How to opt for new tax regime as per section 115BAC?

The Finance Act 2020, has introduced new section 115BAC, as per this provision the assessee has an option whether to pay tax as per new slab rates or the old slab rates. If the assessee opts for new tax regime then the assessee has to forgo some of the tax concessions under the existing income tax act.

How to opt for new or old scheme under the Income Tax Act?

This provision is made applicable for the Individual/ HUF and the individual can exercise the option at the time of filing the return of income. The individuals earning under income salary and business can opt for the option under 115BAC as under:

Salaried individual (including income from Pension, Bank Interest, Hosue Rent, Other Income)

If the individual assessee is a salaried employee then he opt the scheme on a yearly basis. It means the individual can switch to the tax regime of his choice in the next year. For opting the scheme, the employee has to give declaration to the deductor of his intention to opt for old or new tax scheme as per his choice. Upon such intimation, the employer shall compute his total income and make TDS thereon in accordance with the provision of section 115BAC of the act. The declaration made by the employee cannot be changed. However at the time of filing Returns he can again chose one more time.

Business or Profession Income (profit and Gains from Business or Profession)

If the person is earning business income, he can exercise his option under section 115BAC at the time of filing the return of income the option once exercised cannot be withdrawn in subsequent assessment year in respect of assessee with Business Income. If he decide to withdraw it would be allowed just once and he can never chose again

What are the Slabs rates under the new Income tax regime Section 115BAC for FY 2020-21?

If the individual opts for new tax regime then has to pay tax as per the below slab rates:

1 Up to Rs. 2,50,000 Nil 2 From Rs. 2,50,001 to Rs. 5,00,000 5 per cent. 3 From Rs. 5,00,001 to Rs. 7,50,000 10 per cent. 4 From Rs. 7,50,001 to Rs. 10,00,000 15 per cent. 5 From Rs. 10,00,001 to Rs. 12,50,000 20 per cent. 6 From Rs. 12,50,001 to Rs. 15,00,000 25 per cent. 7 Above Rs. 15,00,000 30 per cent.

Sl. No.	Total Income	Rate of Tax
1	Up to Rs. 2,50,000	Nil
2	From Rs. 2,50,001 to Rs. 5,00,000	5 per cent.
3	From Rs. 5,00,001 to Rs. 7,50,000	10 per cent.
4	From Rs. 7,50,001 to Rs. 10,00,000	15 per cent.
5	From Rs. 10,00,001 to Rs. 12,50,000	20 per cent.
6	From Rs. 12,50,001 to Rs. 15,00,000	25 per cent.
7	Above Rs. 15,00,000	30 per cent.

Slab rates as per the old income tax regime for FY 2020-21:

If the individual opts for old tax regime then has to pay tax as per below slab rates:

Sl. No.	Total Income	Rate of Tax
1	Up to Rs. 2,50,000	Nil
2	From Rs. 2,50,001 to Rs. 5,00,000	5 per cent.
3	From Rs. 5,00,001 to Rs. 10,00,000	20 per cent.
4	Above Rs. Rs. 10,00,000	30 per cent.

List of deductions Not Allowed / disallowed under new tax regime Section 115BAC for FY 2020-21?

If the taxpayer opts for paying tax as per the new slabs rates then the assessee must forgo the below listed deductions and exemptions:

