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.
A non-salaried taxpayer has to choose the new regime when filing the tax return. They need not declare or intimate their choice to anyone during the year. However, a non-salaried taxpayer (taxpayers with an income from business or profession) cannot opt-in and opt-out of the new tax regime every year.
People are not able to decide which one to opt for. The new tax regime is available only to Individuals as well as to an HUF whether you are a resident or a non-resident and is optional. The new tax regime offers you concessional rates upto total taxable income of Rs.
The Budget 2020 introduced a new regime under section 115BAC giving an option to individuals and HUFs to pay income tax at lower rates. From FY 2020-21, the assessee can choose to pay income tax under an optional new tax regime.
The new tax regime is different in two ways from the old one. Firstly, it has more slabs with lower tax rates. And secondly, all the major exemptions and deductions available to taxpayers in the existing (old) tax regime are not allowed if the new tax regime is chosen.
The new tax regime offers the flexibility to the taxpayer to invest their money as they prefer. With the new scheme, there is no obligatory requirement to invest in tax saving schemes and insurance plans which may not be in alignment with their financial goals.
While Filing an ITR
Anytime in the financial year before the ITR filing, you cannot switch to another regime.
“I understand that the option under clause (i) of sub-section (5) of section 115BAC, once exercised in a previous year, cannot be withdrawn for the same previous year and can subsequently be withdrawn only once for any other previous rendering me/ Individual/ HUF* ineligible for exercising option under section 115BAC ...
The new Section 115BAC of the Income-tax Act, 1961 provides that a person, being an individual or an undivided Hindu family (HUF) having income other than income from profession or business, may exercise the option concerning of a previous year to be taxed under the Section 115 BAC along with his/her return of income ...
1) Non-availability of tax deduction. 2) Reduced flexibility in choosing the new regime for those having business income.
Under the new tax regime, PPF contributions are not eligible for tax deductions u/s 80 C. The interest earned and the maturity amount of the PPF Account and Sukanya Samridhi Yojana will be eligible for tax exemption under the new tax regime.
HUF and individuals are now eligible to select a new tax regime from FY 2020-21. From this financial year, one can opt to pay income tax under an optional new tax regime. This new regime is available for HUFs and individuals with lower tax rates and zero exemptions or deductions.
We can see in the above example that the old tax regime is beneficial to Taxpayer 1 as taxes are less by INR 37,440. In case of taxpayer 2, where deductions for HRA and LTA are not applicable, the new tax regime is more beneficial by INR 15,600.
The old tax regime is with various deductions to save tax. One can make specific tax saving investments and income to the extent of those investments would be free from taxation. The new tax regime is without any deduction. One can avail lower rates of new tax regime and cannot claim any deduction further to save tax.
Under the new tax regime, PPF contributions are not eligible for tax deductions u/s 80 C. The interest earned and the maturity amount of the PPF Account and Sukanya Samridhi Yojana will be eligible for tax exemption under the new tax regime.
If an individual has a salary of Rs 8 lakh per annum, and he/she has opted for a new income tax slab regime, then an income tax will be Rs 46,800. It is calculated without any exemptions and deductions. An individual can save Rs 28,600 more as compared to an old tax regime.
For a salary ranging between Rs 20 lakhs and Rs 25 lakhs, the applicable tax rate under the new tax regime would be the highest, that is 30%.
Even if you don't have any home loan(both principal and interest are tax exempted upto a certain limit), education loan and 80CCD, old tax regime is better for middle class taxpayers and they could end up saving upto Rs. 15000/annum.