The Budget 2020 introduces a new regime under Section 115BAC giving individuals and HUF taxpayers an option to pay income tax at lower rates with fewer exemptions and deductions to claim. Keep reading to learn more about Section 115BAC of the Income-tax Act, 1961.
Section 115BAC - the new tax regime system came into force from FY 2020-21 (AY 2021-22). The new tax regime introduced concessional tax rates with reduced deductions and exemptions. Section 115BAC was amended in the Budget 2023, and the new regime was made the default regime from FY 2023-24. This Section was further amended with revised tax rates in Budget 2024. If an individual or HUF wants to opt for the old tax regime, then he must file Form 10-IEA before the due date of filing ITR.
In Budget 2024, the income tax slabs under the new tax regime have been revised. The new tax slabs under the new tax regime for FY 2024-25 (AY 2025-26) are shown in the table below, whereas under the old tax regime, the income tax slabs and rates remain unchanged.
Tax Slab for FY 2024-25 | Tax Rate |
Upto 3,00,000 | Nil |
3,00,001 - 7,00,000 | 5% |
7,00,001 - 10,00,000 | 10% |
10,00,001 - 12,00,000 | 15% |
12,00,001 - 15,00,000 | 20% |
Above 15,00,000 | 30% |
Note: The following additional benefits have been extended to the taxpayers who opt for new regime for FY 2024-25 (AY 2025-26):
The tax rates under the new tax regime and the old tax regime for FY 2022-23 (AY 2023-24), FY 2023-24(AY 2024-25) and FY 2024-25(AY 2025-26) are compared below:
| New Tax Regime | |||||
Income Slabs | Age < 60 years & NRIs | Age of 60 Years to 80 years | Age above 80 Years | FY 2022-23 | FY 2023-24 | FY 2024-25 |
Up to ₹2,50,000 | NIL | NIL | NIL | NIL | NIL | NIL |
₹2,50,001 - ₹3,00,000 | 5% | NIL | NIL | 5% | NIL | NIL |
₹3,00,001 - ₹5,00,000 | 5% | 5% | NIL | 5% | 5% | 5% |
₹5,00,001 - ₹6,00,000 | 20% | 20% | 20% | 10% | 5% | 5% |
₹6,00,001 - ₹7,00,000 | 20% | 20% | 20% | 10% | 10% | 5% |
₹7,00,001 - ₹7,50,000 | 20% | 20% | 20% | 10% | 10% | 10% |
₹7,50,001 - ₹9,00,000 | 20% | 20% | 20% | 15% | 10% | 10% |
₹9,00,001 - ₹10,00,000 | 20% | 20% | 20% | 15% | 15% | 10% |
₹10,00,001 - ₹12,00,000 | 30% | 30% | 30% | 20% | 15% | 15% |
₹12,00,001 - ₹12,50,000 | 30% | 30% | 30% | 20% | 20% | 20% |
₹12,50,001 - ₹15,00,000 | 30% | 30% | 30% | 25% | 20% | 20% |
₹15,00,000 and above | 30% | 30% | 30% | 30% | 30% | 30% |
The new tax regime does not allow 70+ deductions and exemptions (discussed in para 4).
The tax payable under both the new and the old regimes without claiming deductions and exemptions for FY 2023-24 (AY 2024-25) is as below:
Annual income* | Tax under the old regime (Rs) (A) | Tax under the new regime (Rs) (B) | Tax savings under the new regime (Rs) (A - B) |
Up to Rs 7,50,000 | 65,000 | 31,200 | 33,800 |
Up to Rs 10,00,000 | 1,17,000 | 62,400 | 54,600 |
Up to Rs 12,50,000 | 1,95,000 | 1,04,000 | 65,000 |
Up to Rs 15,00,000 | 2,73,000 | 1,56,000 | 1,17,000 |
*Assumed that the annual income is after considering the standard deduction under both old and new regimes.
The above table shows that the new tax regime generally saves taxes for taxpayers who don’t claim any deductions or exemptions.
For the assessment year 2024-25, individuals and Hindu Undivided Families (HUFs) have to pay the taxes under the new tax regimes unless they choose to opt in for the old regime while filing the return of income before the due date. Under the new tax regime, the total income should meet the below-mentioned conditions:
The following are some of the major deductions and exemptions you cannot claim under the new tax regime:
Under the New tax regime, you can claim tax exemption for the following:
Here's a detailed list of exemptions and deductions available under the Old vs New Regime.
The below table outlines the key differences in available deductions between the Old Tax Regime and the New Tax Regime (Section 115BAC) for the financial year 2024-25:
Deduction/Exemption | Old Regime | New Regime (Section 115BAC) |
Section 80C (Investment in PPF, NSC, Life Insurance Premium, ELSS, etc.) | Available up to Rs. 1.5 lakh | Not available |
Section 80D (Health insurance premium) | Available | Not available |
Standard Deduction (for salaried individuals) | Rs. 50,000 | Rs. 75,000 (FY 2024-25) and Rs. 50,000 (FY 2023-24) |
House Rent Allowance (HRA) | Available (based on actuals) | Not available |
Leave Travel Allowance (LTA) | Available | Not available |
Interest on Housing Loan (Section 24) (for self-occupied property) | Deduction up to Rs. 2 lakh | Not available |
Section 80E (Interest on education loan) | Available | Not available |
Section 80G (Donations to charitable institutions) | Available | Not available |
Section 80TTA/80TTB (Interest on savings bank account/interest for senior citizens) | Available | Not available |
Entertainment Allowance | Available | Not available |
Professional Tax (for salaried individuals) | Available | Not available |
Additional Depreciation (Section 32(1)(iia)) | Available | Not available |
Income from House Property Loss Set-off | Allowed (set off with other income) | Not available |
Children’s Education Allowance | Available | Not available |
Transport Allowance (for specially abled) | Available | Not available |
A salaried taxpayer can choose to opt for the old regime, as the new regime is default now, at the beginning of FY 2023-24 and intimate their employer. The employee cannot change their choice anytime during the financial year. However, they can change their choice when filing the income tax return in July 2024. The same is applicable for FY 2024-25 also.
