Itaxxsoftware.com: New Tax Section 115BAC

Introduce new Section 115BAC in 2020 budget

In the 2020 budget, Finance Minister Nirmala Sitraman announced a new tax system to further reduce tariffs and tax rates. It has long been claimed by most taxpayers, but it took up the issue of removing all available exemptions and exemptions.

To add to this confusion, the finance minister gave taxpayers a choice between the new system of government and the existing government and left it up to them to decide which one to choose. Instead of simplifying tax laws by combining all of these factors, they are now more complex.

And if you are wondering how to make your decision, this blog answers that question. We look at the new system in detail, its advantages and compare it with the existing tax system

Current Tax System -

High rates but lots of options for tax cuts

The current tax system is complicated to say the least. When the tax rate is high, there are many ways to reduce your tax liability.

Over the years, the government has added more than a dozen exemptions and rebate options to Indian taxpayers by adding sections to the Income-tax Act, allowing them to reduce their taxable income and therefore pay less.

Discounts are part of your salary, such as home rent allowance (HRA) and leave travel allowance (LTA), discounts allow you to reduce your tax amount by investing, saving or spending on certain items. The largest section for discounts is Section 80C through which you can reduce your taxable income by 1.5 lakhs. In addition to these, there are several other categories that offer you discounts on everything from interest on your loans (home and education) to things in terms of premiums for health insurance.

Exemptions	Deductions
House Rent Allowance	Public Provident Fund
Leave Travel Allowance	ELSS (Equity Linked Saving Scheme)
Mobile and Internet Reimbursement	Employee Provident Fund
Food Coupons or Vouchers	Life Insurance Premium
Company Leased Car	Principal and Interest component of Home Loan
Standard Deduction	Children Tuition Fees
Uniform Allowance	Health Insurance Premiums
Leave Encashment	Investment in NPS
	The tuition fee for Children
	Saving Account Interest

Download Automated Income Tax Revised Form 16 Part A&B for the Financial Year 2019-20 [ This Excel Utility can prepare at a time 50 Employees Form 16 Part A&B ]

The combination of exemptions and deduction can reduce your taxable income by millions. However, it also means looking for ways to optimize your salary and savings/investment each year so that you can keep your taxable income to a minimum.

Introduce new tax discipline - more slabs, lower tax rates but no way to reduce taxes

The new tax is different from the existing one.

First, under the new regime, the tax slab has increased, with the rate of sub-15 lakh being reduced. Second, all the concessions and concessions that taxpayers were using during the current regime will not be available in the new regime.

A comparison between the old and new tax slabs is given here

Tax Slab(₹)	Old Tax Rates	New Tax Rates
0 – 2,50,000	0%	0%
2,50,000 – 5,00,000	5%	5%
5,00,000 – 7,50,000	20%	10%
7,50,000 – 10,00,000	20%	15%
10,00,000 – 12,50,000	30%	20%
12,50,000 – 15,00,000	30%	25%
15,00,000 & above	30%	30%

Download Automated Income Tax Revised Form 16 Part B for the Financial Year 2019-20 [ This Excel Utility can prepare at a time 50 Employees Form 16 Part B ]

As you can see under the new system, income of Rs 5 lakh to Rs 5.5 lakh will be taxed at 10 per cent, while the income of Rs 7.5 lakh to Rs 10 lakh will be taxed at 15 per cent. It was 20 per cent flat over the full range of existing systems. Where the previous ten lakh slab where you paid 30 per cent will be divided into three parts at a rate of 20 per cent for 10-12.5 lakh rupees, 25 per cent for 12.5 lakh-15 lakh rupees and then 30 per cent for 15 rupees? Millions and more

So, which one should be picked?

Unfortunately, there is no single answer. And the culprit is again the complexity of Indian tax rules.

Although looking at tax rate reductions, the first reaction is that the new system looks better. However, with these cuts, someone earning Rs.5.5 lakh will have to pay Rs 25,000 and those earning Rs 10 lakh will have to save Rs 3,37,500 in tax. But as they say, the devil is in the details. For these savings, you will have to waive all discounts and rebates that may invalidate these benefits.

