New Income Tax Regime by CA Shubham Jain

Apr 20, 20203 min read

To bring a revolutionary change in Direct Tax Rates or to bring down the burden of taxes on small taxpayers, Hon’ble Finance Minister has proposed a new tax regime by insertion of Sec. 115BAC in which New Slabs are introduced with some restriction. Sec. 115BAC is proposed in Finance Budget, 2020 from Assessment Year 2021-22 (FY 2020-21) onwards and Individuals & HUF who have opt for taxation under Sec. 115BAC of the Income Tax Act have to forego the specified deductions and exemptions.

List of Deductions and Exemptions can’t be claimed while calculating Tax U/S 115BAC:

Under Income from Salary:

1. Leave Travel concession

2. House Rent Allowance 3. Official and personal allowances 4. Allowances to MPs/MLAs 5. Allowances for income of minor 6. Standard Deduction 7. Entertainment Allowance 8. Professional Tax

Under Income from House Property:

1. Interest on housing loan

Under Income from Business Income:

1. Additional depreciation in respect of new plant and machinery 2. Deduction for investment in new plant and machinery in notified backward areas 3. Deduction in respect of tea, coffee or rubber business 4. Deduction in respect of business consisting of prospecting or extraction or production of petroleum or natural gas in India

5. Deduction for donation made to approved scientific research association, university college or other institutes for doing scientific research which may or may not be related to business 6. Deduction for payment made to an Indian company for doing scientific - research which may or may not be related to business 7. Deduction for donation made to university, college, or other institution for doing research in social science or statistical research

8. Deduction for donation made for or expenditure on scientific research

9. Deduction for units established in Special Economic Zones (SEZ)

10. Deduction in respect of capital expenditure incurred in respect of certain specified businesses, i.e., cold chain facility, warehousing facility, etc.

11. Deduction for expenditure on agriculture extension project

12. Deduction for family Pension

Under Chapter VI-A (Deductions):

1. Deduction in respect of certain incomes other than specified under Section 80JJAA.

2. Deduction under Chapter VI-A except 80CCD(2)

Optional Tax slab Rate Available to the Taxpayers:

Surcharge Rate Applicable:

Period for Opting Taxation Under Sec. 115BAC

1. An individual/HUF, having no business or professional income, can exercise his option of choosing tax regime, every year, based on his deductions.

So, an individual/HUF, having income from Salary, House Property, Capital Gains and from Other Sources, can opt for the new tax regime in one financial year, and can again choose to opt for old tax regime in subsequent financial year, based on your deductions. Option shall be exercised along with the return of Income for every previous year. Furthermore, clarification has been issued by the CBDT that “an employee having income other than the income from business or profession and intending to opt for the concessional rate under Section 115 BAC of the Act, may intimate the deductor, being his employer, of such intention for each previous year and upon such intimation, the deductor shall compute his total income, and make TDS thereon in accordance with the provisions of Section 115 BAC of the Act. If such intimation is not made by the employee, the employer shall make TDS without considering the provisions under Section 115BAC of the Act.” However, employee may change the option at the time of return filing. 2. An individual/HUF, having Income from business or professional, can exercise his option opt for the new tax regime of reduced taxes with no deductions, u/s 115BAC, only once and the option once exercised, for a previous year shall be valid for that previous year and all subsequent years. Option shall be exercised on or before the due date u/s 139(1) for furnishing the return of Income. 3. Option can be withdrawn once in lifetime where it was exercised by the Individual/HUF having business Income in the previous year other than the year in which it was exercised except where Individual/HUF ceases to have any Business Income.

Comparison table between Tax Slabs:

Table 1:-

Table - 2

Table - 3

Table - 4

Concluding words:-

The above matter has been done sincerely updated up to the notifications till April 18th, 2020. And the income comparison has done with the all income level possible for both salaried and Business Income Taxpayers between Old and New Tax Regime.

Hope the above, will be useful in choosing appropriate Tax slab for your Tax Calculation.

As per my views New Tax Slab will more beneficial for those taxpayer who are not in a habit of investing (like in; LIC, PF, PPF, Mutual Funds, &/or Mediclaim Policy, etc) for claiming deduction u/s 80C, 80D of the Income Tax Act, 1961

Happy Reading,

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