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
Latest Update
23rd June 2023
- The Income-tax has published notification no.43 for sub-section (5) of section 115BAC. Read more
06th April 2023
- Section 192 of the Income Tax Act, 1961 and sub-section (IA) of Section 115BAC clarify the deduction of TDS. Read Circular
Who Can Choose New Income Tax Regime As Per Section 115BAC?
- HUF as well as the individuals having business income may file the form 10-IE and can tell the IT department for the same to file the taxes as per the latest income tax scheme.
- All the taxpayers are required to file the form 10-IE which is required to file the return within the ITR 3 or 4 pertaining to the business income which is opted under the new scheme.
- Note: Form 10 IE is not required to be filed in the ITR 1 or 2 and if the option is mentioned in the ITR they can select the latest tax scheme.
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 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 April1, 2021.
Frequency of choosing between the options of tax regimes
For Salaried Person
An Individual that has salaried income but no business income has option to make a choice between the old tax regime and new tax regime every year
Business Income
However, the above-mentioned option that is available to salaried persons is not available to Individuals having 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 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
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.
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
