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Article Dated 23rd August, 2021

THE NEW TAX REGIME — FOR INDIVIDUAL AND HUFS FROM ASSESSMENT YEAR 2021-22

SECTION 115BAC — A VERY GOOD OPTION FOR WHOM WHO DOES NOT WANT SAVE TO SAVE TAX

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:

New slab rates

 

Existing slab rates

 

Income from Rs 2.5 lakh to Rs 5 lakh

5%

Income from Rs 2.5 lakh to Rs 5 lakh

5%

Income from Rs 5 lakh to Rs 7.5 lakh

10%

Income from Rs 5 lakh to Rs 10 lakh

20%

Income from Rs 7.5 lakh to Rs 10 lakh

15%

Income above Rs 10 lakh

30%

Income from Rs 10 lakh to Rs 12.5 lakh

20%

 

Income from Rs 12.5 lakh to Rs 15 lakh

25%

Income above Rs 15 lakh

30%

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.

Annual income

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

65,000

39,000

26,000

Up to Rs 10,00,000

117,000

78,000

39,000

Up to Rs 12,50,000

195,000

130,000

65,000

Up to Rs 15,00,000

273,000

195,000

78,000

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:

  1. 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

  2. HRA - House Rent Allowance received from the employer as referred in clause (13A) of section 10

  3. 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)

  4. Allowances to Members of Parliament (MP) and Members of Legislative assemblies (MLA/MLC) as prescribed under sub clause (17)

  5. 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))

  6. Exemption u/s 10AA  in respect of newly established Units in Special Economic Zones. 

  7. 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

  8. 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

  9. Deduction as prescribed under clause (iia) of sub-section (1) of section 32 Being Additional Depreciation available for new machinery

  10. Deduction as prescribed under section 32AD available for Investment in new plant or machinery in notified backward areas in certain States

  11. Deduction as prescribed under section 33AB available in respect amount deposited in Tea development account, coffee development account and rubber development account

  12. 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

  13. 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

  14. 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.

  15. Deduction under section 35CCC for Expenditure on agricultural extension project

  16. 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)

  17. 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

    1. Section - 80C : Deduction in respect of life insurance premia, deferred annuity,  contributions to provident fund, subscription to certain equity shares or debentures, etc

    2. Section - 80CC : Deduction in respect of investment in certain new share

    3. Section - 80CCA : Deduction in respect of deposits under National Savings Scheme or payment to a deferred annuity plan

    4. Section - 80CCB : Deduction in respect of investment made under Equity Linked Savings Scheme

    5. Section - 80CCC : Deduction in respect of contribution to certain pension funds

    6. Section 80CCD : Deduction in respect of contribution to pension scheme of Central Government Except under subsection 2 .

    7. Section - 80CCF : Deduction in respect of subscription to long-term infrastructure bonds

    8. Section - 80CCG : Deduction in respect of investment made under an equity savings scheme

    9. Section - 80D : Deduction in respect of health insurance premia

    10. Section - 80DD : Deduction in respect of maintenance including medical treatment of a dependant who is a person with disability

    11. Section - 80DDB : Deduction in respect of medical treatment, etc

    12. Section - 80E : Deduction in respect of interest on loan taken for higher education

    13. Section - 80EE : Deduction in respect of interest on loan taken for residential house property

    14. Section - 80EEA : Deduction in respect of interest on loan taken for certain house property

    15. Section - 80EEB : Deduction in respect of purchase of electric vehicle

    16. Section - 80F : Deduction in respect of educational expenses in certain cases

    17. Section - 80FF : Deduction in respect of expenses on higher education in certain cases

    18. Section - 80G : Deduction in respect of donations to certain funds, charitable institutions, etc

    19. Section - 80GG : Deductions in respect of rents paid

    20. Section - 80GGA : Deduction in respect of certain donations for scientific research or rural development

    21. Section - 80GGB : Deduction in respect of contributions given by companies to political parties

    22. Section - 80GGC : Deduction in respect of contributions given by any person to political parties

    23. Section - 80H : Deduction in case of new industrial undertakings employing displaced persons, etc.

    24. Section - 80HH : Deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas

    25. Section - 80HHA : Deduction in respect of profits and gains from newly established small- scale industrial undertakings in certain areas

