Partition of HUF

Hindu Undivided Family, commonly known as HUF is a separate entity from its members for the purpose of Income Tax. It is is treated as a ‘person’ under section 2(31)​ of the Income-tax Act, 1961 . The term is defined under the Hindu Law as a family that consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. So basically a Hindu Undivided Family is not created by any Act but by status. Partition means ending the status of Joint Hindu family. Partition of HUF can be of two types under Hindu Law i.e. total and Partial.

Meaning of Partition

Partition means division of property. Under Hindu Law the Joint Family status comes to an end when there is division of property among the members and joint ownership of property comes to an end. The division will be such as that the share of each member will be determined physically. Further, a division of income from any property, without physical division of such property does not amount to partition.

Types of Partition

Partition under Hindu Law, can be total or partial.

  • Total or Complete Partition: Assets of HUF are physically divided. Further, all the members cease to be members of the HUF. And all the properties cease to be properties belonging to the said HUF.
  • Partial Partition: Partition could be partial also with regards to the persons constituting the HUF, or the properties belonging to the HUF, or both. It may be partial vis-à-vis members, where some of the members go out on partition and other members continue to be the members of the family. Partial partition can be specific too where the property is divided between members and the rest of the property continues to be the HUFs property.
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Right to claim Partition of HUF

Under the Hindu law, the partition of a joint Hindu family may take place at the instance of the following persons:

  • A coparcener*
    • Co-parceners refers to two or more persons sharing an inheritance or joint heirs of a property. These coheirs are called “Co-parceners”.
    • HUF consists of co-parceners (who are family members) and the distant relatives, called members of HUF (e.g. brother-in-law, sister-in-law, etc.,).
    • Co-parceners are the family members and it consists of four levels of lineal descendants including the first male ancestor.
  • A son in the womb of his mother at the time of partition of the property
    • A son in his mother’s womb is treated in law in existence and is entitled to re-open the partition to receive a share equal to that of his brothers.
  • Female sharers cannot demand a partition. However, are entitled to get their share when the joint family property is actually divided on partition.
    • Mother gets equal share if there is partition among sons after death of father,
    • Wife gets a share equal to that of a son at the time of partition between father and sons.
  • Daughters have the same rights as sons to reside in and to claim for partition of the parental dwelling house.
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Procedure and Assessment after Partition of HUF

Partition of HUF takes place on the date the properties are physically divided. There must be physical division of the properties. Physical division of income without physical division of properties does not amount to Partition. The following procedure is prescribed under section 171 of Income Tax Act for partition and assessment of HUF:

  • HUF shall be considered as undivided unless where a finding of partition has been given under this section in respect of HUF.
  • Where it is claimed by the members that a partition has taken place to AO at the time of making assessment u/s 143 or 144. Then, the AO shall make an inquiry after giving notice of inquiry to all the members of the family.
  • On the completion of the inquiry, the AO shall record a finding mentioning the total or partial partition of the joint family property. And the date on which it has taken place

Responsibility to pay Tax

  • Where a finding of total or partial partition has been recorded by the AO. And the partition took place during the previous year than:
    • The total income of HUF for the period up to the date of partition shall be assessed as if no partition had taken place; and
    • Each member or group of members shall be jointly and severally liable for the tax on the income so assessed in addition to any tax for which he/she may be separately liable
  • The partition took place after the end of the previous year, the total income of the previous year of the joint family shall be calculated as if no partition had taken place. Each member of group of members shall be jointly and severally liable for the tax on the income so assessed.
  • The several liability of any member or group of members shall be according to the portion of the joint family property allotted to him/her at the partition, whether total or partial.
  • The above provisions shall, also apply in relation to the levy and collection of any penalty, interest, fine or other sum in respect of any period up to date of the partition, whether total or partial.

Notwithstanding anything contained in this section, if the AO finds after completion of the assessment of a HUF that the family has already effected a partition, whether total or partial. The AO shall proceed to recover the tax from every person who was a member of the family before the partition. Further, every such person shall be jointly and severally liable for the tax on the income so assessed.

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Partition of assets of the HUF property

As per the Hindu Law, part distribution of some of the assets of the HUF, i.e. partial partition of the HUF, either in respect of certain assets or in respect of some of the members is fully valid. However, income tax law does not recognize such partial partition of the HUFs’ assets. The income tax laws require that partition of HUF should be full. So in case of partial partition of some assets, the income in respect of such assets, shall be clubbed and included in the income of the HUF. Even if such assets are received by the member/members.

Nature of the property received on partition

The nature of the joint family property on partition shall be of joint family property when the recipient person is married. Hence the character of the property shall remain that of the joint family property. Such property shall be considered as individual property, until the recipient is unmarried or is reduced to a single person. Thus individual property shall continue to be individual property on inheritance. Further, HUF property on partition shall be that of the joint Hindu family subject to the existence of family during the relevant assessment year

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FAQ

Whether the sum received by a member as and towards his share as coparcener of HUF, on its partition is taxable as income?

The sum received by a member as and towards his share as coparcener of HUF, on its partition cannot be brought to tax as income. As partition is not considered as a transfer.

What will be the treatment of assets after partition, as per Income Tax Act?

Treatment of capital gains on distribution of assets on partition of HUF shall be as under:
– Section 47: No capital gains shall arise to HUF on distribution of assets on partition of HUF.
– Section 49(1): Cost of acquisition of such assets to the member shall be the cost of acquisition of such asset in the hands of HUF.
– Period of holding of assets of transferor shall also be considered for computing the period of holding of assets in the hands of transferee.

Can HUF receive gift from its members?

Earlier HUF could not give or receive gift to or from its members beyond a sum of INR 50,000/-without making the donor liable to tax u/s 56(2). However Finance Act, 2012 extended the definition of a relative to include gift from any member of an HUF to HUF. Thus an HUF can now receive a gift from its member exceeding INR 50,000/- without any liability to pay tax u/s 56(2) of Income Tax Act.

Section 115BAA – Tax Rates for Domestic Companies

What is Section 115BAA?

Section 115BAA was introduced by the Government of India through the Taxation Ordinance 2019 on the 20th of September 2019 with the objective of offering reduced rates of taxes to domestic companies. Additionally, the MAT – Minimum Alternate Tax rate has been reduced from the current 18.5% to 15%.

The new section 115BAA states that domestic companies have the option to pay tax at a rate of 22% from the FY 2019-20 onwards if such domestic companies adhere to certain conditions.

When can the Companies Opt for Section 115BAA?

