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 Rs. 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.)||Rate|
|Up to Rs. 2,50,000||Nil|
|From Rs 2,50,001 to Rs 5,00,000||5%|
|From Rs 5,00,001 to Rs 7,50,000||10%|
|From Rs 7,50,001 to Rs 10,00,000||15%|
|From Rs 10,00,001 to Rs 12,50,000||20%|
|From Rs 12,50,001 to Rs 15,00,000||25%|
|Above Rs. 15,00,000||30%|
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:
- Leave Travel concession [Section 10(5)];
- House Rent Allowance [Section 10(13A)];
- Official and personal allowances (other than those as may be prescribed) [Section 10(14)];
- Allowances to MPs/MLAs [Section 10(17)];
- Allowances for income of minor [Section 10(32)]
- Deduction for units established in Special Economic Zones (SEZ) [Section 10AA];
- Standard Deduction [Section 16(ia)];
- Entertainment Allowance [Section 16((ii)];
- Professional Tax [Section 16(iii)];
- Interest on housing loan [Section 24(b)];
- Additional depreciation in respect of new plant and machinery [Section 32(1)(iia)];
- Deduction for investment in new plant and machinery in notified backward areas [Section 32AD];
- Deduction in respect of tea, coffee or rubber business [Section 33AB];
- Deduction in respect of business consisting of prospecting or extraction or production of petroleum or natural gas in India [Section 33ABA];
- 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)];
- 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)];
- Deduction for donation made to university, college, or other institution for doing research in social science or statistical research [Section 35(1)(iii)];
- Deduction for donation made for expenditure on scientific research [Section 35(2AA)];
- Deduction in respect of capital expenditure incurred in respect of certain specified businesses, i.e., cold chain facility, warehousing facility, etc. [Section 35AD];
- Deduction for expenditure on agriculture extension project [Section 35CCC];
- Deduction for family Pension [Section 57(iia)]; and
- 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