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Income Tax Rates Under Section 115BAC

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21 views3 pages

Income Tax Rates Under Section 115BAC

Uploaded by

Gaurav
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

20/07/2024, 11:01 Income Tax Department

Tax on income of individuals 72[and Hindu undivided family].


115BAC. (1) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter,
the income-tax payable in respect of the total income of a person, being an individual or a Hindu
undivided family, for any previous year relevant to the assessment year beginning on or after the 1st day
of April, 2021 73[but before the 1st day of April, 2024], shall, at the option of such person, be computed at
the rate of tax given in the following Table, if the conditions contained in sub-section (2) are satisfied,
namely:—
TABLE
Sl. No. Total income Rate of tax
(1) (2) (3)
1. Upto Rs. 2,50,000 Nil
2. From Rs. 2,50,001 to Rs. 5,00,000 5 per cent
3. From Rs. 5,00,001 to Rs. 7,50,000 10 per cent
4. From Rs. 7,50,001 to Rs. 10,00,000 15 per cent
5. From Rs. 10,00,001 to Rs. 12,50,000 20 per cent
6. From Rs. 12,50,001 to Rs. 15,00,000 25 per cent
7. Above Rs. 15,00,000 30 per cent:
Provided that where the person fails to satisfy the conditions contained in sub-section (2) in any previous
year, the option shall become invalid in respect of the assessment year relevant to that previous year and
other provisions of this Act shall apply, as if the option had not been exercised for the assessment year
relevant to that previous year:
Provided further that where the option is exercised under clause (i) of sub-section (5), in the event of
failure to satisfy the conditions contained in sub-section (2), it shall become invalid for subsequent
assessment years also and other provisions of this Act shall apply for those years accordingly.
Following sub-section (1A) shall be inserted after sub-section (1) of section 115BAC by the Finance
Act, 2023, w.e.f. 1-4-2024:
(1A) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, the
income-tax payable in respect of the total income of a person, being an individual or Hindu undivided
family or association of persons (other than a co-operative society), or body of individuals, whether
incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of
section 2, other than a person who has exercised an option under sub-section (6), for any previous year
relevant to the assessment year beginning on or after the 1st day of April, 2024, shall be computed at the
rate of tax given in the following Table, namely:—
TABLE
Sl. No. Total income Rate of tax
(1) (2) (3)
1. Upto Rs. 3,00,000 Nil
2. From Rs. 3,00,001 to Rs. 6,00,000 5 per cent
3. From Rs. 6,00,001 to Rs. 9,00,000 10 per cent

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20/07/2024, 11:01 Income Tax Department