Companies can exercise the option for Section 115BAA with effect from AY 2020-21, or in any subsequent assessment year. Furthermore, it being an optional scheme, the decision of exercising the option is only available to the assessee company. Moreover, the company can decide the assessment year it wishes to opt in for the reduced tax rate. Importantly, exercising this option for a particular assesssment year would mean that it cannot be withdrawn and must be applied in the subsequent assessment years.

If in any previous year the assessee company fails to satisfy any of the conditions, the scheme under section 115BAA would become invalid, i.e, the assessee company will not be eligible to exercise this option in the future.

Process for Exercising Option for Section 115BAA

As per Rule 21AE, the option u/s 115BAA shall be exercised by electronically furnishing details in Form 10-IC to the principal officer, either under digital signature or electronic verification code. Hence, companies that wish to exercise the option shall do so in the manner prescribed in rule 21AE of the IT rules, 1962.

This form has to be furnished on or before the due date of furnishing return of income provided u/s 139(1) of the IT act, 1962 that is 30th November in case of domestic companies attracting transfer pricing provisions and 31st October in case of other domesetic companies.

Conditions to Satisfy for Section 115BAA

Section 10AA Special provisions in respect of newly established Units in Special Economic Zones
Section 32(1)(iia) Additional Depreciation

 

(it is pertinent to note that this restriction is only on additional depreciation and regular depreciation is permitted to be reduced from the total income of the assessee so long as it does not pertain to other deductions enumerated in this table

Section 32AD Investment Linked Deduction
Section 33AB Tea development account, coffee development account and rubber development account
Section 33ABA Site Restoration Fund
Section 35 Expenditure on Scientific Research
Section 35 AD Deduction in respect of expenditure on specified business
Section 35CCC Expenditure on agricultural extension project
Section 35CCD Expenditure on skill development project
Chapter VI A No deductions under Chapter VI A can be made while computing the total income for the purpose of Section 115BAA, subject to the following exceptions:

 

a. Section – 80JJAA: Deduction in respect of employment of new employees. While all other deductions like 80C, 80G, etc cannot be availed while computing total income for the purpose of section 115BAA, there is no such restriction on section 80JJAA deduction.

b. Section 80LA: Persons having eligible unit in the International Financial Services Centre referred to in section 80LA(1A) shall be allowed to claim deduction u/s. 80LA while computing total income for the purpose of section 115BAA.

c. Section 80M: Deductions in respect of inter-corporate
dividends. Inserted vide Finance Bill, 2020, this deduction can be availed w.e.f. AY 2021-2022 while computing total income for the purpose of section 115BAA.

New Rates Applicable to Domestic Companies

Base tax rate

Surcharge applicable 

Cess

Effective tax rate

22%

10%

4%

22*1.1*1.04 = 25.168%

Such companies will not have to pay Minimum Alternate Tax under section 115JB. Additionally, the companies would not be able to reduce their tax liabilities u/s 115BAA by claiming MAT credits. The domestic company opting for section 115BAA shall not be allowed to claim set-off of any brought forward depreciation for the assessment year in which the option has been exercised and future assessments.

FAQs

Can a company opt out of section 115BAA?

Domestic companies who do not wish to avail this concessional rate immediately can opt for the same after the expiry of their tax holiday period or exemptions or incentives. However, once such a company opts for the company opts for the concessional tax rate under section 115BAA of the income tax act, 1961, it cannot be subsequently withdrawn.

Who shall exercise the option?

The option of reduced rate of tax shall be exercised only for a domestic company that satisfies certain conditions. Hence, individuals, LLPs, partnership firms, AOP, BOI, foreign companies and societies are not eligible to avail this option.

What is the option provided u/s 115BAA?

Section 115BAA provides an option to all domestic companies to pay tax at an effective rate of 25.17% including 22% basic tax plus 10% surcharge and 4% cess subject to satisfaction of certain conditions.

Types of ITR Status

The status of an Income Tax Return or ITR can be checked once the return has been filed and verified. Taxpayers should regularly check the status of their income tax return to ensure that the ITR has been accepted and processed. You can check the status of your ITR by logging in to your income tax account.

Types of ITR Status

  • Submitted and pending for e-verification: This status appears when you have filed the Income Tax Return, but is not e-verified. Or you have manually verified it and sent the acknowledgment to the department but the same has not been received by the department yet.
  • Successfully e-verified: If the status of your return is shown as successfully e-verified, it means that you have submitted and duly verified your return. But the processing of ITR is pending.
  • Processed: If the status is shown as ‘processed’, it means that the return is successfully processed by the department without any discrepancies.
  • Defective: The status of an ITR shows ‘defective’ if it hasn’t been filed in accordance with provisions of the law. If your return is found defective then you will receive a notice of defective return under section 139(9). Asking you to rectify the defect within 15 days from the date of receiving notice. In case, the taxpayer does not respond within the set time limit, then ITR shall be treated as invalid.
  • Case transferred to Assessing Officer:
    • It means the Centralized Processing Centre of the Income Tax Department has transferred the ITR to the jurisdictional assessing officer to process it.
    • CPC generally transfers only those cases to the assessing officer which may involve complexities that could not be processed without any human intervention and thus require the assessing officer to step in.
    • If your case has been transferred to the jurisdictional assessing officer, then just wait for a communication from the respective officer.
    • The assessing officer may ask you to provide necessary evidence in support of your claim or assertions to process the return.

Steps to check ITR Status

Without the Login Credentials

  1. Income Tax Return Status

    Visit the e-filing portal and scroll down and click on the option Income Tax Return Status option.

  2. Enter required details

    On the next screen, enter the acknowledgement number and a valid mobile number and click on continue.

  3. Enter OTP

    Next, enter the 6 digit OTP you receive on the mobile number.

  4. ITR Status

    On successful validation, you will be able to view the status of your ITR.

With Login Credentials

  • Login to the e-Filing portal using your login credentials.
  • Click e-File > Income Tax Returns > View Filed Returns
  • On the View Filed Returns page, you will be able to view all the returns filed by you. You will be able to download ITR-V Acknowledgement, uploaded JSON (from the offline utility), complete ITR form in PDF, and intimation order (by using the options on the right-hand side).
  • Click View Details to view the life cycle of the return and action items related to it (e.g., returns pending for e-Verification).

FAQ

Why is it important to check my ITR status?

ITR status shows the current status/stage of your filed ITR. Once your ITR has been filed, you may check if it has been accepted and processed by the Income Tax Department. In certain cases where some discrepancies are found, you may need to respond to the communication from the ITD. Hence, it is advisable to periodically check your ITR status.

Do I need to log in to check my ITR status?

