The Indian govt. has formulated a new tax structure under Sec 115BAC of the Income Tax Act in the year 2020. A major point of this was to reduce the overall complexity of income tax compliance and processing for taxpayers as much as possible and also allowing for some lower tax rate.
Besides, there is this section added which brings an opportunity for you to calculate your income tax using the simple methods. Those who earn will now pay the tax at the lower rates. But for this, they need to be take into account the deductions and exemptions which are not being allowed by the new regulations.
Introduction of New Tax Regime in FY 2023-24 under Section 115 BAC
The new tax regime introduced under Section 115BAC and this has brought about many changes like:
- Increase basic exemption limit to Rs 3 lakhs.
- Reduced tax rates as in compared to old regime.
- Allowed deduction of Rs 50,000 for the salaried taxpayers.
- Higher tax rebate limit of Rs. 7 lakhs applicable on taxable income vs. Rs 5 lakhs earlier.
What are the Tax Rates under the New Regime?
These are the tax rates under the new tax regime:
| Income Slabs | Tax Rates (FY23-24) | Tax Rates (FY22-23) |
| Up to Rs 3 lakh | Nil | Nil |
| Rs 3 lakh to Rs 6 lakh | 5% | 5% |
| Rs 6 lakh to Rs 9 lakh | 10% | 10% |
| Rs 9 lakh to Rs 12 lakh | 15% | 15% |
| Rs 12 lakh to Rs 15 lakh | 20% | 20% |
| Income above Rs 15 lakh | 30% | 30% |
Old Tax Regime and New Tax Regime for FY 2023-24
Mentioned below is a comparison of old and new tax regime for FY 2023-24:
| Tax Slab | Income Tax Rates (Old Regime) | Income Tax Rates (New Regime) |
| Up to Rs. 2.5 lakhs | Nil | Nil |
| Rs. 2.5 lakhs – Rs. 3 lakhs | 5% | Nil |
| Rs. 3 lakhs – Rs. 5 lakhs | 5% | 5% |
| Rs. 5 lakhs – Rs. 6 lakhs | 20% | 20% |
| Rs. 6 lakhs – Rs. 7.5 lakhs | 20% | 20% |
| Rs. 7.5 lakhs – Rs. 9 lakhs | 20% | 20% |
| Rs. 9 lakhs – Rs. 10 lakhs | 20% | 20% |
| Rs. 10 lakhs – Rs. 12 lakhs | 30% | 30% |
| Rs. 12 lakhs – Rs. 12.5 lakhs | 30% | 30% |
| Rs. 12.5 lakhs – Rs. 15 lakhs | 30% | 30% |
| Above Rs. 15 lakhs | 30% | 30% |
Deductions and Exemptions Unavailable under Section 115 BAC
Deductions which are unavailable under Section 115 BAC are:
| Deductions/Exemptions UnAvailable | Description |
| Section 80C | Deductions for investments made in instruments ex.- the Public Provident Fund, National Savings Certificate, Life insurance premium, etc. |
| Section 80D | Deductions for health insurance premiums |
| Section 80G | Deductions for donations made to charitable institutions |
| Section 80TTA | Deductions for interest earned on savings accounts of banks, cooperative societies or post offices |
| Section 80E | Deductions for interest paid on education loans are not available under Sec 115BAC |
Exemptions and Deductions Available under the New Regime
Deductions and exemptions which have been made available under Section 115 BAC are:
| Deductions/Exemptions Available | Details |
| Transport allowances for disabled | For specially-abled persons |
| Travel and transfer compensation | Costs incurred during official travel or relocation |
| Daily allowance | For everyday expenses while away from regular duty |
| Perquisites (official) | Certain benefits provided for official purposes |
| Section 10(10C), 10(10), 10(10AA) | Voluntary retirement, gratuity, leave encashment |
| Let-out property (Section 24) | Interest paid on loan for a rented property |
| Tax-free gifts | Gifts up to Rs 50,000 |
| NPS employer contribution | Employer’s contribution to your National Pension Scheme account |
| Section 80JJA deductions | Specific expenses are claimed as deductions |
| Standard deduction of amount Rs 50,000 | Fixed deduction of amount Rs 50,000 |
| Family pension income (Section 57(iia)) | Pension received from the employer after an employee’s death |
| Agniveer Corpus Fund contribution (80CCH(2)) | Amount paid/deposited into this specific fund |
Deductions Not Available for Business Income under New Tax Regime for 2023-24
Deductions which are unavailable for business income under the new tax regime:
| Deductions/Exemptions Not Available | Details |
| Section 35AD | Deduction for expenditure on scientific research for specified businesses |
| Section 35CCD | Deduction for expenditure on rural development for specified businesses |
| Section 80JJAA | Deduction for profits of MSME units |
| Section 32AD | Investment allowance |
| Section 33AB | Deductions for tea development account |
| Section 33ABA | Deductions for site restoration fund, agricultural extension project |
| Section 10AA | Exemption for Special Economic Zone (SEZ) units |
Choosing Between the New Tax Regime and the Existing Regime
Taxpayers should be careful when it comes to evaluating their financial situation and tax planning before choosing between the old and new tax regimes. Mentioned here is a comparison to help with the choice of the process:
| Scenario | New Regime (Advantages) | Old Regime (Advantages) |
| Lower tax rates | ✓ | |
| Simplified calculations | ✓ | |
| More deductions and exemptions | ✓ | |
| Flexibility in tax planning | ✓ |
Final Thoughts
Section 115BAC comes with the choice of lower income tax options for eligible listed taxpayers and Hindu Undivided Family. This has not only improved the implementation of a tax system that the taxpayer find useful but it also brings many prospects hat one might fit to their convenience in terms of their gains and losses.
FAQs
- What is Sec 115BAC of Income Tax Act?
Sec 115BAC gives you a more easy tax regime with lower rates, but it is based on letting go of certain deductions that were available before to entities.
- What is eligibility criterion under Sec 115BAC?
Individuals and HUFs are eligible for this newer tax regime under Section 115BAC.
- What are added benefits of Section 115BAC?
Key benefits are the lower tax rates and simplified calculations.
- Does StartupFino offer personalised consultations for taxpayers considering Section 115BAC?
StartupFino offers personalised consultations for taxpayers considering Section 115BAC.
- What services does StartupFino provide to help individuals navigate tax planning under Section 115BAC?
StartupFino provides services to aid individuals in tax planning under Section 115BAC.
- Can StartupFino help individuals assess their eligibility and benefits under Section 115BAC?
Yes, StartupFino can help individuals assess their eligibility and benefits under Section 115BAC.
