Impact on Adoption of Section 115BAC for Salaried Person - A New Tax Regime Under Income Tax Act1961

1. Salaried employee

At what rate of Tax income shall be charged under section 115BAC of Income Tax Act,1961?

Individual/HUF have the option to pay tax at the rate specified in the below table on satisfaction of the conditions specified under section 115BAC of the act:

Following Exemptions or deductions will not be available, if the assessee opts to be taxed under section 115BAC i.e. New Scheme:

What are the "Exemptions and deductions" will not be available under the head income from salary?

1. House Rent Allowance: Under the old scheme, house rent allowance is exempt to the extent of the minimum of following 3 limits:

   1. Actual HRA received

   2. Rent paid – 10% of salary

   3. 50% of salary in 4 big cities and 40% of salary in case of any other city.

2. Leave Travel Concession: Under the old scheme, leave travel concession is exempt for two journeys in a block of 4 years

3. Standard Deduction: Under the old scheme, standard deduction of Rs. 50,000 is allowed.

4. Tax On Employment: Under the old scheme, tax on employment (i.e. the professional tax) paid by employee is allowed as a deduction.

Whether Deduction Under the Head House Property available?

1. Interest on loan taken for self-occupied house property shall not be allowed: Under the old scheme, interest on loan taken for self-occupied house property is allowed as deduction subject to maximum of ₹. 2,00,000.

2. Loss under the head income from house property shall not be allowed to be set off from any other head of income in the same assessment year: Under the old scheme, loss under the head income from house property is allowed to be set off from any other head of income in the same assessment year to be maximum extent of ₹. 2,00,000.

What is the impact on Deduction claimed under chapter VIA ( i.e. section 80C to 80U) claimed under old scheme?

some of the important deductions under Chapter VIA for an individual whose total income does not include income under the head business or profession are as under:

1. Section 80c, 80CCC, and Sec 80CCD: Under the old scheme, the deduction is allowed subject to maximum of ₹ 1,50,000

2. Section 80CCD, additional deduction relating to pension fund: Under the old scheme, additional deduction relating to pension fund is allowed up to ₹ 50,000

3. Section 80D, Health insurance premium: Under the old scheme, health insurance premium is allowed as a deduction subject to maximum of ₹ 75,000 (including for senior citizen parents)

4. Section 80E, interest on loan taken for higher education of himself or children: Under the old scheme, such interest is allowed a deduction.

5. Section 80TTA, interest on savings bank deposit: Under the old scheme, such interest was allowed as deduction subject to maximum of ₹ 10,000

6. Section 80TTB, interest on bank deposits (including of FDR) in case of a senior citizen: Under the old scheme, such interest is allowed as deduction subject to maximum of ₹ 50,000.

When the Option can be Exercised?

Option to pay tax under this new tax scheme can be exercised along with the return of income to be furnished under the section 139(1) for the previous year relevant to the assessment year

Whether Option once exercised can be revert back to the old scheme?

Option to be exercised every previous year for which the return of income to be furnished. Hence the question of whether can be opt out or not does not arises.

How the option to be exercised?

1) The option to be exercised in accordance with the provisions of section 115BAC(5) by a person, being an individual or Hindu undivided family, for any previous year relevant to the assessment year beginning on or after 1.4.2021, shall be in Form No. 10-IE.

The option in Form No. 10-IE shall be furnished electronically either under digital signature or electronic verification code.