No, ITR status can be checked pre-login as well as post-login. You can avail additional information like downloading the return / intimation if you check your ITR status post-login.

Do I need my mobile number registered with the e-Filing portal to view my ITR status without logging in?

No, you can use any valid mobile number to view your ITR status without logging in. However, you need to enter the valid ITR acknowledgement number if you are using this service without logging in.

Section 194P- Exemption for ITR filing for senior citizen

Union Finance Bill 2021 came up with the introduction of a new section 194P. It provides conditions for exempting from filing Income Tax returns to senior citizens aged 75 years and above. New Section 194P is applicable from 1st April 2021.

Explanation to Section 194P

Section 139 of the Income Tax Act provides that every person being an individual shall furnish a return of his income if his total income during the previous year exceeded the basic exemption limit.

Section 194P was introduced in order to provide relief to senior citizens who are of the age of 75 years or more and to reduce compliance for them.

Moreover, Benefits under section 194P are subject to fulfillment of certain conditions.

Conditions to Section 194P

Section 194 exempted senior citizens of 75 years of age or more from filing the income tax return, subject to the following conditions:

  • Senior citizens should be of age 75 years or above. 
  • Senior citizens should be ‘Resident of India’ in the previous year. 
  • He has no other income except pension income and interest income.
  • Interest income accrued/ earned from the same specified bank in which he is receiving his pension.
  • The senior citizen will declare to its bank containing details of Chapter VI-A deductions and rebate allowable under 87A.
  • Also, They need to declare that they have not earned any other income except pension and interest income.
  • The bank is a ‘specified bank’ as notified by the Central Government. Such banks will be responsible for the TDS deduction of senior citizens after considering the deductions under Chapter VI-A and rebate under 87A. 

If all conditions are satisfied, there will not be any requirement of furnishing return of income by such senior citizens.

FAQs

What is Section 87 A in income tax?

A rebate under section 87A is one of the income tax provisions that help taxpayers reduce their income tax liability. One can claim an income tax rebate of a maximum of INR 12500 if total income does not exceed INR 5 lakh in a financial year.

Who is senior citizen as per Income Tax Act?

As per Income Tax Act 1961, an individual is treated as senior citizen once he attains the age of 60 years or more and he will be treated as super senior citizen once he attains the age of 80 years or more.

When is tax filing not mandatory?

As per the tax provisions, filing income tax returns is mandatory where the gross total income of an individual is more than the basic exemption. Here, Gross total income would mean the income before any deductions under chapter VI-A.

Section 115BAC – Understanding the New Tax Regime

The Finance Minister, Nirmala Sitharaman had presented the Budget 2020 on the 1st of February 2020. Finance Minister had many major announcements including introduction of new tax regime under section 115BAC of Income Tax Act, 1961. The new tax regime is available only to individuals and HUF. Also, new regime comes with reduced income tax slab rates and the removal of rebates and exemptions.

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 are as follows:

Income Range Rates as per New Tax Regime
Up to INR 2,50,000 Nil
INR 2,50,000 – 5,00,000 5%
INR 5,00,000 – 7,50,000 10%
INR 7,50,000 – 10,00,000 15%
INR 10,00,000 – 12,50,000 20%
INR 12,50,000 – 15,00,000 25%
Above INR 15,00,000 30%

Changes in Deductions and Exemptions in as per 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 that have been removed as per clause (i) of sub-section (2) of section 115BAC:

  1. Leave travel concession as per section 10(5);
  2. House rent allowance as per section 10(13A);
  3. Official and personal allowances (other than those as may be prescribed) as per section 10(14);
  4. Allowances to MPs/MLAs as per section 10(17);
  5. Allowance for income of minor as per section 10(32);
  6. Exemption for SEZ unit as per section 10AA;
  7. Standard deduction, the deduction for entertainment allowance and employment/professional tax as per section 16;
  8. Interest under section 24 in respect of self-occupied or vacant property as per section 23(2).
  9. Additional depreciation under clause (iia) of sub-section (1) of section 32;
  10. Deductions u/s 32AD, 33AB, 33ABA;
  11. Various deduction for donation or expenditure on scientific research contained in section 35;
  12. Deduction u/s 35AD or section 35CCC;
  13. Deduction from family pension under clause (iia) of section 57;
  14. 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 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 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). For salaried individuals, they can submit 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

Can I choose a new tax regime at the time of filing ITR, if I have opted for the old tax regime with my employer?

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.”

Is standard deduction on salary u/s 16 available under new tax regime?

No, standard deduction on salary u/s 16 is not available under new tax regime

How to inform the IT Department which tax regime is selected?

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.

I have incurred short-term and long-term capital losses. Also, I have losses from trading in derivatives. Can I carry forward those in the new tax regime?

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.

Operation Clean Money

The Operation Clean Money was launched by the Income Tax Department on January 31, 2017, to verify the large cash deposit made during the period from November 9 to December 30, 2016. The aim of launching this operation was to verify the taxpayer’s cash transaction status i.e., exchange/savings of banned notes during the time of demonetisation and to enforce strict actions if these transactions don’t match the tax status.

The mission of launching Operation Clean Money is to create a tax-compliant society through fair, transparent and non-intrusive administration where every Indian takes pride in paying taxes.

The operation entered into its second phase in May 2017. Under this initiative, 18 lakh taxpayers were sent emails and SMS for submitting a response online on the e-filing response. Updates in the form of OCM status are published by the Income Tax Department accounting for the action taken on the accounts that were revealed.

First Phase of the Operation Clean Money

The 3 key areas on which the first phase focused are:

Preliminary Assessment

Here, the assessment was done for the time of demonetization where the account of the depositors was compared with their tax profile. In this process 17.92 lakh people were identified and were requested to submit an online response on transactions they had carried out. Both business and non-business entities were analysed for the distribution of large cash deposits during the preliminary assessment.

e-Verification Process

After the account holders were identified and notified on the income tax e-filing platform of ITD, they were asked to submit an online explanation. The department also added supporting documents like User Guide and FAQ to help the taxpayers in submitting the online explanation. Apart from sending Email and SMS to the taxpayers, the Income Tax Department also released advertisements to educate taxpayers about registration and submission of online response.

According to the reports released, out of the 17.92 lakh accounts, 13.33 lakh account holders responded online even without visiting the IT office. These queries were involving cash deposits of around INR 2.89 lakh crore. Additional details of 41,600 bank accounts where cash was deposited were also disclosed by the taxpayers. The department thoroughly when through the explanations given by the taxpayers. If they found it to be justified and genuine then they would close the verification process.

