Section 115BAC is the newly inserted section in the Income Tax Act, 1961 that deals with the new income tax regime. This section and alternate tax regime was introduced in Union Budget 2020 and is applicable to individuals and Hindu Undivided Families (HUFs) only.
The Budget 2020 introduces a new regime under section 115BAC giving an option to individuals and HUF taxpayers to pay income tax at lower rates.
The new system is applicable for income earned from 1 April 2020 (FY 2020-21), which relates to AY 2021-22.
Income Tax Slab Rates for FY 2020-2021 (AY 2021-2022)
The Finance Minister introduced new tax regime in Union Budget, 2020 wherein there is an option for individuals and HUF (Hindu Undivided Family) to pay taxes at lower rates without claiming deductions under various sections. The following Income Tax slab rates are notified in new tax regime :
Exemptions and deductions not claimable under the new tax regime.
- Major Deductions under Chapter VIA (u/s 80C, 80CCC, 80CCD, 80DD, 80DDB, 80E, 80EE, 80EEA, 80G, 80IA, etc)
- Standard Deduction
- Allowances u/s 10(14)
- Deductions u/s 32AD, 33AB, 33ABA, 35AD, 35CCC
- House Rent Allowance (HRA) u/s 10(13A)
- Leave Travel Allowance u/s 10(5)
- Deduction for Entertainment Allowance and Employment/Professional Tax u/s 16
- Exemption for SEZ unit u/s 10AA
- Home Loan Interest u/s 24(b)
- Deduction for Donation or Expenditure on Scientific Research
- Depreciation u/s 32(iia)
- Deduction from Family Pension u/s 57(iia)
What are the exemptions and deductions available under the new regime?
While most of the income tax deductions have been discontinued under the new income tax regime (as mentioned in the earlier section), the following deductions are allowed:
- 80CCD(2) - The employer’s contribution to notified pension account under Section 80CCD (2) of the Income Tax Act. However, this deduction cannot exceed 10% of the employee’s previous year’s salary.
- Conveyance Allowance for Performance of Office Duties
- Deduction u/s 80JJAA (additional employee cost)
- Any Allowance for the Cost of Travel/ Tour/ Transfer
- Transport Allowance for Differently Abled Employees (Divyang)
- Daily Allowance given to Employees under Certain Conditions
Hope this helps.
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