New tax regime u/s 115BAC
An explanation of the New tax regime u/s 115BAC
In this post, we will talk about the new tax regime u/s 115BAC; let us go over each section in detail:
What is Section 115 BAC?
Section 115 BAC of the Income Tax Act allows individuals and Hindu Undivided Families (HUFs) to choose under which tax regime they wish to pay their taxes. You can stay with the current tax system, which has more deductions and exemptions, or switch to a more straightforward system with lower tax rates but fewer deductions & exemptions. You can choose the regime that best suits your financial needs.
Income Tax Slab Rates of New Tax Regime under Section 115 BAC
The new income tax slabs and rates under the new tax regime for FY 2023-24 (AY 2024-25) and FY 2022-23 (AY 2023-24) are as follows:
New Regime Tax Rates (FY 23-24)
Income Slabs | Rates |
Up to Rs 3 lakh | Nil |
Rs 3 Lakh to 6 lakh | 5% |
Rs 6 Lakh to 9 lakh | 10% |
Rs 9 lakh to 12 lakh | 15% |
Rs 12 Lakh to 15 lakh | 20% |
Income over Rs 15 lakh | 30% |
New Regime Tax Rates (FY 22-23)
Income Slabs | Rates |
Up to Rs. 2.5 lakh | Nil |
Rs 2.5 Lakh to 5 lakh | 5% |
Rs 5 lakh to 7.5 lakh | 10% |
Rs 7.5 lakh to 10 lakh | 15% |
Rs 10 lakh to 12.50 lakh | 20% |
Rs 12.5 lakh to 15 lakh | 25% |
Income over 15 lakh | 30% |
Eligibility for Section 115BAC
HUFs and individuals may choose to pay income tax at the new income tax slab rates if their total income for this financial year meets the following conditions:
- The disclosed income should not include any of the business earnings.
- It is calculated without any deductions or exemptions, as mentioned below:
- Chapter VI-A, excluding those under section 80CCD/80JJAA.
- Section 24b
- Clause (5)/(13A)/(14)/(17)/(32) of Section 10/10AA/16
- Section 32(1)/ 32AD/ 33AB/ 33ABA
- Section 35/ 35AD/ 35CCC
- Clause (iia) of Section 57
- The calculation does not account for losses from previous years due to the deductions as mentioned above or from real estate owned by the homeowner.
- It is calculated without regard for bonuses or allowances.
- The calculation is conducted without claiming depreciation under Section 32 clause (iia).
Exemptions and Deductions of Section 115BAC of Income Tax Act
Under the New tax regime, you can claim the following tax exemptions:
- Transportation allowance if an individual is disabled.
- A conveyance allowance which is received to cover conveyance expenses incurred as part of the employment.
- Any payment made to cover the expense of a trip or transfer.
- The daily allowance received to cover ordinary, normal charges or expenses incurred as a result of his absence from his regular place of duty.
- Prerequisites for official purposes
- Exemption from voluntary retirement (10C), gratuity (10), and leave encashment (10AA).
- Interest on Home Loan on rented property (Section 24).
- Gifts up to Rs 50,000.
- Deduction for employer contributions to the NPS account [Section 80CCD(2)].
- Deduction for additional employee expenses (Section 80JJA).
- Budget 2023 introduced a standard deduction of Rs 50,000 under the New Tax Regime, which is applicable from FY 2023-24.
- Budget 2023 also introduced the deduction under Section 57(iia) of family pension income.
Budget 2023 included a deduction for amounts paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2).
Deductions that are Not Claimable Under Section 115BAC
The following are some of the significant deductions and exemptions you cannot claim under the new tax regime.
- The standard deduction under Sections 80TTA and 80TTB
- Professional tax and entertainment allowance on salary.
- Leave Travel Allowance (LTA).
- House Rental Allowance (HRA).
- Minor Child Income Allowance.
- Helper’s allowance.
- Children’s Education Allowance.
- Other special allowances. [Section 10.14].
- Interest on housing loans for self-occupied or unoccupied properties (Section 24).
- Chapter VI-A deduction (Sections 80C, 80D, 80E, and so on, except Sections 80CCD(2) and 80JJAA).
- Employee’s (personal) contributions to NPS.
- Donations to political parties, trusts, etc.
- Budget 2023 update: Deduction from family pension income up to FY 2022-23 (it is approved as a deduction from FY 2023-24).
- Budget 2023 update: Standard deduction of Rs.50,000 up to FY 2022-23 (since, after FY 2023-24, it is allowed as deductible).
Old vs New: Which income tax regime is better?
Choosing the old tax system can help you save money. Here’s the reason;
More Deductions and Exemptions: Investing in ULIP plans, child education plans, pension plans, PPF, NPS, and home loan interest can all result in tax benefits.
Lower Effective Tax Rates: When you use these deductions wisely, your taxable income drops, possibly putting you in a lower tax bracket.
Flexibility: Choosing the previous tax regime gives you more choice over your tax planning.
Conclusion
Section 115BAC of the Income Tax Act simplifies the tax payment process. If you have few deductions for things like NPS, life insurance, or health insurance, the new regulations may be useful. However, if you rely on tax-saving investments, the old approach may be more beneficial to you.
This concludes our discussion of the New tax regime u/s 115BAC. If you have any questions, please post them in the comment section below.
FAQs
1.Is HRA allowed in the new tax regime?
Ans: No, the new tax scheme does not provide for an HRA exemption.
2.Can I claim deductions under Section 80C in the new tax system?
Ans: No, you cannot claim deductions under section 80C because they are not available under the new tax regime.
3.Is Section 87A available under the new tax regime?
Ans: Yes, the Section 87A rebate is available through Section 115BAC upto an income of Rs 7 Lakh (for FY 2023-24).
