PREAMBLE
What we see in the last couple of years, revenue lawmakers are trying hard to simplify the tax structure and taxation system, to give maximum benefit to the common people of the country as far as tax liability is concerned and at the same time to increase the revenue of the Government. Undoubtedly their efforts are for the well-being of our beloved country and its people. But in a country like ours, it is a gigantic task to maintain a balance between all these factors i.e simplifying tax structure, giving maximum benefit to the taxpayers, and at the same time increasing the revenue of the Government. In reality, we see instead of simplifying the taxation system it becomes more complex to comply, and instead of getting the benefit, common taxpayers suffer (financially) from the new system. I think common taxpayers will not get much benefit with the introduction of section 115BAC instead it will make the taxation system more complex.
Effective Date of Applicability
The Budget 2020 introduced section 115BAC in the Income Tax Act, 1961. The section is applicable for income earned for the periods starting from 01.04.2020 i.e. from the assessment year 2021-2022 this new system (optional) takes effect for the calculation of income tax liability of an individual and HUF.
Tax Rate Structures
Section 115BAC is prescribing for six different tax rate structures for individuals and HUF. The old tax rate structures will also continue along with the new tax rate structures. An individual and HUF will have the option to choose any one of the two systems and calculate tax accordingly.
The table below depicts the tax rates under the new system and the existing system
|
Tax rate structures under Section 115BAC (Optional) |
Tax rate structures under the existing system |
||||
|
Income |
Rate of tax |
Income |
Age less than 60 years |
Age 60 to 80 years |
Age above 80 years |
|
Upto Rs. 2,50,000 |
Nil |
Upto Rs. 2,50,000 |
Nil |
- |
- |
|
From Rs. 2,50,001 to Rs. 5,00,000 |
5% |
Upto Rs. 3,00,000 |
- |
Nil |
- |
|
From Rs. 5,00,001 to Rs. 7,50,000 |
10% |
Upto Rs. 5,00,000 |
- |
- |
Nil |
|
From Rs. 7,50,001 to Rs. 10,00,000 |
15% |
From Rs. 2,50,001 to Rs. 5,00,000 |
5% |
- |
- |
|
From Rs. 10,00,001 to Rs. 12,50,000 |
20% |
From Rs. 3,00,000 to Rs. 5,00,000 |
5% |
- |
|
|
From 12,50,001 to Rs. 15,00,000 |
25% |
From Rs, 5,00,001 to Rs. 10,00,000 |
20% |
20% |
20% |
|
Above Rs. 15,00,000 |
30% |
Above Rs. 10,00,000 |
30% |
30% |
30% |
Ineligibility to Claim Deductions and Exemptions
Following exemptions and deductions become ineligible to claim on exercising the option to calculate tax liability under the new system.
|
Sl No. |
Sections |
Particulars |
|
1 |
10(5) |
Value of any travel concession or assistance received or due by an individual from his employer or former employer. |
|
2 |
10(13A) |
House rent allowance |
|
3 |
10(14) read with Rule 2BB |
Special allowances are granted to an employee by his employer. In the future, the CBDT may exempt one or more allowances under this section. |
|
4 |
10(17) |
Any allowance received by MP and MLA |
|
5 |
10(32) |
Income of a minor child up to Rs. 1,500 in respect of each child whose income is includible u/s 64(1A) |
|
6 |
10AA |
Special provisions in respect of newly established units in Special economic zones. |
|
7 |
16 |
Standard deduction from salary. Entertainment allowance received by a Govt. employee. Professional tax paid by a salaried employee. |
|
8 |
24(b) read with 23(2) |
Deduction of interest on borrowed capital in respect of the self-occupied property. Interest on borrowed capital in respect of let-out property will continue to be eligible for deduction u/s 24(b). |
|
9 |
32(1)(iia) |
Additional depreciation of 20% in case of new machinery or plant. |
|
10 |
32AD |
Deduction on account of investment in new plant and machinery in notified backward areas in certain states. |
|
11 |
33AB |
Where an assessee is carrying on the business of growing and manufacturing of Tea, Coffee, and Rubber in India. Deduction on account of deposit in Tea development, Coffee development or Rubber development account. |
|
12 |
33ABA |
Deposit to Site Restoration fund by an assessee carrying on business consisting of the prospecting for or extraction or production of petroleum or natural gas or both in India. |
|
13 |
35(2AA), 35(1)(ii), 35(A)(iia), 35(1)(iii) |
Expenditure on scientific research |
|
14 |
35AD |
Deduction in respect of expenditure on specified business |
|
15 |
35CCC |
Expenditure on agricultural expansion project |
|
16 |
57(iia) |
Deduction from family pension |
|
17 |
All sections from 80C to 80U except 80CCD (2), 80JJAA and 80LA(1A) |
All deductions under Chapter VIA except the following three:
|
(i) Carried forward loss and depreciation from any earlier year can’t be set off if such loss and depreciation are attributable to any of the deductions referred from serial no. 1 to 17 in the table above.
(ii) The carried forward loss and depreciation as in serial number (i) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year.
(iii) Loss from house property can’t be set off with any other head of income.
(iv) Depreciation can be claimed under section 32 except for additional depreciation as mentioned in serial number 9 in the table above.
(v) No deduction or exemption for allowances and perquisites, by whatever name called, provided under any other law for the time being in force, can be claimed.
Procedures to Exercise Option U/S 115BAC
Where an assessee wants to adopt the new system of tax liability calculation U/S 115BAC, he/it has to make an application in the manner as described below:
i. Assessee has income under the head business or profession
Form 10-IE is required to be filed on or before the due date as prescribed U/S 139(1) for filing ITR. Such option once exercised by filing Form 10-IE shall apply to subsequent assessment years.
Note: Option once exercised filing Form 10-IE may be withdrawn in any subsequent assessment year and thereafter the person shall never be eligible to exercise option U/S 115BAC. But where the assessee ceases to have any income from business or profession but has income under other heads, in which case the assessee can choose to follow the new system of tax liability calculation according to the point (ii) below.
ii. Assessee has income other than the income from business or profession
The option has to be exercised along with the ITR to be furnished U/S 139(1).
Procedures for filing of Form 10-IE to exercise/withdraw option U/S 115BAC
- Log in to the income tax e-filing portal
- Click on "e-File" Tab (a dropdown list will appear)
- Put the cursor on the "Income Tax Forms" (a dropdown list will appear)
- Click on "File Income Tax Forms"
- Click on "File Now" depicted against "Determination of tax in certain special cases (Form 10-IE)"
- Fill up the form accordingly and file under digital signature or electronic verification code (i.e. EVC)
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