Targeted Enforcement Actions

In 8,239 cases survey action was undertaken and undisclosed income worth INR 6,746 crores were detected. After assessing the account holders, such high-risk cases were identified and the below-mentioned actions were undertaken:

  • More than 400 cases were referred to the Enforcement Directorate/Central Bureau of Investigation
  • Search action was conducted on 900 groups and asset value of INR 900 crore was seized

Second Phase of Operation Clean Money

The second phase of Operation Clean Money was launched on April 14 2017. In this phase, additional 5.56 lakh people have been identified whose tax profiles are inconsistent. The main aim of phase two is to identify high-risk people for investigation. Two specialised data analytics agencies and one business process management agency for analysing the demonetization data and to track the compliance status of taxpayers.  The second phase of this operation is to undertake actions like:

  • Comprehensive Risk Assessment
  • Differentiated Targeted Treatment
  • Enable Citizen Engagement
  • Identification of New Cases for Online Verification
  • Identification of High-risk Cases using Advanced Analytical Techniques
  • Ensuring Complete and Accurate Reporting of Information

A framework is set up to determine cases with different levels of risk.

Risk Category Number of People
High Risk 1 lakh
Medium Risk 7.54 lakh
Low Risk 5.95 lakh
Very Low Risk 3.14 lakh

 

Operation Clean Money Portal and its Features

The government launched the portal for Operation Clean Money with specific features:

  • Enabling Transparent Tax Administration: The department shares the status of sanitized cases and also shares the explanation of verification issues. It also shares the thematic analysis reports.
  • Providing Comprehensive Information: The portal is a one-stop destination as it provides a detailed guide, FAQs, quick reference guides and training toolkits related to the e-verification process.
  • Enabling Citizen Engagement: OPC portal also allows citizen engagement as it provides the citizens to take pledge, contribute by educating fellow citizens, by sharing their experience and also by providing feedbacks.

Income Tax Assessee under the Income Tax Act

An income tax assessee is a person who pays tax or any sum of money under the provisions of the Income Tax Act, 1961. Moreover, Section 2(7) of the act describes income tax assessee as everyone, liable to pay taxes for any earned income or incurred loss in a single assessment year. Also they can be termed as each and every person for whom:

  • Any proceedings are going on under the act for the assessment of his income
  • Income of another person for which he is assessable
  • Any loss sustained by him or by such other person or
  • Person entitled to any tax refund

Since an assessee is a person who pays a certain amount to the government it is important to understand the definition of a person.

Who is a Person under Income Tax Act?

Definition of “Person” is given u/s 2(31) of the Income Tax Act 1961. The term ‘person’ under the Income-tax Act includes natural as well as artificial persons. Also, It can be an association of persons or a body of individuals or a local authority or an artificial juridical person.

Types of Person

The 7 categories of “persons” mentioned under the Income Tax Act:

  1. Individual
  2. Hindu Undivided Family
  3. Partnership Firm
  4. Company
  5. Association of Persons (AOP) or Body of Individuals (BOI)
  6. Local Authority
  7. Artificial Judicial Body(not covered under any of the above-mentioned categories)

Types of Assessee

As per the Income Tax Act, they can be classified into different categories as follows:

  • Normal Assessee
  • Representative Assessee
  • Deemed Assessee
  • Assessee-in-default

 For better understanding, Description about the same is as below:

Normal Assessee

An individual who pays tax for the total income earned during a financial year or the loss incurred by him. Also, if any person is liable to pay any interest or penalty to the government or entitled to get any refund under the act is considered normal assessee.

Moreover, any person against whom proceedings under Income Tax Act are going on, irrespective of the fact whether any tax or other amount is payable by him or not is also a normal assessee.

Representative Assessee

A person who is responsible to pay tax for the income or loss caused by a third party. It generally happens in case person liable for tax payment is a non-resident, minor, or lunatic. They can not file tax by themselves. Therefore, It can either be an agent or guardian who need to comply with the rules on their behalf.

Deemed Assessee

An individual who is responsible to pay the tax by the legal authorities. It can be:

  • Every person who is deemed to be an assessee under the Act
  • Every person in respect of whom any proceeding under this Act has been taken for the assessment of the income/loss of any other person in respect of whom he is assessable or the amount of refund due to him or to such other person

Moreover, This category covers a person to pay taxes on behalf of any other person in specified circumstances.

Examples

  • Legal representative of a deceased person – (a) if a person dies intestate (without writing will) then his elder son or other legal heirs (b) if a person dies after writing will the executor of property
  • Agent of a non-resident
  • Trustee of a trust
  • Guardian of a minor

Assessee-in-default

When individuals fail to meet their statutory responsibilities of paying tax, then they become assessee in default. For example, an employer should deduct tax from the salary of his employees before giving the salary. Moreover, employer has to pay deducted taxes to the government as per the due date. However, If the employer fails to deposit this tax he is an assessee-in-default.

FAQs

How do I add representative assessee to my income tax?

Login to your account on the income tax website. Go to My Account Tab, and click on ‘Add/Register as Representative’ to add a representative.

What is deemed assessee in income tax?

When individuals are obligated to pay tax on behalf of someone else by the instruction of legal authorities, they come under deemed assessee category.

What is the difference between AOP and BOI?

A person in AOP could be a company or an individual person. The term person could include any association, body of individuals or company, However, in a BOI, only individuals can join. Hence we can say, BOI only comprises of individuals, whereas an AOP could include legal entities.

How to file income tax return of deceased person in India

The income tax return needs to be filed for the income earned during a financial year. Even if the person in question is deceased, Legal heir has to file the ITR on his/her behalf if deceased person had taxable income. The return is to be filed for the income earned till the date of death. Also, Legal heir has to register himself at the income tax website for filing the return on behalf of deceased. In this article, we will be discussing how to file income tax return of a deceased person in India.

Usually, spouse or close relative of the deceased takes charge as the legal
representative. Else, in case of will of the taxpayer who has passed away, the executor is held responsible. To register as legal heir, any of the legal heir certificates is required.

Further, Certificate of legal heir ship can be obtained from the Tehsildar of the representative’s jurisdiction by submitting application in the prescribed form along with supporting documents. After basic verification by the office certificate can be obtained.

To register as legal heir, any of the following documents are also eligible as legal heir certificates:

  • The legal heir certificate issued by the court of law
  • The certificate of the surviving family members issued by the local revenue authorities.
  • The legal heir certificate issued by the Local revenue authorities.
  • The registered will of the deceased person
  • The family pension certificate issued by the State/Central government.

