Section 115BAC of Income Tax Act (1961) is a newly added provision that addresses the 115BAC income tax system introduced as an alternative regime. The Union Budget 2020 added this provision to create an alternative tax system that is exclusively applicable to individuals and Hindu Undivided Families (HUFs). Under this system, taxpayers can get the benefits of considerably lower tax brackets, which may result in higher savings across slabs. Nevertheless, a number of significant income tax deductions and exemptions that were offered under the earlier tax regime are not available in the new regime.

Individuals and HUFs (Hindu Undivided Families) are eligible for Section 115BAC if they have income apart from that generated by any business or profession. Here are some conditions that have to be met.

• No revenue from a company or profession should be included in the total income.
• The total income must be calculated under all sections, including Chapter VIA (excluding 80CCD and 80JJAA), sections 24b, 10, 32, 35, and so on, without claiming any deductions or exemptions.
• Section 10 or 10AA or Section 16 clauses (5), (13A), (14), (17), and (32).
• No set-off losses from prior years resulting from home ownership or the aforementioned deductions are allowed.
• There are no deductions or exclusions allowed for prerequisites or allowances.
• Additionally, it is not possible to claim depreciation under Section 32 (iia) while calculating the total income under Section 115BAC. You may use a 115BAC calculator for this purpose.

It is necessary to do the following computation without including losses from the previous assessment year that resulted from the aforementioned deductions. This also applies to those from any property that the person or HUF owns. The computation is also made without taking into account any exclusions or deductions for benefits and allowances.

The new 115BAC slab rates for FY 2023–2024 are listed in the following table.

The new income tax structure no longer allows most tax deductions. However, the Income Tax Act's Section 115BAC permits the ones mentioned below.

• Gifts up to Rs. 50,000/-
• Prerequisites for official purposes
• Conveyance allowance received to cover the cost of transportation incurred while on the job
• Daily allowance received to cover routine charges or expenses incurred because of absence from the designated place of duty
• Transport allowances if people with special needs are employed
• Exemption on voluntary retirement under section 10 (10C), gratuity under section 10 (10), and leave encashment under section 10 (10AA)
• Interest on home loan under Section 24 for a property which is rented out
• Deductions for additional employee costs under Section 80JJA
• Payments made to cover costs of transfers or trips
• Deductions on the employer’s payments to NPS accounts under Section 80CCD (2)

A salaried taxpayer can notify his/her employer at the beginning of FY 2023-24 in case he/she wishes to stick with the older regime. This is because the new tax regime 115BAC is now the default option available for taxpayers. Employees cannot change their selections throughout any specific fiscal year and can only revert to another system when they file their income tax returns again. Non-salaried taxpayers are also required to choose the new regime while filing their income tax returns.

Selecting the tax regime at the start of the financial year is crucial from the standpoint of tax planning, especially when considering the benefits and limitations of income tax 115BAC. The payable tax amount under the old and new regimes should be compared along with computing the TDS paid and final tax dues. Additionally, if taxpayers wish to continue with the earlier tax regime, then Form 10-IEA should be provided to the income tax department before filing their returns.

According to the income tax rules 115bac, several commonly claimed deductions and exemptions are not applicable under the new regime.

Some of the deductions that cannot be claimed under Section 115BAC include the following:

• Standard deduction (Section 80TTB/TTA)
• Leave Travel Allowance
• Entertainment allowance and professional tax on salary
• Minor child income allowance
• House rent allowance
• Helper allowance
• Section 10 (14) special allowances
• Allowance for children’s education
• Housing loan interest on self-occupied/vacant property
• Chapter VI-A deductions (except for Sections 80CCD (2) and 80JJAA)
• Donations to any political party or trust
• Employee contribution to NPS

Under Section 115BAC of the Income Tax Act, taxpayers can exercise the option to select a lower 115BAC tax slab rate. However, while selecting the new tax regime under section 115BAC, it is crucial to remember the numerous deductions and exemptions that must be given up.

To make an educated choice about the new or old tax system under section 115 BAC of Income Tax Act, take into account every point covered in this article.