By CA ANIL KAUSHIK
THE NEW TAX REGIME
The Government has introduced a new tax regime for Individual and HUF taxpayers from FY 2020-21 relevant to assessment year 2021-22, which extends benefits of lower rate of tax but which snatches almost all the other tax benefits at the same time. The main feature of the New Tax regime in brief is LOWER TAX RATES BUT ZERO DEDUCTIONS/EXEMPTIONS.
THE NEW TAX REGIME IS OPTIONAL
The new tax regime is optional and would be available only to those eligible assesses who exercise this OPTION by filing Form 10IE electronically on the Income Tax Portal on or before the due date of filing the ITR u/s 139(1) of the Income Tax Act 1961, else the tax rate and rules of the Old Tax Regime would apply.
THE TAX RATES IN NEW TAX REGIME VIS A VIS OLD TAX REGIME
The tax rates under the new tax regime and the existing tax regime are:
Existing slab rates
Income from Rs 2.5 lakh to Rs 5 lakh
Income from Rs 5 lakh to Rs 7.5 lakh
Income from Rs 5 lakh to Rs 10 lakh
Income from Rs 7.5 lakh to Rs 10 lakh
Income above Rs 10 lakh
Income from Rs 10 lakh to Rs 12.5 lakh
Income from Rs 12.5 lakh to Rs 15 lakh
Income above Rs 15 lakh
THE NEW TAX REGIME IS BENEFICIAL PRIMA FACIE ONLY TO THOSE INDIVIDAULS AND HUFs WHO CLAIM “ NIL” OR “NEGIGIBLE” DEDUCTIONS UNDER CHAPTER VI OR OTHER TAX EXEMPTION .
The new tax regime saves taxes for taxpayers who don’t claim any deductions or exemptions, as depicted in the table given below.
Tax under the existing regime (Rs)
Tax under the new regime (Rs)
Tax savings under the new regime (Rs)
Up to Rs 7,50,000
Up to Rs 10,00,000
Up to Rs 12,50,000
Up to Rs 15,00,000
CLAIMING DEDUCTIONS AND BENEFITS AGAINST SUBSECTION 2 OF SECTION 115BAC WOULD RENDER THE OPTION EXERCISED FOR CHOOSING NEW TAX REGIME AS INVALID:
The option exercised to opt for The New Tax Regime in Form 10IE shall not be valid if conditions of subsection 2 of section 115BAC are not fulfilled.
THE DEDUCTION AND EXEMPTION WHICH ARE EXPRESSLY WITHDRWAN THAT MEANS NOT AVAILABLE UNDER NEW TAX REGIME
Subsection 2 of section 115BAC does not allow claim of the following deductions/exemption at all:
LTA- In the case of an individual, the value of any travel concession or assistance received from the employer as referred clause (5) of section 10
HRA - House Rent Allowance received from the employer as referred in clause (13A) of section 10
Special Allowance received from employer to meet increased cost of living r prescribed under clause (14) of section 10 (other than those as may be prescribed for this purpose)
Allowances to Members of Parliament (MP) and Members of Legislative assemblies (MLA/MLC) as prescribed under sub clause (17)
Exemption of Rs. 1500 as prescribed under clause (32) of section 10 (allowable in respect of each Minor Child if the income of the minor child is clubbed in the hands of the assessee in terms of section 64(1))
Exemption u/s 10AA in respect of newly established Units in Special Economic Zones.