For filing of income tax return on behalf of the assessee who has passed away, legal heir or representative needs to first register as the legal heir and obtain approval from the tax authorities.

Steps to register as a Legal Heir

  1. Login to e-filing portal

    Go to income tax department e-filing portal. Login to e-filing portal using credentials of legal heir

  2. Register as Representative

    Go to My Account and register as Representative.
    (i) Select the type of Request – New Request
    (ii) Select the ‘Category to Register’ as Deceased (Legal Heir) > Click ‘Proceed’

  3. Provide details

    Provide the following details:
    PAN of the Deceased
    Surname of the deceased
    Middle Name of the deceased
    First Name of the deceased
    Date of Death
    Bank account details of Legal heir

  4. Attach documents & Submit

    Attach the following documents as attachments against the hyperlink provided for the same:

    PAN card of Deceased
    Copy of PAN card of the legal heir
    Death Certificate
    Copy of Legal Heir Proof
    Order passed in the name of the deceased

Moreover, after completing the above process, the request will be sent to the e-Filing Administrator. Administrator will review, approve/reject the request and send a confirmation e-mail to the registered e-mail ID.

  • After approval of legal heir request, legal heir has to login to e-filing portal.
  • Click on “Upload Return” under e-file tab.
  • Select the PAN of the deceased person & applicable ITR form to upload.
  • Select applicable Assessment year & upload XML file.
  • As a legal heir you can digitally sign the ITR of the deceased or can e-verify the return.

Moreover, Only once the ITR can be filed from the legal representative . If the income still continue to arise then Legal heir has to file for the estate PAN.

Calculating the Income Earned by the Deceased

The total earnings of the deceased from the start of the financial year till the date of death will be taken as his/her total income. Moreover, The income of deceased earned after his/her death is taxable in the hands of the legal heirs. For example: A, who expired on November 20, earned INR 70,000 as interest every month on his fixed deposits. The computed income will be as follows:

  1. Income in the hands of the deceased: INR 70,000 x 8 months = INR 5,60,000
  2. Income taxable in the hands of the legal heir (in personal ITR of the Legal Heir): INR 70,000 x 4 months = INR 2,80,000

The legal heir is liable to file the ITR on behalf of the deceased. He also needs to deposit any balance income tax which must be paid. In case, the deceased person receives any notice before their death, then the legal heir will be responsible to carry out the proceedings. Moreover, the deceased is liable to pay any penalty or interest charged on him by the Income Tax Authorities.

Though, the amount that the legal heir has to pay on the deceased’s behalf shall not be more than the assets that he inherits. Where there is any refund in case of a deceased assessee, the refund can be
received by the legal heir..

Further, It is advisable to get the refund amount in any bank account where the deceased holder was a joint account holder with any other person. If
there is no such joint account, the nominee appointed by the deceased assessee can operate the account

FAQs

Who needs to file ITR in case of multiple legal heirs?

For multiple legal heirs, any one person needs to be authorized as the legal heir for the purpose of filing ITR.

Who will become responsible person in case of death of Karta of HUF?

In case of death of the Karta of the Hindu Undivided Family (HUF), the HUF will still continue to remain in existence and senior most member of the family will become the taxpayer and will file the income tax return after the death of the original taxpayer.

How to surrender the deceased person’s PAN card after death?

To surrender the deceased person’s PAN card, you need to write an application to the assessing officer (AO) under whose jurisdiction PAN is registered . The letter should contain reasons for surrender (i.e. death of the holder), name, PAN, date of birth of deceased, along with a copy of death certificate.

Income Tax Slab Rates for FY 2021-22 (AY 2022-23), FY 2020-21 (AY 2021-22)

The Union Budget for the year 2021 was presented by the Finance Minister Nirmala Sitharaman on the 1st of February, 2021. The new income tax rate will be applicable from FY 2020-21 corresponding to Assessment Year 2021-22. The Union Budget will be presented on the 1st of February, 2021.

Furthermore, given the budget is just a couple of days away now, the expectations surrounding it are huge. Additionally, the FM has also launched the “Union Budget Mobile App” to access the budget documents by the Members of Parliament (MPs) and the general public.

Income Tax Slab Rates for FY 2021-22 AY (2022-23)

Income tax slab rates for individuals (for resident or non-resident below the age of 60 years)

Existing Regime New Tax Regime u/s 115BAC
Income Tax Slab Income Tax Rate Income Tax Slab Income Tax Rate
Up to INR 2,50,000 NIL Up to INR 2,50,000 NIL
INR 2,50,001 to INR 5,00,000 5% above INR 2,50,000 INR 2,50,001 to INR 5,00,000 5% above INR 2,50,000
INR 5,00,001 to INR 10,00,000 INR 12,500 + 20% above INR 5,00,000 INR 5,00,001 to INR 7,50,000 INR 12,500 + 10% above INR 5,00,000
Above INR 10,00,000 INR 1,12,500 + 30% above INR 10,00,000 INR 7,50,001 to INR 10,00,000 INR 37,000 + 15% above INR 7,50,000
    INR 10,00,001 to INR 12,50,000 INR 75,000 + 20% above INR 10,00,000
    INR 12,50,001 to INR 15,00,000 INR 1,25,000 + 25% above INR 12,50,000
    Above INR 15,00,000 INR 1,87,000 + 30% above INR 15,00,000

Income Tax slab rates for senior citizens (for individuals who are of the age of 60 years or more but less than the age of 80 years)

Existing Regime New Tax Regime u/s 115BAC
Income Tax Slab Income Tax Rate Income Tax Slab Income Tax Rate
Up to INR 3,00,000 NIL Up to INR 2,50,000 Nil
INR 3,00,001 to INR 5,00,000 5% above INR 3,00,000 INR 2,50,001 to INR 5,00,000 5% above INR 2,50,000
INR 5,00,001 to INR 10,00,000 INR 10,000 + 20% above INR 5,00,000 INR 5,00,001 to INR 7,50,000 INR 12,500 + 10% above INR 5,00,000
Above INR 10,00,000 INR 1,10,000 + 30% above INR 10,00,000 INR 7,50,001 to INR 10,00,000 INR 37,500 + 15% above INR 7,50,000
    INR 10,00,001 to INR 12,50,000 INR 75,000 + 20% above INR 10,00,000
    INR 12,50,001 to INR 15,00,000 INR 1,25,000 + 25% above INR 12,50,000
    Above INR 15,00,000 INR 1,87,500 + 30% above INR 15,00,000

Senior citizens of the age of 75 and above who have interest income or pension income do not have to file their ITR
Tip
Senior citizens of the age of 75 and above who have interest income or pension income do not have to file their ITR

