Section 115BAC of Income Tax Act 1961
New Tax Regime and Its Implications

A new scheme of taxation has been introduced by the Finance Act, 2020 by insertion of a new Section 115BAC. The basic feature of this new tax regime is lower tax rates as compared to existing slab rates but on the other hand the assessee has to forego around 70 exemptions and deductions presently available.

Applicability of the Scheme

This scheme is applicable w.e.f. Assessment Year 2021-22. It is applicable to

Individuals
HUFs
Both Resident as well as Non-Residents

The scheme is, however, optional and the assessee can continue with the existing system of taxation. The switchover from one scheme to the another is allowed subject to certain conditions as discussed later.

The tax rates under the New Tax Regime as per the section 115BAC till AY 2023-24 are as under

Total Income (Rs)	Rate
Up to 2,50,000	Nil
From 2,50,001 to 5,00,000	5%
From 5,00,001 to 7,50,000	10%
From 7,50,001 to 10,00,000	15%
From 10,00,001 to 12,50,000	20%
From 12,50,001 to 15,00,000	25%
Above 15,00,000	30%

These rates are amended by Finance Act 2023 whereby the basic exemption limit is raised from 2,50,000 to 3,00,000. Further, the section was erstwhile applicable to Individual and HUF only which now applies to Individual, HUF, AOP (other than co-operative societies) and BOI. This change has been brought to include more assessee for claiming benefit under the section.

It is to be noted here that the slab rate of Rs. 3,00,000 / Rs. 5,00,000 enjoyed by Senior Citizens/Super Senior Citizens in Old slabs will not be available to them if they opt for this new tax regime. However, Rebate U/S 87A , Surcharge, Education Cess , Special Rates of Chapter XII will be same in the new tax regime as it is the existing system.

Exemptions and deductions not claimable under the new tax regime

The following are some of the major deductions and exemptions you cannot claim under the new tax system

The standard deduction under Section 80TTA/80TTB, professional tax and entertainment allowance on salaries
Leave Travel Allowance (LTA)
House Rent Allowance (HRA)
Minor child income allowance
Helper allowance
Children education allowance
Other special allowances [Section 10(14)]
Interest on housing loan on the self-occupied property or vacant property (Section 24)
Chapter VI-A deduction (Section 80C, 80D, 80E and so on, except Section 80CCD(2) and Section 80JJAA)
Exemption or deduction for any other perquisites or allowances
Deduction from family pension income

What are the exemptions and deductions available under the new regime?

You can claim tax exemption for

Transport allowances in case of a specially-abled person.
Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.
Any compensation received to meet the cost of travel on tour or transfer.
Daily allowance received to meet the ordinary regular charges or expenditure you incur on account of absence from his regular place of duty.
Deduction for employer’s contribution to NPS account (Section 80CCD(2)).
Deduction for additional employee cost (Section 80JJA).

Can I choose between the new tax regime and the existing regime?

A salaried taxpayer can choose the new tax regime at the beginning of Financial Year and intimate their employer. The employee cannot change their choice anytime during the financial year. However, they can change their choice when filing the income tax return for the respective financial Year.

In case an employee does not choose the new tax regime at the beginning of the financial year, the employer will deduct tax (TDS) under the existing tax regime. Hence, a salaried taxpayer can opt in and opt out every year. That means you can choose the new tax regime in one year and choose the regular tax regime in another year.

A non-salaried taxpayer has to choose the new regime when filing the tax return. They need not declare or intimate their choice to anyone during the year. However, a non-salaried taxpayer (taxpayers with an income from business or profession) cannot opt-in and opt-out of the new tax regime every year. Once a non-salaried opts out of the new tax regime, they cannot opt-in again for the new tax regime in the future.

Old V/s New Tax Regime Slab Rates for FY 2022-23(AY 2023-24)?

Taxable Income for FY 2022-23	Tax Rate under new regime	Tax Payable	Tax Rate under old regime	Tax Payable
Upto 2,50,000	Exempt	-	Exempt	-
From 2,50,001- 5,00,000	5%	12,500	5%	12,500
From 5,00,001-7,50,000	10%	25,000	20%	50,000
From 7,50,001-10,00,000	15%	37,500	20%	50,000
From 10,00,001-12,50,000	20%	50,000	30%	75,000
From 12,50,001-15,00,000	25%	62,500	30%	75,000
Above Rs 15 Lakhs	30%	To be calculated on the basis of income	30%	To be calculated on the basis of income

Disclaimer: Although all provisions, notifications and updates, are analyzed in-depth by our team before writing to the public. Any change in detail or information other than fact must be considered a human error. The Guide, Articles, Blogs, FAQ and videos is to provide updated information. Tax matters are always subject to frequent changes hence advisory is only for the benefit of the general public. Hence neither TaxSmooth nor any of its Team members is liable for any consequence that arises on the basis of these write-ups.

CHETNAA GOYAL

FCA, B.COM, More than 10 years of Experience in Direct Tax

New Scheme Of Taxation U/S 115BAC

Section 115BAC of Income Tax Act 1961New Tax Regime and Its Implications