Sl. No.	Deductions or Exemptions not allowed	Amount of deduction/ Exemptions
1	House rent allowance u/s 13A	Lower of 40%/ 50% Of (Basic+ DA+ Turnover commission) or Actual amount received or Rent paid Minus 10% of (Basic+ DA+ Turnover commission)
2	Leave travel allowance	Exemption is available only on the actual travel costs i.e., the air, rail or bus fare incurred by the employee
3	Food coupons	Upto Rs. 50 Per meal is exempt the excess is taxable under salary
4	Children Education allowance	Max Rs. 100 per month per child upto Maximum 2 child
5	Helper allowance	Fully Exempt
6	Special compensatory allowance	Fully Exempt
7	Border area allowance	Fully Exempt
8	Tribal areas allowance	Rs. 200 per month
9	Transport allowance for employees of transport	Lower of amount received X 70% or Rs. 10000 pm
10	Travelling allowance	Fully Exempt
11	Island duty allowance	Fully Exempt
12	Uniform allowance	Fully Exempt
13	Research allowance	Fully Exempt
14	Leave encashment benefit	Lower of Rs. 3,00,000 per annum or Annual leave encashment amount or Average salary of last 10 months or Salary per day X untilised leave (Considering maximum 30 days allowed leave per year)
15	Reimbursement of medical expense u/s 17(2)	Amount of expense incurred on treatment in government hospital or Employers hospital or Government recognised hospital
16	Any allowance granted to an employee to meet the hostel expenditure on his child	Max Rs. 300 per month per child upto Maximum 2 child
17	Compensatory Field Area Allowance	Fully Exempt
18	Compensatory Modified Field Area Allowance	Fully Exempt
19	Underground Allowance for mine workers	Max Rs. 800 per month
20	Daily allowance by any person by reason of his membership of Parliament or of any State Legislature or of any Committee thereof u/s 10(17)	Fully Exempt
21	Entertainment allowance u/s 16	For government employees only: Lower of 20% of Basic salary or Actual amount received or Maximum Rs. 5000
22	Profession tax u/s 16	Maximum Rs. 2,500
23	Interest on Housing loan u/s 24(2) with respect to self-occupied property	Maximum Rs. 2,00,000
24	Standard deduction u/s 16	Maximum Rs. 50,000
25	Deduction with respect to Specified investment under 80C	Maximum Rs. 1,50,000
26	Deduction with respect to Contribution to NPS u/s 80CCD(1B)	Maximum Rs. 50,000
27	Deduction with respect to mediclaim premium or medical expenses u/s 80D	Maximum Rs. 50,000 / Senior Citizen then Rs 75,000
28	Deduction with respect to medical treatment of handicapped relative u/s 80DD	Maximum deduction Normal disability =75,000 and for Severe disability = 1,25,000
29	Deduction with respect to treatment of specified disease u/s 80DDB	Maximum deduction Lower of Actual expenses or Maximum Rs. 40000 for other and 100000 for senior citizen
30	Deduction with respect to Interest on Education Loan u/s 80E	Interest amount for 8 consequtive years
31	Deduction with respect to donation to trust or political parties under section 80G	Amount of donation
32	Deduction with respect to donation to trust or political parties under section 80GGC	100% of Donation made
33	Deduction with respect to interest on savings account u/s 80TTA	Lower of Amount of saving interest or Rs. 10,000
34	Deduction with respect to interest on Deposits to senior citizens u/s 80TTB	Lower of Amount of interest or Rs. 50,000
35	Additional Deduction for Interest on Home Loan u/s 80EE	Maximum Rs. 50,000
36	Additional Deduction for Interest on Home Loan u/s 80EEA	Maximum Rs. 1,50,000
37	Deduction for Interest on electric vehicle loan u/s 80EEB	Maximum Rs. 1,50,000
38	Deduction for handicapped assessee under section 80U	Normal= 75,000 or Severe= Rs. 1,25,000
39	Deduction for Royalty from books under section 80QQB	Lower of Eligible royalty or Rs. 3,00,000
40	Deduction for Royalty from patent under section 80RRB	Lower of Eligible royalty or Rs. 3,00,000
41	Deduction for donation to scientific research Organisation under section 80GGA	100% of Amount of donation
42	Deduction under section 80GG for rent paid other than HRA	Lower of Rs. 5000 per month or 25% of Adjustment gross total income or Rent paid- 10% of Adjustment gross total income
43	Deduction u/s 80JJA with respect to Income from collecting and processing biodegradable waste	100% of profit of business
44	Deduction under section 57 with respect to family pension	Lower of Rs. 15,000 or 1/3 rd of the amount of pension received
45	Deduction u/s 10(32) In Case of Income from Minor Child	Maximum deduction of Rs. 1500 per child
46	Deduction u/s 10AA with respect to income of SEZ unit	Maximum deduction is 100% of profits for 1st 5 years of business and 50% of profits for the next 5 years of business
47	Deduction of deprecation as per section 32	Amount of depreciation as per rate schedule of income tax act
48	Deduction u/s 32AD for investment in new Plant and Machinery in notified backward area	15% of the Actual cost of new plant and machinery installed
49	Deduction with respect to specified business under section 35AD	100% of the profit from specified business
50	Deduction with respect to expenditure on agricultural extension project u/s 35CCC	150% of the expenditure allowed on agricultural extension
51	Deduction with respect to tea, coffee, rubber business u/s 33AB	Lower of Actual amount deposited in NABARD a/c or 40% of PGBP before this deduction
52	Deduction with respect to petroleum and natural gas business u/s 33ABA	Lower of Actual amount deposited in site restoration account or 20% of PGBP (before the deduction)
53	Deduction with respect to contribution to outsiders to IIT national laboratory for scientific research under section 35(2AA)	150% of the contribution paid
54	Deduction with respect to expenditure on scientific research u/s 35	100% deduction for Revenue and capital expenditure incurred for scientific research

Deductions and exemptions allowed under new tax regime Section 115BAC for FY 2020-21?

The below list of exemptions and deductions are allowed under new tax regime:

Sl. No.	Total Income	Rate of Tax
1	Exemptions with respect to gratuity under section 10(10)	Lower of Last drawn salary X no of years employed X 15/26 or Rs. 20 Lakhs or Actual gratuity received
2	Exemptions with respect to commuted (lumpsum) pension u/s 10(10A)	For government employees= Fully exempt and other employees= if gratuity is received by the employee then 1/3 rd of the commuted pension is exempt else 50% of the commuted pension is exempt
3	Exemptions on Maturity proceeds of Life insurance u/s 10(10D)	Fully exempt
4	Deduction under section 80CCD(2) with respect to Contribution by employer to NPS	Lower of employer contribution or Maximum 10% of the Salary
5	Interest on Housing loan u/s 24(2) with respect to let out property	Whole amount of interest on housing loan
6	Deduction under section 80JJAA with respect to additional employees cost	Maximum 30% of additional employee cost incurred during the year