Section 115BAC has been inserted in the Finance Act 2020 in the recent budget. This allows the option to Individuals & HUF to avail concessional rate of income tax with certain conditions pertaining to claiming deductions & other concessions. The other existing option will also continue.
This comes into effect from April 2020 (i.e. FY:2020-21 / AY:2021-22).
Since the Employers need to deduct tax (TDS) on salaries, CBDT vide its Circular No. C1 of 2020 dated 13/04/2020 has clarified the procedure and rules related exercising either of the two options for calculating TDS. This is summarized as under:
- The Employee needs to inform the Employer that for the financial year, he would be opting for the computation as per the new Section 115BAC. On receiving this intimation, the Employee will deduct tax (TDS) on salary accordingly.
- If no intimation is received from the Employee, the existing system of TDS on salary for that employee shall continue.
- Once the intimation is made by the Employee to the Employer to opt for tax computation under Section 115BAC, this cannot be changed during the course of the financial year. However, this can be changed in the subsequent financial year.
- At the time of filing tax returns, the employee has the option to select either of the two options to compute the tax liability. This is irrespective of the option used by the Employer for TDS purposes.
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The concessional tax slabs as per Section 115BAC is as under:
| Income Slab In Rupees (Lakhs) | Tax Rate (%) Section 115BAC | Tax Rate (%) Existing System |
| Less than 5.00 | Exempted | Exempted |
| 5.00 – 7.50 | 10% | 20% |
| 7.50 – 10.00 | 15% | 20% |
| 10.00 – 12.50 | 20% | 30% |
| 12.50 – 15.00 | 25% | 30% |
| Above 15.00 | 30% | 30% |
Note: The taxable income as computed under the provisions of Section 115BAC is without Deductions and other Reliefs.
Click Here to view the original circular