[ecis2016.org] The new tax regime, under 115BAC of the Income Tax Act, allows taxpayers to pay income tax at lower rates. But, they have to forgo several deductions and exemptions offered under the old tax regime.
115BAC of the Income Tax Act
In the Union Budget 2020, finance minister, Nirmala Sitharaman introduced Section 115BAC to the Income Tax Act, to provide individual/HUFs with an alternate tax regime. The new tax regime, under 115BAC to the Income Tax Act, allows taxpayers to pay taxes at lower rates, albeit after letting go of certain deductions and exemptions allowed under the old tax regime.
You are reading: 115BAC of Income Tax Act: All about Section 115BAC new tax regime
The benefits of 115BAC are not meant for those earning their income from profession or business.
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Tax rate under 115BAC
| Income | New tax rate |
| Up to Rs 2.50 lakhs | Nil |
| From Rs 2.50 lakhs to Rs 5 lakhs | 5% |
| From Rs 5 lakhs to Rs 7.50 lakhs | 10% |
| From Rs 7.5 lakhs to Rs 10 lakhs | 15% |
| From Rs 10 lakhs to Rs 12.50 lakhs | 20% |
| From Rs 12.50 lakhs to Rs 15 lakhs | 25% |
| Above Rs 15 lakhs | 30% |
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Old income tax slab
Income tax slabs for individuals aged below 60 years and for HUF
| Income | Rate under old tax regime slab |
| Up to Rs 2.50 lakhs | Nil |
| From Rs 2.50 lakhs to Rs 5 lakhs | 5% |
| From Rs 5 lakhs to Rs 7.50 lakhs | 20% |
| From Rs 7.5 lakhs to Rs 10 lakhs | 20% |
| From Rs 10 lakhs to Rs 12.50 lakhs | 30% |
| From Rs 12.50 lakhs to Rs 15 lakhs | 30% |
| Above Rs 15 lakhs | 30% |
Income tax slabs for individuals aged between 60-80 years
| Income | Old tax regime slab |
| Up to Rs 3 lakhs | Nil |
| From Rs 3 lakhs to Rs 5 lakhs | 5% |
| From Rs 5 lakhs to Rs 10 lakhs | 20% |
| Over Rs 10 lakhs | 30% |
Income tax slabs for individuals aged over 80 years
| Income | Old tax regime slab |
| Up to Rs 5 lakhs | Nil |
| From Rs 5 lakhs to Rs 10 lakhs | 20% |
| Above Rs 10 lakhs | 30% |
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New tax regime vs old tax regime
| Income | Old tax regime | New tax regime | ||
| Age up to 60 years | Age 60-80 years | Age over 80 years | All age groups | |
| Up to Rs 2.50 lakhs | Nil | Nil | Nil | Nil |
| From Rs 2.50 lakhs to Rs 3 lakhs | 5% | Nil | Nil | 5% |
| From Rs 3 lakhs to Rs 5 lakhs | 5% | 5% | Nil | 5% |
| From Rs 5 lakhs to Rs 7.50 lakhs | 20% | 20% | 20% | 10% |
| From Rs 7.50 lakhs to Rs 10 lakhs | 20% | 20% | 20% | 15% |
| From Rs 10 lakhs to Rs 12.50 lakhs | 30% | 30% | 30% | 20% |
| From Rs 12.50 lakhs to Rs 15 lakhs | 30% | 30% | 30% | 25% |
| Above Rs 15 lakhs | 30% | 30% | 30% | 30% |
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Deductions allowed under 115BAC
- Transport allowance for specially-abled.
- Conveyance allowance for conveyance expenditure incurred as part of employment.
- Compensation received to meet the cost of travel on tour or transfer.
- Daily allowance received to meet the regular charges or expenditure incurred on account of absence from the regular place of duty.
- Deduction for employer’s contribution to NPS account.
- Deduction for additional employee cost.
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Old vs new tax regime
| Old tax regime | New tax regime |
| Four tax slabs | Seven tax slabs |
| 15% income tax for income above Rs 15 lakhs | 15% income tax for income above Rs 15 lakhs |
| Savings-centric | Spending-centric |
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Deductions that are not allowed under 115BAC
- Chapter VI-A deduction (Section 80C, 80D, 80E, 80EEA, etc.).
- Standard deduction.
- Professional tax.
- Entertainment allowance.
- Leave travel allowance (LTA).
- House rent allowance (HRA).
- Children education allowance.
- Minor child income allowance.
- Helper allowance.
- Other special allowances.
- Interest on housing loan under Section 24.
- Deduction from family pension income.
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Section 115BAC: Success so far
The new tax regime has been more popular among non-resident Indians than resident Indians in spite of lower tax rates. This is because most taxpayers in India use various tax saving instruments and do not find the new tax regime as beneficial as the old one.
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Factors to consider if you want to switch to 115BAC
- Your income levels.
- Your tax-saving investments.
- Deductions and exemptions that you are eligible for.
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