With the introduction of Section 115BAC, Finance Act 2020 introduced a new tax regime for individuals and HUF. The new tax regime comes with a lower rate in return for the taxpayers to waive off certain deductions. In this article, we shall discuss the basics of the new tax regime, why it has been introduced, as well as the new section introduced. Since taxpayers are offered a choice between the new regime and the existing one, we shall also compare it with the old one to make it simpler for the taxpayers to decide which one to choose.
Table of Contents
Basics of the New Tax Regime
An assessee is offered a choice between the new tax regime and the existing one. Therefore, to make it more systematic for the Income Tax Department, Form 10-IE has been introduced. Taxpayers opting for the new regime should inform the Income Tax Department beforehand as well. The due dates for filing of Form 10-IE are as follows:
| Assessee | Due Dates |
| Assessee having business income | Before due date of filing ITR, i.e., 31st July or as extended by the government |
| Assessee having salary income | Before or at the time of filing ITR |
Details To Be Furnished in Form 10-IE
Individual and HUF are required to submit the following details in Form 10-IE:
- Name
- Address
- PAN
- Date of Birth
- Financial Year
- Nature of Business or Profession
- In case of withdrawal of option – Whether new tax regime has been opted in any previous year and now being withdrawn.
Slab Rates – Old & New Tax Regime
| Slab (in Rs) | Old Tax Rate | New Tax Rate |
| 0-250000 | 0% | 0% |
| 250000-500000 | 5% | 5% |
| 500000-750000 | 20% | 10% |
| 750000-1000000 | 20% | 15% |
| 1000000-1250000 | 30% | 20% |
| 1250000-1500000 | 30% | 25% |
| >1500000 | 30% | 30% |
Apart from the above tax rate, health and education cess @4% is also charged.
Deductions and Exemptions – Not Allowable Under New Tax Regime
For those managing a Hindu Undivided Family, understanding how to navigate tax planning specifically for HUFs is crucial. We’ve prepared a comprehensive guide that explores strategies and tax benefits specifically tailored to HUFs, which can be further applied to enhance your tax planning under the new regime. For more detailed insights and examples, visit our detailed guide on Tax Planning for HUF. This resource will help you maximize your tax savings and make informed decisions about structuring and managing HUF finances.
The following is the list of deductions that the taxpayers can not claim in order to avail the benefit of lower tax rate under the new tax regime:
- The standard deduction
- Professional tax
- Entertainment allowance
- Leave travel allowance
- House Rent allowance
- Minor child income allowance
- Children education allowance
- Food coupons
- Helper allowance
- Special compensatory allowance
- Border area/tribal area allowance
- Transport/Travelling allowance
- Uniform allowance
- Reimbursement of medical expenditure
- Hostel expenditure reimbursed to the employee
- Underground allowance to mineworkers
- Interest on housing loan of SOP
- Deduction of family pension income
- All deductions under Chapter VI A except section 80CCD(2) & 80JJAA
- Deduction of depreciation u/s 32
- Deduction with respect to scientific research u/s 35AD
Deductions and Exemptions – Allowable Under New Tax Regime
However, the taxpayer can claim the following deductions:
- Deduction under Section 80CCD(2) & Section 80JJAA
- Exemption concerning gratuity u/s 10(10)
- Exemption of commuted pension u/s 10(10A)
- Interest on housing loan of LOP
- Exemption on maturity proceeds of Life Insurance u/s 10(10D)
Which To Choose – Old or New Tax Regime?
It is always advisable to compare the tax calculation as per both and then choose. However, analysis of old and new tax regimes is made through the following illustration:
| Gross Total Income | Deduction And Exemption | Tax Calculation As Per Old Regime | Tax Calculation As Per New Regime |
| <250000 | – | 0 | 0 |
| 450000 | 200000 | 0 | 0 |
| 600000 | 200000 | 0 | 23400 |
| 800000 | 200000 | 33800 | 46800 |
| 1100000 | 200000 | 96200 | 98800 |
| 1400000 | 200000 | 179400 | 169000 |
| 1800000 | 200000 | 304200 | 288600 |
Thus, we see that it depends on the income slab as well as the number of deductions whether the new scheme is beneficial or old. Also, kindly note that interest under Section 234 A, B, C, and rebate under Section 87A is applicable on both schemes.
Conclusion
The taxpayers should choose between the old and new tax schemes only after making the analysis. Also, it is advisable to seek professional opinions whenever necessary.
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FAQs
The new tax regime offers lower income tax rates in exchange for giving up most deductions and exemptions. Taxpayers can choose between this regime and the existing one.
The tax rates range from 5% for income between ₹2.5 lakh to ₹5 lakh, up to 30% for income above ₹15 lakh.
Deductions such as the standard deduction, HRA, LTA, and most Chapter VI-A deductions (except sections 80CCD(2) and 80JJAA) are not allowed.
Yes, deductions under Sections 80CCD(2) and 80JJAA, as well as exemptions like gratuity and commuted pension, are still available.
It depends on your income level and the deductions you are eligible for. Comparing both regimes with your specific income and deductions will help determine which is more beneficial.
You need to file Form 10-IE before the due date of your Income Tax Return if opting for the new regime.
