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Choosing old or new concessional tax under sec 115BAC
With effect from the assessment year 2021-22, section 115BAC provides an option to an individual or HUF to opt for new tax regime to pay taxes at concessional tax rates which is available without claiming specified exemptions or deductions.
I am receiving many enquiries from a person having salary income whether to choose new or old tax regime. I generally recommend them to choose old tax regime that existed in FY 2019-20 as it serves dual purpose of investment and tax saving. I believe it is better to channelise hard-earned money into tax saving options such as PPF, NSC, ELSS, NPS, Mediclaim, post office schemes, pension plan etc that fulfil future family financial need. We, Balakrishna and Co, Chartered Accountant firm will advise our client on this before filing "individual income tax return".
In case of assessee having income other than income from business and profession, option is required to be exercised along with the return of income for each year.
However, in case an assessee having income under the head "profit and gains of business or profession" (PGBP), option once exercised cannot be changed for the subsequent previous years, except in certain circumstances.
Before making any conclusion, employee/taxpayer should compare impact on tax on new and old tax regime. For comparing tax impact, you can input income and deduction details in the below tax calculator provided by the income tax department.
https://www.incometaxindiaefiling.gov.in/Tax_Calculator/index.html?lang=eng
Before proceed with the above link, first thing is to check pay slip for eligible exemptions as well as deductions available under Chapter VIA of income tax act.
Exemptions and deductions allowable under old tax regime.
- Eligible LTA exemption
- Eligible HRA exemption
- Relocation allowance
- Children education allowance
- Helper Allowance
- Standard Deduction of Rs. 50000/-
- Profession Tax
- Housing Loan Interest payment
- Chapter VIA deductions such as LIC, PF, PPF, Mediclaim etc.
It is to be noted that, for those having higher salary income claiming more than 2,50,000 exemption from standard deduction (Rs. 50000), PF, tuition fee, HRA/Housing loan interest and LTA etc, opting old regime is beneficial.
Intimation to employer for deduction of TDS as per New/Old tax rate
After identifying the tax impact, employees should intimate at the beginning of the year, his option of old or new tax regime by way of simple application to employer enable him to deduct TDS accordingly.
FORMAT OF SIMPLE APPLICATION BY EMPLOYEE TO EMPLOYER REGARDING INTIMATION FOR OPTING OLD/NEW TAX SLAB RATE:-
To
Ref: PAN-
Sub: Intimation for deduction of TDS as per New/Old tax rate slab for FY: 2020-21.
Dear Sir/Madam,
With reference to the captioned subject matter I would like to request you to deduct TDS as per New/Old tax slab rate for the FY: 2020-21 and oblige.
Thanking You
Yours Faithfully
Upon such intimation, the employer/deductor shall compute his total income, and make TDS thereon in accordance with the provisions of section 115BAC of the Act.
If an employee intends to opt for old tax regime, he has to submit declaration for investment in Form No. 12BB along with application.
It is to be noted that if no application is received from an employee regarding old or new tax slab rate then employer should deduct TDS as per old tax slab rate.
The intimation once made to the employer for TDS will not be allowed to be modified during the course of the year. However, this restriction applicable only for intimation to employer for the purpose of TDS and not for exercising option u/s 115BAC as the same has to be done at the time of furnishing of return for the relevant previous year.
Thus, the option at the time of filing of return of income could be different from the intimation made by the employee to the employer. For example If employer deducted TDS as per old tax slab rate and employee wants to file ITR as per new tax rate or vise versa, there is no problem at all. If there is an excess TDS he can claim refund.
In case of a person who don’t have income from the head "profit and gains of business or profession," he can choose different option in each subsequent year and intimate the same to employer for TDS deduction. The intimation to the employer once made will generally hold good for subsequent previous years unless fresh intimation is made to employer.
In case of a person who has income under the head "profit and gains of business or profession" once the option for taxation under section 115BAC of the Act exercised at the time of filing income tax return, he cannot change his option for subsequent year. For such person the intimation to the employer for subsequent previous years must not deviate from the option exercised in a previous year.
The person who has income from F&O transaction or income from day trading should exercise their option for taxation under section 115BAC of the Act with due care keeping in mind of tax implication as he can’t change his option in subsequent year which is available for other employees.
Finaly,
Can we file Income Tax return without Chartered Accountant?
Yes, off course, You can file your ITR without the help of Chartered Accountant just like you can take medicines for any illness without consulting doctor.