Old Tax Regime vs New Tax Regime

#incometaxforms, #Incometaxrate,#Oldtaxregimevsnewtaxregime #Form10IE

What is Section 115BAC?

Section 115BAC is the newly inserted section in the Income Tax Act, 1961 that deals with the new income tax regime. This section and alternate tax regime was introduced in Union Budget 2020 and is applicable to individuals and Hindu Undivided Families (HUFs) only. A key feature of this new regime is that the income tax slab rates have been significantly reduced. However, the new rates come at the cost of various key income tax exemptions and deductions, which are currently available under the old (existing) income tax regime.

The Finance Act, 2020, has provided an option to Individuals and HUF for payment of taxes at the following reduced rates from Assessment Year 2021-22 and onwards:

Total Income (Rs) Rate

Up to 2,50,000 Nil

From 2,50,001 to 5,00,000 5%

From 5,00,001 to 7,50,000 10%

From 7,50,001 to 10,00,000 15%

From 10,00,001 to 12,50,000 20%

From 12,50,001 to 15,00,000 25%

Above 15,00,000 30%

Surcharge: Surcharge is levied on the amount of income-tax at following rates if total income of 

an assessee exceeds specified limits:-

Assessment Year 2021-22

Range of Income

Rs. 50 Lakhs toRs. 1 Crore

Rs. 1 Crore to Rs. 2 Crores

Rs. 2 Crores to Rs. 5 Crores

Rs. 5 crores to Rs. 10 Crores

Exceeding Rs. 10 Crores

10% 15% 25% 37% 37%

Note: The enhanced surcharge of 25% & 37%, as the case may be, is not levied, from income 

chargeable to tax under sections 111A, 112A and 115AD. Hence, the maximum rate of surcharge on tax payable on such incomes shall be 15%.

Conditions to be satisfied:

The option to pay tax at lower rates shall be available only if the total income of assessee 

is computed without claiming following exemptions or deductions:

a) Leave Travel concession [Section 10(5)]

b) House Rent Allowance [Section 10(13A)]

c) Official and personal allowances (other than those as may be prescribed) [Section 

10(14)]

d) Allowances to MPs/MLAs [Section 10(17)]

e) Allowances for income of minor [Section 10(32)]

f) Deduction for units established in Special Economic Zones (SEZ) [Section 10AA];

g) Standard Deduction [Section 16(ia)]

h) Entertainment Allowance [Section 16((ii)]

i) Professional Tax [Section 16(iii)]

j) Interest on housing loan [Section 24(b)]

k) Additional depreciation in respect of new plant and machinery [Section 32(1)(iia)];

l) Deduction for investment in new plant and machinery in notified backward areas

[Section 32AD];

m) Deduction in respect of tea, coffee or rubber business [Section 33AB];

n) Deduction in respect of business consisting of prospecting or extraction or 

production of petroleum or natural gas in India [Section 33ABA];

o) Deduction for donation made to approved scientific research association, university 

college or other institutes for doing scientific research which may or may not be 

related to business [Section 35(1)(ii)];

p) Deduction for payment made to an Indian company for doing scientific research 

which may or may not be related to business [Section 35(1)(iia)];

q) Deduction for donation made to university, college, or other institution for doing 

research in social science or statistical research [Section 35(1)(iii)];

r) Deduction for donation made for or expenditure on scientific research [Section 

35(2AA)];

s) Deduction in respect of capital expenditure incurred in respect of certain specified 

businesses, i.e., cold chain facility, warehousing facility, etc. [Section 35AD];

t) Deduction for expenditure on agriculture extension project [Section 35CCC];

u) Deduction for family Pension [Section 57(iia)]

v) Deduction in respect of certain incomes other than specified under Section 80JJAA, 

80CCD(2) and deduction under section 80LA for Unit located in IFSC [Part C of 

Chapter VI-A.

Old tax regime vs. new tax regime 

The old (existing) tax regime allows for a variety of income tax deductions and exemptions, and hence is suitable for most of the taxpayers. However, the new tax regime may prove beneficial to those who have not significantly invested in various tax-saving schemes, such as Employee Provident Fund (EPF), Equity Linked Savings Scheme (ELSS), Life Insurance, National Pension Scheme (NPS), National Savings Certificate (NSC), tax-saving Fixed Deposit (FD), etc

CBDT notified a new form to be filled by those opting for the new tax regime for financial year 2020-21. This new form notified by CBDT on October 1 is Form 10-IE. Those opting for new tax retime from the financial year 2020-21 onwards, will need to submit an additional Form 10-IE while submitting their income tax returns.