The Finance Act 2020 launched the brand new concessional tax regime for Individual and HUF taxpayers u/s 115BAC of the Income Tax Act, 1961 (hereinafter known as ‘the IT Act’)and accordingly the mentioned new tax regime had been made efficient from FY 2020-21 (AY 2021-22) which supplies a person and HUF an choice to pay revenue tax underneath part 115BAC of the IT Act concessional slab charges topic to sure circumstances.
Steps to compute tax legal responsibility underneath new tax regime for FY 2022-23:
(i) Compute the Gross Income (together with Income from all heads corresponding to Salary, House Property, Capital Gains, Other Sources)
(ii) Avail the mandatory exemptions and deduction. In case the taxpayer is choosing the brand new concessional tax regime, he can not avail the next tax exemptions and deductions underneath the next sections:
· 10(13A) – House Rent Allowance
· 10(5) – Leave journey Concession
· 10(14) – Special allowance detailed in Rule 2BB (corresponding to youngsters training allowance, hostel allowance, and so forth. apart from transport allowance, journey allowance, day by day allowance).
· 10(17) – Allowances obtained by MP, member of state legislature, and so forth.
· 10(32) – Clubbing advantage of Rs. 1500 per minor baby
· 10AA – Deduction for SEZ unit
· Section 16 – Standard Deduction of Rs. 50000, Entertainment Allowance, Professional Tax
· 24(b) – Interest on borrowed mortgage for a Self Occupied property or Vacant Property u/s 23(2)
· 32(1)(iia) – Additional Depreciation
· 32AD – Investment Allowance for funding in Andhra Pradesh / Telangana / Bihar / West Bengal
· 33AB – Tea / Coffee / Rubber Development
· 33ABA – Site Restoration Fund
· 35(2AA) – Deduction for Payment to National Laboratory or University or IIT
· 35AD – Deduction in respect of specified enterprise
· 35CCC – Expenditure on agricultural extension undertaking
· 57(iia)- Family pension
· Any provision of chapter VI – A – part 80C, 80D and so forth. However, Section 80CCD(2) (employer contribution on account of worker in a notified pension scheme) will be claimed.
The taxpayer can not set off any introduced ahead loss or unabsorbed depreciation attributable to the aforementioned deductions.
(iii) The taxpayer ought to compute the tax legal responsibility as per the charges talked about beneath for brand new tax regime and accordingly compute the tax underneath the brand new concessional tax regime u/s 115BAC of the IT Act.
Total IncomeIncome tax charges underneath previous tax regimeIncome tax charges underneath new tax regimeUpto Rs. 2,50,000*NilNilRs. 2,50,001 – Rs. 5,00,0005% (Note 1)5% (Note 1)Rs. 5,00,001 – Rs. 7,50,000Rs. 12,500 + 20% of complete revenue exceeding Rs. 5,00,000Rs. 12,500 + 10% of complete revenue exceeding Rs. 5,00,000Rs. 7,50,001 – Rs. 10,00,000Rs. 62,500 + 20% of complete revenue exceeding Rs. 7,50,000Rs. 37,500 + 15% of complete revenue exceeding Rs. 7,50,000Rs. 10,00,001 – Rs. 12,50,000Rs. 1,12,500 + 30% of complete revenue exceeding Rs. 10,00,000Rs. 75,000 + 20% of complete revenue exceeding Rs. 10,00,000Rs. 12,50,001 – Rs. 15,00,000Rs. 1,87,500 + 30% of complete revenue exceeding Rs. 12,50,000Rs. 1,25,000 + 25% of complete revenue exceeding Rs. 12,50,000Above Rs. 15,00,000Rs. 2,62,500 + 30% of complete revenue exceeding Rs. 15,00,000Rs. 1,87,500 + 30% of complete revenue exceeding Rs. 15,00,000
Note 1: Rebate u/s 87A is relevant in case of latest tax regime and must be availed for the quantity of tax payable or Rs. 12,500, whichever is lesser, leading to NIL tax legal responsibility supplied the taxpayer’s complete revenue is upto Rs. 5,00,000
Note 2: Any resident senior citizen whose age is greater than 60 years however lower than or equal to 80 years has fundamental exemption restrict of Rs. 3,00,000. Further, any one that is non-resident particular person or HUF or tremendous senior citizen whose age is greater than 80 years has fundamental exemption restrict of Rs. 5,00,000.
(iv) Increase the tax computed in step (iii) by Health & Education cess @ 4% and relevant surcharge.
(v) The taxpayer must also compute the tax as per the conventional/ previous tax regime (as per the charges talked about above) with the intention to verify the helpful of the 2 tax regimes.
Further, any taxpayer availing the choice underneath helpful tax regime must consider the next:
1. The particular person taxpayer availing the choice u/s 115BAC could be required to file Form 10-IE together with the Income Tax return to be filed u/s 139(1) of the IT Act.
2. The Individual taxpayer could select whether or not or to not train such possibility on a year-on-year foundation. However, in case of any taxpayer deriving enterprise revenue, such possibility as soon as exercised can’t be withdrawn besides in circumstances the place the taxpayer ceases to have enterprise revenue.
3. Individual taxpayers availing the concessional tax regime u/s 115BAC wouldn’t be subjected to Alternate Minimum Tax (AMT) provisions. Accordingly, any introduced ahead AMT credit score can’t be set off in opposition to revenue u/s 115BAC of the IT Act.
Which tax regime one ought to select?
Gopal Bohra , Partner , N.A. Shah Associates mentioned “Currently the brand new tax regime will not be broadly opted by the taxpayers particularly those that are paying curiosity on self-occupied home property and makes investments eligible for deduction underneath part 80C/80CCD and 80D. The fundamental exemption restrict underneath each regimes is Rs. 2,50,000/- but when one provides different exemptions which can be found underneath the previous regime one won’t pay tax on revenue approx. upto Rs. 7,50,000/- (i.e. fundamental exemption Rs. 2.50 lacs plus curiosity on self-occupied home Rs. 2 lacs plus deduction u/s 80C with 80CCD Rs. 2 lacs plus approx. Rs. 1 lac comprising of the usual deduction, Mediclaim premium, curiosity on saving 80TTA/80TTB and so forth.) underneath the previous regime whereas underneath the brand new regime the tax exemption is of solely fundamental exemption. The majority of the taxpayers who’re incomes revenue above say Rs. 10 lacs each year can have many of the investments eligible for exemptions talked about above, for them there isn’t any incentive to maneuver to the brand new tax regime. Unless the federal government enhance the fundamental exemption restrict underneath the brand new tax regime to carry parity between the 2 regimes, a taxpayer would proceed with the previous, difficult tax regime with a number of tax exemption choices.”
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