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New Tax Regime Under Section 115BAC

Budget 2020 has announced a new tax regime u/s 115BAC in addition to the existing regime. The new regime is optional and is applicable from financial year 2020-21. An individual or HUF can choose between regular tax regime (old regime) or tax regime u/s 115BAC (new regime) depending on their tax planning.

 

Tax Slabs in New Regime Vs Old Regime

The new tax regime u/s 115BAC comes with concessional tax rates compared to regular regime (old regime).

Income slabs (Rs)

Tax Rate(Regular Tax Regime)

Tax Rate(Tax Regime u/s 115BAC – devoid of exemptions & deductions)

Up to 2.5 lakh

Nil

Nil

2.5-5 lakh

5%

5%

5-7.5 lakh

20%

10%

7.5-10 lakh

20%

15%

10-12.5 lakh

30%

20%

12.5-15 lakh

30%

25%

Above 15 lakh

30%

30%

 

Rate of tax without PAN under Tax Regime U/s 115BAC

Income tax calculation for the employees without PAN is same as previous financial year. Also, it is same for both regular and tax regime u/s 115BAC. Given below is the tax slab for employees without PAN.

Old Regime Income Tax Rates

New Regime Income Tax Rates

Tax Rates for employees without PAN

0% – 20%

0% – 20%

20%

25%

25%

25%

30%

30%

30%

 

Advantage and Disadvantage of Tax Regime U/s 115BAC

A Taxpayer has to choose between the tax regime u/s 115BAC and existing regular regime. Given below are the advantages and disadvantages of the tax regime u/s 115BAC.

Advantage of tax regime u/s 115BAC:

  • Less Compliance
  • Low tax rate and higher in-hand income
  • More choices for investments

Disadvantages of tax regime u/s 115BAC as the tax payer has to forego the following deductions and exemptions:

  • Leave Travel Allowance
  • House Rent Allowance
  • Conveyance Allowance
  • Daily expenses in the course of employment
  • Relocation allowance
  • Children education allowance
  • Other special allowances [Section 10(14)]
  • Standard deduction
  • Professional tax
  • Interest on housing loan (Section 24)
  • Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2) and 80JJA)

 

Default Regime Setting in TallyPrime

By default, all employees are grouped under Regular Tax Regime (old regime). You can change the tax regime details from Regular Tax Regime to Tax Regime u/s 115BAC with revised applicable data as 01-Apr-2020 or later.

Additionally, the tax regime details can be changed from Tax Regime U/s 115BAC to Regular Tax Regime with revised applicable date as per your requirement.

 

Select Tax Regime

You can choose the tax regime applicable to the employee in both employee creation screen and multi employee creation screen. Further, a new option has been provided to select tax regime while configuring income tax declarations.

Income tax on salary under Tax Regime U/s 115BAC is calculated based on tax slab u/s 115BAC and by considering exemptions/deductions that are available under this scheme. Income tax on salary under Regular Tax Regime is calculated based on existing income tax slab and by considering all exemptions/deductions which are available under it.

 

Changing regime in middle of Financial Year

You can change the tax regime as many times during financial year. TallyPrime allows you to choose either tax regime at any point of time. You are prompted to enter the date of revision every time the tax regime is changed for an employee. Additionally, you can keep track of the all the tax regimes applied to the employee’s income using the Tax Regime History.

When the tax regime is changed either from Regular Tax Regime to Tax Regime u/s 115BAC or vice versa within a financial year, the tax is calculated based on latest tax regime. Further, exemptions and deductions allowed under the respective regime, income tax deducted till date, and number of months remaining are considered. The value arrived is apportioned accordingly to deduct income tax for each month.

 

Tax Regime Details in the Reports

A provision is made to display the applicable tax regime of the employee in the reports:

  • Income tax computation
  • Pay Slip
  • Pay Sheet
  • Payroll Statement
  • Employee Profile
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