HOW to choose Tax Regime for Assessment Year 2021-22 and onwards..
I would like to quote: -
“BE CAREFUL WHAT YOU WISH FOR, THERE IS ALWAYS A CATCH”.
….. LAURIE HALSE
ANDORSON
This quote aptly applies to us as INDIAN Taxpayer Today.
The Union Budget 2020 introduced a new personal income tax regime for individual
taxpayers. It is a tax regime with various tax slabs with reduced rates. However, the option
for this concessional tax regime came with a catch, as a result of it about 70 exemptions and
deductions were withdrawn in the new tax regime.
So, each one can calculate own exemptions and deductions list and then will arrive at the net
taxable income. After arriving at net taxable income as per both regimes by applying tax slabs
as per selected regime we will come to know the tax payable under both tax regimes and can
choose the beneficial one.
The best part is that individual who is not having business income can choose the tax regime
at the time of filing of the return. Though we have selected any regime, before filing of the
return we can change it at the time of filing of return.
Let’s See
Time, Form & Manner of Exercise of Option for Availing the Benefit of Reduced Tax Rates
u/s 115BAC
The concessional rate shall not apply unless option is exercised by the individual or HUF in
the form and manner as may be prescribed
1. where such individual or HUF has no business income, along with the return of income to
be furnished under sub-section (1) of section 139 of the Act; and
2. in any other case, on or before the due date specified under sub-section (1) of section 139
of the Act for furnishing the return of income for any previous year relevant to the
assessment year commencing on or after 1st April, 2021 and such option once exercised
shall apply to subsequent assessment years.
Period of Exercising Option:
(i) An individual/HUF assessee, having no business or professional income, can exercise his
option of choosing between the two tax regimes, every year, based on his entitlement of
‘specified deductions’.
So, an individual/HUF assessee, having income under the heads ‘Salary’, ‘House Property’,
‘Capital Gains’ and ‘Income from Other Sources’, can opt for the new tax regime in one
financial year, and can go back to the old tax regime in subsequent financial year, depending
upon the circumstances and entitlement of ‘specified deductions’.
(ii) An individual/HUF assessee, having business or professional income, can opt for the new
tax regime of reduced taxes with no deductions, u/s 115BAC, only once and the option once
exercised, for a previous year shall be valid for that previous year and all subsequent years.
(iii) The option of the new tax regime u/s 115BAC shall become invalid for a previous year or
previous years, as the case may be, if the Individual or HUF fails to satisfy the conditions and
other provisions as stipulated in section 115BAC of the Income Tax Act.
(iv) the option can be withdrawn only once where it was exercised by the individual or HUF
having business income for a previous year other than the year in which it was exercised
and thereafter, the individual or HUF shall never be eligible to exercise option under this
section, except where such individual or HUF ceases to have any business income.
The declaration of tax regime by employee to employer will make it easy to deduct tax as per
the regime chosen by the employee. The tax saving as per any regime will differ from person
to person.
CA Rashmi Adbe