Determining which option to go with can be complicated if you look at it systematically.

Here you will find everything you want to do -

1. Calculate all the discounts you get: If you are living on rent, you are claiming HRA which is the highest salary discount. In addition to these, other tax-free elements include LTA, food bill, phone bill, etc. You will all be taxable if you want to relocate to the new tax system.

2. See the discounts you claim: As a salaried employee, the two deductions you automatically receive are the standard deduction of Rs. 50,000 and your contribution to your Employees Provident Fund (EPF). Under the new regime, you will not be able to claim this discount even if you contribute to the EPF. After all, you can't claim a discount against your home loan (if you have one) or an insurance policy, which has helped reduce your taxable income so far.

Now, combine these discounts and discounts and subtract it from your salary to see what your taxable income is and what it will be like if you give up these discounts. You should decide which regime you should choose for.

Let’s take three examples in individual situations of how exemptions and exemptions or their lack will affect taxation in both systems.

Situation 1: Some people are demanding some discounts and discounts

Ramit is an employee of a bank who earns 8 lakh rupees a year. Being a salaried employee, he contributes to the EPF and also receives HRA benefits on his salary as a renter. In addition to these, he is eligible for LTA and he has spent Rs 25,000 on his trip this year and will claim it. He is unable to save anything beyond his EPF contribution due to family responsibilities.

Let's see which tax system will save more tax for him

Income Tax Calculation
			Old Tax Regime (₹)			New Tax Regime (₹)
a) Annual Income			8,00,000			8,00,000
b) Standard Deduction			-50,000
c) EPF Contribution (Section 80C)			-25,000
d) HRA			-30,000
e) Leave Travel Allowance			-25,000
f) Total (Deduction & Exemption)			1,30,000
Net Taxable Income (a-f)			₹6,70,000			₹8,00,000
Tax Slab	Old Rates	New Rates		Tax (Old)	Tax (New)
0 – 2,50,000	0%	0%
2,50,000 – 5,00,000	5%	5%		12,500	12,500
5,00,000 – 7,50,000	20%	10%		34,000	25,000
7,50,000 – 10,00,000	20%	15%			7,500
10,00,000-12,50,000	30%	20%
12,50,000 – 15,00,000	30%	25%
15,00,000 & above	30%	30%
Total taxes				46,500	45,000
Cess				1,860	1,800
Total tax need to pay				48,360	46,800

Download Automated Income Tax Revised Form 16 Part A&B And Part B for the Financial Year 2019-20 [ This Excel Utility can prepare One by One Form 16 Part A&B and Part B ]

As you can see, the new tax system will save Ramit more taxes, reducing the tax burden by Rs 1,550.

Situation 2: Someone is claiming all the big discounts and a few discounts

IT professional Amit earns 13 lakh rupees in one year. Being a salaried person, he contributed to the EPF. He has also invested Rs 40,000 in Tax Savings Mutual Fund (ELSS) and bought a term life insurance with a coverage of Rs one crore. For this, he has paid a premium of Rs 10,000. Also, he is eligible to claim Rs 30,000 in HRA, tax exemption. 20,000 in LTA

Now, let's see how tax liability changes in any of its tax structures

Income Tax Calculation
			Old Tax Regime (₹)			New Tax Regime (₹)
a) Annual Income			13,00,000			13,00,000
b) Standard Deduction			-50,000
c) Section 80C			-75,000
d) HRA			-30,000
*e) Sodexo (Meal Coupons- 220012)**			-26,400
f) Leave Travel Allowance			-20,000
g) Total (Deduction & Exemption)			2,01,400
Net Taxable Income (a-g)			₹10,98,600			₹13,00,000
Tax Slab	Old Rates	New Rates		Tax (Old)	Tax (New)
0 – 2,50,000	0%	0%
2,50,000 – 5,00,000	5%	5%		12,500	12,500
5,00,000 – 7,50,000	20%	10%		50,000	25,000
7,50,000 – 10,00,000	20%	15%		50,000	37,500
10,00,000-12,50,000	30%	20%		29,580	50,000
12,50,000 – 15,00,000	30%	25%			12,500
15,00,000 & above	30%	30%
Total taxes				1,42,080	1,37,500
Cess				5,683	5,500
Total tax need to pay				1,47,763	1,43,000

