 JJAA i.e. additional i.e. additional employee cost is available
  • Deduction under section 80CCD(2) i.e. employer’s contribution to pension account is allowed
  • Conveyance Allowance for the performance of the office duties is allowed.
  • Daily allowance to employees is allowed
  • Any allowance that is made for the cost of Tour/Travel/Transfer
  • Transport Allowance for Differently Abled Employees is allowed

Section 80LA

In case a person owns a unit in the International Financial Services Centre that is referred in sub-section (1A) of section 80 LA who has exercised the option, the conditions enlisted in section 115 BAC shall have to be modified to the width of that deduction as per section 115 BAC shall be available to the aforesaid unit.

Depreciation Allowance

In case of Depreciation allowance that is made with respect to a block of assets that has not been given full effects to prior to the assessment year that is going to begin from April 1, 2021, then the corresponding adjustment shall have to be made to a written down value of such block of assets as on April 1, 2020, in a prescribed manner; however, if the option of the new tax regime has been implemented for a previous year that is relevant to assessment year beginning from April 1, 2021.

Frequency of choosing between the options of tax regimes

For Salaried Person

An Individual that has salaried income but no business income has the option to make a choice between the old tax regime and the new tax regime every year

Business Income

However, the above-mentioned option that is available to salaried persons is not available to Individuals having a business income.If the businessman has once opted for a new tax regime, they are left with the last option to switch back to the old regime.

Application for the withdrawal/exercise of the option

The Individuals or Hindu Undivided Families have to file Form 10-IE to opt-in or take a step to opt-out of new tax regime.

FORM 10-IE Under Section 115BAC and 115BAD

The Ministry of Finance through notification bearing number 82/2020 of Income Tax Rules shall have to prescribe the manner for exercising the option under section 115BAC.

  • Rule 21 AG: It entails exercising of option as per sub-section (5) of section 115 BAC,
  • Rule 21 AH: It entails exercising of option as per sub-section (5) of section 115 BAD

As per Rule 21 AG, each individual and Hindu Undivided Family who exercises the option as per section 115 AC(The new Tax Regime) has to file the application in the Form 10-IE via electronic mode on the income.

Due Date of Filing Form 10IE

  • For Business Income before the due date of filing Income Tax Return
  • For salary income before filing the ITR even if ITR is filed after due date

Frequency of Filing the Form 10-IE

A person earning Salary Income shall have to file the above-mentioned form 10-IE for every year during which he wants to select the new tax regime.
The person earning business income has to file Form 10-IE twice — First at the time of switching to the new tax regime and second when switching back to the Old scheme.

Non Filing of the Form 10-IE

In case of non-filing of the Form 10-IE by the aforesaid due date, then the taxpayer shall not be allowed to avail the tax benefit of concessional tax rates that are available in the new tax regime.

Switching from the Previous Chosen Option

As per the circular issued by CBDT dated April 13, 2020, once the chosen tax regime has been communicated to the employer: thereafter, employees cannot change the tax regime during that financial year. Nevertheless, at the time of filing the Income Tax Return, an individual shall have an option to switch to another tax regime, irrespective of the fact of what has been communicated to the employer.

Contents of Form

  • Name of the Individual/Hindu Undivided Family
  • Confirmation regarding profit or gains from the business or profession
  • Address
  • Permanent Account Number
  • Date of Birth/Date of Incorporation
  • Confirmation
  • Date of Birth/Incorporation
  • Details of previous form 10-IE filed (in case if applicable)
  • Declaration

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