Comparison between Section 115BAC before and after AY 2024-25

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Section 115BAC deals with lower/ concessional tax rates for individual, HUF etc. rather than the tax rates prescribed for individual in Finance Act, 2023. However, it is important to note that there is no difference in tax rates prescribed under section 115BAC for male, female or senior citizen and tax rates prescribed in the section are applicable to all equally.

Now, we shall try and make a comparison of the provision before 01.04.2024 and after 01.04.2024:

The provision is applicable to Individual or HUF irrespective of whether they are resident or non-resident.

Earlier the heading of the section was as under:

Tax on income of individuals, Hindu undivided family and others.

It was later on changed to:

Tax on income of individuals and Hindu undivided family.

However, this has not impacted any change in the provisions of the act, but in sub-section 1A of the Act, AOP (association of person), BOI (body of individuals) and artificial judicial persons have been included whereas they are not there in the heading of the Section.

Sub-section 1 of the Act was earlier used to showcase the slab rate or tax rate for individual or HUF, however now sub-section (1A) has been introduced from 01.04.2024 to determine taxability of income of such individual and HUF and the relevant extract of both sub-section are as under:

Change No. 1:

Sub-section 1 of Section 115BAC is as under:

(1) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, the income-tax payable in respect of the total income of a person, being an individual or a Hindu undivided family, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2021 but before the 1st day of April, 2024, shall, at the option of such person, be computed at the rate of tax given in the following Table, if the conditions contained in sub-section (2) are satisfied, namely:—

TABLE

Provided that where the person fails to satisfy the conditions contained in sub-section (2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and other provisions of this Act shall apply, as if the option had not been exercised for the assessment year relevant to that previous year:

Provided further that where the option is exercised under clause (i) of sub-section (5), in the event of failure to satisfy the conditions contained in sub-section (2), it shall become invalid for subsequent assessment years also and other provisions of this Act shall apply for those years accordingly.

Sub-section 1A of section 115BAC is as under:

Following sub-section (1A) shall be inserted after sub-section (1) of section 115BAC by the Finance Act, 2023, w.e.f. 1-4-2024:

(1A) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, the income-tax payable in respect of the total income of a person, being an individual or Hindu undivided family or association of persons (other than a co-operative society), or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2, other than a person who has exercised an option under sub-section (6), for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2024, shall be computed at the rate of tax given in the following Table, namely:—

TABLE

Changes:

As can be seen above now the tax rates have been completely changed. Earlier there used to be a difference of Rs. 2.5 lakh in respect of every slab rates and now the difference has been increased to Rs. 3 lakh and accordingly this is a better and more beneficial tax rates for individuals.

Change No. 2:

Clause (i) of sub-section (2) of Section 115BAC before amendment:

(2) For the purposes of sub-section (1), the total income of the individual or Hindu undivided family shall be computed,—

(i) without any exemption or deduction under the provisions of clause (5) or clause (13A) or prescribed under clause (14) (other than those as may be prescribed for this purpose) or clause (17) or clause (32), of section 10 or section 10AA or section 16 or clause (b) of section 24 (in respect of the property referred to in sub-section (2) of section 23) or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35 or section 35AD or section 35CCC or clause (iia) of section 57 or under any of the provisions of Chapter VI-A other than the provisions of sub-section (2) of section 80CCD or sub-section (2) of section 80CCH or section 80JJAA;

Clause (i) of sub-section (2) of Section 115BAC after amendment:

(2) For the purposes of sub-section (1A), the total income of the person referred to therein, shall be computed—

(i) without any exemption or deduction under the provisions of clause (5) or clause (13A) or prescribed under clause (14) (other than those as may be prescribed for this purpose) or clause (17) or clause (32), of section 10 or section 10AA or clause (ii) or clause (iii) of section 16 or clause (b) of section 24 [in respect of the property referred to in sub-section (2) of section 23] or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35 or section 35AD or section 35CCC or under any of the provisions of Chapter VI-A other than the provisions of sub-section (2) of section 80CCD or sub-section (2) of section 80CCH or section 80JJAA;

Changes:

As highlighted above there are two changes in clause (i) of sub-section (2) which deals with non-reduction of allowance or exemption from the income of assessee which is as under:

(1) Earlier no deduction or exemption under section 16 was allowed from salary. However, now deduction under clause (ia) shall be allowed and accordingly, salaried employee will now be allowed standard deduction under new regime as well. However, the tax calculator of income tax as of now for AY 2024-25 is not allowing standard deduction under new regime.