Download Automated Income Tax Revised Form 16 Part B for the Financial Year 2019-20 [ This Excel Utility can prepare One by One Form 16 Part B ]

As you can see, the new tax system works even better here. In fact, in the old tax system, Amit would pay a further Rs 4,763 in the amount of tax. This does not mean, however, that he should discontinue his investment or terminate his term insurance policy. Tax benefits should not be seen as a benefit and as a primary reason to invest or buy insurance.

Situation 3: Someone is taking advantage of all the big discounts and discounts

For this example, let's take the example of Sumit, who earns Rs 20 lakh annually. He earned a full 10,000 rupees. EPF and ELSS Mutual Fund 1.5 lakh limit of Section 80C through a combination of contributions. He also bought health insurance, for which he paid a premium of Rs 25,000 as a claim for tax exemption under section 80D. Also, to save more tax from his salary, he has invested an additional Rs 30,000 in NPS. Like Ramit, he also demanded Rs 25,000 in LTA, which is not tax-deductible.

Now let's see which tax system will give him more money.

Income Tax Calculation
			Old Tax Regime (₹)			New Tax Regime (₹)
a) Annual Income			20,00,000			20,00,000
b) Standard Deduction			-50,000
c) Section 80C (EPF +ELSS Mutual fund)			-1,50,000
d) HRA			-50,000
e) Health Insurance			-25,000
e) Leave Travel Allowance			-25,000
e) NPS 80CCD (1B)			-30,000
f) Total (Deduction & Exemption)			3,30,000
Net Taxable Income (a-f)			₹16,70,000			₹20,00,000
Tax Slab	Old Rates	New Rates		Tax (Old)	Tax (New)
0 – 2,50,000	0%	0%
2,50,000 – 5,00,000	5%	5%		12,500	12,500
5,00,000 – 7,50,000	20%	10%		50,000	25,000
7,50,000 – 10,00,000	20%	15%		50,000	37,500
10,00,000-12,50,000	30%	20%		75,000	50,000
12,50,000 – 15,00,000	30%	25%		75,000	62,500
15,00,000 & above	30%	30%		51,000	1,50,000
Total taxes				3,13,000	3,37,500
Cess				12,540	13,500
Total tax need to pay				3,26,040	3,51,000

Download Automated Income Tax Revised Form 16 Part A&B for the Financial Year 2019-20 [ This Excel Utility can prepare at a time 100 Employees Form 16 Part A&B ]

For this situation, the old tariff works even better. It will bring lower taxes with a difference of Rs 24,960

The main concern

As we said earlier, the advances presented do not make things easier for Indian taxpayers in general. Whatever it is, you should be careful about one thing. The system you choose should not choose whether you deserve your contribution or protection. There should be reasons to achieve your life goals and ensure your family's future, not the tax benefits you get from them.

Download Automated Income Tax Arrears Relief Calculator U/s 89(1) along with Form 10E From the Financial Year 2000-01 to Financial Year 2020-21 (Updated Version) [ This Excel utility calculate your Arrears Salary Received from the F.Y.2000-01 to F.Y.2020-21 year wise Bifurcate the Salary and get Tax Relief U/s 89(1) and also filled the Automatic Form 10E in Excel]

If you Opt-in Old Tax Regime then you can get the Tax Exemptions. Important for tax planning. It reduces the tax burden of an assessee. Let's take a look at important deductions in Income tax F.Y. 2020-21 and A.Y. 2021-22. Or if you Opt-in as New Tax Regime, then you can not avail the below all Exemptions.

