Income Tax 01 Feb,2020
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Whether section 115BAC is a relief or a myth?
Editorial Team

Finance minister, Smt. Nirmala Sitharaman, presented the Union budget 2020 in Parliament on 01-02-2020. This budget has proposed a new tax regime for the individuals and HUFs. Under this regime, an option has been given to the individuals and HUF to pay tax at lower rates, subject to fulfilment of certain conditions. One of the conditions is that the person opting for the regime has to forego certain exemptions and deductions.

The Finance minister in her budget speech highlighted that tax burden on a person earning Rs. 15 lakhs shall be reduced by Rs. 78,000. However, this situation will rarely arise as a tax saving of Rs. 78,000 arises only when the assessee has not been availing any exemption or deduction in the current regime. We have analysed the following situation to understand the implications of this new tax regime:

Nature of deduction available
in the current tax regime

Breakeven point

When it is beneficial to opt for
new regime of Section 115BAC?

Reference

No deduction is allowable

-

Always

Table 1

Deduction allowable under Section 80C

8,50,000

Income in excess of Breakeven

Table 2

Deduction allowable under:

- Sections 80C

- Section 80D

12,25,000

Income in excess of Breakeven

Table 3

Deduction allowable under:

- Sections 80C

- Section 80D

- Section 16 (Standard Deduction)

15,00,000

Never

Table 4

Deduction allowable under:

- Sections 80C

- Section 80D

- Section 16 (Standard Deduction)

- Section 24 (Interest on housing loan)

-

Never

Table 5

Table 1: Individual not eligible for any deduction

Income Tax liability under
 New regime
Tax liability under
Old regime
Net tax saving
6,00,000 23,400 33,800 10,400
7,00,000 33,800 54,600 20,800
8,00,000 46,800 75,400 28,600
9,00,000 62,400 96,200 33,800
10,00,000 78,000 1,17,000 39,000
11,00,000 98,800 1,48,200 49,400
12,00,000 1,19,600 1,79,400 59,800
12,50,000 1,30,000 1,95,000 65,000
13,00,000 1,43,000 2,10,600 67,600
14,00,000 1,69,000 2,41,800 72,800
15,00,000 1,95,000 2,73,000 78,000

Table 2: Individual eligible for deduction under section 80C

Income Tax liability under
New regime
Tax liability under
Old regime
Net tax saving
6,00,000 23,400 - -23,400
6,50,000 28,600 - -28,600
7,00,000 33,800 23,400 -10,400
7,50,000 39,000 33,800 -5,200
7,75,000 42,900 39,000 -3,900
7,90,000 45,240 42,120 -3,120
8,00,000 46,800 44,200 -2,600
8,50,000 54,600 54,600 -
9,00,000 62,400 65,000 2,600
9,10,000 63,960 67,080 3,120
9,20,000 65,520 69,160 3,640
9,25,000 66,300 70,200 3,900
9,50,000 70,200 75,400 5,200
10,00,000 78,000 85,800 7,800

Table 3: Assessee is eligible for deduction under sections 80C and 80D

Income Tax liability under
New regime
Tax liability under
Old regime
Net tax saving
6,00,000 23,400 - -23,400
6,50,000 28,600 - -28,600
7,00,000 33,800 - -33,800
7,50,000 39,000 23,400 -15,600
8,00,000 46,800 33,800 -13,000
8,50,000 54,600 44,200 -10,400
9,00,000 62,400 54,600 -7,800
9,50,000 70,200 65,000 -5,200
10,00,000 78,000 75,400 -2,600
10,50,000 88,400 85,800 -2,600
11,00,000 98,800 96,200 -2,600
11,50,000 1,09,200 1,06,600 -2,600
12,00,000 1,19,600 1,17,000 -2,600
12,25,000 1,24,800 1,24,800 -
12,30,000 1,25,840 1,26,360 520
12,40,000 1,27,920 1,29,480 1,560
12,50,000 1,30,000 1,32,600 2,600

Table 4: Assessee is eligible for deduction under section 80C and 80D and standard deduction under section 16

Income Tax liability under
New regime
Tax liability under
Old regime
Net Tax Saving
6,00,000 23,400 - -23,400
7,00,000 33,800 - -33,800
8,00,000 46,800 23,400 -23,400
9,00,000 62,400 44,200 -18,200
10,00,000 78,000 65,000 -13,000
11,00,000 98,800 85,800 -13,000
12,00,000 1,19,600 1,06,600 -13,000
13,00,000 1,43,000 1,32,600 -10,400
14,00,000 1,69,000 1,63,800 -5,200
15,00,000 1,95,000 1,95,000 -
16,00,000 2,26,200 2,26,200 -
17,00,000 2,57,400 2,57,400 -
18,00,000 2,88,600 2,88,600 -

Table 5: Assessee is eligible for deduction under section 80C and 80D, standard deduction under section 16 and deduction for interest on housing loan under section 24(b)

Income Tax liability under
New regime
Tax liability under
Old regime
Net Tax Saving
6,00,000 23,400 - -23,400
6,50,000 28,600 - -28,600
7,00,000 33,800 - -33,800
7,50,000 39,000 - -39,000
8,00,000 46,800 - -46,800
8,50,000 54,600 - -54,600
9,00,000 62,400 - -62,400
9,50,000 70,200 - -70,200
10,00,000 78,000 23,400 -54,600
10,50,000 88,400 33,800 -54,600
11,00,000 98,800 44,200 -54,600
11,50,000 1,09,200 54,600 -54,600
12,00,000 1,19,600 65,000 -54,600
12,50,000 1,30,000 75,400 -54,600
13,00,000 1,43,000 85,800 -57,200
13,50,000 1,56,000 96,200 -59,800
14,00,000 1,69,000 1,06,600 -62,400
14,50,000 1,82,000 1,17,000 -65,000
15,00,000 1,95,000 1,32,600 -62,400
15,50,000 2,10,600 1,48,200 -62,400
16,00,000 2,26,200 1,63,800 -62,400
16,50,000 2,41,800 1,79,400 -62,400
17,00,000 2,57,400 1,95,000 -62,400