Income Tax New Tax Old Tax FY 2020-21 Archives

Employees Opting for New Tax Regime can claim Income Tax exemption on conveyance allowance

CBDT amends Rule 2BB to provide more benefit to taxpayers

The 2020 Budget has introduced a new tax regime under Section 115BAC in order to make taxation simpler for people. This new tax regime has given an option to individuals and HUF taxpayers to pay income tax at lower rates. The new tax rates will be applicable for income earned in the FY 2020-21. This new tax regime was proposed for individuals willing to forego certain specified deductions or exemptions while computing total income for tax purpose and paying taxes at a lower rate.

What are the tax rates in the optional new regime?

New slabs – Income	Tax Rate	Existing Slabs – Income	Tax Rate
From Rs 2.5 lakh to Rs 5 lakh	5%	From Rs 2.5 lakh to Rs 5 lakh	5%
From Rs 5 lakh to Rs 7.5 lakh	10%	From Rs 5 lakh to Rs 10 lakh	20%
From Rs 7.5 lakh to Rs 10 lakh	15%	Above Rs 10 lakh	30%
From Rs 10 lakh to Rs 12.5 lakh	20%
From Rs 12.5 lakh to Rs 15 lakh	25%
Above Rs 15 lakh	30%

Exemptions/deductions not claimable under Section 115BAC:-

Section 115BAC(2) prescribes the list of deductions /exemptions which are not available for deduction while computing total income if a taxpayer opts for the concessional tax regime. The following are the deductions and exemptions you cannot claim under the new tax system:

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)
Without exemption or deduction for any other perquisites or allowances
Deduction from family pension income

However, the CBDT is empowered to prescribe certain exemptions available under Section 10 which can be availed by the employees. Exercising such power, the Board has made the following amendments.

Amendments by CBDT in Rule 2BB

CBDT has amended Rule 2BB, which prescribes allowances for the purposes of Sec. 10(14). Rule 2BB allows exemption claim under Section 10(14) in respect of salaried employees opting for new tax regime under Section 115BAC in certain cases.

Now conveyance & travel allowance will be available for exemption under Section 10(14) for employees opting for new tax regime.
However, meal coupons etc will be out of exemption.
Blind, deaf and dumb or orthopedically handicap employees can also claim ad-hoc exemption of transport allowance of Rs 3,200 per month while computing salaried income.
An assessee can claim exemption u/s. 10(14) only in respect of:-
Tour/Transfer allowance
Daily travel allowance
conveyance allowance
Transport allowance for handicapped, subject to the conditions.

Amendments by CBDT in Rule 3

CBDT has amended Rule 3 [dealing with perquisites valuation], which states “exemption provided in respect of free food and non-alcoholic beverage provided by such employer through paid voucher shall not apply to the employee, being an assessee, who exercised option under section 115BAC.

The new IT slabs would be for individuals not availing certain specified deductions or exemptions. The CBDT notification considers free meal/beverages provided by an employer to employees during office hours to be a personal benefit and not an expenditure for official purposes. Therefore, similar to other allowances withdrawn under the new tax regime, tax exemption of such free meals/beverages has been withdrawn as well. The amended rule shall come into force from April 1, 2021, and shall accordingly apply in relation to the assessment year 2021-22, financial year 2020-21 and subsequent assessment years.

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Format of Declaration to be taken from Salaried Employee by Employer to deduct TDS in Old or New IT Slab Rates

The Finance Act 2020, has introduced new section 115BAC, as per this provision the assessee has an option whether to pay tax as per new slab rates or the old slab rates including employees for Financial Year 2020-21 Assessment Year 2021-22. Where the employee opts for new tax regime then the employee has to forgo some of the tax concessions under the existing income tax act, whereas if the employee opts for old tax regime then he will get the benefits of deduction under the income tax act.

The provision is made applicable for the Individual/ HUF and the individual can exercise the option at the time of filing the return of income. If the individual assessee is a salaried employee then he opt the scheme on a yearly basis. It means the individual can switch to the tax regime of his choice in the next year.

For opting the scheme, the employee has to give declaration to the deductor of his intention to opt for old or new tax scheme as per his choice. Upon such intimation, the employer shall compute his total income and make TDS thereon in accordance with the provision of section 115BAC of the Act. The declaration made by the employee cannot be changed. However at the time of filing Returns he can again chose one more time. Also Next year he can chose again if employee wish to switch method

Employers are confused with the format and mode of declaration

The Format of declaration is simple form which is given below. You can also download the word file and take declaration in physical form. Due to Covid19 and Lockdown many employees are working from Home or it is difficult to take physical signed copy of declaration. In such cases the declaration can be taken online from employee on his email address. The format use can be same. Remember to receive email from the email id usually used by employees. Also preserve the same, as once the declaration of Old or New rates of Income Tax for FY 2020-21 AY 2021-22 is made the employee cannot change during the year, or request employer to change before 31 March 2021

If employee are confused which rate to chose then read the below mention article on section 115BAC which will help you to decide which rate to go for in FY 2020-21

Which Slab Rate to Choose FY 2020-21 Old or New? Know Opt in Opt out rules for salaried & business, deduction not allowed section 115BAC

Format of declaration u/s 115BAC:

From,

___________________________________

(Name and address of Employee)

To,

HR Payroll

____________________(Company Name)

Address of Company

Subject: Declaration u/s 115BAC for opting old tax regime/ new tax regime under Income Tax Act for computation of TDS on salary

Dear HR Pay roll,

I ___________________(Name of employee) hereby declare that I want to opt for _________________(old tax regime/ new tax regime) under Income tax act for computation of TDS on salary. I also know that if I opt for new tax regime than I will have to forgo all the deduction under the Income tax act and pay taxes as per the new slab rates notified by the Finance Act 2020. Whereas if I opt for old tax regime than I will have get benefit of all the deduction under the Income tax act and pay taxes as per the old slab rates notified by the Finance Act 2020.

Please consider this declaration and calculate and deduct the TDS.

Yours sincerely,

__________________(Name of employee)

___________________

(Signature)

Download the Declaration form at from hereDownload