How to opt for a new tax system according to section 115BAC?
The Finance Act 2020, has presented a new section 115BAC, according to this arrangement the assessee has an option whether to pay tax according to new chunk rates or the old piece rates. In the event that the assessee opts for the new tax system, at that point the assessee needs to renounce a portion of the tax concessions under the current income tax act.
How to opt for new or old plan under the Income Tax Act?
This arrangement is made appropriate for the Individual/HUF and the individual can practice the option at the hour of documenting the arrival of income. The people gaining under income pay and business can opt for the option under 115BAC as under:
1. Salaried individual (counting income from Pension, Bank Interest, Hosue Rent, Other Income)
In the event that the individual assessee is a salaried representative, at that point, he opt the plan on a yearly premise. It implies the individual can change to his preferred tax system in the following year. For opting the plan, the worker needs to offer announcement to the deductor of his goal to opt for old or new tax plot according to his decision. Upon such implication, the business will register his all-out income and make TDS subsequently as per the arrangement of section 115BAC of the demonstration. The announcement made by the worker can’t be changed. Anyway, at the hour of recording Returns, he can again pick once again.
• Business or Profession Income (benefit and Gains from Business or Profession)
On the off chance that the individual is winning business income, he can practice his option under section 115BAC at the hour of recording the arrival of income the option once practised can’t be pulled back in resulting evaluation year in regard of the assessee with Business Income. On the off chance that he choose to pull back, it would be permitted only a single time and he can never pick again
What are the Slabs rates under the new Income tax system Section 115BAC for FY 2020-21?
| SI | 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 the 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:
| SI | 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:
| Sr 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 | The 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 the 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 The average salary of last 10 months or Salary per day X utilised 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 a 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 up to 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 the 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 consecutive 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 the 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 the profit of the 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 | The 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 the 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 the 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:
| Sr no | Deductions or Exemptions not allowed | Amount of deduction/ Exemptions |
| 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 |
