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The Budget 2020 introduces a new regime under section 115BAC giving an option to individuals and HUFs to pay income tax at lower rates. From FY 2020-21, the assessee can choose to pay income tax under an optional new tax regime. The new tax regime is available for individuals and HUFs with lower tax rates and zero deductions and exemptions available under various provisions of the Income-tax Act, 1961.

Section 115BAC of The Income Tax Act, 1961   New Tax Regime vs. Old Tax Regime

Exemptions and Deductions available under the Old Tax Regime and New Tax Regime

Particulars

Old Tax Regime

New Tax Regime

Leave travel concession [Section 10(5)] Yes No
House rent allowance [Section 10(13A)] Yes No

Prescribed allowances or benefits [Section 10(14)] read with rule 2BB

Yes No

Daily allowance to a Member of Parliament [Section 10(17)]

Yes No

Special provisions in respect of newly established Units in Special Economic Zones [Section 10(AA)]

Yes No

Deductions from salaries such as Standard Deduction, Entertainment Allowance, and Professional Tax [Section 16]

Yes No

Deductions from income from house property [Section 24(b)]

Yes No

Deductions to be made in computing total income [Chapter VI-A] except Section 80CCD (2) and 80 JJAA

Yes No
Any Other Expenditure [Section 57 (iii)] Yes No

Deduction in respect of investment in new plant and machinery in the specified businesses [Section 32(1)(iia)]

Yes No

Deduction in respect of investment in new plant or machinery in notified backward areas in certain States [Section 32AD]

Yes No

Deduction in respect of Tea development account, coffee development account, and rubber development account [Section 33AB]

Yes No

Deduction in respect of Site Restoration Fund [Section 33ABA]

Yes No

Deduction in respect of expenditure on scientific research [Section 35]

Yes No

Deduction in respect of expenditure on specified business [35AD]

Yes No

Deduction in respect of expenditure on agricultural extension project [Section 35CCC]

Yes No

Set-off and carry forward of loss or unabsorbed depreciation from any earlier assessment year

Yes No

Any other exemption or deduction for allowances or perquisite, by whatever name called, provided under any other law for the time being in force.

Yes No
Rebate u/s 87A Yes Yes
Benefits of Lower Tax Rates No Yes
 

The taxpayers having income from salaries, income from house property, capital gains or income from other sources may select tax regime year on year basis. However, if taxpayers have profits and gains of business or profession and they opt for new tax regime, they can switch back to old tax regime but only once in a lifetime and they will not be able to opt for new tax regime again except they cease to have any income from business or profession.

 

Comparison between the Old Tax Regime and New Tax Regime

Tax Slabs Old Tax Regime New Tax Regime
Up to 2,50,000 0% 0%
From 2,50,001 to 5,00,000 5% 5%
From 5,00,001 to 7,50,000 20% 10%
From 7,50,001 to 10,00,000 20% 15%
From 10,00,001 to 12,50,000 30% 20%
From 12,50,001 to 15,00,000 30% 25%
Above 15,00,000 30% 30%

The Percentage of Surcharge and Health and Education Cess in the New Tax Regime remains the same as the Old Tax Regime.


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Category Income Tax, Other Articles by - ASHOK PITRODA 



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