Section 115BAC was introduced during the speech on the union budget 2020 by the Finance Minister. The insertion of section 115BAC was effective from the financial year 2020-21 (AY 2021-22).  Taxpayers opting for the new tax regime must be familiar with section 115BAC of the income tax act 1961. For That. Read On..

What is section 115BAC?

Section 115BAC is a provision added to the income tax act in FY 2020-21 which allows taxpayers to pay income tax at a lower rate. Individuals and Hindu Undivided Families (HUFs) who opt for section 115BAC while filing their tax returns will have to forego around 70 tax exemptions and deductions to pay their tax returns at lower tax rates. Under this section, individuals and HUFs who opt for the new tax regime are taxed at lower rates than the existing tax structure.

However, in return for the lower tax rates, they won’t be able to claim certain tax exemptions such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), and certain deductions like deduction of Rs. 1.5 lakhs under section 80C, a deduction for medical premiums paid under section 80D, a deduction of Rs. 50,000 for investments in NPS (National Pension Scheme), and so on.

Note: The standard deduction will only be applicable to salary income earned in FY 2023-24 (1st April - 31st March 2024) under section 115BAC. Any taxpayer who opts new tax regime for the previous financial years other than FY 2023-24 will not able to claim the standard deduction for salary income. 

Who Can Opt For The New Tax Regime u/s 115BAC?

The eligibility criteria to opt for section 115BAC have been again revised in 2023. Individuals and HUFs will be given the choice, starting from the Assessment Year 2021-22, to pay income tax according to the newly introduced lower income tax slab rates. However, this option will be available to them only if their total income is for the relevant Financial Year fulfills the below-mentioned conditions.

• There is no inclusion of income from business in the declared income.

• The calculation is done without considering any deductions/exemptions that are made available under the following conditions.

• Chapter VI-A except for those u/s 80CCD/80JJAA

• Section 35/ 35AD/ 35CCC

• Clause (iia) of Section 57

• Section 24b

• Clause (5)/(13A)/(14)/(17)/(32) of Section 10/10AA/16

• Section 32(1)/ 32AD/ 33AB/ 33ABA

• The calculation is carried out without setting off losses from earlier AY due to the deductions stated above or from house property.

• The calculation of the same is carried out without taking into account any deductions or exemptions related to perquisites or allowances.

• The calculation is done without making any claim for depreciation under clause (iia) of Section 32.

Income Tax Slabs Rates In Section 115BAC

Section 115BAC is also known as the new tax regime. Thus, the applicable tax slab rates will be as per the new tax regime under section 115BAC. Following are the new tax slab rates as per section 115BAC.

Note: Do Note that individuals who opt for the new tax regime will not receive any tax refund.

Also, Read: "NRI Tax Return In India".

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