Section 115BAC: New Slab Rates, Eligibility, and Deductions

An alternative tax regime under Section 115BAC was announced in the Budget 2020. It introduced concessional tax rates without considering the legal mandates required for exemptions or deductions. You can choose between the old and the new tax rates based on your financial situation.

Any individual or HUF with income from sources apart from their profession is eligible to make claims under Section 115BAC of the Income Tax Act, 1961. However, their declared income must not cover any of the business income. 

 

The income calculation for this is done without considering any exemptions or deductions provided under the following provisions: 

• Chapter VI-A (except those mentioned u/s 80CCD and 80JJAA)

• Clauses (5), (13A), (14), (17), and (32) of sections 10, 10AA, and 16

• Section 24b

• Sections 35, 35AD, and 35CCC

• Sections 32(1), 32AD, 33AB, and 33ABA

• Clause (iia) of Section 57

 

In addition to the above, the income calculation should not reflect the following: 

• Previous assessment years’ losses resulting from deductions mentioned above

• Losses from residential property owned by the taxpayer 

• Deductions or exemptions for any allowances or benefits 

• Claims related to depreciation u/s 32 clause (iia)

The income tax slabs under the new tax regime have been changed in the Budget 2023. 

 

Here is an overview of the rates falling under new tax regime under Section 115BAC of the Income Tax Act:

Given below is an overview of tax slabs and rates for the alternative tax regime and old tax regime:

*Note: Over 70 deductions and exemptions are not applicable under the new tax regime. 

 

Given below is a table illustrating the tax you would have to pay under the old or new tax regime without claiming deductions for the financial year 2023-24:

Disclaimer: The above calculation is just an illustration. Actual tax liability may vary.

Here are some permissible deductions in the new tax regime: 

• Conveyance allowances owed in lieu of performing officer duties 

• Costs associated with business travel and transfers 

• Daily allowance provided in certain circumstances will be exempt 

• Deductions featured under sections 80JJAA and 80CCD (2) 

• Transportation costs of a specially-abled person

• Costs involved in the purchase of business and official prerequisites

• Gifts of up to ₹5,000

• Exemptions on gratuity u/s 10(10), voluntary retirement 10(10C), and leave encashment u/s 10(10AA)

• Interest accrued on a housing loan (let-out property) as specified under Section 24

 

In addition to the above, the following provisions were also added to the Section 115BAC deduction list after Budget 2023:

• Standard deduction of ₹50,000 from financial year 2023-24

• Deduction under Section 57 (iia) for expenses related to income from family pension

• Deduction for deposits in the Agniveer Corpus Fund under Section 80CCH (2)

If individuals and HUFs choose to file their taxes under Section 115BAC of the Income Tax Act, they will not be allowed to make the following deductions: 

• Children Education Allowance (CEA)

• Helper allowance

• House Rent Allowance (HRA)

• Leave Travel Allowance (LTA)

• Minor child income allowance

• Entertainment allowance 

 

Additionally, deductions made under business income will not be considered as per the new regime outlined in Section 115BAC. In accordance with this rule, here is a list of some deductions you cannot claim in the alternate tax regime: 

• Additional depreciation, as mentioned under Section 32

• Investment allowance, as made clear under Section 32AD

• Sector-specific business deductions made clear in Sections 33ABA and 33AB

• Expenditure incurred owing to scientific research, as mentioned in Section 35

• Capital expenditure defined in Section 35AD

• Exemptions made clear under Section 10AA for SEZ units

Note that the above is not an exhaustive list of deductions and allowances exempt under the new tax regime. You can find the complete list on the income tax website.

• Opting for the new regime means you cannot claim deductions and exemptions of the old regime 

• Taxpayers can choose either the new or old regime; neither option is mandatory 

• The new regime was made the default tax regime from FY 23-24

• Individuals cannot choose the new regime if they have any business income in the given fiscal year 

• The same surcharge rate is applicable for both regimes, except when the income is above ₹5 Crores, resulting in the rate going down to 25% from 37%