Deduction u/s 16 claimable from the Income under the Head Salaries under the clause
(ia) Standard Deduction to the extent of Salary or Rs. 50000 whichever is less
(ii) Entertainment Allowance- to a Government Employee to the extent of 20% of Salary or Rs.5000 per month whichever is less
(iii) Professional Tax or Tax on employment levied under any law within the meaning of clause (2) of article 276 of the Constitution
Deduction of Interest on Housing Loan under clause (b) of section 24 (in respect of the self occupied or vacant property referred to in sub-section (2) of section 23)
In respect of Interest Paid on Housing Loan/Capital Borrowed for construction, repair , renewal or reconstruction of the House property allowable as deduction from Income from House Property to the extent prescribed
Deduction as prescribed under clause (iia) of sub-section (1) of section 32 Being Additional Depreciation available for new machinery
Deduction as prescribed under section 32AD available for Investment in new plant or machinery in notified backward areas in certain States
Deduction as prescribed under section 33AB available in respect amount deposited in Tea development account, coffee development account and rubber development account
Deduction available u/s 33ABA in respect of amount deposited in Site restoration Fund
By an assessee is carrying on business consisting of the prospecting for, or extraction or production of, petroleum or natural gas or both in India
Deduction under sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35 in respect of Expenditure on Scientific Research
Deduction u/s 35AD for capital expenditure incurred wholly and exclusively for the purposes of a , infrastructure facility cold chain facility, specified business – like warehousing, affordable housing, cross country natural gas/crudeoil/petroleum oil pipeline Network. Fertilizers, Bee Keeping, Inland Container Depot, Slurry Pipe line for Iron Ore etc.
Deduction under section 35CCC for Expenditure on agricultural extension project
Deduction or clause (iia) of section 57 being Standard Deduction in respect of Family Pension – as allowable @33.33% of Family Pension or Rs,15000 whichever is less)
All deductions under any of the provisions of Chapter VI-A other than the provisions of sub-section (2) o f section 80CCD or section 80JJAA;In Other Words the following deduction available under CHAPTER VIA shall not be available on choosing New Tax Regime u/s 115BAC - Deductions to be made in computing total income
Section - 80C : Deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc
Section - 80CC : Deduction in respect of investment in certain new share
Section - 80CCA : Deduction in respect of deposits under National Savings Scheme or payment to a deferred annuity plan
Section - 80CCB : Deduction in respect of investment made under Equity Linked Savings Scheme
Section - 80CCC : Deduction in respect of contribution to certain pension funds
Section 80CCD : Deduction in respect of contribution to pension scheme of Central Government Except under subsection 2 .
Section - 80CCF : Deduction in respect of subscription to long-term infrastructure bonds
Section - 80CCG : Deduction in respect of investment made under an equity savings scheme
Section - 80D : Deduction in respect of health insurance premia
Section - 80DD : Deduction in respect of maintenance including medical treatment of a dependant who is a person with disability
Section - 80DDB : Deduction in respect of medical treatment, etc
Section - 80E : Deduction in respect of interest on loan taken for higher education
Section - 80EE : Deduction in respect of interest on loan taken for residential house property
Section - 80EEA : Deduction in respect of interest on loan taken for certain house property
Section - 80EEB : Deduction in respect of purchase of electric vehicle
Section - 80F : Deduction in respect of educational expenses in certain cases
Section - 80FF : Deduction in respect of expenses on higher education in certain cases
Section - 80G : Deduction in respect of donations to certain funds, charitable institutions, etc
Section - 80GG : Deductions in respect of rents paid
Section - 80GGA : Deduction in respect of certain donations for scientific research or rural development
Section - 80GGB : Deduction in respect of contributions given by companies to political parties
Section - 80GGC : Deduction in respect of contributions given by any person to political parties
Section - 80H : Deduction in case of new industrial undertakings employing displaced persons, etc.