INCOME TAX DEDUCTIONS F.Y. 2020-21 & A.Y. 2021-22

FOR INDIVIDUAL & HUF

Section	Deduction Limit	Investments / Expenses
80C	Up to Rs. 150,000/- In (80C, 80CCC & 80CCD(1) together)	Life Insurance Premium P.P.F.(Public Provident Fund) Investment E.P.F. (Employee’s Provident Fund) N.S.C. (National Savings Certificate) Investment & Accrued Interest ELSS Mutual Funds (Equity Linked Saving Schemes) Five years Bank or Post Office Tax Saving Deposits S.C.S.S (Post Office Senior Citizen Savings Scheme) Principal repayment of Home Loan Kid’s Tuition Fees Sukanya Samriddhi Account Deposit scheme
80CCC		Contribution to the annuity plan of L.I.C. or any other Life Insurance Company for receiving a pension from the fund is considered for tax benefit.
80CCD(1)		Allowed to an Individual who makes deposits to his/her Pension account (like e NPS). Maximum deduction allowed is 10% of salary (in case of a taxpayer being an employee) or 10% of gross total income (in case of a taxpayer being self-employed).
80CCD(1b)	Additional deduction Up to Rs. 50,000/-	The amount deposited by a taxpayer to their NPS account. Contributions to Atal Pension Yojana are also eligible.
80D	Up to Rs. 25,000/- & Rs. 50,000/- for Senior citizens	Mediclaim / Health Insurance Premium
80EE	Up to Rs. 50,000/-	Home Buyers can claim an additional Tax deduction of up to Rs 50,000 on home loan interest payments. The below criteria has to be met for claiming tax deduction under section 80EE. The home loan should have been sanctioned in FY 2016-17. Loan amount should be less than Rs 35 Lakh. The value of the house should not be more than Rs 50 Lakh & The home buyer should not have any other existing residential house in his name.
80G	100% (generally in case of government funds) or 50% (generally in case of non-governmental funds)	Contributions made to certain relief funds and charitable institutions. This deduction can only be claimed when the contribution has been made via cheque or draft or in cash. But deduction is not allowed for donations made in cash exceeding Rs 10,000. In-kind contributions such as food material, clothes, medicines etc do not qualify for deduction under section 80G.
80TTA	Up to Rs. 10,000/-	Interest on deposits in SAVINGS BANK ACCOUNT, co-operative society or post office can be claimed under this section. Section 80TTA deduction is not available on the interest income from fixed deposits.

Other Rebates:

24(b)

Up to Rs. 200,000/- in case of self-occupied property or no maximum limit if the property is let out

Interest on housing, the loan is allowable as deduction on accrual basis not on paid basis (even if account books are kept on a cash basis) if capital is borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of the house property. The deduction can be claimed for two or more housing loans.

87A

Up to

Rs. 2500/-

This rebate is available on tax on total income to a resident individual if his total income does not exceed Rs. 350,000/-

Withal Income Tax Exemptions are available under Sec.10 and other deduction withal of Income Tax Act, 1961.

• Leave Peregrinate Allowance under clause 5 of Section 10(5).

• House Rent Allowance under Section 10(13A).

• Allowances to MPs/MLAs under section 10(17).

• Allowances for the income of minor u/s 10(32) etc.

• Standard deduction of Rs 50,000 u/s 16.

• Deductions from House Property Income of interest paid on house loan (Self-occupied/Vacant) u/s 24.

• Regalement allowance and employment/ professional tax will not be available.

• Deduction of Rs 15,000 for family pension u/s 57.

• Set off of carrying forward loss and depreciation from earlier assessment years is not sanctioned.

• Without setting off a loss under the head income from house property.

• Without the benefit of expedited depreciation u/s 32(1)(iia). However mundane depreciation can be claimed u/s 32.

Automated Income tax preparation Excel Based All in One for Govt and Non-Govt Employees forF.Y.2020-21 (Old Tax Regime and New Tax Regime U/s 115BAC)

[This Excel Utility can prepare at a time your Tax Computed Sheet + Individual Salary The structure as per the Govt & Non-Govt Concern’s Salary Pattern + Automated Arrears Relief Calculator U/s 89(1) with Form 10E + Automated Income Tax Revised Form 16 Part A&B and Form 16 Part B as per Budget 2020]