Section 115BAC of the Income Tax Act introduces a new tax regime for individuals and HUF taxpayers, providing an option to pay income tax at lower rates with fewer exemptions and deductions. This new regime became effective from FY 2020-21 (AY 2021-22) and is the default option for taxpayers starting from FY 2023-24 (AY 2024-25). However, taxpayers have the flexibility to opt out of the new regime and continue with the old tax regime.
Eligibility Criteria for New Tax Regime
To be eligible for the new tax regime under Section 115BAC, the following conditions must be met:
- Income calculation excludes deductions and exemptions specified under Chapter VI-A, except for those mentioned in Section 80CCD/80JJAA.
- Deductions specified in Section 35/35AD/35CCC.
- Clause (iia) of Section 57.
- Deductions specified in Section 24b.
- Clause (5)/(13A)/(14)/(17)/(32) of Section 10/10AA/16.
- Deductions specified in Section 32(1)/32AD/33AB/33ABA.
Opting Out of the New Tax Regime
Salaried taxpayers can choose to opt out of the new regime at the beginning of the financial year by informing their employer. This choice cannot be changed during the financial year, but taxpayers can opt out when filing their income tax return in July 2024.
Non-salaried taxpayers (taxpayers with income from business or profession) have to opt out of the new regime when filing their tax return. They cannot opt in and out of the new tax regime every year. Once a non-salaried taxpayer opts out of the new tax regime, they cannot opt back in the future.
Benefits of Opting Out of the New Tax Regime
Opting out of the new tax regime allows taxpayers to claim certain deductions and exemptions that are not available under
Option for new tax regime us 115BAC cannot be opted after the due date of filing of return mentioned
FAQ
Can I switch back from new tax regime to old?
What are the drawbacks of 115BAC?
Can we opt 115BAC?
Is standard deduction allowed in new regime?
Who can take Option U/S 115bac?
The option u/s 115BAC can be taken by both residents as well as a non-resident taxpayers. Further, the option is available to senior citizens as well as other taxpayers. This section of the article gives you the income tax slab rates as prescribed u/s 115BAC in the case of New Tax Regime in comparison to Old Tax Regime:
What is section 115bac – the new tax regime?
From FY 2020-21, you can choose to pay income tax under an optional new tax regime. The new tax regime is available for individuals and HUFs with lower tax rates and fewer deductions/exemptions. We will discuss the features of the new tax regime and how you can benefit from it.
Who is eligible to avail new tax regime U/S 115bac?
New Tax Regime u/s 115BAC is applicable for F.Y. 2020-21 (A.Y. 2021-22) & onwards. Who is eligible to avail the New Tax Regime u/s 115BAC? New Tax Regime u/s 115BAC is available to Individuals & HUFs. The option u/s 115BAC can be taken by both residents as well as a non-resident taxpayers.
When to exercise option under 115bac?
In the case of an Individual/HUF having income from business/profession, the option under section 115BAC is to be exercised on or before the due date of filing ITR specified under section 139 (1). It means that you have to exercise the option of the new tax regime before efiling of income tax return.