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Whether ‘Individuals or HUFs’ should opt for New Tax Regime of Section 115BAC from Assessment Year 2021-22

The Finance minister in her budget speech highlighted that  tax burden on a person earning Rs. 15 lakhs shall be reduced by  Rs. 78,000. However, this situation will rarely arise as a tax saving  of Rs. 78,000 arises only when the assessee has not been availing any exemption or deduction in the current regime. We have  analysed the following situation to understand the implications  of this New Tax Regime of Section 115BAC:


Nature of Deduction
available in the Current Tax Regime

Break-
even Point

When it Is beneficial to opt for the New Regime of Section 115BAC ?

Reference
(See Table below)

No Deduction is allowable

-

Always

Table 1

Deduction allowable under Section 80C

8,50,000

Income In excess of
Break-even

Table 2

Deduction allowable under :

  • Section 80C
  • Section 80D

12,25,000

Income In excess of
Break-even

Table 3

Deduction allowable under :

  • Section 80C
  • Section 80D
  • Section 16 (Standard Deduction)

15,00,000

Never

Table 4

Deduction allowable under :

  • Section 80C
  • Section 80D
  • Section 16 (Standard Deduction)
  • Section 24(b) (Interest on Housing Loan)

-

Never

Table 5

Table-1 : Impact of Section 115BAC if Individual Not eligible for any Deduction

Income

Tax Liability under New Tax Regime of Section 115BAC

Tax liability
under Old Tax Regime

Net Tax
Saving

6,00,000

23,400

33,800

10,400

7,00,000

33,800

54,600

20,800

8,00,000

46,800

75,400

28,600

9,00,000

62,400

96,200

33,800

10,00,000

78,000

1,17,000

39,000

11,00,000

98,800

1,48,200

49,400

12,00,000

1,19,600

1,79,400

59,800

12,50,000

1,30,000

1,95,000

65,000

13,00,000

1,43,000

2,10,600

67,600

14,00,000

1,69,000

2,41,800

72,800

15,00,000

1,95,000

2, 73,000

78,000

Note : In this situation always opt for the New Tax Regime of Section 115BAC if the Assessee is not eligible for any Deduction.

Table - 2 : Impact of Section 115BAC if Individual eligible for Deduction under Section 80C

Income

Tax Liability under New Tax Regime of Section 115BAC

Tax liability
under Old Tax Regime

Net Tax
Saving

6,00,000

23,400

-

-23,400

6,50,000

28,600

-

-28,600

7,00,000

33,800

23,400

-10,400

7,50,000

39,000

33,800

-5,200

7,75,000

42,900

39,000

-3,900

7,90,000

45,240

42,120

-3,120

8,00,000

46,800

44,200

-2,600

8,50,000

54,600

54,600

-

9,00,000

62,400

65,000

2,600

9,10,000

63,960

67,080

3,120

9,20,000

65,520

69,160

3,640

9,25,000

66,300

70,200

3,900

9,50,000

70,200

75,400

5,200

10,00,000

78,000

85,800

7,800

Note :
The above table shows that it is beneficial to opt for the New Tax Regime of Section 115BAC if your Income is more than Rs.8,50,000 with your eligible Deduction under 80C.

The selection of New Tax Regime of Section 115BAC is not advisable up to your income Rs.8,50,000 in case the Assessee is eligible for Deduction under Section 80C.

Table - 3 :  Impact of Section 115BAC if Individual eligible for Deduction under Section 80C & 80D

