Section 115BAC is the newly embedded section in the Income Tax Act, 1961 that manages the new income tax regime.

The Budget 2020 introduces a new regime under section 115BAC, you can decide to pay income tax under a discretionary new tax regime. The new tax regime is accessible for Individual and HUFs with lower tax rates and zero allowances/exemptions. We will talk about the highlights of the new tax regime and how you can profit by it.

Tax rates under new tax regime –

Income up to 2.5 lakh – nil tax

Income from 2.5 to 5 lakh – 5%

Income from 5 to 7.5 lakh -10%

Income from7.5 to 1o lakh -15%

Income from 10 to 12.5 lakh -20%

Income from 12.5 to 15 lakh -25%

Income above 15 lakh -30%

Note- There are no deduction and no exemption available for new tax regime, only you can avail benefit of section 87A.

Only following Benefits are available under new regime –
  • Transport allowances in case of an especially-abled individual.
  • Conveyance allowance obtained to fulfill the conveyance expenditure incurred as part of the employment.
  • Any compensation acquired to meet the price of travel on tour or transfer.
  • Allowance for day-to-day expenses, you incur on account of absence from his regular place of duty.
Can i pick out between the new tax regime and the old regime?

An employee can select the new tax regime at the beginning of FY 2020-21 and intimate their employer but employee can change this regime only at the time of filling their Income tax return. In case if employee didn’t select new tax regime then their TDS will be deduct under old tax regime. Only salaried person can opt this option every year (A salaried taxpayer can opt-in and choose-out every 12 months) mean salaried person can opt new regime for one year and old regime for another year. a non-salaried taxpayer cannot decide-in and decide-out of the new tax regime each yr. once a non-salaried opts out of the new tax regime, they cannot opt-in again for the new tax regime in the future.

Loss from housing property i.e., 2lakh re. interest on housing property

Under new tax regime you cannot claim interest on housing loan (in case of self-occupied property). It means deduction of re. 2 lakh which is allowed in old tax regime not allowed in new tax regime.

In case of let-out property, we can claim a deduction of interest paid on housing loan but one thing should be noted that new tax regime restricts the deduction to the taxable rental income receive from housing property.

There is no option of carry forward and set off of losses from housing property.

Following deduction and exemptions not allowed for business income under new tax regime –
  • Additional depreciation u/s 32.
  • Investment allowance u/s 32AD
  • Section 33AB and 33ABA
  • Scientific research expenditure u/s 35
  • Capital nature expenditure u/s 35AD
  • Exemption u/s 10AA for SEZ units

Note – For individual/ HUF -Unabsorbed depreciation and business losses cannot set off and carry forward under new regime.