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What is Section 115BAC of Income Tax Act: Slab Rates, Eligibility & Deductions

What is Section 115BAC of the Income Tax Act?

What are the New Slab Rates as per Section 115BAC of the Income Tax Act?

The following table lists down the new slab rates as per section 115BAC of the Income Tax Act, which can be used for calculation -

Annual Income

New Income Tax Slab Rate

Nil to ₹2.5 lakh

Exempted

Above ₹2.5 lakh to ₹5 lakh

5%

Above ₹5 lakh to ₹7.5 lakh

10%

Above ₹7.5 lakh to ₹10 lakh

15%

Above ₹10 lakh to ₹12.5 lakh

20%

Above ₹12.5 lakh to ₹15 lakh

25%

Above ₹15 lakh

30%

One can use an income tax calculator 115BAC for calculating the taxes. This tool asks for several data from a user. Once these are entered, the required result is displayed on the screen.

[Source]

What are the Eligibility Criteria for the New Tax Regime on Section 115BAC?

What are the Exemptions and Deductions Under Section 115BAC of the Income Tax Act?

What are the Deductions Not Applicable Under Section 115BAC of the Income Tax Act?

What is the Difference between Old and New Tax Regime on Section 115BAC?

When is the New Regime Better?

 

This particular section can be best explained with the help of an example. Go through the following tables.

The following calculations have been carried out considering an income amounting to ₹1,25,0000.

 

As Per Old Regime

Parameters

Resulting amount (₹)

Old regime (₹)

Salary

1250000

1250000

Less: Standard Deduction

50000

50000

Less: Professional Tax

2400

2400

Gross Total Income

1197600

1197600

Less: Deduction Under Section 80C

150000

150000

Total Income

1047600

1047600

Income Tax

-

126780

Add: Education Cess at 4%

-

5071

Total Tax

-

131851

As Per New Regime

Parameters

Resulting amount (₹)

New regime (₹)

Salary

1250000

1250000

Less: Standard Deduction

50000

-

Less: Professional Tax

2400

-

Gross Total Income

1197600

1250000

Less: Deduction Under Section 80C

150000

-

Total Income

1047600

-

Income Tax

-

125000

Add: Education Cess at 4%

-

5000

Total Tax

-

130000

From the above tables, it is clear that the tax difference between the two regimes comes out to be ₹1851. Therefore, for the income stated above, the new regime turns out to be marginally beneficial. However, if one claims further deductions for investment in NPS, education loans, health insurance, etc., the existing regime will be helpful with respect to tax savings.

When is the Old Regime Better?

 

Similar to the previous section, this one also is best explained through an example illustrated in the following tables.

Here, the income has been considered as ₹ 10,00000.

 

As Per Old Regime

Parameters

Resulting amount (₹)

Old regime (₹)

Salary

1000000

1000000

Less: Standard Deduction

50000

50000

Less: Professional Tax

2400

2400

Gross Total Income

947600

947600

Less: Deduction Under Section 80C

150000

150000

Total Income

797600

797600

Income Tax

-

72020

Add: Education Cess at 4%

-

2881

Total Tax

-

74901

As Per New Regime

Parameters

Resulting amount (₹)

New regime (₹)

Salary

1000000

1000000

Less: Standard Deduction

50000

Nil

Less: Professional Tax

2400

Nil

Gross Total Income

947600

1000000

Less: Deduction Under Section 80C

150000

Nil

Total Income

797600

1000000

Income Tax

-

75000

Add: Education Cess at 4%

-

3000

Total Tax

-

78000

From the above tables, it is clear that the existing tax regime turns out to be beneficial for the stated income amount. Suppose an individual claims lower deductions for tax savings towards investment in NPS, health insurance, etc. In that case, the new regime will be more beneficial against individuals who use the tax-saving investments.

One must note that individuals having an income bracket between ₹5 lakh to ₹10 lakh with a lower claim of deductions will benefit from the new regime. On the other hand, individuals who fall under a higher income tax bracket amounting to more than ₹15 lakh of yearly income can benefit more from the existing regime by making tax-saving investments.  

One should keep in mind the above-mentioned aspects to make an informed decision regarding choosing the old or new tax regime under section 115BAC of the Income Tax Act.

[Source]

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