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115BAC of Income Tax Act: All about Section 115BAC new tax regime

[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. 

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.

Source: https://ecis2016.org/.
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Source: https://ecis2016.org
Category: Must Knows

Debora Berti

Università degli Studi di Firenze, IT

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