Section 115BAC Explained – Old vs New Tax Regime and Slab Rates

Section 115BAC of the Income Tax Act provides an alternative tax regime (new tax regime) for Individuals, HUFs, AOPs, BOIs, and AJPs (‘eligible assesses’). Under this tax regime, eligible assesses have the option of being taxed at reduced rates based on their income brackets.

If an eligible assessee opts for this regime, the income shall be taxable at the following rate:

Further, a resident individual who has opted for the new tax regime can claim a rebate of up to Rs. 60,000, provided his total income does not exceed Rs. 12,00,000. However, if the total income exceeds the threshold limit of Rs. 12,00,000, the marginal rebate is allowed. 

Furthermore, an assessee opting for the new tax regime is required to satisfy the following conditions: 

• The total income of the assessee is computed without claiming specified exemptions and deductions (discussed in FAQ 3)
• The total income of the assessee is computed without set-off of losses or depreciation carried forward from earlier years if such loss or depreciation is attributable to any of the specified exemptions and deductions
• The total income of the assessee is computed without set-off of any loss under the head “Income from house property” with any other head of income
• The total income of the assessee is calculated after claiming depreciation in the prescribed manner, and where the depreciation rate of any block of assets is more than 40%, it is restricted to 40%
• The total income of the assessee is computed without claiming any exemptions or deductions for allowances or perquisites provided under any other law for the time being in force

The decision to opt for the new tax regime will depend on the amount of exemptions and deductions available to the assessee. If an individual has no deductions or exemptions to claim, it would always be beneficial for them to opt for the new tax regime. 

On the other hand, if an individual is eligible to claim deductions/exemptions like Section 80C, Section 80D, House Rent Allowance or interest on a housing loan under Section 24, it is recommended that taxes be calculated under both regimes to determine which is more beneficial. 

The option to pay tax at lower rates shall be available if the total income is computed without claiming the following exemptions or deductions:

• Leave Travel Concession [Section 10(5)]
• House Rent Allowance [Section 10(13A)]
• Official and Personal Allowances (other than those prescribed) [Section 10(14)]
• Allowances to MPs/MLAs [Section 10(17)]
• Exemption for Income of Minor [Section 10(32)]
• Deduction for Units in Special Economic Zones (SEZ) [Section 10AA]
• Entertainment Allowance [Section 16(ii)]
• Professional Tax [Section 16(iii)]
• Interest on Housing Loan (for self-occupied house property) [Section 24(b)]
• Additional Depreciation for New Plant and Machinery [Section 32(1)(iia)]
• Deduction for Investment in New Plant and Machinery in Notified Backward Areas [Section 32AD]
• Deduction for Tea, Coffee, or Rubber Business [Section 33AB]
• Deduction for Prospecting, Extraction, or Production of Petroleum or Natural Gas in India [Section 33ABA]
• Deduction for Donations to Approved Scientific Research Associations, Universities, Colleges, or Institutes [Section 35(1)(ii)]
• Deduction for Payments to Indian Companies for Scientific Research [Section 35(1)(iia)]
• Deduction for Donations to Universities, Colleges, or Institutions for Social Science or Statistical Research [Section 35(1)(iii)]
• Deduction for Donations for Scientific Research or Expenditure on Scientific Research [Section 35(2AA)]
• Deduction for Capital Expenditure on Specified Businesses (e.g., cold chain facility, warehousing facility) [Section 35AD]
• Deduction for Expenditure on Agriculture Extension Projects [Section 35CCC]
• Deductions under Sections 80C to 80U pexcept those under Section 80JJAA, Section 80CCD(2), Section 80CCH(2), and Section 80LA(1A)) [Chapter VI-A]

The following table lists the break-even points for deductions at income levels of Rs. 8 lakhs, Rs. 9 lakhs, Rs. 10 lakhs, Rs. 12.50 lakhs, and Rs. 15 lakhs.

Here’s a comparison in a table format for an individual under 60 years of age: 

In this example, the new tax regime results in a lower tax liability (Rs. 1,09,200) compared to the old tax regime (Rs. 1,17,000). Therefore, you should opt for the new tax regime. 

Effective from the Assessment Year 2024-25, the new tax regime will be the default option for Individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs), Bodies of Individuals (BOIs), and Artificial Juridical Persons (AJPs). If an assessee does not want to opt for the new tax regime, he will have to explicitly opt out of it and choose to be taxed under the old tax regime. 

An assessee having income from a business or profession can opt out of the new tax regime and switch to the old tax regime by furnishing Form No. 10-IEA on or before the due date for filing the return of income under Section 139(1). Further, once he exercises the option of the old tax regime, it shall apply for the year in which the option is exercised and for the subsequent assessment year. 

Form No. 10-IEA can be filed online at the Income Tax e-Filing Portal by navigating to: e-file > Income Tax forms > file Income Tax Forms. 

If the assessee has income other than income from a business or profession and wants to opt for the old tax regime, he must indicate his choice of the tax regime in the ITR while filing an income return. 

The Income Tax Act provides alternative tax regimes under the provisions mentioned in the table below for other assessees, which are not the default tax regimes. Thus, a taxpayer wishing to opt for an alternative tax regime must file a specified form on or before the due date of filing an income tax return (ITR). .

These forms can be filed online at the Income Tax e-Filing Portal by navigating to: e-file > Income Tax forms > file Income Tax Forms.