115BAC - All About New Tax Scheme

Is the new slab mandatory?

No, this is an optional scheme. Previous income tax slab also exists. This slab is available for you as an optional scheme for the financial year 2020-21 and onwards. During income tax filing for financial year 2020-21, you have to choose a suitable scheme which is beneficial for you.

Who can avail this option?

This scheme is available for Individual and Hindu Undivided Family taxpayers.

By when you should choose the option?

At the time of filing return for the financial year.

Which scheme should I opt?

You have to decide the scheme depending upon your gross total income and tax-saving investments by you. So basically it seems that if we are falling in the high-income group and have invested in Tax saving schemes then we should go for Old slab.

While for individuals in the middle-income group, earning a gross income of say Rs 4-5 lakh; the new regime may prove advantageous. (with no deductions and tax savings available).

But which scheme is better depends upon gross total income and deductions. You should calculate the tax burden under both schemes and choose best out of it.

Can I change the scheme in the next financial year?

Yes, If you earn only salary income or other sources of income (other than business income), you can change the scheme in next year.

But if you have business income, you got a one-time exit option from the new scheme. If you exit once, you can’t re-opt new scheme again in future.

Are Deductions available in the new scheme?

People opting new scheme will get two types of deduction only. Investment in New pension scheme and Additional wages based section 80JJAA are eligible deductions. Even housing interest payments, all-time favourite 80C and all other deductions, business loss, unabsorbed additional depreciation won’t be available anymore. Pensioners and salaried class should think wisely, because you will not get the deduction for interest from deposits as well as standard deduction of Rs 50,000.00

Business Loss and unabsorbed depreciation?

If you have business income, you are not privileged to opt-out from new scheme in one year and again opt this scheme in the subsequent previous year. One more shocking news is, all carry forward business loss as well as unabsorbed ‘additional’ depreciation from earlier assessment year deemed to be given effect. But unabsorbed depreciation from normal depreciation is available for setoff. And no deduction can be claimed in the subsequent year. Even if you opt-out the new scheme you can’t get any accumulated carry forward loss of the previous year. If you have such additional unabsorbed depreciation, to that extant written down value of the fixed asset will be adjusted.

Rental income and 115BAC?

Self-occupied property: In this case, Rental income will be zero. So any interest paid for the borrowing of housing loan is not available as a deduction against ‘any other’ heads of income.

Let out property: Interest paid over and above rental income will lapse. That is not available for set-off against any other head of income.

Senior and Super Seniors?

Seniors and super seniors will not get basic exemption concession of Rs 3,00,000 or Rs 5,00,000 respectively. They will get uniform basic exemption limit of Rs 2,50,000.

Section 87A Rebate available (Rs 12,500.00)?

Benefit of section 87A is available under both new and old scheme. Section 87A rebate of Rs 12,500 will be available in both case, provided taxable income (after all deduction in case of old scheme) not exceeding Rs 5,00,000.00

Standard Deduction of Rs 50,000?

As already mentioned above Standard deduction of Rs 50,000 will not be available in the new scheme. You can avail the benefit in old scheme.

TDS and related issues

TDS by the employer will be based on the option selected by the employee. If employee intimates his selection, the employer has to deduct the TDS based on computation by intimated method. In case if the employee has not intimated the employer, TDS will be made based on the default method i.e. old slab.

115BAC has no impact on tax deduction of other taxpayers (other than salaried).

Being an employee, I intimated one of the options to my employer. Can I shift to another option during the year?

For TDS purpose during the financial year once intimated, one can’t shift or change the method. Employee is free to opt the scheme and file his income tax return under any scheme which is beneficial to him. For example, You have chosen the old slab and intimated the same to the employer. Employer will deduct TDS based on the old slab. Rest of the year, you can’t change the method. But during income tax filing you can opt the method you wish. Thus, it is clear that the choice of availing the scheme is at the time of filing the return of income.

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