Income tax slab rates for Super Senior citizens (for individuals of the age of 80 years and above)

Existing Regime New Tax Regime u/s 115BAC
Income Tax Slab Income Tax Rate Income Tax Slab Income Tax Rate
Up to INR 5,00,000 NIL Up to INR 2,50,000 Nil
INR 5,00,001 to INR 10,00,000 20% above INR 5,00,000 INR 2,50,001 to INR 5,00,000 5% above INR 2,50,000
Above INR 10,00,000 INR 1,00,000 + 30% above INR 10,00,000 INR 5,00,001 to INR 7,50,000 INR 12,500 + 10% above INR 5,00,000
    INR 7,50,001 to INR 10,00,000 INR 37,500 + 15% above INR 7,50,000
    INR 10,00,001 to INR 12,50,000 INR 75,000 + 20% above INR 10,00,000
    INR 12,50,001 to INR 15,00,000 INR 1,25,000 + 25% above INR 12,50,000
    Above INR 15,00,000 INR 1,87,500 + 30% above INR 15,00,000

Cess: An additional 4% Health and Educational Cess will be applicable to the tax amount calculated in the above 3 categories.
Surcharge: 10% of Income Tax when total income exceeds INR 50,00,000 and 15% of income tax when total income exceeds INR 1,00,00,000.
Rebate: An individual (resident) is entitled to rebate under section 87A if his total income does not exceed INR 5,00,000. The amount of rebate shall be 100% of income-tax or INR 12,500, whichever is less. 

Income Tax slab rates for partnership firms

A partnership firm that includes LLP is taxable at 30%. 
Surcharge: A surcharge of 12% is payable if total income exceeds INR 1 Cr. 
Cess: An additional 4% surcharge will be taxable for Health and Education Cess.

ITR for Salaried Individuals
CA Assisted Income Tax Return filing for individuals having salary, one house property & income from other sources.
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ITR for Salaried Individuals
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Income Tax Rates for Companies

Particulars  Tax Rates
Existing Companies   22%
Newly Incorporated Companies (Manufacturing)  15%

The tax rate for foreign companies is 40%. 
Cess: An additional 4% Health and Educational Cess will be applicable to the tax amount.
Surcharge: A surcharge of 12% is payable if total income exceeds INR 1 Cr. 

Income Tax slab rates for AOP/BOI/Any other artificial juridical person

 

Net Income Range Income Tax Rates
Up to INR 2,50,000 NIL 
INR 2,50,000 to INR 5,00,000  5%
INR 5,00,000 to INR 10,00,000 20%
Above INR 10,00,000 30%

Cess: An additional 4% Health and Educational Cess will be applicable to the tax amount calculated above.
Surcharge: 10% of Income Tax when total income exceeds INR 50,00,000 and 15% of income tax when total income exceeds INR 1,00,00,000.

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Income Tax slab rates for co-operative society

Net Income Range Income Tax Rate
Up to INR 10,000 10%
INR 10,000 to INR 20,000 20%
Above INR 20,000 30%

Cess: An additional 4% Health and Educational Cess will be applicable to the tax amount calculated above.
Surcharge: 12% of tax is applicable when total income exceeds INR 1 Cr.

Income Tax rates for local authority

The local authority is taxable at 30%. 
Cess: An additional 4% Health and Educational Cess will be applicable to the tax amount calculated above.
Surcharge: 12% of Income Tax when total income exceeds INR 1 Cr.

What is Surcharge?

A surcharge is an additional charge on Income Tax. It was introduced with a principal that the rich should contribute more by way of tax, as compared to the poor.

Earlier the surcharge was applicable only on corporate assessments. In Budget 2013, a 10% surcharge was introduced on rich individuals having income greater than INR 1 crore. This rate was subsequently increased to 12% in budget 2015 and further to 15% in budget 2016.

How to Calculate Surcharge?

A Surcharge is calculated on total income tax and not on total income. Criteria for income above INR 1 crore is only to check the applicability of Surcharge. Also, note that if a surcharge is applicable then education cess will be calculated on the total amount of income tax plus a surcharge. Let’s look at a scenario to understand.

Particulars Taxpayer A Taxpayer B
Total taxable income 97,00,000 1,01,00,000
Total tax payable as per Income Tax Slab Rate 27,35,000 37,25,000
Applicability of Surcharge No Yes
Surcharge @ 15% NA 5,58,750
Total tax plus Surcharge 27,35,000 42,83,750
Education Cess @ 2% and higher education cess @ 1% 82,050 1,28,510
Total tax payable 28,17,050 44,12,260

 

Surcharge Rates

The given tax rate slabs are applicable to any individual, HUF or artificial judicial person.

Nature of Income Up to INR 50L  More than 50L and up to 1 Cr. More than 1 Cr. and up to  2 Cr.  More than 2 Cr. and up to 5 Cr. More than 5 Cr. and up to 5 Cr.  More than 5 Cr. and up to 10 Cr. More than 10 Cr.
Short term capital gain covered under section 111A NIL 10% 15% 15% 15% 15% 15%
Long term capital gain covered under section 112A NIL 10% 15% 15% 15% 15% 15%
Any other Income  NIL 10% 15% 25% 15% 37% 37%

 

Income Tax Slab Rates FY 2020-21 (AY 2021-22)

Income tax slab rates for individuals (for resident or non-resident below the age of 60 years):

 

Income Range  Current Income Tax Rates New Income Tax Rates
Up to INR 2,50,000 NIL NIL
INR 2,50,001 to INR 5,00,000 5% 5%
INR 5,00,001 to INR 7,50,000 20% 10%
INR 7,50,001 to INR 10,00,000 20% 15%
INR 10,00,001 to INR 12,50,000 30% 20%
INR 12,50,001 to INR 15,00,000 30% 25%
Above INR 15,00,000 30% 30%

 

Income Tax slab rates for senior citizens (for individuals who are of the age of 60 years or more but less than the age of 80 years):

Existing Tax Regime New Tax Regime u/s 115BAC
Income Range Tax Slab Rates Income Range Tax Slab Rates
Up to INR 3,00,000 NIL  Up to INR 2,50,000 NIL
INR 3,00,001 to INR 5,00,000  5% INR 2,50,001 to INR 5,00,000  5%
INR 5,00,001 to INR 10,00,000 20% INR 5,00,001 to INR 7,50,000 10%
Above INR 10,00,000 30% INR 7,50,001 to INR 10,00,000 15%
    INR 10,00,001 to INR 12,50,000 20%
    INR 12,50,001 to INR 15,00,000 25%
    Above INR 15,00,000 30%