(2) Earlier no deduction was allowed against family pension received by assessee, now the deduction prescribed under section 57 clause (iia) shall be allowed.

Change No. 3:

Insertion of second proviso after sub-section 3:

Provided further that in a case where,

(i) the assessee has not exercised the option under sub-section (5) for any previous year relevant to the assessment year beginning on or before the 1st day of April, 2023;

(ii) the income-tax on the total income of the assessee is computed under sub-section (1A); and

(iii) there is a depreciation allowance in respect of a block of assets which has not been given full effect prior to the assessment year beginning on the 1st day of April, 2024,

corresponding adjustment shall be made to the written down value of such block of assets as on the 1st day of April, 2023 in the manner as may be prescribed.

Changes:

If a person if opting for the first time the concessional rate u/s 115BAC(1A) and has not opted for the same earlier it needs to make adjustment to the WDV of the asset for depreciation if there is any depreciation allowance which was not given full effect before.

Change No. 4:

Sub-section 4 to Section 115BAC before amendment:

(4) In case of a person, having a Unit in the International Financial Services Centre, as referred to in sub-section (1A) of section 80LA, which has exercised option under sub-section (5), the conditions contained in sub-section (2) shall be modified to the extent that the deduction under section 80LA shall be available to such Unit subject to fulfilment of the conditions contained in the said section.

Explanation.—For the purposes of this sub-section, the term “Unit” shall have the meaning assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005).

Sub-section 4 to Section 115BAC after amendment:

(4) In case of a person, having a Unit in the International Financial Services Centre, as referred to in sub-section (1A) of section 80LA,

(i) who has exercised option under sub-section (5) for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2021 but before the 1st day of April, 2024;

(ii) whose total income is computed under sub-section (1A),

the conditions contained in sub-section (2) shall be modified to the extent that the deduction under section 80LA shall be available to such Unit subject to fulfilment of the conditions contained in the said section.

Explanation.—For the purposes of this sub-section, the term “Unit” shall have the meaning assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005).

Changes:

A new amendment has been made to notify that option to choose was only applicable till FY 2022-23 and not after that.

Change No. 5:

Insertion of second proviso to sub-section 5 of Section 115BAC:

Provided further that the provisions of this sub-section shall not apply for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2024.

Changes:

Since from AY 2024-25, new regime under section 115BAC will be default for each eligible assessee, the provision asking the assessee to opt for Section 115BAC will not be required.

Change No. 6:

Insertion of sub-section 6 to Section 115BAC from AY 2024-25:

(6) Nothing contained in sub-section (1A) shall apply to a person where an option is exercised by such person, in the manner as may be prescribed, for any assessment year, and such option is exercised,

(i) on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for such assessment year, in case of a person having income from business or profession, and such option once exercised shall apply to subsequent assessment years; or

(ii) along with the return of income to be furnished under sub-section (1) of section 139 for such assessment year, in case of a person not having income referred to in clause (i):

Provided that the option under clause (i), once exercised for any previous year can be withdrawn only once for a previous year other than the year in which it was exercised and thereafter, the person shall never be eligible to exercise the option under this sub-section, except where such person ceases to have any income from business or profession in which case, option under clause (ii) shall be available.

Changes:

Earlier the provision of sub-section 5 used the language as under:

“Nothing contained in this section shall apply unless option is exercised in the prescribed manner”

Now the language of sub-section 6 is as under:

“Nothing contained in sub-section (1A) shall apply to a person where an option is exercised by such person, in the manner as may be prescribed”

Thus, now assessee is required to file the Form 10-IEA instead of Form 10-IE if it wishes to opt out of Section 115BAC and by default it will be considered as if the assessee has opted for new regime.

Hence, above are all amendments made in Section 115BAC to be effective from AY 2024-25 w.e.f. 01.04.2024.

Guidance on above article for Indian Income Tax by:

Naman Maloo (C.A., B.Com)
He is currently working as Partner – Direct Tax with a renowned firm in Jaipur having experience in dealing Assessments before Income Tax authority, Tax Audit, International Taxation, Tax planning for NRI, Business planning and consultation.
E-mail: naman.maloo@jainshrimal.in | LinkedIn: Naman Maloo

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