4. From Rs. 9,00,001 to Rs. 12,00,000 15 per cent


5. From Rs. 12,00,001 to Rs. 15,00,000 20 per cent
6. Above Rs. 15,00,000 30 per cent
(2) For the purposes of sub-section (1), the total income of the individual or Hindu undivided family shall
be computed,—
(i) without any exemption or deduction under the provisions of clause (5) or clause (13A) or prescribed
under clause (14) (other than those as may be prescribed for this purpose) or clause (17) or clause
(32), of section 10 or section 10AA or section 16 or clause (b) of section 24 (in respect of the
property referred to in sub-section (2) of section 23) or clause (iia) of sub-section (1) of section 32
or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-
clause (iii) of sub-section (1) or sub-section (2AA) of section 35 or section 35AD or section 35CCC
or clause (iia) of section 57 or under any of the provisions of Chapter VI-A other than the provisions
of sub-section (2) of section 80CCD or 74[sub-section (2) of section 80CCH or] section 80JJAA;
Following shall be substituted for the opening portion and clause (i) of sub-section (2) of section
115BAC by the Finance Act, 2023, w.e.f. 1-4-2024:
(2) For the purposes of sub-section (1A), the total income of the person referred to therein, shall be
computed—
(i) without any exemption or deduction under the provisions of clause (5) or clause (13A) or prescribed
under clause (14) (other than those as may be prescribed for this purpose) or clause (17) or clause
(32), of section 10 or section 10AA or clause (ii) or clause (iii) of section 16 or clause (b) of section
24 [in respect of the property referred to in sub-section (2) of section 23] or clause (iia) of sub-
section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or
sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35 or section
35AD or section 35CCC or under any of the provisions of Chapter VI-A other than the provisions of
sub-section (2) of section 80CCD or sub-section (2) of section 80CCH or section 80JJAA;
(ii) without set off of any loss,—
(a) carried forward or depreciation from any earlier assessment year, if such loss or depreciation
is attributable to any of the deductions referred to in clause (i);
(b) under the head "Income from house property" with any other head of income;
(iii) by claiming the depreciation, if any, under any provision of section 32, except clause (iia) of sub-
section (1) of the said section, determined in such manner as may be prescribed; and
(iv) without any exemption or deduction for allowances or perquisite, by whatever name called,
provided under any other law for the time being in force.
(3) The loss and depreciation referred to in clause (ii) of sub-section (2) shall be deemed to have been
given full effect to and no further deduction for such loss or depreciation shall be allowed for any
subsequent year:
Provided that where there is a depreciation allowance in respect of a block of assets which has not been
given full effect to prior to the assessment year beginning on the 1st day of April, 2021, corresponding
adjustment shall be made to the written down value of such block of assets as on the 1st day of April,
2020 in the prescribed manner, if the option under sub-section (5) is exercised for a previous year relevant
to the assessment year beginning on the 1st day of April, 2021.
Following second proviso shall be inserted after the existing proviso to section 115BAC(3) by the
Finance Act, 2023, w.e.f. 1-4-2024:
Provided further that in a case where,
(i) the assessee has not exercised the option under sub-section (5) for any previous year relevant to the
assessment year beginning on or before the 1st day of April, 2023;
(ii) the income-tax on the total income of the assessee is computed under sub-section (1A); and
(iii) there is a depreciation allowance in respect of a block of assets which has not been given full effect
prior to the assessment year beginning on the 1st day of April, 2024,
corresponding adjustment shall be made to the written down value of such block of assets as on the 1st
day of April, 2023 in the manner as may be prescribed.

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20/07/2024, 11:01 Income Tax Department

(4) In case of a person, having a Unit in the International Financial Services Centre, as referred to in sub-
section (1A) of section 80LA, which has exercised option under sub-section (5), the conditions contained
in sub-section (2) shall be modified to the extent that the deduction under section 80LA shall be available
to such Unit subject to fulfilment of the conditions contained in the said section.
Explanation.—For the purposes of this sub-section, the term "Unit" shall have the meaning assigned to it
in clause (zc) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005).
Following sub-section (4) shall be substituted for the existing sub-section (4) of section 115BAC by
the Finance Act, 2023, w.e.f. 1-4-2024:
(4) In case of a person, having a Unit in the International Financial Services Centre, as referred to in sub-
section (1A) of section 80LA,
(i) who has exercised option under sub-section (5) for any previous year relevant to the assessment year
beginning on or after the 1st day of April, 2021 but before the 1st day of April, 2024;
(ii) whose total income is computed under sub-section (1A),
the conditions contained in sub-section (2) shall be modified to the extent that the deduction under section
80LA shall be available to such Unit subject to fulfilment of the conditions contained in the said section.
Explanation.—For the purposes of this sub-section, the term "Unit" shall have the meaning assigned to it
in clause (zc) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005).
(5) Nothing contained in this section shall apply unless option is exercised in the prescribed manner75 by
the person,—
(i) having income from business or profession, on or before the due date specified under sub-section (1)
of section 139 for furnishing the returns of income for any previous year relevant to the assessment
year commencing on or after the 1st day of April, 2021, and such option once exercised shall apply
to subsequent assessment years;
(ii) having income other than the income referred to in clause (i), alongwith the return of income to be
furnished under sub-section (1) of section 139 for a previous year relevant to the assessment year:
Provided that the option under clause (i), once exercised for any previous year can be withdrawn only
once for a previous year other than the year in which it was exercised and thereafter, the person shall
never be eligible to exercise option under this section, except where such person ceases to have any
income from business or profession in which case, option under clause (ii) shall be available.
Following second proviso shall be inserted after the existing proviso to sub-section (5) of section
115BAC by the Finance Act, 2023, w.e.f. 1-4-2024:
Provided further that the provisions of this sub-section shall not apply for any previous year relevant to
the assessment year beginning on or after the 1st day of April, 2024.
Following sub-section (6) shall be inserted after sub-section (5) of section 115BAC by the Finance
Act, 2023, w.e.f. 1-4-2024:
(6) Nothing contained in sub-section (1A) shall apply to a person where an option is exercised by such
person, in the manner as may be prescribed, for any assessment year, and such option is exercised,
(i) on or before the due date specified under sub-section (1) of section 139 for furnishing the return of
income for such assessment year, in case of a person having income from business or profession,
and such option once exercised shall apply to subsequent assessment years; or
(ii) along with the return of income to be furnished under sub-section (1) of section 139 for such
assessment year, in case of a person not having income referred to in clause (i):
Provided that the option under clause (i), once exercised for any previous year can be withdrawn only
once for a previous year other than the year in which it was exercised and thereafter, the person shall
never be eligible to exercise the option under this sub-section, except where such person ceases to have
any income from business or profession in which case, option under clause (ii) shall be available.

