New Tax Computation Regime (Sec 115BAC) – Some FAQs

1. Applicability of the New Tax Regime

The new tax regime introduced in budget of 2020 under section 115BAC shall be applicable as follows:

• Effective from AY 21-22 i.e. FY 20-21
• The section covers Individual/HUF
• Both residents and non-residents are covered
• No special slabs are mentioned for senior /super senior citizens

2. Rates Applicable under the New Tax Regime

A comparison between tax rates of old and new regime:

**No special slabs are mentioned for senior /super senior citizens

3. Will there be a change in Special Rates for taxation of capital gain and winnings?

Special Rates for taxation of capital gain and winnings shall remain same as before:

• LTCG u/s 112 – 20%
• LTCG u/s 112A – 10%
• STCG u/s 111A – 15%
• Winnings – 30%

4. Whether Rebate u/s 87A is available in the new regime?

Tax rebate u/s 87A can be claimed, if the total income does not exceed Rs 5L. The maximum rebate u/s 87A is Rs 12,500.

5. Benefits not available to Assessee-opting for New Scheme:

 i. Salaried Employee cannot claim the following deductions/allowance under the New Regime:

• Standard Deduction
• Professional tax paid
• Entertainment allowance (in case of govt employees)
• Leave travel Concession
• House Rent Allowance
• Minor child income Allowance
• Helper Allowance
• Children Education Allowance
• Other Special Allowances provided u/s 10(14) except:

1. Transport allowance granted to a handicapped employee
2. Conveyance allowance
3. Any allowance granted to meet the cost of travel on tour or on transfer
4. Daily allowance

• Interest paid on home loan on self-occupied house
• All deductions provided under Chapter VIA (except 80CCD(2) and 80JJAA)
• Deduction from family pension under Clause (iia) of Section 57

  ii. Individual/HUF having Income from Business and Profession cannot claim the following deductions/allowance sunder the New Regime:

• Exemption to SEZ u/s. 10AA
• Investment allowance under section 32AD
• Sector-specific business deductions under section 33AB and 33ABA
• Expenditure on scientific research under section 35
• Capital expenditure under section 35AD
• Exemption under section 10AA for SEZ units
• Expenditure incurred towards notified agricultural extension project under section 35CCC
• Additional depreciation u/s. 32(iia)
• Carried forward or unabsorbed depreciation of earlier years
• Interest paid on home loan on self-occupied house Maximum deduction Rs. 2,00,000
• All deductions provided under Chapter VIA (except 80CCD(2) and 80JJAA)
• Deduction from family pension under Clause (iia) of Section 57

6. Unabsorbed Depreciation and business loss from previous regime

As provided in Sec 115BAC, additional depreciation or brought forward business loss cannot be setoff in the new tax regime even if it pertains to previous years.

Example – Rs 10L is the unabsorbed depreciation of which Rs 6L is normal depreciation and Rs 4L is additional depreciation. While, Rs.6L can be setoff but Rs. 4L needs to be added back to the WDV while computing the Income from Business and Profession.

7. What Benefits are still available under New Regime?

Benefits still available under new regime:

• Transport allowances in case of a specially abled person.
• Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.
• Any compensation received to meet the cost of travel on tour or transfer.
• Daily allowance received to meet the ordinary regular charges or expenditure you incur on account of absence from his regular place of duty.
• Interest received on post office saving account u/s 10(15)(i) Max Rs. 3,500
• Gratuity received from employer Maximum Rs. 20 Lacs
• Amount received from LIP on maturity u/s 10(10D)
• Interest on PPF under Sec 10(11)
• Employer contribution in NPS or EPF up to 12% of salary & Interest on EPF up to 9.5% P.A.
• Interest and maturity amount of PPF or Sukanya Smriddhi Yojna

8. How to choose whether to opt for Old or New Regime?

A comparison needs to be done on case-to-case basis, in order to decide which regime to opt for. The following table is an attempt to broadly classify which regime maybe suitable to the assessee:

*Considering exemption under Sec 80C, 80CCD(1B), Sec 80D and HRA of ~ Rs. 2.6L

9. When should an Assessee determine whether to opt for New Regime or Old Regime?

a. An Assessee needs to determine the regime before filing the Income Tax Return.

b. An Assessee who is an employee needs to provide a declaration to the employer             regarding the regime being chosen by them.

• The employee cannot change their choice anytime during the financial year.
• TDS shall be deducted as per the declaration provided by the employee. If no declaration is provided, it can be assumed that the employee has opted for the old regime.
• Employee shall not be bound by the declaration and can change the regime before filing of Income tax return.

c. For Assessee having Business Income– Once the Assessee opts for Sec 115BAC, he will have to continue with the new regime. It can be withdrawn only once in a previous year, other than the previous year it was exercised in. Assessee can never go back to Sec 115BAC, except when such an Individual/HUF cease to have any business income.

10. Can credit of Alternate Minimum Tax (AMT) paid in prior year be taken under new regime?

Tax credit for Alternative Minimum Tax paid in a prior year cannot be claimed in the new regime.

Authored by – CA Anushka Saraogi

Sec 115BAC – New Regime for Tax Computation