Income

Tax Liability under New Tax Regime of Section 115BAC

Tax Liability under Old Tax Regime

Net Tax Saving

6,00,000

23,400

-

-23,400

6,50,000

28,600

-

-28,600

7,00,000

33,800

-

-33,800

7,50,000

39,000

23,400

-15,600

8,00,000

46,800

33,800

-13,000

8,50,000

54,600

44,200

-10,400

9,00,000

62,400

54,600

-7,800

9,50,000

70,200

65,000

-5,200

10,00,000

78,000

75,400

-2,600

10,50,000

88,400

85,800

-2,600

11,00,000

98,800

96,200

-2,600

11,50,000

1,09,200

1,06,600

-2,600

12,00,000

1,19,600

1,17,000

-2,600

12,25,000

1,24,800

1,24,800

-

12,30,000

1,25,840

1,26,360

520

12,40,000

1,27,920

1,29,480

1,560

12,50,000

1,30,000

1,32,600

2,600

Note :
The above table shows that it is beneficial to opt for the New Tax Regime of Section 115BAC if your Income is more than Rs. 12,25,000 with your eligible Deduction under 80C and Section 80D (it has been assumed that Deduction of Rs.50,000 shall be Claimed under Section 80D).
The selection of New Tax Regime of Section 115BAC is not advisable up to your income Rs. 12,00,000 in case the Assessee is eligible for Deduction under Section 80C and 80D.

Table - 4 :  Impact of Section 115BAC if Individual eligible for Deduction under Section 80C, 80D and Standard Deduction U/s 16

Income

Tax Liability under New Tax Regime of Section 115BAC

Tax Liability under Old Tax Regime

Net Tax
Saving

6,00,000

23,400

-

-23,400

7,00,000

33,800

--

-33,800

8,00,000

46,800

23,400

-23,400

9,00,000

62,400

44,200

-18,200

10,00,000

78,000

65,000

-13,000

11,00,000

98,800

85,800

-13,000

12,00,000

1,19,600

1,06,600

-13,000

13,00,000

1,43,000

1,32,600

-10,400

14,00,000

1,69,000

1,63,800

-5,200

15,00,000

1,95,000

1,95,000

-

16,00,000

2,26,200

2,26,200

-

17,00,000

2,57,400

2,57,400

-

18,00,000

2,88,600

2,88,600

-

Note :
It is NOT advisable to opt New Tax Regime of Section 115BAC if the Assessee is eligible for Deduction U/s 80C and 80D (it has been assumed that Deduction of Rs.50,000 shall be Claimed under Section 80D) and Standard Deduction U/s 16 from the Assessment Year 2021-22

Table - 5 :  Impact of Section 115BAC if Individual eligible for Deduction under Section 80C, 80D, Standard Deduction U/s 16 and Deduction for Interest on Housing Loan U/s 24(b)

Income

Tax Liability under New Tax Regime of Section 115BAC

Tax Liability under Old Tax Regime

Net Tax
Saving

6,00,000

23,400

-

-23,400

6,50,000

28,600

-

-28,600

7,00,000

33,800

-

-33,800

7,50,000

39,000

-

-39,000

8,00,000

46,800

-

-46,800

8,50,000

54,600

-

-54,600

9,00,000

62,400

-

-62,400

9,50,000

70,200

-

-70,200

10,00,000

78,000

23,400

-54,600

10,50,000

88,400

33,800

-54,600

11,00,000

98,800

44,200

-54,600

11,50,000

1,09,200

54,600

-54,600

12,00,000

1,19,600

65,000

-54,600

12,50,000

1,30,000

75,400

-54,600

13,00,000

1,43,000

85,800

-57,200

13,50,000

1,56,000

96,200

-59,800

14,00,000

1,69,000

1,06,600

-62,400

14,50,000

1,82,000

1,17,000

-65,000

15,00,000

1,95,000

1,32,600

-62,400

15,50,000

2,10,600

1,48,200

-62,400

16,00,000

2,26,200

1,63,800

-62,400

16,50,000

2,41,800

1,79,400

-62,400

17,00,000

2,57,400

1,95,000

-62,400

Note :
It is NOT advisable to opt New Tax Regime of Section 115BAC if the Assessee is eligible for Deduction U/s 80C and 80D (it has been assumed that Deduction of Rs.50,000 shall be Claimed under Section 80D) , Standard Deduction U/s 16  and Deduction for Interest on Housing Loan U/s 24(b)  from the Assessment Year 2021-22

Tax Treatment of Employer’s Contribution to the account of an Employee from Assessment Year 2021-22 (Financial Year 2020-21) Tax Amendments in Finance Bill 2020 Modification of Concessional Tax Rate Scheme for a Domestic Company under Section 115BAA and 115BAB from Assessment Year 2021-22
Income Tax Slab for Financial Year 2020-21 (AY : 2021-22)



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