The Finance Minister, Nirmala Sitharaman presented the Budget 2020 and made major announcements including the introduction of a new tax regime under section 115BAC of the Income Tax Act, 1961. The new tax regime is available only to individuals and HUF. Also, the new regime comes with reduced income tax slab rates and the removal of rebates, exemptions, and deductions. Even after lower slab rates, the majority of taxpayers were filing ITR under the old tax regime. Hence to make compliance easier and make more taxpayers opt for the new regime in Budget 2023 the slab rates were revised and the New regime was announced as the default tax regime for the taxpayers.
New Tax Slab Rates
Under section 115BAC, new tax slabs have been introduced with existing rates which are slashed on income up to INR 15 Lakh. The tax slab rates as per the New Income Tax Regime eligible up to AY 2023-24 are as follows:
| Income Range | Rates as per New Tax Regime |
| Up to INR 2,50,000 | Nil |
| INR 2,50,001 – 5,00,000 | 5% |
| INR 5,00,001 – 7,50,000 | 10% |
| INR 7,50,001 – 10,00,000 | 15% |
| INR 10,00,001 – 12,50,000 | 20% |
| INR 12,50,001 – 15,00,000 | 25% |
| Above INR 15,00,000 | 30% |
The tax slab rates as per the New Income Tax Regime eligible AY 2024-25 onwards are as follows:
| Income Range | Rates as per New Tax Regime |
| Up to INR 3,00,000 | Nil |
| INR 3,00,001 – 6,00,000 | 5% |
| INR 6,00,001 – 9,00,000 | 10% |
| INR 9,00,001 – 12,00,000 | 15% |
| INR 12,00,001 – 15,00,000 | 20% |
| Above INR 15,00,000 | 30% |
Changes in Deductions and Exemptions under section 115BAC
According to the announcement made in the Budget 2020, there have been major removals of tax exemptions and deductions. This has made tax compliance less tedious. Here is the list of what deductions have been removed as per clause (i) of sub-section (2) of section 115BAC:
- Leave travel concession as per section 10(5);
- House rent allowance as per section 10(13A);
- Official and personal allowances (other than those as may be prescribed) as per section 10(14);
- Allowances to MPs/MLAs as per section 10(17);
- Allowance for income of minor as per section 10(32);
- Exemption for SEZ unit as per section 10AA;
- The standard deduction, the deduction for entertainment allowance and employment/professional tax as per section 16;
- Interest under section 24 in respect of self-occupied or vacant property as per section 23(2).
- Additional depreciation under clause (iia) of sub-section (1) of section 32;
- Deductions u/s 32AD, 33AB, 33ABA;
- Various deductions for donation or expenditure on the scientific research available in section 35;
- Deduction u/s 35AD or section 35CCC;
- Deduction from family pension under clause (iia) of section 57;
- Any deduction under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA,etc). However, deduction under sub-section (2) of section 80CCD (employer contribution on account of the employee in notified pension scheme) and section 80JJAA (for new employment) can be claimed.
Set-off of Losses and Unabsorbed depreciation as per section 115BAC
As per section 115BAC, losses from house property can only be set off against other income from house property. Moreover, losses from income from house property cannot be carried forward in the new income tax regime.
In the case of a business income, an individual or HUF cannot claim set-off of the brought forward business loss or unabsorbed depreciation and also cannot carry forward the same to the extent they relate to deductions/exemptions withdrawn in clause (i) of sub-section (2) of section 115BAC.
Opting for the new scheme
As per the income tax laws, an individual having business income shall submit form 10-IE before the due date of filing ITR i.e. July 31 (unless extended by the government). Salaried individuals, can submit the form before/at the time of ITR filing.
Switching between Old Tax Regime & New Tax Regime
- Business Income
- Individuals having business income are not eligible to choose between the new and old tax regime every year. Once they have opted for the new tax regime, they only have a one-time option of switching back to the old tax regime in their lifetime. Once they switch back, they cannot opt for new tax regime again.
- Essentially, people with business income may have to fill Form 10-IE twice – once to use the new tax regime and the second time to switch back to the old regime.
- No Business Income
- An individual having salaried income and no business income has the option to choose between the old and new tax regimes every year. This means that a salaried individual will have to file this form for every year for which he wants to choose the new tax regime.
FAQs
If an individual who has opted for old tax regime with his/her employer for TDS on salary, plans to opt new tax regime at the time of filing ITR, then he/she can do that by filling the new form i.e. 10-IE.”
No, standard deduction on salary u/s 16 is not available under new tax regime
The Central Board of Direct Taxes (CBDT) has released Form 10-IE. Any person who wish to pay income tax as per the new tax regime has to communicate his/her choice to the Income Tax Department through form 10-IE.
Yes, You can carry forward short-term and long-term capital losses as well as loss from trading in derivatives in the new tax regime because only the losses that relate to deductions/exemptions withdrawn in clause (i) of sub-section (2) of section 115BAC cannot be set off or carried forward.
Hey @TeamQuicko
Can I opt out of New Scheme once opted in???
If I want to opt for the New regime but had told my employer that I am choosing the existing one, can I select new tax regime while filing ITR??
Hey @riya_gupta
An individual having salaried income and no business income has the option to choose between the old and new tax regimes every year i.e. he/she can switch regimes from year to year.
However, individuals having business income are not eligible to choose between the new and old tax regime every year. Once they have opted for the new tax regime, they only have a one-time option of switching back to the old tax regime in their lifetime.
Once they switch back, they will not be allowed to opt for new tax regime again.
Hey @TanyaChopra
If you have opted for old tax regime with your employer for TDS on salary, and plan to opt the new tax regime at the time of filing ITR, then you can do that by filling the new form i.e. 10-IE.
Can full-time traders claim expenses like Broker charges STT, GST + other expenses like computer buy for trading, internet connection bill etc under new tax slabs?
Apart from the tax-saving criteria, which tax slab is better for a first-time taxpayer?
Hey @HarishMehta
If you forget to fill the new form i.e. Form 10-IE, at the time of filing ITR, then you may be disallowed the tax rates available under the new tax regime. The tax department will calculate your income tax liability based on the existing/old tax regime.
Hey @SonalYadav
These budget changes will be applicable from FY 2020-21. From FY 2020-21 it will be up to the taxpayer to select the tax regime based on their Income and Investments situation.
Following are the pros of following a new tax regime:
Following are the cons of following a new tax regime:
Hope this helps!
Hey @HarshitShah
Yes, any individual taxpayer can opt for new tax slabs, there are no restrictions based on type of income earned by a taxpayer.
Under new tax slabs, you will be able to claim all the direct expenses related to your business activity while calculating your taxable income.
Hope this helps!
I have carry forward losses in the previous financial years, is it allowed to claim losses under the new tax regime?