Comparison Of Section-15BAC New Tax Regime With Existing.

[AVINASH BHATT]

Section 115BAC: New tax regime under Income tax act 1961.

The Budget 2020 inserted a new tax regime under section 115BAC having an option to individuals and HUF taxpayers to pay income tax at lower tax rates. The new system is applicable for AY 2021-22

Individuals and HUF taxpayers are eligible to choose a new tax regime from AY 2021-22.

From AY 2020-21, assessee have option to pay income tax under the new tax regime (optional). The new tax regime is available for individuals and HUFs with lower tax rates but not Deduction/ Exemptions are allowed. Let’s see how can we take advantage of new regime in comparative data.

Slab rates under new Tax regime vs Existing slab:

Slab Rate (115 BAC)	Rate	Existing slab rates	Rate
Income from ₹ 2.5 lakh to ₹ 5 lakh	5%	Income from ₹ 2.5 lakh to ₹ 5 lakh	5%
Income from ₹ 5 lakh to ₹ 7.5 lakh	10%	Income from ₹ 5 lakh to ₹ 10 lakh	20%
Income from ₹ 7.5 lakh to ₹ 10 lakh	15%	Income above ₹ 10 lakh	30%
Income from ₹ 10 lakh to ₹ 12.5 lakh	20%
Income from ₹ 12.5 lakh to ₹ 15 lakh	25%
Income above ₹ 15 lakh	30%

list of the main exemptions and deductions that tax payers will have to forgo if they opt for 115 BAC:

(1) Leave travel allowance (LTC) exemption which is currently available to salaried employees twice in a block of four years under section 10(5) of Income tax Act will not be allowable under the new tax regime.

(2) House rent allowance (HRA) is received by the salaried class. A deduction is permissible under Section 10(13A) of the Income Tax Act, in accordance with Rule 2A of the Income Tax Rules. You can claim exemption on your HRA under the Income Tax Act if you stay in a rented house and get a HRA from your employer, but this is not allowable under new Tax regime.

(3) Standard   deduction   of Rs-50,000   currently   available   to   salaried   tax payers   under Section 16(ia) but not allowable.

(4) Deduction available under section 80TTA/80TTB will not be available to the taxpayers. "As Section - 80TTA and 80TTB are covered under chapter-VIA and the new tax regime excludes deductions under chapter-VIA subject to certain exceptions. Thus, a person opting for the new tax regime shall not be entitled to claim deduction u/s 80TTA (Deduction in respect of Interest on deposits in savings account) and 80TTB (Deduction in respect of Interest on deposits in savings account) and 80TTB(Deduction in respect of Interest on deposits to senior citizens).”

(5) Deduction for entertainment allowance (for government employees) and employment/professional tax as contained in section 16.

(6) Tax benefit on interest paid on housing loan taken for a self-occupied or vacant house property: Interest paid on housing loan for such a property could be claimed as a deduction from income from house property which resulted in a loss from house property (as the property was self/occupied or vacant). This loss could be set off against salary income thereby reducing the individuals’ taxable income and net tax liability. This comes under section 24.

(7)  Deduction of ₹ 15000 allowed from family pension under section 57 (iia), but excluded under 115 BAC.

(8) The most commonly claimed deductions under section 80C will also go. This includes the commonly availed section 80C deductions claimed for provident fund contributions, life insurance premium, school tuition fee for children and various specified investments such as ELSS, NPS, PPF etc.

However,   deduction   under   sub-section (2)   of   section  80CCD   (employer  contribution  on  account of   employee  in   notified   pension   scheme-mostly  NPS)  and   section  80JJAA   (for new employment) can still be claimed.

(9) The deduction claimed for medical insurance premium under section 80D will also not be claimable

(10) Tax benefits for disability under sections 80DD and 80DDB will not be claimable

(11) Tax break on interest paid on education loan will not be claimable-section 80E

(12) Tax break on donations to charitable institutions available under section 80G will not be available
All deductions under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc) will not be claimable by those opting for the new tax regime.

The above are part a total of 70 deductions and tax exemptions that will not be available in the proposed new tax regime.

Few exemptions and deductions available under the new regime:

(A) Transport allowances in case of a specially-abled person.

(B) Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.

(C) Any compensation received to meet the cost of travel on tour or transfer.

(D) Daily allowance received to meet the ordinary regular charges or expenditure you incur on account of absence from his regular place of duty.

Tax comparison chart at Various income slabs, under new Tax regime vs old regime.

