The Income Tax Act, 1961 explains all about Income Tax in India. In 2020, a new section added in this law, which is called Section 115BAC. It is imposed on earnings of Individuals and Hindu Undivided Family. The Government of India has already introduced some tax rules and regulations which are called Tax regime. So, the existing tax regime tells us about different tax rates. Along with this, there is a new tax regime introduced by the Government through this newly inserted section which we have mentioned above. This section talks about concessional tax rates. It gives benefits to individuals to pay taxes according to concessional tax rates. However, there are some conditions imposed on these benefits. These conditions include not letting people make use of exemptions and reductions given under the tax laws of India.
What is 115BAC of Income Tax Act ?
This section was introduced under the taxation laws through clause 53 of the Finance Act of 2020. It is applicable on both individuals as well as HUFs. Through this section new tax rates and limitations on the same have been introduced. It is a very lenient section which is not applicable on all the taxpayers blindly. It gives options to the taxpayers which means they can choose between its applicability and non applicability on them. In the present writeup section 115 sub clause bac’s implications on the public at large has been discussed with respect to its features and benefits.
Why Section 115 BAC was Introduced by the Government?
Earlier, people used to invest and save money a lot. Due to which, the Government had provided them with some exemptions and deductions. The aim of the Government was to give protection and benefits to the public.However, nowadays, the Government is of the view that people do not invest a lot. Due to which they do not make use of the exemptions and deductions provided. Therefore, the Government has introduced a new tax regime. However, for investors who receive exemptions and deductions, sec 115 BAC is not applicable to them.
Key Features of Sec 115 bac of Income Tax Act
Some of the key features of this section are discussed below:
- Optional regime with revised tax rates.
- Lower tax rates for certain income slabs.
- Simplified tax calculation.
- Forgo certain exemptions and deductions.
- Applicable to individuals and HUFs.
- Enhances transparency in tax assessment.
- Offers flexibility to choose tax regime.
- Tax rate given under this section is from nil to 30%
Benefits of Section 115BAC for the Individual Taxpayers
Some of the key benefits of this section for the individual taxpayers are given below:
- It provides clarity and transparency while the calculation of the tax
- It reduces the complexity of the tax calculation for the individual taxpayers
- The section offers alternative tax slab rates than the traditional tax regime, which could result in reduced taxes for eligible taxpayers.
- It provides flexibility to the taxpayers in order to choose between the old tax regime and the new one which is introduced through the above mentioned section
- Calculation process of the tax has been simplified for the individual taxpayers
- It offers simple tax structure by the waiver of the exemptions and the deductions
- Streamlined tax assessment process has been provided by the authorities to the taxpayers through this section
- Not mandatorily applicable on all the individual taxpayers
- One can avail its applicability very easily by simply through Form 10-IE
- Only needs to avail this section for the one financial year and it will automatically applicable on the subsequent assessment years
Conditions Applicable for Taking the Benefits of 115 BAC
Before seeking benefits under Sec 115 BAC, we must know what are the conditions imposed on it. Some of the key conditions are discussed below:
Computation of Total Income
This is the first condition. Here the total income is computed without using exemptions and deductions. Given below are some of the exemptions and deductions which do not have to be used under the above mentioned section of the :
- Section 10 (5) : Leave Travel concession
- Section 10(13A) : House Rent Allowance
- Section 10(17) : Daily allowance
- Section 10(32) : Minors income along with the parents income etc.
Losses which Cannot be Set-off
The total income must be commuted without a set-off of loss. In the normal case you can set-off losses. However,if you want to enjoy benefits under 115BAC of the Income Tax Act, then losses cannot be set-off. The losses which arise due to the above mentioned exemptions, then they cannot be set-off. And loss caused to house property cannot be adjusted under any other head of income.
Depreciation
Depreciation is another important aspect of this section of the Income Tax Act which was inserted in the taxation law approximately three years back. The total income of an individual must be commuted without the additional depreciation under this section, then only section 115 BAC can be applicable otherwise not.
Conclusion
Due to the various benefits and features, Section 115bac is whole heartily welcomed by the taxpayers. Individuals can choose the applicability of this section on themselves as it provides flexibility to do the same. However, they have to make the choice in the specified time- limit. Before the addition of this section there was an old tax system which offered many exemptions and deductions on taxes but after this new tax regime there will be no exemptions and deductions can be enjoyed by the income tax payer. This is something which a taxpayer has to leave in order to enjoy the benefits of this above mentioned section of the taxation law.
FAQ’s
- How does Section 115 BAC affect tax calculations for individual taxpayers?
Section 115BAC provides individual taxpayers with the option to choose lower tax rates, simplifying tax calculations while foregoing certain exemptions and deductions. It offers flexibility in selecting the tax regime that aligns with their financial circumstances.
- Can I switch between the existing tax regime and Section 115 BAC?
Yes, taxpayers have the flexibility to switch between the existing tax regime and Section 115BAC at the beginning of each financial year.
- Are there any limitations or restrictions associated with Section 115 BAC?
Yes, Section 115(BAC) restricts certain exemptions and deductions and prohibits changing the option within a financial year.
- Is there a dedicated support team at Startup Fino to address queries related to Section 115BAC?
Yes, startupfino has an experienced team of expert professionals who can resolve or address all the queries which you have regarding the mentioned section of the taxation law.
- How can individuals get started with Startup fino’s services for tax planning under Section 115BAC?
You can avail the Startupfino’s services related to tax planning under the Section 115(BAC) by simply visiting their official website, through their customer service representatives, or by contacting them directly via email (hello@startupfino.com) or phone (8298291011).
- What distinguishes Startup fino from other service providers offering tax planning assistance for Section 115BAC?
StartupFino stands out for tax planning under Section 115(BAC), offering customized strategies and expert assistance, ensuring maximum tax savings in a straightforward process.