Income tax slab rates for Super Senior citizens (for individuals of the age of 80 years and above):

Income Range  Current Income Tax Rates
Up to INR 5,00,000 NIL 
INR 5,00,001 to INR 10,00,000 20%
Above INR 10,00,000 30%

 

Income Range New Income Tax Rates
Up to INR 2,50,000 NIL
INR 2,50,001 to INR 5,00,000  5%
INR 5,00,001 to INR 7,50,000 10%
INR 7,50,001 to INR 10,00,000 15%
INR 10,00,001 to INR 12,50,000 20%
INR 12,50,001 to INR 15,00,000 25%
Above INR 15,00,000 30%

Cess: An additional 4% Health and Educational Cess will be applicable to the tax amount calculated in the above 3 categories.
Surcharge: 10% of Income Tax when total income exceeds INR 50,00,000 and 15% of income tax when total income exceeds INR 1,00,00,000.
Rebate: An individual (resident) is entitled to rebate under section 87A if his total income does not exceed INR 5,00,000. The amount of rebate shall be 100% of income-tax or INR 12,500, whichever is less.

FAQs

What is Surcharge?

It is the amount that is levied upon the tax payable and not on the income that is generated. In other words, it is a tax that is levied upon the general tax.

For example: if an individual has generated an income of INR 100 over which the tax payable is INR 30, then the surcharge would be 10% of INR 30.

How to calculate rebate u/s 87A?

1. Calculate your Gross Total Income (GTI)
2. Reduce the deductions under sections 80C to 80U
3. Calculate your Tax Payable as per Income Tax slabs
4. Deduct the amount of rebate allowed

What is the difference between the Financial Year and Assessment Year?

The Financial Year is the year which begins on 1st April and ends on 31st March. It is the year in which income is earned by the taxpayer. The Assessment Year is a year immediately following the Financial Year. The taxpayer needs to file the Income Tax Return (ITR) not in the year in which he/she earns the income but after the end of that year i.e, in the assessment year.  

Difference Old Tax Regime vs New Tax Regime

The Finance Minister, Nirmala Sitharaman had presented the Budget 2020 on the 1st of February 2020. Finance Minister had many major announcements including the changes in the current tax regime with respect to tax slab rates and other major changes.

In order to simplify taxes and remove the dependency of citizens on tax consultants, the FM has introduced a new tax regime. The new regime comes with reduced income tax slab rates and the removal of rebates and exemptions.

The new tax regime is available only to individuals and HUF. Also, as of now, individuals/Hindu Undivided Family can choose between the old tax regime and the new tax regime in the upcoming Assessment Year. The major difference between both of these tax regimes is income tax slab rates as well as the ability to claim exemptions and deductions.

Old & New Tax Slab Rates

Under the New Tax Regime, 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’ and ‘Old Income Tax Regime’ are as follows:

Income Range Rates as per Old Tax Regime Rates as per New Tax Regime
Up to INR 2,50,000 Nil Nil
INR 2,50,000 – 5,00,000 5% 5%
INR 5,00,000 – 7,50,000 20% 10%
INR 7,50,000 – 10,00,000 20% 15%
INR 10,00,000 – 12,50,000 30% 20%
INR 12,50,000 – 15,00,000 30% 25%
Above INR 15,00,000 30% 30%

Moreover, The Finance Minister announced that under the new tax regime, the basic tax exemption limit will remain the same for all assesses including the senior citizens. Therefore, in case you opt for the new regime, there will be no higher tax exemption for the senior and super senior citizens.

Age New Regime Exemption Limit Old Regime Exemption Limit
People Below 60 Years of Age INR 2,50,000 INR 2,50,000
People Between 60 to 80 Years of Age INR 2,50,000 INR 3,00,000
People Above 80 Years of Age INR 2,50,000 INR 5,00,000

The comparison can also be understood with the help of below chart:

Changes in Deductions and Exemptions under the New Tax Slab

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 stayed and what deductions have been removed:

What is not covered in New Tax Regime What is covered in New Tax Regime

Leave Travel Allowance 

Income from Life Insurance

House rent allowance

Money received as a scholarship for education, etc.

Standard deduction of Rs 50,000 that was available for salaried individuals

Leave encashment on retirement

Deductions available under Section 80TTA/TTB

Agricultural Income

Entertainment allowance deduction and professional tax ( For government employees)

Standard Deduction on Rental Income

Tax relief on interest paid on home loan for self-occupied or vacant property u/s 24

Retrenchment compensation

Deduction of INR 15000 allowed from family pension

VRS proceeds up to INR 5 lakhs

Tax-saving investment deductions under Chapter VI-A (80C,80D, 80E,80CCC, 80CCD, 80DD, 80DDB,, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc) (Except, deduction under Section 80CCD(2)

Death cum retirement benefit

Changes under Income from House Property in the New Tax Slab

Changes in Deductions on Home Loan interest – Section 24(b)

No claim of home loan Interest on Self Occupied House Property: Individuals who have taken a home loan on their self-occupied property and are paying interest on it, can not claim that interest deduction under Section 24(b).

A claim of home loan Interest on Rental House Property: Under the new income tax regime, individuals can claim interest on home loans for let-out property only up to the amount of their rental income declared under the head house property income.

The setting off of losses from house property income

As per the new income tax regime, 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.

Deduction for first-time Homebuyers

Deduction u/s 80EE & Section 80EEA gives relief on interest paid on home loans for first time home buyers. This deduction is no longer available for taxpayers following the new income tax regime.

Deductions for business expenditure under New Tax Slab

Following deductions and exemptions not allowed for business income:

  1. Additional depreciation under section 32.
  2. Investment allowance under section 32AD
  3. Sector-specific business deductions under section 33AB and 33ABA
  4. Expenditure on scientific research under section 35
  5. Capital expenditure under section 35AD
  6. Exemption under section 10AA for SEZ units

Setting-Off Business/Profession Loss

In the case of a business income, an individual/ HUF cannot set-off the brought forward business loss or unabsorbed depreciation. Further, they cannot carry forward these B&P losses and unabsorbed depreciation relating to deductions/exemptions withdrawn under clause (i) of sub-section (2) of section 115BAC.

In simple terms, you can carry forward short-term & long-term capital losses, derivatives trading losses in the new tax regime. Since, only the losses relating to deductions & exemptions withdrawn under clause (i) of sub-section (2) of section 115BAC cannot be set off or carried forward, for eg: House property losses, additional deprication, etc.

