CA. Ajay Khandelwal
What is New Tax Regime
Government has introduced new New Tax Regime 115BAC in Union Budget 2020. Under this regime, tax rates have been reduced on one hand, but some of the deductions or exemptions have been removed on the other hand.
A taxpayer may opt for new alternative tax regime proposed under Section 115BAC or old existing tax regime, while filing the Income Tax Return for Assessment Year 2021-22. The Income Tax return for Assessment Year 2021-22 will going to start soon and every taxpayer has to plan about which regime is better for him so that he has to pay minimum possible tax.
Comparative Tax Slabs in both the regimes
The tax slabs in both regimes (for persons below 60 years of age) are as below :
| Taxable Income (Rs.) | Tax Rate : Old Tax Regime | Tax Rate : New Alternative Tax Regime |
| Upto 2.50 lacs | Nil | Nil |
| Above 2.50 lacs to 5.00 lacs | 5% | 5% |
| Above 5.00 lacs to 7.50 lacs | 20% | 10% |
| Above 7.50 lacs to 10.00 lacs | 20% | 15% |
| Above 10.00 lacs to 12.50 lacs | 30% | 20% |
| Above 12.50 lacs to 15.00 lacs | 30% | 25% |
| Above 15.00 lacs | 30% | 30% |
One thing very important to note is that the basic exemption limit for Senior Citizens and Super Senior Citizens is Rs. 250000/- only in new tax scheme as against Rs. 300000/- and Rs. 500000/- respectively in old tax scheme.
So, as per above table New regime seems to be attractive and lesser tax demanding. But, some other tax benefits are not allowed to persons who opt for new tax regime.
Tax Benefits curbed under New Regime
The persons who opt for new regime will not be able to enjoy a large number of tax benefits. Some of the tax benefits curbed under new tax regime are as below:
A. Benefits curbed in case of Salaried tax payers and Pensioners :
- Standard deduction of Rs. 50000/- under Section 16 not allowed to salaried tax payers.
- Professional Tax (Tax on Employment) deduction under Section 16 is not allowed to salaried tax payers.
- Deduction of Other Allowances under Section 10(14) not allowed to salaried tax payers.
- Benefit of availing Leave Travel Concession(LTC/LFC) under Section 10(5) is not allowed to salaried tax payers.
- House Rent Allowance(HRA) deduction under Section 10(13A) not allowed to salaried tax payers.
B. Benefits curbed in case of all tax payers :
- Benefit of adjustment of Interest on Housing Loan from other incomes upto Rs. 2,00,000/- under Section 24 is not allowed to all taxpayers.
- Amounts paid for certain tax saving investments and expenses under Section 80C (LIC, PPF, School Tution Fee, Housing Loan Principal, NSC, PF, Mutual Fund, etc) are not allowed to be deducted from gross income in case of all taxpayers.
- Deduction of NPS contribution under Section 80CCD(1B) upto Rs. 50000/- not allowed to all taxpayers.
- Amounts paid for Medical Insurance Premium, medical treatment and Pre medical check-up under Section 80D are not allowed to be deducted from Gross total income in case of all taxpayers.
- Deduction of Education Loan interest under Section 80E not allowed to all taxpayers.
- Section 80G provides for deduction of amounts paid for donations to certain institutions (including Prime Minister & Chief Minister Relief Funds), but the same is not allowed to all taxpayers in this new regime.
- Saving Account Interest upto Rs. 10000/- under Section 80TTA is not allowed to be deducted from income in case of all taxpayers who are not senior citizens.
- FD and savings Account Interest upto Rs. 50000/- under Section 80TTB is not allowed to be deducted from income in case of all taxpayers who are senior citizens.
- Fixed Deduction of Rs. 75000/125000 under Section 80U to Handicapped taxpayers is not allowed.
- There are some other tax benefits which are not allowable for taxpayers opting for new tax regime.
Thus, we can see that a large number of tax benefits have been curbed for persons opting for alternative tax regime. So, one has to plan accordingly while filing of income tax return.
1. To Know about Donations and Income Tax Benefit click here https://www.happyhealthysociety.com/donations/
2. For Tax Planning at March End click here https://www.happyhealthysociety.com/savetax/
3. To know about Taxability of Leave Encashment on retirement click here https://www.happyhealthysociety.com/leave/
Disclaimer : The above post has been prepared to share the scope and implications of Section 15BAC and other provisions of the Income Tax Act, 1961. Though every effort has been made to avoid errors or omissions in this document yet any error or omission may creep in. Therefore, it is notified that I shall not be responsible for any damage or loss to any one, of any kind, in any manner therefrom. I shall also not be liable or responsible for any loss or damage to any one in any matter due to difference of opinion or interpretation in respect of the text. On the contrary it is suggested that to avoid any doubt the user should cross check the correct law and the contents with the notified / gazetted materials.
