Section 115BAC is made applicable from FY 2020-21 i.e. AY 2021-22 which is the current financial year and all employees have to make a declaration whether they are going to opt for new tax regime or stay in old tax regime.
Before opting that one needs to know what all benefits they are going to loose and what all benefits one will get.
We have even made a calculation sheet for comparing the old and new regime and you can use that as well. CLICK HERE to download Calculation sheet.
Now, let’s see what is the new slab rate i.e. what are the benefits:
||Rate of tax
||Upto 2.5 lakh
||From 2,50,001 to 5,00,000
||From Rs 5,00,001 to Rs 7,50,000
||From Rs 7,50,001 to Rs 10,00,000
||From Rs 10,00,001 to Rs 12,50,000
||From Rs 12,50,001 to Rs 15,00,000
||Above Rs 15,00,000
Do remember that in this slab rate also you will get benefit of rebate u/s 87A i.e. if you have income upto Rs. 5 lakh you can claim a rebate upto 12,500 from tax i.e. salary upto Rs. 5 lakh will be tax free.
It’s time to now see what all benefits you have to let go if you wish to opt for the new tax regime:
- Standard deduction of Rs. 50,000 from salary u/s 16.
- Travel concession to government employees. Section 10(5).
- House rent allowance 10(13A).
- Reimbursement of expense to employee in form of allowance for actual expense 10(14).
- Allowances to parliamentary members 10(17).
- Deduction of interest from Self occupied House property u/s 24(b).
- Deduction under Chapter VI-A i.e. 80C to 80U except 80CCD(2) (NPS) and 80JJAA.
The major exemptions which are going to affect employees the most are standard deduction, House rent allowance (HRA), Interest on housing loan and 80C to 80U deduction.
Now even if you have opted for new regime before your employer he cannot change the same for deducting your TDS but the employee can choose a tax regime different from what he has mentioned to his employer if that’s more beneficial.
Thus, in the year end you feel it is more beneficial to stay in old regime you can stay in old regime, file the return and claim refund of TDS if any.