If an individual/HUF opts for new tax regime for FY 2020-21, then form 10-IE has to be filed to inform the tax department that one is choosing the new tax regime. As per the income tax laws, an individual having business income shall submit this form before the due date of filing ITR i.e. July 31 (unless extended by the government). For salaried individuals, the form can be submitted before/at the time of ITR filing, even if ITR is filed after the due.
Tip
If an individual/HUF opts for new tax regime for FY 2020-21, then form 10-IE has to be filed to inform the tax department that one is choosing the new tax regime. As per the income tax laws, an individual having business income shall submit this form before the due date of filing ITR i.e. July 31 (unless extended by the government). For salaried individuals, the form can be submitted before/at the time of ITR filing, even if ITR is filed after the due.

Comparison of Old and New Tax Slab

There cannot be a straight answer to the question that which tax regime is better to opt for. It depends on each taxpayer’s situation and financial position.
Looking at the reduction in tax rates new system looks better but due to non-availability of various deductions or exemptions, it is advisable to do comparative evaluation and analysis under both the regimes before you opt for the new regime or decide to continue with the old one.

Here are some examples of how much tax a person must pay in the old and new regime without any exemptions for the same salary.

ITR for Salaried Individuals
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A PERSON WITH AN ANNUAL INCOME OF INR 7,50,000

Suppose a person is having income of INR 7,50,000 which includes INR 3,50,000 from Salary, INR 2,00,000 is profit from trading, INR 50,000 is from Interest on FDs and remaining INR 1,50,000 from Rental Income

Income Old Regime Tax Rate Old Regime Tax Amount New Regime Tax rate New Regime Tax Amount
Up to INR 2,50,000 0% 0 0% 0
From INR 2,50,000 – 5,00,000 5% INR 12,500 5% INR  12,500
From INR 5,00,000 – 7,50,000 20% INR 50,000 10% INR 25,000
Total Tax   INR 62,500   INR 37,500
Cess 4% INR 2,500 4% INR  1,500
Annual tax payable   INR 65,000   INR 39,000

However, if the person earning INR. 7,50,000 claims some exemptions, the tax liabilty will change accordingly-

Deduction Deduction Amount Old Regime Tax Amount with Exemptions New Regime Tax Amount
Standard Deduction INR 50,000    
Section 80C Deduction INR 1,50,000    
Section 80D Deduction INR 20,000    
Net Taxable Amount   INR 5,30,000 INR 7,50,000
Total Tax   INR 18,500 INR 37,500
Cess 4%   INR 740 INR 1,500
Net Tax Payable (annually)   INR 19,240 INR  39,000

A PERSON WITH AN ANNUAL INCOME OF INR 10,00,000

Suppose a person is having income of INR 10,00,000 which includes INR 6,00,000 from Salary, INR 2,00,000 is profit from trading, INR 50,000 is from Interest on FDs and remaining INR 1,50,000 from Rental Income

 

Income Old Regime Tax Rate Old Regime Tax Amount New Regime Tax rate New Regime Tax Amount
Up to INR 2,50,000 0% 0 0% 0
From INR 2,50,000 – 5,00,000 5% INR 12,500 5% INR  12,500
From INR 5,00,000 – 7,50,000 20% INR 50,000 10% INR 25,000
From  7,50,000 to INR 10,00,000 20% INR 50,000 15% INR 37,500
Total Tax   INR 1,12,500   INR 75,000
Cess 4% INR 4,500 4% INR  3,000
Annual tax payable   INR 117,000   INR 78,000

However, if the person earning INR. 10,00,000 claims some exemptions, the tax amount will change accordingly-

Deduction Deduction Amount Old Regime Tax Amount with Exemptions New Regime Tax Amount
Standard Deduction INR 50,000    
Section 80C Deduction INR 1,50,000    
Section 80D Deduction INR 20,000    
Net Taxable Amount   INR 7,80,000 INR 10,00,000
Total Tax   INR 68,500 INR 75,000
Cess 4%   INR 2,740 INR 3,000
Net Tax Payable (annually)   INR 71,240 INR  78,000

Moreover, Tax on incomes taxable at special rate such as long term and short term capital gains will be same in new as well as old tax regime.

Income Tax Calculator
Calculate income tax liability for FY 2020-21. Compare tax liability as per New vs Old Tax Regime.
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Income Tax Calculator
Calculate income tax liability for FY 2020-21. Compare tax liability as per New vs Old Tax Regime.
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This table below can give a broad idea about tax slab based on income range:

Pros & Cons of New Tax Regime

  • The pros of the new regime are as follows:
    • Reduced tax rates and compliance: The new regime provides for concessional tax rates. Further, as most of the exemptions and deductions are not available, the documentation required is lesser and filing tax is simpler.
    • No need to lock-in funds in the prescribed instruments for the specified period: 
      • Under the new regime, the benefit of deduction/allowances would not be the criteria for availing the tax exemption. This may be helpful for those categories of taxpayers who may not subscribe to the specified modes of investments, as most of the investments have a lock-in period, before which it cannot be withdrawn. They can invest in open-ended mutual funds/instruments/deposits, which provides them good returns as well as the flexibility of withdrawal as well.
    • Increased liquidity in the hands of the taxpayer: 
      • The reduced tax rate would provide more disposable income to the taxpayer, who could not invest in specified instruments due to certain financial or other personal reasons.
    • Flexibility of customizing the investments: 
      • The existing tax regime restricts the investment choices for the taxpayer as they have to make the investments only in the instruments specified. However, the new regime provides taxpayers with the flexibility of customizing their investment choices.
  • The cons of the new regime are as follows:
    • Non-availability of certain specified tax deductions: 
      • The new tax regime does not allow the taxpayer to avail certain specified deductions.
    • Discourages the ‘Savings’ Culture:
      • Since investment schemes will not provide any tax benefits under 80C.

FAQs

Can I choose a new tax regime at the time of filing ITR, if I have opted for the old tax regime with my employer?

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.”

Can I opt out of New Scheme once opted in?

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.

What if I forget to fill the new form?

If an individual forgets to fill the new form i.e. Form 10-IE, at the time of filing ITR, then he/she may be disallowed the tax rates available under the new tax regime. The tax department will calculate his/her income tax liability based on the existing/old tax regime.

I have incurred short-term and long-term capital losses. Also, I have losses from trading in derivatives. Can I carry forward those in the new tax regime?

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.

I am having two rented house properties. Can I claim interest on a loan taken for one property against rental income earned from both of them under the new tax regime?

Yes, you can claim interest deduction against rental income earned from both of them under the new tax regime.