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October 7, 2020

Opting for New Tax Regime for FY 2020-21 you have to file New Form 10-IE before due date

by facelesscompliance in Income Tax

Opting for New Tax Regime for FY 2020-21 you have to file New Form 10-IE before due date

The Union Budget 2020 introduced a new personal income tax regime for individual taxpayers. It offered an individual the choice of paying tax under the new tax structure with lower rates but without deductions or continue to pay tax under the existing tax laws and claiming the applicable exemptions, set off loss or additional depreciation.

The newly-inserted Section 115BAC of the Income-tax Act, 1961 provides that a person, being an individual or from an undivided family having income other than income from business or profession may opt to be taxed under the section along with his return of income to be furnished under sub-section (I) of section 139 of the Act for each year.

Assessee cannot avail the below mentioned deductions if they opt of this new tax regime:

  • The standard deduction, professional tax and entertainment allowance on salaries
  • Leave Travel Allowance (LTA)
  • House Rent Allowance (HRA)
  • Minor child income allowance
  • Helper allowance
  • Children education allowance
  • Other special allowances [Section10(14)]
  • Interest on housing loan on the self-occupied property or vacant property (Section 24)
  • Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2) and 80JJAA)
  • Exemption or deduction for any other perquisites or allowances
  • Deduction from family pension income

Income tax slabs under the new tax regime for all individuals for FY 2020-21 (AY 2021-22) are as follows:

Income Tax SlabTax Rate
Up to Rs 2.5 lakhNil
Rs 2.5 lakh to Rs 5 lakh5% (Rebate of Rs 12,500 available)
Rs 5 lakh to Rs 7.5 lakh10%
Rs 7.5 lakh to Rs 10 lakh15%
Rs 10 lakh to Rs 12.5 lakh20%
Rs 12.5 lakh to Rs 15 lakh25%
Rs 15 lakh and above30%

CBDT vide Notification No. 82/2020 dated 01.10.2020 introduced new Form 10-IE

Form 10-IE which has been has been newly introduced by the Government is the form an individual is required to fill and submit at the time of filing income tax return (ITR) if he/she opts for the new tax regime for a particular financial year.

When is Form 10-IE required to be filed?

  • If an individual/HUF opts for new tax regime for FY 2020-21, then this form has to be filed at the time of filing ITR for FY 2020-21 to inform the tax department that they are choosing the new tax regime.
  • As per the income tax laws, an individual having business income shall submit this form before the due date of filing ITR i.e. July 31 (unless extended by the government).
  • The due date of filing ITR for FY 19-20 has been extended till 30th November, 2020.
  • For salaried individuals, the form can be submitted before/at the time of ITR filing, even if ITR is filed after the due date.

How is Form 10-IE required to be furnished?

Form No. 10-IE shall be furnished electronically either under digital signature or electronic verification code. The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall:

  • specify the procedure for filing of Form No. 10-IE
  • specify the data structure, standards and manner of generation of electronic verification code, referred to in sub-rule (2), for verification of the person furnishing the said Form; and
  • be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the Form so furnished.

Individuals having business income are required to fill this form at the time of opting for the new tax regime and at the time of withdrawing this option.

Salaried individuals with no business income will have to fill the form only if they opt for the new tax regime. In the future, if they do not opt for the new tax regime for a particular financial year then they will not be required to fill the form

What information is required to be furnished in Form 10-IE?

The individual/HUF is required to furnish the following information in Form 10-IE:

  • Name of the individual/HUF
  • Address
  • PAN
  • The financial year for which option is exercised
  • If the individual/HUF has income under business or profession
  • Date of birth
  • Nature of business/profession, (mandatory if an individual is having income from business and profession)
  • Whether the individual/ HUF has any Unit in International Financial Services Centre (IFSC), as referred to in section 80LA(1A)
  • Whether option under clause section 115BAC(5)(i) has been exercised in Form 10-IE for any earlier previous year/ years and is now being withdrawn (to be activated if withdrawal option is selected)

One-time Deduction w.r.t Depreciation

  • Section 115BAC restricts an assessee opting for this section to claim the deduction in respect of additional depreciation.
  • Notification No. 82/2020 dated 01.10.2020 provided for one time relief in the form of depreciation allowance, in respect of a block of asset, from any earlier assessment year which is attributable to the provisions in section 32(1)(iia).
  • Such depreciation shall be deemed to have been given full effect to and no further deduction for such depreciation shall be allowed for any subsequent year
  • Section 32(1)(iia) provides that where an assessee has acquired and installed any new machinery or plant (other than ships and aircraft), he shall be entitled to claim additional depreciation at the rate of 20% or 35% as the case may be. Additional depreciation shall be allowed only if the assessee is engaged in the business of manufacture or production of any article or thing or the business of generation, transmission or distribution of power.

It is important to remember that, if one forgets to file Form 10-IE at the time of filing ITR, then the individual or HUF may be disallowed the tax rates available under the new tax regime. The tax department will calculate his/her income tax liability based on the existing/old tax regime. It is also important to note that only the forms are notified and same are still not available for filing on e-filing website as filing would be needed before filing ITR for FY 2020-21 and there is still time for that.

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