Section 115bac of Income Tax Act

A new tax regime has been introduced for taxpayers, applicable from 2020-21. As per the new rules, the taxpayers can select between two tax regimes, the existing one or the new one. If the taxpayers select the new regime, they will have to forgo almost seventy tax exemptions, deductions, set off the loss and additional depreciation which were available under the old regime.

This article delivers the information related to the new tax rules introduced by the Ministry of Finance under Section 115BAC of the Income Tax Act bare act.

Section 115BAC of Income Tax Act applicability lies on?

As per Section 115BAC of the Income Tax Act, the new tax regime with modified tax rates can be opted by:

• Individuals; and
• Hindu undivided family (HUF).

Where such Individuals and HUF have income other than “income from business or profession". And for availing the benefits of Section 115BAC, the conditions as provided in sub-section (2) of Section 115BAC are to be fulfilled.

If the taxpayer fails to fulfill the specified conditions in any previous year (P/Y), the option will become invalid for the assessment year (A/Y) in respect to such a previous year.

 
What is Section 115BAC of the Income Tax Act slab rate?

The old/existing slab rates are

• Income from Rupees 2.5 5 lakhs: 5%
• Income from Rupees 5 10 lakhs: 20%
• Income above Rupees 10 lakhs: 30%

The new slab rates are:

• Income up to Rs 2.5 lakhs: NIL
• Income from Rupees 2.5 5 lakhs: 5%
• Income from Rupees 5 7.5 lakhs: 10%
• Income from Rupees 7.5 10 lakhs: 15%
• Income from Rupees 10 12.5 lakhs: 20%
• Income from Rupees 12.5 15 lakhs: 25%
• Income above Rupees 15 lakhs: 30%

Other Key Considerations:

• A person cannot claim various deductions and exemptions if the new tax system has opted.
• A taxpayer receiving salary income can choose the new tax system and inform the employer for each financial year in order to claim the benefit under Section 115 BAC.
• If the employee fails to give intimation to the employer for opting for the new tax system, the employer will deduct TDS as per the old tax regime.
• A non-salaried taxpayer can select the new tax regime when filing the return. 
• A taxpayer earning income under the head “Profit and gains from business or profession” has selected the option of paying the tax for the previous year under Section 115BAC and cannot change the option for subsequent previous years (exception is available under certain circumstances).

The new tax system provides the same basic exemption limit to be applicable to all the taxpayers, in comparison to the existing tax system where the exemption limits for a resident individual are distributed as per their age. The 115BAC of income tax calculator is also available on the Income-tax website.