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Individuals and HUFs can pay Tax as per Section 115BAC from Assessment Year 2021-22 (Financial Year 2020-21)

Currently, the Individuals and HUF are taxed as per the slab  rates and the highest slab rate is 30% which applies when income exceeds ` 10,00,000. The Finance Bill, 2020, has provided  an option to Individuals and HUF for payment of taxes at the  following reduced rates:

Total Income (Rs.)


Up to Rs. 2,50,000


From Rs 2,50,001 to Rs 5,00,000


From Rs 5,00,001 to Rs 7,50,000


From Rs 7,50,001 to Rs 10,00,000


From Rs 10,00,001 to Rs 12,50,000


From Rs 12,50,001 to Rs 15,00,000


Above Rs. 15,00,000


The option to pay tax at lower rates shall be available only if the  total income of assessee is computed without claiming following  exemptions or deductions: 

  1. Leave Travel concession [Section 10(5)]; 

  2. House Rent Allowance [Section 10(13A)];

  3. Official and personal allowances (other than those as may be  prescribed) [Section 10(14)]; 

  4. Allowances to MPs/MLAs [Section 10(17)]; 

  5. Allowances for income of minor [Section 10(32)] 

  6. Deduction for units established in Special Economic Zones (SEZ)  [Section 10AA]; 

  7. Standard Deduction [Section 16(ia)]; 

  8. Entertainment Allowance [Section 16((ii)]; 

  9. Professional Tax [Section 16(iii)]; 

  10. Interest on housing loan [Section 24(b)];

  11. Additional depreciation in respect of new plant and machinery  [Section 32(1)(iia)]; 

  12. Deduction for investment in new plant and machinery in notified  backward areas [Section 32AD]; 

  13. Deduction in respect of tea, coffee or rubber business [Section  33AB]; 

  14. Deduction in respect of business consisting of prospecting or  extraction or production of petroleum or natural gas in India  [Section 33ABA]; 

  15. Deduction for donation made to approved scientific research  association, university college or other institutes for doing  scientific research which may or may not be related to business  [Section 35(1)(ii)]; 

  16. Deduction for payment made to an Indian company for doing  scientific research which may or may not be related to business  [Section 35(1)(iia)]; 

  17. Deduction for donation made to university, college, or other  institution for doing research in social science or statistical  research [Section 35(1)(iii)]; 

  18. Deduction for donation made for expenditure on scientific  research [Section 35(2AA)]; 

  19. Deduction in respect of capital expenditure incurred in respect of  certain specified businesses, i.e., cold chain facility, warehousing  facility, etc. [Section 35AD];

  20. Deduction for expenditure on agriculture extension project  [Section 35CCC]; 

  21. Deduction for family Pension [Section 57(iia)]; and 

  22. Deduction in respect of certain incomes other than specified  under Sections 80JJAA, 80CCD(2) and deduction under section  80LA for Unit located in IFSC [Part C of Chapter VI-A].

Total income of the assessee is calculated after claiming  depreciation under section 32, other than additional depreciation,  and without adjusting brought forward losses and depreciation  from any earlier year (if such loss or depreciation pertains to  any deduction under the aforesaid sections).

Further, loss under  the head house property can’t be set off against other heads  of Income.

Moreover, such loss and depreciation will not be  carried forward.
If the assessee has any unabsorbed depreciation, relating to  additional depreciation, which has not been given full effect, the  corresponding adjustment shall be made to WDV of the block of  assets in the prescribed manner.

In case the assessee has business income, this option shall be  exercised on or before the due date for furnishing the returns  of income. Once the assessee has exercised the option for any  previous year, it cannot be subsequently withdrawn for the same  or any other previous year.

The option once exercised for any  previous year can be withdrawn only once in subsequent previous year (other than the year in which it was exercised) and  thereafter, he shall never be eligible to exercise this option again  except where such person ceases to have any business income. 

If assessee does not have business income, the option must be  exercised along with the return of income for every previous  year.

If an assessee, after opting for Section 115BAC, claims  any of prescribed deduction or allowance in any previous year,  then the option to pay tax at concessional rate shall become  invalid for that year. 

The assessee opting for this scheme have been kept out of the  purview of Alternate Minimum Tax (AMT). Further the provision  relating to the computation, carry forward and set off of AMT  credit shall not apply to these assessees.

‘Calculation of Tax’ in case of ‘Salaried Person’ under new Regime of Section 115BAC Tax Amendments in Finance Bill 2020 Taxation of Resident Co-operative Societies from Financial Year 2020-21 (Assessment Year 2021-22)
Income Tax Slab for Financial Year 2020-21 (AY : 2021-22)

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