Annual income	Tax under the existing regime (Rs) Inc Cess	Tax under the new regime (Rs)	Tax savings under the new regime (Rs)
Up to ₹ 7,50,000	65,000	39,000	26,000
Up to ₹ 10,00,000	117,000	78,000	39,000
Up to ₹ 12,50,000	195,000	130,000	65,000
Up to ₹ 15,00,000	273,000	195,000	78,000

The  new  tax  regime  (115 BAC)  is  beneficial  for  the  assessee  who  is  not claiming any deduction / exemption.

When can I Opt for New Tax regime?

1. A salaried taxpayer can opt the new tax regime at the beginning of FY 2020-21 by intimating their employer. The employee cannot opt out his/her choice during the financial year once opted for this regime. However, the change can be done at the time of filing the income tax return in July 2021.

The due date for tax filing for the FY 2020-21 (AY 2021-22) is 30th Sep 2021 (extended from 31st July 2021).

2. In case an employee does not opt the new tax regime at the beginning of the financial year, the employer is liable to deduct tax (TDS) under the existing tax regime. Hence, a salaried taxpayer can opt-in / opt-out every year. That means you can choose the new tax regime in one year and choose the regular tax regime in another year.

  A non-salaried taxpayer has to opt for the new regime at the time of filing the tax return. They need not declare or intimate their choice to anyone at any time during the year. However, a non-salaried taxpayer cannot opt-in and opt-out of the new tax regime every year because of certain restriction. Once (non-salaried) opts out of the 115 (bac), they cannot opt-in again for the new tax regime in the future.

Comparison:

New Tax regime vs old Tax regime (Where old regime is more beneficial than 115BAC):

	Annual income	INR	Tax under the existing regime (Rs) inc cess	Tax under the new regime (Rs)
	Salary	1,100,000.00	1,100,000.00	1,100,000.00
	Less (-) Standard Deduction	(50,000.00)	-50000	-
	Less (-) Professional Tax	(2,400.00)	-2400	-
	Gross Total Income	1,047,600.00	1047600	1100000
	Less Deduction u/s 80C (Generally claimed deduction)	(150,000.00)	-150000	-
	Total Taxable Income	897600	897600	1100000
	Income Tax
	Upto 250000		-	-
	250001-500000		12,500.00	12,500.00
	5000001-750000		50,000.00	25,000.00
	750001-1000000		29,520.00	37,500.00
	1000001-125000		-	50,000.00
	+add 4% Cess		3,680.80	3,000.00
	Total Tax		95701	128000

New Tax regime vs old Tax regime (Where new regime is more beneficial than old tax regime):

	Annual income	INR	Tax under the existing regime (Rs) inc cess	Tax under the new regime (Rs)
	Salary	1,250,000.00	1,250,000.00	1,250,000.00
	Less (-) Standard Deduction	(50,000.00)	-50000	-
	Less (-) Professional Tax	(2,400.00)	-2400	-
	Gross Total Income	1,197,600.00	1197600	1250000
	Less Deduction u/s 80C (Generally claimed deduction)	(150,000.00)	-150000	-
	Total Taxable Income	1047600	1047600	1250000
	Income Tax
	Upto 250000		-	-
	250001-500000		12,500.00	12,500.00
	5000001-750000		50,000.00	25,000.00
	750001-1000000		59,520.00	37,500.00
	1000001-125000		14,280.00	50,000.00
	+add 4% Cess		5,452.00	5,000.00
	Total Tax		141752	130000

Treatment of House property Income under new Tax regime.

As per existing Tax regime the interest on loan for self-occupied property in deductible up to 2 lakh. but in case of New Tax regime Section-115(bac) cannot claim a deduction on interest for a housing loan. Also, can’t  set-off the  loss  of  ₹ 2 lakh  from  house property from your salary income.

Treatment of “Business expenditure not allowed under new Tax regime”:

Following Exemption and Deductions are not allowed if opted for 115(bac)

1. Additional Depreciation under section-32 of Income tax act 1961.
2. Investment allowance under section 32AD (Investment in new plant or machinery in notified backward areas in certain States)
3. Sector-specific business deductions under section 33AB and 33ABA (regarding business of growing & manufacturing of tea & Site Restoration Fund.)
4. Capital expenditure under section 35AD (Specified business weighted deduction )
5. Exemption provided to SEZ units under Section-10AA.

 

Treatment of unabsorbed depreciation & Business loss if opted for 115(bac):

As discussed above the Individual of HUF can’t claim unabsorbed depreciation under new tax regime. Deduction are also not available as well.