A new section 115BAC was introduced where tax rates were reduced and new slabs defined as 5%, 10%, 15%, 20%, 25% and 30% without any deductions ( two specific deductions are still there). This resulted in tax savings for those who didn't have much investments u/s 80C.
Section 115BAC of the Income Tax Act introduces the new tax regime, which offers reduced slab rates in exchange for forgoing most deductions and exemptions. Section 115BAC also has provided the option to the taxpayers to choose their most beneficial regime every financial year (subject to conditions as prescribed).
Eligibility for Section 115BAC
Hindu Undivided Families and Individuals can opt to pay their income tax as per the new income tax slab rates. Provided their total income for the financial year corresponds to the following conditions: Total income should not include any income from business or profession.
Disadvantages of Section 115BAC
Limited Benefits for Lower Income Groups: For incomes below INR 7,50,000, the tax savings may not outweigh the benefits of deductions available under the old framework.
Non-salaried taxpayers (with business or professional income) can opt out once, but they cannot switch back to 115BAC in future years. How do I choose 115BAC? To choose 115BAC, salaried individuals must inform their employer at the start of the financial year.
Note: - From the A.Y. 2024-25, the default tax regime will be the new tax regime of section 115BAC and a taxpayer need to explicitly opt out of the new tax regime and choose to be taxed under old tax regime. Further, there is no penalty for changing regimes (In case of business income only once it can be done).
Exemptions and Deductions That Are Not Claimable Under the New Regime
Choosing between the Old and New Tax Regimes depends on your income level, deductions, and exemptions. For salaried individuals with minimal deductions, the New Regime is likely more beneficial due to relaxed tax slabs and a rebate up to ₹7 lakh or ₹12 lakh (based on updated 87A provisions).
However, the intimation made to the employer would not amount to exercising the option in sub- section (6) of section 115BAC for opting out of the new tax regime. The employee shall be required to do so separately before the due date specified under section 139(1) for filing of return of income.
Hence, the maximum rate of surcharge on tax payable on such incomes shall be 15%, except when the income is taxable under section 115A, 115AB, 115AC, 115ACA and 115E. ***Note : Health & Education cess @ 4% to be paid on the amount of income tax plus Surcharge (if any) in both the regimes. Exceeds (Rs.)
Please note: Section 80C deduction is not available in the new tax regime except deduction u/s 80CCD(2)/80CCH/80JJAA as per the provision of Section 115BAC of the Income Tax Act, 1961.
For salaried individuals, the ₹75,000 standard deduction further boosts the effective tax-free limit – if your salary is ₹12.75 lakh, after the standard deduction your taxable income is ₹12 lakh, meaning you also pay zero tax.
The new tax regime allows salaried people and senior citizens earning pensions a standard deduction of ₹75,000. Family Pension: If you have a family pension income, the new regime offers a deduction for it. You can claim a deduction of ₹25,000 or one-third of the pension amount, whichever is lower.
How to opt out of the new regime. Individuals, HUFs, and AOPs must submit Form 10-IEA to opt out of the new tax regime. Form 10-IEA acts as a formal declaration to switch back to the old regime. Required for taxpayers filing ITR-3, ITR-4, or ITR-5 with business or professional income.
Tax benefit on home loan interest rate
Section 24 of the Income Tax Act allows deduction on interest paid for self-occupied property up to Rs. 2 lakh per financial year. This home loan exemption applies even to a second home that is vacant or used by family members.
Key takeaway to save tax on salary above 30 Lakh
If you have significant tax-saving Tax deduction, opt for the old regime. Salaried employees could claim benefits like HRA, LTA, conveyance allowance, daily allowances, medical reimbursement, and *Tax deduction under Section 80C under the old regime.
Section 115BAC allows taxpayers to choose lower tax rates by giving up many deductions. It simplifies filing but impacts claims like health insurance under Section 80D. Evaluating slab rates, eligibility and financial goals helps decide whether the new or old regime suits better.
As an NRI, PIO, or OCI, you may be required to file tax returns in India if your Indian income surpasses the specified threshold or if you seek to claim refunds for excess tax deductions. While filing an ITR is mandatory only under certain circumstances, voluntary filing can be beneficial in many ways.
The Old Regime had many problems due to its strict social class system. Members of the first and second estates did not have to pay taxes, so the burden of taxation was left entirely to the third estate. Poor crop seasons, hunger, and heavy taxation were the main issues of the Ancien Regime.
According to a distributional analysis from the nonpartisan Joint Committee on Taxation—which previously estimated the tax bill provides more than $600 billion in new tax relief to middle-class households—the largest proportional tax benefits go to workers and families making less than $50,000.
The new regime provides lower tax rates and a simpler structure but has fewer exemptions and limited tax planning opportunities. Individuals should carefully assess their income, deductions, and tax liabilities to determine which regime is more beneficial for them.
Salaried taxpayers can switch regimes every financial year. Business and professional taxpayers can switch only once after opting for the new regime. After switching back to the old regime, the new one is barred unless business income ceases. Depreciation, losses, and deductions play a decisive role in this choice.
NRI income tax slab rates 2025-26: Choose your tax regime wisely. Residents, as well as non-residents, have the same tax slab rates. Both have the flexibility to choose between the existing tax regime and the new tax regime slabs.
The new regime offers a significant tax saving of Rs 2,40,000 even without claiming any deductions. This is because the highest tax rate in the new regime (30%) is lower than the highest tax rate in the old regime (30%). Therefore, if you have a salary of Rs 50 lakhs, the new tax regime is better for you.
What is Section 115BAC of Income Tax Act? According to Section 115BAC of the Income Tax Act, individuals or Hindu undivided families (HUFs) with income other than from a profession or business can choose to be taxed under the new tax regime with reduced tax slab rates.