Section 115BAC: Alternative Tax Regime- Benefits

Last Updated On: Jan. 28, 2021, 10:09 p.m.
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SECTION 115BAC: ALTERNATIVE TAX REGIME

The Budget 2020 introduces a new regime under section 115BAC giving an option to individuals and HUF taxpayers to pay income tax at lower rates. The new system is applicable for income earned from 1 April 2020 (FY 2020-21), which relates to AY 2021-22.

 

Tax Rate as per New Tax Regime:

Sl. No. Total income Rate of tax As per New Regime
1. Up to Rs. 2,50,000 Nil
2. From Rs. 2,50,001 to Rs. 5,00,000 5%
3. From Rs. 5,00,001 to Rs. 7,50,000 10%
4. From Rs. 7,50,001 to Rs. 10,00,000 15%
5. From Rs. 10,00,001 to Rs. 12,50,000 20%
6. From Rs. 12,50,001 to Rs. 15,00,000 25%
7. Above Rs. 15,00,000 30%

 

 

 

Tax Rate as per Old Regime:

Sl. No. Total income Rate of tax as per New Regime
1. Up to Rs. 2,50,000 Nil
2. From Rs. 2,50,001 to Rs. 5,00,000 5%
3. From Rs. 5,00,001 to Rs. 10,00,000 20%
4. Above Rs. 10,00,000 30%

 

 

 

 

Exemptions and Deduction that are not applicable under New tax Regime:

The following are the deductions and exemptions you cannot claim under the new tax system:

  • The standard deduction, professional tax and entertainment allowance on salaries
  • Leave Travel Allowance (LTA)
  • House Rent Allowance (HRA)
  • Minor child income allowance
  • Helper allowance
  • Children education allowance
  • Other special allowances [Section10(14)]
  • Interest on housing loan on the self-occupied property or vacant property (Section 24)
  • Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2) and 80JJAA)
  • Without exemption or deduction for any other perquisites or allowances
  • Deduction from family pension income

 

Exemptions and Deductions available:

You can claim tax exemption for:

  • Transport allowances in case of a specially-abled person.
  • Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.
  • Any compensation received to meet the cost of travel on tour or transfer.
  • Daily allowance received to meet the ordinary regular charges or expenditure you incur on account of absence from his regular place of duty.
  • Comparison between new Tax slab and Existing Tax Slab:

 

Suppose a Salaried Class person with no Investments and no housing loan, then his/her tax liability will be as under:4

Total Taxable Income Existing Slab New Slab Savings
Rs. 5 Lac Nil Nil Nil
Rs. 7.50 Lac 57350 40970 16380
Rs. 10 Lac 111980 81940 30040
Rs. 15 Lac 270400 204840 65560
Rs. 25 Lac 598150 532600 65550

 

 

 

 

How to adopt the New Regime?

As per the rules, person can choose the option at the time of filing the return. He has to tick the option whether he want to calculate the Tax under the old regime or under new regime, and this option can vary every year that means assessee can change the option every year if he is not having Business Income.

 

Intimation to Employer for TDS

As per circular No. C1/2020 dated 13th April 2020 employee has to intimate the employer that which option he is going to choose so that employer can deduct the TDS accordingly. However, such intimation is not deemed as adopting any option for the Filing of return i.e., suppose employee give the employer intimation of adoption of new regime and he agreed for TDS deduction as per the slab of new regime and later on the at the time of filing of ITR, employee change his mind to remain under existing scheme, then he can do so at the time of Filing ITR. In other words, final adoption of the regime will take place at the time of filing ITR.

                            

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