    26. Section - 80HHB : Deduction in respect of profits and gains from projects outside India

    27. Section - 80HHBA : Deduction in respect of profits and gains from housing projects in certain cases

    28. Section - 80HHC : Deduction in respect of profits retained for export business

    29. Section - 80HHD : Deduction in respect of earnings in convertible foreign exchange

    30. Section - 80HHE : Deduction in respect of profits from export of computer software, etc

    31. Section - 80HHF : Deduction in respect of profits and gains from export or transfer of film software, etc

    32. Section - 80-I : Deduction in respect of profits and gains from industrial undertakings after a certain date, etc

    33. Section - 80-IA : Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc

    34. Section - 80-IAB : Deductions in respect of profits and gains by an undertaking or enterprise engaged in development of Special Economic Zone

    35. Section - 80-IAC : Special provision in respect of specified business

    36. Section - 80-IB : Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings

    37. Section - 80-IBA : Deductions in respect of profits and gains from housing projects

    38. Section - 80-IC : Special provisions in respect of certain undertakings or enterprises in certain special category States

    39. Section - 80-ID : Deduction in respect of profits and gains from business of hotels and convention centres in specified area

    40. Section - 80-IE : Special provisions in respect of certain undertakings in North-Eastern  States

    41. Section - 80J : Deduction in respect of profits and gains from newly established industrial undertakings or ships or hotel business in certain cases

    42. Section - 80JJ : Deduction in respect of profits and gains from business of poultry farming

    43. Section - 80JJA : Deduction in respect of profits and gains from business of collecting and processing of bio-degradable waste

    44. Section - 80K : Deduction in respect of dividends attributable to profits and gains from new industrial undertakings or ships or hotel business

    45. Section - 80L : Deductions in respect of interest on certain securities, dividends, etc

    46. Section - 80LA : Deductions in respect of certain incomes of Offshore Banking Units and International Financial Services Centre

    47. Section - 80M : Deduction in respect of certain inter-corporate dividends

    48. Section - 80MM : Deduction in the case of an Indian company in respect of royalties, etc., received from any concern in India

    49. Section - 80N : Deduction in respect of dividends received from certain foreign companies

    50. Section - 80-O : Deduction in respect of royalties, etc., from certain foreign enterprises

    51. Section - 80P : Deduction in respect of income of co-operative societies

    52. Section - 80PA : Deduction in respect of certain income of Producer Companies

    53. Section - 80Q : Deduction in respect of profits and gains from the business of publication of books

    54. Section - 80QQ : Deduction in respect of profits and gains from the business of publication of books

    55. Section - 80QQA : Deduction in respect of professional income of authors of text books in Indian languages

    56. Section - 80QQB : Deduction in respect of royalty income, etc., of authors of certain books other than text-books

    57. Section - 80R : Deduction in respect of remuneration from certain foreign sources in the case of professors, teachers, etc

    58. Section - 80RR : Deduction in respect of professional income from foreign sources in certain cases

    59. Section - 80RRA : Deduction in respect of remuneration received for services rendered outside India

    60. Section - 80RRB : Deduction in respect of royalty on patents

    61. Section - 80S : Deduction in respect of compensation for termination of managing  agency, etc., in the case of assessees other than companies

    62. Section - 80T : Deduction in respect of long-term capital gains in the case of assessees other than companies

    63. Section - 80TT : Deduction in respect of winnings from lottery

    64. Section - 80TTA : Deduction in respect of interest on deposits in savings account

    65. Section - 80TTB : Deduction in respect of interest on deposits in case of senior citizens

    66. Section - 80U : Deduction in case of a person with disability

    67. Section - 80V : Deduction from gross total income of the parent in certain cases

  18. 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

  1. Under Subsection 2 of Section - 80CCD : Deduction in respect of contribution to pension scheme of Central Government in respect of employers’ contribution

  2. 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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