Alternate Tax Regimes

New Tax Regime under section 115BAC for all assessees other than a company

CA. Manoj Gupta

The Finance Act, 2023 has carried out certain amendments to section 115BAC from the assessment year 2024-25. The Finance Act, 2023 has made the new tax regime as default regime by inserting a new sub-section (1A) in section 115BAC from the assessment year 2024-25.

The Finance Act, 2023 has also amended section 115BAC from the assessment year 2024-25 so as to provide that this section shall be applicable compulsorily for 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 for old tax regime.

Accordingly, following procedural amendments have been carried out.

(i) Certain benefits to be allowed still

Rule 2BB was amended from 1-4-2021 i.e. from the assessment year 2021-22 when optional new tax regime was introduced via section 115BAC so as to provide that an employee, being an assessee, who has exercised option under sub-section (5) of section 115BAC shall be entitled to exemption only in respect of the allowances mentioned below :

(a) any allowance granted to meet the cost of travel on tour or on transfer [allowance granted to meet the cost of travel on transfer includes any sum paid in connection with transfer, packing and transportation of personal effects on such transfer];

(b) any allowance, whether, granted on tour or for the period of journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty;

(c) any allowance granted to meet the expenditure incurred on conveyance in performance of duties of an office or employment of profit :

It is provided that free conveyance is not provided by the employer;

(d) Transport allowance granted to an employee, who is blind or orthopedically handicapped with disability of lower extremities, to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty. [Subject to maximum of Rs. 3,200 per month]

Above rule 2BB has been amended from 21-6-2023 so as to provide that an employee, being an assessee,

(i) who has exercised option under sub-section (5) of section 115BAC; or

(ii) whose income is chargeable to tax under sub-section (1A) of section 115BAC,

shall be entitled to exemption only in respect of the allowances mentioned in sub-clauses (a) to (c) of sub-rule (1) and at serial No. 11 of the Table below sub-rule (2) to the extent and subject to the conditions, if any, specified therein.