Section - 80HH : Deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas
Section - 80HHA : Deduction in respect of profits and gains from newly established small- scale industrial undertakings in certain areas
Section - 80HHB : Deduction in respect of profits and gains from projects outside India
Section - 80HHBA : Deduction in respect of profits and gains from housing projects in certain cases
Section - 80HHC : Deduction in respect of profits retained for export business
Section - 80HHD : Deduction in respect of earnings in convertible foreign exchange
Section - 80HHE : Deduction in respect of profits from export of computer software, etc
Section - 80HHF : Deduction in respect of profits and gains from export or transfer of film software, etc
Section - 80-I : Deduction in respect of profits and gains from industrial undertakings after a certain date, etc
Section - 80-IA : Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc
Section - 80-IAB : Deductions in respect of profits and gains by an undertaking or enterprise engaged in development of Special Economic Zone
Section - 80-IAC : Special provision in respect of specified business
Section - 80-IB : Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings
Section - 80-IBA : Deductions in respect of profits and gains from housing projects
Section - 80-IC : Special provisions in respect of certain undertakings or enterprises in certain special category States
Section - 80-ID : Deduction in respect of profits and gains from business of hotels and convention centres in specified area
Section - 80-IE : Special provisions in respect of certain undertakings in North-Eastern States
Section - 80J : Deduction in respect of profits and gains from newly established industrial undertakings or ships or hotel business in certain cases
Section - 80JJ : Deduction in respect of profits and gains from business of poultry farming
Section - 80JJA : Deduction in respect of profits and gains from business of collecting and processing of bio-degradable waste
Section - 80K : Deduction in respect of dividends attributable to profits and gains from new industrial undertakings or ships or hotel business
Section - 80L : Deductions in respect of interest on certain securities, dividends, etc
Section - 80LA : Deductions in respect of certain incomes of Offshore Banking Units and International Financial Services Centre
Section - 80M : Deduction in respect of certain inter-corporate dividends
Section - 80MM : Deduction in the case of an Indian company in respect of royalties, etc., received from any concern in India
Section - 80N : Deduction in respect of dividends received from certain foreign companies
Section - 80-O : Deduction in respect of royalties, etc., from certain foreign enterprises
Section - 80P : Deduction in respect of income of co-operative societies
Section - 80PA : Deduction in respect of certain income of Producer Companies
Section - 80Q : Deduction in respect of profits and gains from the business of publication of books
Section - 80QQ : Deduction in respect of profits and gains from the business of publication of books
Section - 80QQA : Deduction in respect of professional income of authors of text books in Indian languages
Section - 80QQB : Deduction in respect of royalty income, etc., of authors of certain books other than text-books
Section - 80R : Deduction in respect of remuneration from certain foreign sources in the case of professors, teachers, etc
Section - 80RR : Deduction in respect of professional income from foreign sources in certain cases
Section - 80RRA : Deduction in respect of remuneration received for services rendered outside India
Section - 80RRB : Deduction in respect of royalty on patents
Section - 80S : Deduction in respect of compensation for termination of managing agency, etc., in the case of assessees other than companies
Section - 80T : Deduction in respect of long-term capital gains in the case of assessees other than companies
Section - 80TT : Deduction in respect of winnings from lottery
Section - 80TTA : Deduction in respect of interest on deposits in savings account
Section - 80TTB : Deduction in respect of interest on deposits in case of senior citizens
Section - 80U : Deduction in case of a person with disability
Section - 80V : Deduction from gross total income of the parent in certain cases
Section - 80VV : Deduction in respect of expenses incurred in connection with certain proceedings under the Act
DEDUCTION WHICH WOULD BE EXPRESSLY ALLOWABLE IN NEW TAX REGIME
However the Following deduction would be claimable in The NEW TAX REGIME also
Under Subsection 2 of Section - 80CCD : Deduction in respect of contribution to pension scheme of Central Government in respect of employers’ contribution
Section - 80JJAA : Deduction in respect of employment of new employees
NO SET OFF OF ANY LOSS BE ALLOWED IN NEW TAX REGIME
Moreover the assessee opting for New Tax Regime shall not be allowed set off of any loss in respect of ,—
(a) Loss being carried forward OR depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions NOT ALLOWED UNDER THE NEW TAX REGIME AS DISCUSSED ABOVE;
(b) Loss under the head "Income from house property" shall not be allowed to set off with any other head of income;
DEPRECIATION EXECPT ADDITIONAL DEPRECIATION WILL BE ALLOWED IN NEW TAX REGIME
The assessee choosing for new tax regime shall be allowed the depreciation, if any, under any provision of section 32, except the additional depreciation as allowable under clause (iia) of sub-section (1) of section 32 in respect of new machinery, which shall not be allowed in the New Tax Regime.