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Common questions

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Failure to meet conditions of the new tax regime renders the option invalid, requiring taxpayers to revert to the old system for the relevant assessment year, often leading to complex recalculations of tax liabilities under the default system. This could increase immediate tax burdens significantly if prior filings leveraged deductions that are now disallowed under the default provisions. Additionally, the taxpayer becomes ineligible for the new regime in subsequent years unless specific criteria, mainly related to changing income sources, are met again .

Under the new tax regime effective from April 2024, the total income for individuals opting for this regime must be computed without any standard deductions and exemptions specified under certain sections like 10, 10AA, and Chapter VI-A among others. This also includes restrictions on carry-forward of losses and certain claims of depreciation, thereby potentially increasing taxable income for those heavily utilizing these deductions in previous regimes .

The 2023 amendment allows for no further deduction of certain depreciations once opted into the new regime if such assets were unclaimed before April 2021 or April 2024, depending on regime choice. It mandates adjusting written-down values for asset blocks, ensuring the choice under 115BAC results in comprehensive accounting for prior depreciations, affecting tax computations for the subsequent years .

Taxpayers must update asset written-down values to account for unutilized depreciation prior to transitioning to the new tax regime if opting into it for assessment years starting after April 2021 or April 2024. This adjustment aligns taxable asset values with reformed regime conditions, ensuring no double benefits of past depreciation under the new simplified framework, highlighting systemic asset valuation adjustments in historical asset treatments .

The Finance Act, 2023 permits exercising the option under section 115BAC on or before the filing deadline under section 139. Once chosen for business income earners, this choice is harder to revoke, as withdrawal is limited to once beyond the first exercise year unless there is a cessation of business income. Subsequent eligibility is severely restricted, incentivizing careful initial choice and impacting long-term business tax strategies .

Choosing the new tax regime restricts the ability to carry forward losses related to specified deductions and allows for claiming depreciation only under certain prescribed conditions. This impacts business income computation as losses and depreciation can't offset taxable profits, which could lead to higher tax liabilities for those with substantial business losses or unclaimed depreciation under previous tax regimes .

Under the revised provisions effective April 2024, IFSC Units can claim deductions under section 80LA even when opting for the new tax regime, provided they meet the specific conditions outlined in section 80LA. These include conducting eligible business activities in the IFSC, among other criteria. This modification helps ensure that businesses in these financial zones maintain tax benefits while aligning with the broader revised regime requirements .

The Finance Act, 2023 introduces a revised tax regime effective from April 1, 2024, under which individuals and Hindu undivided families have tax computed as follows: Up to Rs. 3,00,000 at NIL rate, from Rs. 3,00,001 to Rs. 6,00,000 at 5 percent, from Rs. 6,00,001 to Rs. 9,00,000 at 10 percent, from Rs. 9,00,001 to Rs. 12,00,000 at 15 percent, from Rs. 12,00,001 to Rs. 15,00,000 at 20 percent, and above Rs. 15,00,000 at 30 percent .

Taxpayers now need to evaluate the benefits of the new regime against traditional deductions and exemptions, considering the irrevocability (in most cases) of the choice. This choice requires comprehensive planning, especially for those with multiple income sources or those leveraging substantial deductions, altering how businesses approach financial forecasts and personal financial management to optimize long-term tax liabilities .

Taxpayers opting for the new regime must formally exercise their option in a prescribed manner under section 139's filing obligations. For individuals with business income, the choice should be made by the due date for filing returns to ensure it applies to subsequent years. Once opted, the regime limits the option's withdrawal and re-exercise, binding the taxpayer unless income sources change from business to non-business types .

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