The due date for tax filing for the FY 2023-24 (AY 2024-25) is 31st July 2024, unless extended. If you have not filed your return within 31st July, you have until 31st December, 2024 to summit your Belated Return.
In case an employee does not choose the old tax regime at the beginning of the financial year, the employer will deduct tax (TDS) under the default tax regime i.e. the new tax regime. A salaried taxpayer can choose the new tax regime in one year and choose the regular tax regime in another year.
A non-salaried taxpayer has to choose the new regime when filing the tax return. They need not declare or intimate their choice to anyone during the year. However, a non-salaried taxpayer (taxpayers with an income from business or profession) cannot opt-in and opt-out of the new tax regime every year. Once a non-salaried opts out of the new tax regime, they cannot opt-in again for the new tax regime in the future.
From a tax planning perspective, choosing the tax regime at the beginning of the financial year is essential. A taxpayer must compare the income tax under the new tax regime with the old regime. Once the taxpayer chooses the tax regime at the beginning of the year, the investments and TDS or advance tax payable calculations are made accordingly. Also, the taxpayer has to furnish Form 10IEA to the income tax department before filing the return if the taxpayer intends to opt for the old tax regime.
Income | Amount (Rs) | Old regime (Rs) | New regime (Rs) |
Salary | 12,50,000 | 12,50,000 | 12,50,000 |
Less: Standard deduction | 50,000 | 50,000 | 50,000 |
Less: Professional tax | 2,400 | 2,400 | - |
Gross total income | 11,97,600 | 11,97,600 | 12,00,000 |
Less: Deduction u/s 80C | 1,50,000 | 1,50,000 | - |
Total income | 10,47,600 | 10,47,600 | 12,00,000 |
Income tax | 1,26,780 | 90,000 |
In the above example, for an income of Rs 12,50,000, the new tax regime is significantly beneficial by Rs 38,251. However, if you claim further deductions for interest on housing loan for SOP, health insurance, investment in NPS, education loans and so on, the old regime will be helpful in respect of tax savings.
Income | Amount (Rs) | Old regime (Rs) | New regime (Rs) |
Salary | 10,00,000 | 10,00,000 | 10,00,000 |
Less: HRA Exemption | 70,000 | 70,000 | - |
Less: Standard deduction | 50,000 | 50,000 | 50,000 |
Less: Professional tax | 2,400 | 2,400 | - |
Gross total income | 9,47,600 | 8,77,600 | 9,50,000 |
Less: Deduction u/s 80C | 1,50,000 | 1,50,000 | - |
Less: Deduction u/s 80D | 50,000 | 50,000 | - |
Total income | 10,47,600 | 6,77,600 | 9,50,000 |
Income tax | 48,020 | 52,500 | |
Add: Education cess @ 4% | 1,921 | 2,100 | |
Total tax | 49,941 | 54,600 |
In Example 2, for an income of Rs 10 lakh having HRA exemption and 80D deduction, the old tax regime is beneficial by Rs 4,659.
If an individual claims lower deductions for tax savings towards health insurance, investment in NPS and so on, the new regime will be more beneficial against individuals who utilise the tax-saving investments.
Also, individuals with an income bracket between Rs 5-15 lakh with lower deductions claims will benefit from the new regime. In contrast, individuals can benefit more from the old regime by making tax-saving investments.
It is important to note that each taxpayer should calculate income tax, consider their tax-saving investments and then choose the regime. Refer to this page for a detailed comparison between the old tax regime and the new tax regime.
In the case of a self-occupied property, you cannot claim a deduction on interest for a housing loan under the new tax regime. The deduction of Rs 2 lakh allowed in the existing system is not available in the new tax regime. Also, you cannot set off the loss of Rs 2 lakh from house property from your salary income.
If you have let out house property, you can claim a deduction for interest paid on the housing loan. Note that the new tax regime restricts the deduction to the taxable rent received from the property against the old regime. In the new regime, you cannot set off the loss arising from the house property due to excess interest paid over the rental income with any other head of income. Also, you cannot carry forward the loss from house property to future years for set off.
Deductions and exemptions not allowed against business income:
In the case of a business income, an individual or HUF cannot claim set-off of the brought forward business loss or unabsorbed depreciation.
The deductions are not available under the new regime to the extent they relate to deductions/exemptions withdrawn.
Based on the provided information, it is evident that the current tax regime offers advantages for the specified income level. If an individual chooses to claim fewer deductions for tax savings, such as investments in NPS or health insurance, the new regime becomes more advantageous compared to individuals who rely on tax-saving investments.
It is important to consider that individuals with an income ranging from Rs.5 lakh to Rs.10 lakh, who opt for lower deductions, will benefit from the new regime. Conversely, individuals falling into higher income tax brackets, earning more than Rs.15 lakh annually, can benefit from the old regime by utilising tax-saving investments.
Related Articles:
Old Tax Regime vs New Tax Regime: Which is Better
Income Tax Slabs 2024-25 and ‘New tax regime’
Income Tax in India: Basics, slabs and E-filing Process 2021
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