NO EXEMPTION OR DEDUCTION FOR ALLOWANCES OR PERQUISTES IN NEW TAX REGIME
Besides above no exemption or deduction for allowances or perquisite, by whatever name called, provided under any other law for the time being in force shall also not be allowed under the new tax regime.
HOUSE PROPERTY LOSS UNDER THE NEW TAX REGIME
As discussed above , In case of a self-occupied property, deduction on interest for a housing loan under the new tax regime cannot be claimed . Thus the deduction to the extent of Rs 2.00 lakh allowed in the existing system shall not not available in the new tax regime. Also, you cannot set-off the House property loss available in the existing tax regime upto Rs 2 lakh from the salary income.
In case of let-out house property, deduction for interest paid on the housing loan can be claimed . But it is noteworthy that the new tax regime restricts the deduction to the taxable rent received from the property as against the old regime. In the new regime, set-off the loss arising from the house property due to excess of interest paid over the rental income can not be claimed , nor the loss from house property can be carried forward to future years for set off.
UNABSORBED DEPRECIATION AND BUSINESS LOSS UNDER THE NEW REGIME
In the case of a business income, an individual or HUF cannot claim set-off of the brought forward business loss or unabsorbed depreciation Or such b/f loss in respect of the deductions not available under the new regime to the extent they relate to deductions/exemptions withdrawn.
THE NEW TAX REGIME IS OPTIONAL –
THE ASSESSEE HAVE “RIGHT TO CHOOSE” OR “ NOT TO CHOOSE” THE NEW TAX REGIME
A salaried taxpayer can choose the new tax regime at the beginning of FY 2020-21 and intimate their employer. The employee cannot change their choice anytime during the financial year. However, the change can be done on before the due date of filing the ITR by filing Form 10IE on the income tax portal , however after filing Form 10IE for a previous year, the same cannot be withdrawn by him for that previous year.
FILE FORM 10IE ON OR BEFORE THE DUE DATE OF FILING THE ITR - AND THAT TOO BEFORE FILING THE ITR
The last extended date for salaried class and others (not liable to audit) is 30th Sep,2021 for assessment year 2021-22 accordingly Form 10IE can be filed upto 30 Sep,2021, However file it before filing the ITR as the details of filing 10IE are to be filled in the ITR Form, without which it would be invalid.
SWITCHING FROM OLD TAX REGIME TO NEW TAX REGIME AND VICE VERSA
The salaried taxpayer can opt-in and opt-out every year but once option exercised for a previous year he cannot change that for the same previous years. Thus, the salaried tax payer can choose the new tax regime in one year and choose the regular tax regime in another year.
AN INDIVIDUAL OR HUF HAVING BUSINESS INCOME CAN “OPT FOR THE NEW TAX REGIME” - BUT IF “OPTS OUT” IN ANY PREVIOUS YEAR THE OPTION FOR NEW TAX REGIME SHALL NOT BE AVAILABLE FOR ANY PREVIOUS YEAR IN FUTURE
A non-salaried taxpayer , having business income has to choose the new regime at the time of filing the tax return on or before the due date u/s 139(1). He is to declare/ intimate the option chosen to the concerned at any time during the previous year. However, a non-salaried taxpayer having business income cannot opt-in and opt-out of the new tax regime every year, Once a non-salaried assessee opts out of the new tax regime, he cannot opt-in again for the new tax regime in the future. The option is twice in their life time, First in the previous year when they choose to be taxed under the New Tax Regime – Second in the previous year when they choose not be taxed as per New Tax Regime- There after there is no option to such assessee for choosing to be taxed as per the New Tax Regime.
CHOOSE OR NOT TO CHOOSE- A DILEMMA
The salaried class can choose the option every year before filing the ITR based on the total income for that year, tax can be computed under both the regime and option for the regime under which less tax is payable can be chosen. But this is not the case for an assessee having business income, as he cannot exercise this option every year , more over the tax benefits available to such assessee may have long period effects, hence such assessee needs an extensive tax planning to be done by a tax expert.
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