Section 115 BAC of the Income Tax Act, 1961 deals with the taxation of individuals, Hindu Undivided Families (HUFs), firms, Association of Persons (AOPs), and Body of Individuals (BOIs) who opt for the new tax regime introduced by the Finance Act, 2020. Under this section, individuals and entities who opt for the new regime will not be eligible for most of the deductions and exemptions available under the old tax regime. Instead, they will be taxed at a lower rate, ranging from 5% to 30% on the total taxable income, based on the slab rate. However, this lower rate of taxation is available only if the individual or entity does not claim any exemptions or deductions under the Income Tax Act.
Section 115 BAC of the Income Tax Act is a section introduced in the 2020 Union Budget of India, which provides for a new optional tax regime for individuals and Hindu Undivided Families (HUFs). This section gives taxpayers the option to pay tax at lower rates as compared to the existing tax slab rates, but in exchange for giving up certain tax exemptions and deductions. The purpose of Section 115 BAC is to provide a simpler and more straightforward tax regime for individuals, which reduces the complexity of tax calculation and compliance. The section applies to the assessment year 2020-21 and subsequent assessment years.
Section 115 BAC of the Income Tax Act provides for different tax rates for individuals, Hindu Undivided Families (HUFs), and firms (including association of persons (AOPs), body of individuals (BOIs) and limited liability partnerships (LLPs)) who opt to be taxed under the new tax regime.
The tax rates under Section 115 BAC are as follows:
For Individuals:
1. Taxable income between INR 2.5 lakhs to INR 5 lakhs: 5%
2. Taxable income between INR 5 lakhs to INR 7.5 lakhs: 10%
3. Taxable income between INR 7.5 lakhs to INR 10 lakhs: 15%
4. Taxable income between INR 10 lakhs to INR 12.5 lakhs: 20%
5. Taxable income between INR 12.5 lakhs to INR 15 lakhs: 25%
6. Taxable income above INR 15 lakhs: 30%
For Hindu Undivided Families (HUFs) and firms:
1. Taxable income above INR 2.5 lakhs: 30%
It's important to note that the above rates are applicable for those who opt for the new tax regime under Section 115 BAC and forego certain exemptions and deductions.
Section 115 BAC of the Income Tax Act applies to individuals, Hindu Undivided Families (HUFs), firms, Association of Persons (AOPs), Body of Individuals (BOIs), and companies. This section provides for a lower tax rate for individuals, HUFs, and firms having a total income of up to Rs. 15 lakhs per financial year. The eligible taxpayer can opt for the lower tax rate under this section if their total income for the financial year does not exceed Rs. 15 lakhs. The option to choose this tax regime is available for financial years beginning on or after 1st April 2020 and ending on 31st March 2023.
Section 115 BAC is a new provision introduced in the Income Tax Act, which provides for a lower tax rate for individuals and Hindu Undivided Families (HUFs). Under this section, individuals and HUFs have the option to be taxed at a lower rate, instead of the normal tax rate, if they forego certain exemptions and deductions available to them.
The exemptions and deductions that are not available under Section 115 BAC include:
1. Deduction under Section 80C to 80U, which includes investments in various schemes such as Public Provident Fund (PPF), National Saving Certificate (NSC), and Life Insurance Premium, among others.
2. Deduction for House Rent Allowance (HRA)
3. Deduction for Standard Deduction
4. Deduction for Interest on Housing Loan under Section 24
5. Deduction for Leave Travel Allowance (LTA)
6. Deduction for Education Loan Interest under Section 80E
It is important to note that this section is optional and the taxpayer can choose to opt for the normal tax rate and claim all exemptions and deductions available to them. The choice of opting for this section should be based on individual tax planning and the specific financial situation of the taxpayer.
Under Section 115 BAC of the Income Tax Act, certain deductions and exemptions available under the previous tax regime are not applicable. Some of these deductions include:
1. Section 80C: This section provides a deduction for investments in specified instruments such as Public Provident Fund (PPF), National Savings Certificate (NSC), life insurance premium, among others.
2. Section 80D: This section provides a deduction for health insurance premium paid for self, spouse, and children.
3. Section 80E: This section provides a deduction for interest paid on education loan.
4. Section 80G: This section provides a deduction for donations made to specified charitable organizations.
5. House Rent Allowance (HRA): HRA is not eligible for deduction under Section 115 BAC.
Note: These deductions may still be available for individuals who choose to opt for the old income tax regime. However, the exact deductions and exemptions would depend on the provisions of the Income Tax Act and may change from time to time.
