- Date : 03/04/2023
- Read: 3 mins
Discover the benefits of Section 115BAC of the Income-tax Act for optimising your tax returns in 2023. Choose between the old and new tax regimes wisely to save thousands of rupees. Learn everything you need to know about this little-known tax regime.
As the new financial year 2023-24 begins, taxpayers in India are preparing to file their income tax returns for the previous year. This year, taxpayers need to be aware of Section 115BAC of the Income-tax Act, which was introduced in the Union Budget 2020 and took effect on April 1, 2020.
If you are an individual or part of a Hindu Undivided Family (HUF), you can opt for the new tax regime under Section 115BAC of the Income-tax Act. This option provides lower tax rates but fewer deductions and exemptions than the old regime. However, once you choose the new regime, you cannot switch back for that year.
Section 115BAC allows taxpayers to choose between two tax regimes – the existing tax regime and the new tax regime. While the current tax regime offers various deductions and exemptions, the new tax regime has lower tax rates but fewer deductions and exemptions.
Under the new tax exemption, taxpayers can avail of lower tax rates, but they must forego deductions and exemptions available under the existing tax regime. Taxpayers can switch to the new tax saving by opting for it when filing their income tax returns. However, once taxpayers opt for the new income tax slab, they cannot return to the old one for that year.
Taxpayers opting for the new tax regime can avail of the following tax rates:
Taxpayers opting for the old tax regime can avail of deductions and exemptions such as
Standard Deduction of Rs. 50,000 for salaried taxpayers.
Deduction of up to Rs. 1.5 lakhs under Section 80C for investments in schemes such as Public Provident Fund (PPF), National Pension Scheme (NPS), Equity-Linked Savings Scheme (ELSS), and Life Insurance.
Deduction of up to Rs. 25,000 under Section 80D to pay health insurance premiums.
Exemption of up to Rs. 2.5 lakhs on income from interest earned on savings bank accounts.
Taxpayers must carefully evaluate their income and expenses before choosing between the old and new tax regimes. For instance, taxpayers with a high income but fewer deductions and exemptions may benefit from the new tax regime. On the other hand, taxpayers with significant investments and expenses may benefit from the old tax regime.
In conclusion, Section 115BAC of the Income-tax Act allows taxpayers to choose between the old and new tax regimes. However, taxpayers must carefully evaluate their income and expenses before opting for the new or old tax regime. It would be best for you to seek the help of a tax consultant or chartered accountant to make an informed decision.