What is Section 115BAC of the Income-tax Act?

Individuals opting for the new tax regime must know about Section 115BAC of the Income-tax Act, 1961. Section 115BAC was introduced in Budget 2020 and became effective from FY 2020-21 (AY 2021-22). Section 115BAC is commonly known as the new tax regime.

When individuals opt to pay taxes at lower rates under the new tax regime, they are required to select Section 115BAC while filing the income tax return.

Section 115BAC allows individuals to pay income tax at a lower rate. However, when individuals opt for the new tax regime or Section 115BAC, they have to forego approximately 70 tax exemptions and deductions.

When opting for the new tax regime under Section 115BAC, an individual cannot claim common deductions such as deduction of Rs 1.5 lakh under Section 80C for specified investments or expenses, deduction of Rs 25,000 for medical insurance premium paid under Section 80D, deduction of Rs 50,000 for investment in National Pension System (NPS) under Section 80CCD (1b) and so on.

Apart from this, there are tax exemptions that an individual cannot avail under the new tax regime. Some of these tax exemptions include house rent allowance and leave travel allowance.

Till FY 2022-23, a salaried individual was not able to claim standard deduction of Rs 50,000 from salary income. However, to make Section 115BAC more attractive for individuals, standard deduction on salary income is allowed under the new tax regime.

Do note that standard deduction from salary income under Section 115BAC will be applicable for salary income earned between April 1, 2023, and March 31, 2024, i.e., in FY 2023-24. Any individual opting for the new tax regime in FY 2022-23, or any other previous financial year, will not be eligible to claim standard deduction from salary income.Who can opt for the new tax regime in Section 115BAC?
The eligibility condition for Section 115BAC has been revised in Budget 2023. Till FY 2023, an individual or Hindu Undivided Family (HUF) could opt for the new tax regime under Section 115BAC of the Income-tax Act.

The eligibility criteria for the new tax regime has been expanded in Section 115BAC. From April 1, 2023, association of persons (AOP) other than co-operative society, body of individuals and artificial judicial persons can also opt for the new tax regime – apart from individuals and HUFs.

What are income tax slabs and rates in Section 115BAC?
Section 115BAC deals with the new tax regime. Hence, the income tax slabs and rates applicable under this section will be that of the new tax regime.

Income tax slabs under new tax regime from April 1, 2023

Income tax slabs Income tax rate
Income up to Rs 3,00,000 0%
Income between Rs 3,00,001 and Rs 6,00,000 5%
Income between Rs 6,00,001 and Rs 9,00,000 10%
Income between Rs 9,00,001 and Rs 12,00,000 15%
Income between Rs 12,00,001 and Rs 15,00,000 20%
Income above Rs 15,00,001 30%

Do note that surcharge and cess are also applicable on the income tax payable.

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