New Income Tax Regime- Section 115BAC

What are the new Income Tax Slab Rates under the New tax regime?

As per Budget 2020 individual and HUF taxpayers including are provided a choice to pay income tax under an optional new tax regime. The new tax regime came up with lower tax rates and fewer deductions.
Let us discuss further the changes made in the new tax regime and how you can benefit from them:-

The introduction of new tax regime made people more confused on which tax regime to opt for. Let us give you more clear picture on this.
The basic exemption limit has still been kept unchanged i.e. there will be no tax upto Rs 2.5lakhs for an individual/HUF. But, if the income of such taxpayer does not exceed Rs 5 lakhs then no tax would be payable after availing the benefit of rebate u/s 87A.
As soon as your taxable income crosses the threshold of Rs 5 lakhs the benefit u/s 87A will not be available and tax would be payable at 5% for income above Rs 2.5 lakhs but up to Rs 5 lakhs. Let us understand this with the help of an example

*The above calculations are excluding cess.

What is the eligibility criteria to opt for New Tax Regime?

Every year at the time of return filing, the new tax regime can be opted by the individual or the HUF who has no business/professional income They do not have a choice to opt-in or opt out of the regime every year. The option shall become invalid for a previous year or previous years, as the case may be, if the Individual or HUF fails to satisfy the conditions and other applicable provisions of the Act.
However, if the non-salaried taxpayer opts out of the new regime, he cannot opt for this regime in the future. Taxpayers having business income and wanting to opt for a new tax regime have to communicate to the Income tax department by filing from-10IE before the due date of filing ITR. This option once exercised for a previous year shall be valid for that previous year and all subsequent years.

What are the Income Tax Deductions & Exemption not available under the New Tax Regime?

The taxpayer opting for the new tax regime under section 115BAC shall not be entitled to the following exemptions/ deductions:

1. Leave travel concession u/s section 10(5);
2. House rent allowance u/s section 10(13A);
3. Some of the allowance as contained in section 10(14);
4. Allowances to MPs/MLAs as contained in section 10(17);
5. Allowance for the income of minor as contained in section 10(32);
6. Exemption for SEZ unit contained in section 10AA;
7. The standard deduction, a deduction for entertainment allowance and employment/professional tax as contained in section 16;
8. Interest under section 24 in respect of self-occupied or vacant property referred to in subsection (2) of section 23. (Loss under the head income from house property for the rented house shall not be allowed to be set off under any other head and would be allowed to be carried forward as per extant law);
9. Additional depreciation under section 32(1)(iia);
10. Deductions under section 32AD, 33AB, 33ABA;
11. Various deduction for donation for or expenditure on scientific research contained in section 35(2AA) or 35(1)(ii) or (iia) or (iii);
12. Deduction under section 35AD or section 35CCC;
13. Deduction from family pension under section 57(iia);
14. Any deduction 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,80TTA, 80TTB etc).

What are the Income Tax Exemptions and Allowances available under New Tax Regime?

Following exemptions and allowances are allowed to the Individual or HUF :

1. Transport Allowance granted to a divyang employee to meet the expenditure for the purpose of commuting between place of residence and place of duty.
2. Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office;
3. Any Allowance granted to meet the cost of travel on tour or on transfer;
4. Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.
5. Employer’s contribution to the NPS for up to 10% of employee’s salary under Section 80CCD (2) [ 14% in case of Govt employee]
6. Deduction for additional employee cost (Section 80JJAA).

Which income tax regime is beneficial for FY 2022-23(AY 2023-24)?

For the FY 2020-212022-23 (AY 2023-24) the taxpayer can choose amongst the old and new tax regimes. The new optional tax regime has reduced the income tax rate however has removed a few of the deductions and allowances that were available under the old tax regime. Let’s get a comparative study of the pros and cons of both tax slabs available to the taxpayer

Your tax outflow will be effected in a below-depicted manner under the new tax structure. For calculations, taxable income has been taken after all the deductions and allowances allowed (if any)