section 115bac

Section 115BAC – New Optional Income Tax Slab for Individual or HUF

The Finance Bill, 2020 proposed to insert section 115BAC (Tax on income of individuals and Hindu undivided family), which says:

(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 i.e., from AY 2021-22, 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:—

S.No. Total income Rate of tax
1 Upto Rs 2,50,000 Nil
2 From Rs 2,50,001 to Rs 5,00,000 5%
3 From Rs 5,00,001 to Rs 7,50,000 10%
4 From Rs 7,50,001 to Rs 10,00,000 15%
5 From Rs 10,00,001 to Rs 12,50,000 20%
6 From Rs 12,50,001 to Rs 15,00,000 25%
7 Above Rs 15,00,000 30%

Section 115BAC

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)- that is by person having business income, opt to pay tax under section 115BAC on or before the due date specified under  section 139(1) for furnishing the returns, in the event of failure to satisfy the conditions contained in sub-section (2), section 115BAC shall become invalid for subsequent assessment years also and other provisions of this Act shall apply for those years accordingly.

(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–

section 10(5)- Leave travel concession

section 10(13A)- House rent allowance

section 10(14)- Allowances exempt (other than those as may be prescribed for this purpose)

section 10(17)- Allowance received by any person by reason of his membership of Parliament or of any State Legislature or of any Committee thereof

section 10(32)-Exemption of Rs.1500 per minor child in case income clubbed with parent

section 10AA- Special provisions in respect of newly established Units in Special Economic Zones

section 16- Deductions from salaries

section 24(b)-Interest on loan taken in respect of the property referred to in section 23(2)

section 32(1)(iia)- Additional depreciation in the case of persons engaged in the business of manufacture or production of any article or thing or in the business of generation, transmission or distribution of power is deductible at 20% of the actual cost of machinery or plant. This is in addition to the depreciation allowable under section 32(1)(ii).

section 32AD- Investment in new plant or machinery in notified backward areas in certain States

section 33AB- Tea development account, coffee development account and rubber development account

section 33ABA- Site Restoration Fund

section 35(1)(i), 35(1)(ii), 35(1)(iia) and 35(2AA)- Deduction for Expenditure on scientific research

section 35AD- Deduction in respect of expenditure on specified business

section 35CCC- Expenditure on agricultural extension project

section 57(iia)- Deduction for family pension

or under any of the provisions of Chapter VI-A (section 80C to 80VV) other than: 

section 80CCD (2)- Deduction for Employer Contribution to NPS

section 80JJAA- Deduction in respect of employment of new employees    

(ii) without set off of any loss,

  1. 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);
  2. 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 that is additional depreciation 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) that is normal depreciation shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed to be carry forward for set off in 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.

(4) In case of a person, having a SEZ Unit in the International Financial Services Centre, as referred to section 80LA(1A), 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.

(5) Nothing contained in this section shall apply unless option is exercised in the prescribed manner by the person, —

(i) having business income, on or before the due date specified under section 139(1) 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 no business income, along with 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 business income in which case, option under clause (ii) shall be available.

With this I finish my article, and guess what in my next article I’ll clear all your doubts regarding Impact of new optional tax slab on salaried persons with examples, till then enjoy your reading.

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