Section 115BAC is a game-changing provision in the Income Tax Act of India, offering individual taxpayers and Hindu Undivided Families (HUFs) an alternative to the existing tax regime. With simplified tax slabs and reduced rates, this regime aims to make tax filing easier. However, it comes with a trade-off—several deductions and exemptions are no longer applicable. Let’s explore the key features, benefits, and considerations of this new regime.
Features of the New Tax Regime
1. Revised Tax Slabs and Rates
The new regime introduces lower tax rates for different income slabs, ensuring that taxpayers have the potential to save more, especially if they don’t rely heavily on deductions.
2. Simplified Tax Filing
By eliminating multiple deductions and exemptions, this regime simplifies the tax filing process.
3. Flexibility to Choose
Taxpayers can choose between the old and new regimes each financial year, allowing them to optimise their tax liabilities.
4. Impact on Deductions
Most deductions and exemptions, such as those under Sections 80C, 80D, and the standard deduction, are not applicable. This is a key consideration when evaluating which regime to opt for.
5. Eligibility
Section 115BAC is applicable to individual taxpayers, HUFs, and non-resident Indians (NRIs). It covers all income sources, including salary, house property, business income, and capital gains.
Tax Rates Under the New Regime
Below are the tax rates for the Financial Year (FY) 2023–24 under the new regime:
| Income Slabs | Tax Rates (FY 2023–24) |
| Up to ₹3,00,000 | Nil |
| ₹3,00,000 to ₹6,00,000 | 5% |
| ₹6,00,000 to ₹9,00,000 | 10% |
| ₹9,00,000 to ₹12,00,000 | 15% |
| ₹12,00,000 to ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Comparison with Old Regime Tax Rates (FY 2023–24):
| Income Slabs | Old Regime Tax Rates |
| ₹2,50,000 to ₹5,00,000 | 5% |
| ₹5,00,000 to ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Benefits of the New Tax Regime
- Lower Tax Rates: The regime offers reduced tax rates across income slabs.
- Simplified Filing: No need to worry about tracking and claiming deductions.
- Flexibility: The choice to opt for this regime annually gives taxpayers control over their tax planning.
- Better for Non-Investors: Ideal for those who don’t heavily invest in tax-saving instruments like PPF or ELSS.
- Encourages Spending: Without the need to lock funds in tax-saving schemes, individuals have more liquidity for personal or business use.
Exemptions and Deductions Not Claimable Under the New Regime
Under the new regime, several popular deductions and exemptions are no longer available, including:
- Standard Deduction: ₹50,000 for salaried individuals.
- Section 80C: Investments like PPF, ELSS, and tuition fees.
- Section 80D: Medical insurance premiums.
- HRA Exemption: House Rent Allowance.
- LTA Exemption: Leave Travel Allowance.
- Interest on Housing Loan: Section 24(b) deduction on home loan interest.
- Deductions for Savings Bank Interest: Section 80TTA/80TTB deductions.
Exemptions and Deductions Available Under the New Regime
Some exemptions and deductions remain intact under the new regime:
| Exemption/Deduction | Details |
| Transport Allowance (Disabled) | ₹3,200 per month for differently-abled persons. |
| Conveyance Allowance | Exemption for official duties. |
| Travel Concessions | Concessions received for family travel. |
How to Choose Between the New and Old Tax Regimes
Choosing the right tax regime depends on your income and tax-saving habits:
- Evaluate Your Deductions: Calculate the deductions and exemptions you usually claim under the old regime.
- Use a Tax Calculator: Compare tax liabilities under both regimes.
- Consider Flexibility: If you have business income, note that your choice may lock you into the regime for subsequent years.
- Consult a Financial Advisor: Get professional advice to make an informed decision.
Example: Tax Calculation Under Both Regimes
Suppose Shreya earns ₹10,00,000 annually and invests ₹1,50,000 under Section 80C. Here’s how her tax liability compares:
| Details | Old Regime (₹) | New Regime (₹) |
| Gross Income | 10,00,000 | 10,00,000 |
| Less: Section 80C Deduction | 1,50,000 | 0 |
| Taxable Income | 8,50,000 | 10,00,000 |
| Tax Payable | 95,000 | 62,400 |
Shreya saves ₹32,600 under the new regime but loses deductions for her investments.
FAQs
1. What is Section 115BAC?
Section 115BAC is a provision that introduces an alternative tax regime with lower tax rates and revised slabs but limits deductions and exemptions.
2. Who can opt for the new tax regime?
The regime is available to individual taxpayers, HUFs, and NRIs.
3. What are the benefits of the new tax regime?
It offers lower tax rates, simplified filing, and flexibility in choosing the regime each year.
4. Are deductions like 80C and HRA available under the new regime?
No, popular deductions like Section 80C, HRA, and others are not available.
5. How do I switch between tax regimes?
Salaried individuals can switch annually, but business owners can only switch back once after opting for the new regime.
6. Is the new regime better for high-income earners?
Yes, for those who don’t claim many deductions, the lower tax rates can result in savings.
7. How do I declare my choice of regime?
Declare your choice when filing your income tax return for the relevant financial year.
8. Can I still carry forward business losses in the new regime?
Yes, but they can only be set off against income from the same business.
9. What happens to unabsorbed depreciation under the new regime?
It can be carried forward but is restricted to set-off against business income.
10. Should I consult an advisor before choosing a tax regime?
Yes, consulting a financial advisor can help you make an informed choice tailored to your income and investments.
