All you need to know about The New Tax Regime✨

Section 115BAC of the Income-Tax Act📘

Welcome to this week's edition of our newsletter, where we delve into the intricacies of the Section 115BAC of the Income-tax Act to help you make the most of your hard-earned money. In today's issue, we shed light on an essential provision that can significantly impact your tax liability: Section 115BAC.

Read on to discover how this powerful provision can unlock a world of tax benefits for you!

Section 115BAC: A Game-Changer in Income Tax Planning

We all strive to optimize our income tax payments while staying compliant with the law. Section 115BAC of the Income-tax Act is a valuable tool that empowers taxpayers to achieve just that. Introduced in the Union Budget of 2020, this section offers individuals the option to choose between existing tax rates and a simplified tax regime, ensuring greater flexibility and potential tax savings.

Under the new tax regime outlined in Section 115BAC, individuals are not eligible to claim certain common deductions. These deductions include the popular deduction of Rs 1.5 lakh under Section 80C for specific investments or expenses, the deduction of Rs 25,000 for medical insurance premiums paid under Section 80D, and the deduction of Rs 50,000 for investment in the National Pension System (NPS) under Section 80CCD (1b), among others.

Additionally, the new tax regime does not allow individuals to avail themselves of certain tax exemptions. Examples of these exemptions include house rent allowance and leave travel allowance.

Until the financial year 2022-23, salaried individuals were unable to claim the standard deduction of Rs 50,000 from their salary income. However, to make Section 115BAC more appealing to individuals, the new tax regime allows for the inclusion of the standard deduction on salary income.

Benefits of Section 115BAC:

• Reduced Tax Rates: Under the simplified new tax regime, taxpayers enjoy lower tax rates compared to the regular tax slab rates. This means you can potentially keep more of your hard-earned income in your pocket.

• No Deductions or Exemptions: While the old tax regime offers various deductions and exemptions, Section 115BAC eliminates these, streamlining the tax calculation process. This simplification saves you time and effort in keeping track of numerous tax-saving investments and deductions.

• Versatility and Choice: Section 115BAC provides taxpayers with the freedom to select the tax regime that best suits their financial situation. You can evaluate your income sources, investments, and deductions to determine which regime will yield maximum tax savings for you.

• Clarity and Ease of Compliance: The simplified tax regime eliminates the need to maintain meticulous records and compute deductions. This ensures a hassle-free tax filing experience, reducing the chances of errors or omissions.

Section 115BAC Eligibility:

As per the revised eligibility criteria in Budget 2023, the option to choose the new tax regime under Section 115BAC of the Income-tax Act was initially available to individuals and Hindu Undivided Families (HUFs) until the financial year 2023.

However, the eligibility criteria for the new tax regime have been expanded under Section 115BAC. Starting from April 1, 2023, in addition to individuals and HUFs, Associations of Persons (AOP) other than cooperative societies, bodies of individuals, and artificial judicial persons can also opt for the new tax regime. This means that a broader range of entities can now take advantage of the benefits offered by Section 115BAC.

Revised Tax Slabs under Section 115BAC:

• Income up to Rs 3,00,000 - NIL

• Income between Rs 3,00,001 and Rs 6,00,000 - 5%

• Income between Rs 6,00,001 and Rs 9,00,000 - 10%

• Income between Rs 9,00,001 and Rs 12,00,000 - 15%

• Income between Rs 12,00,001 and Rs 15,00,000 - 20%

• Income above Rs 15,00,000 - 30%

Here’s how you can make the most of Section 115BAC:

Calculate Your Tax Liability: Use reliable tax calculators or seek professional assistance to compute your tax liability under both old and new tax regimes. This will help you compare the potential savings and make an informed decision. 

Tax Calculator by JJ Tax available for your ease on the link below :

https://www.jjfintax.com/tax-calculator.html

Long-term Planning: Consider the impact of Section 115BAC on your long-term tax planning. Assess the benefits over multiple years, especially if you anticipate changes in your income or financial situation.

Bottom Line :

Remember, Section 115BAC offers a remarkable opportunity to simplify and optimize your tax payments and retain more of your hard-earned money. By taking advantage of this provision and adopting a strategic approach, you can enhance your financial well-being and achieve your long-term goals.

That's it for this week's newsletter! We hope you found this insight into Section 115BAC enlightening and valuable. If you have any questions or need further assistance, please don't hesitate to reach out to our team of experts. Stay tuned for more tax-saving tips and financial updates in our upcoming editions!