Section 115BAC introduces India’s simplified “New Tax Regime” with lower tax slabs but fewer deductions and exemptions. Made optional in Budget 2020 and now default since FY 2023–24, it’s for individuals and HUFs who don’t rely heavily on old regime benefits.
Who Can Opt In?
Eligible taxpayers include:
- Resident and non-resident Individuals
- Hindu Undivided Families (HUFs)
- AOPs, BOIs, and Artificial Juridical Persons, excluding companies, partnership firms & cooperatives.
For salaried individuals, you can choose every year while filing ITR.
For those with business/professional income, once you opt out of the new regime, you cannot revert unless prescribed by future law.
Tax Slabs under Section 115BAC (FY 2025‑26)
- ₹0 – 4 L: Nil
- ₹4 – 8 L: 5%
- ₹8 – 12 L: 10%
- ₹12 – 16 L: 15%
- ₹16 – 20 L: 20%
- ₹20 – 24 L: 25%
- Above ₹24 L: 30%
Allowed Deductions & Exemptions
You can still claim:
- Standard deduction on salary (₹75,000)
- Employer’s NPS contribution (80CCD(2))
- 80JJAA deduction (new employee costs)
- Agniveer Corpus Fund contributions (80CCH(2))
- Specific allowances:
- Daily travel/transfer allowances
- Medical travel allowances
- Special allowances for divyang employees
- Standard rebate under Section 87A:
- For FY 2025‑26: ₹60,000 rebate if taxable income ≤ ₹12 L
- For FY 2024‑25: ₹25,000 rebate for income up to ₹7 L
Disallowed Deductions and Exemptions
Under the new regime, you cannot claim:
- House Rent Allowance (HRA), LTA, standard 80C (e.g., PPF, ELSS), 80D (health insurance), 80E, 80G, 80TTA/TTB
- Home loan interest deduction under Section 24
- Perquisites like food allowance, child education
- Depreciation, allowances for MPs/MLAs, EV loan interest under 80EEB, etc.
Opting In and Out
- Default: New tax regime applies by default since FY 2023–24
- To use the Old regime:
- Business/profession income payers must file Form 10-IEA before ITR due date
- Salaried/non-business individuals select the old regime in the ITR form
- Important: Once you opt for the old regime, business/profession individuals can’t revert to new. Salaried can switch yearly.
When to Choose the New Regime?
The new regime is best if you:
- Have few tax-saving investments
- Prefer simplified filing without schedules/Proofs
- Benefit more from lower slabs and standard deduction over old regime claims
But if you heavily invest in 80C/80D, have home loan interest, or claim HRA/LTA, the old regime may lead to greater savings.
Quick Snapshot
| Feature | New Regime (115BAC) | Old Regime |
|---|---|---|
| Tax Rates | Lower, slab-wise | Higher |
| Standard Deduction | ₹75,000 | ₹50,000 |
| Most Allowances/Deductions | Not allowed | Allowed (e.g., 80C, HRA, etc.) |
| Rebate | ₹60k (FY 25–26) | ₹12.5k (if income ≤₹5 L) |
| Flexibility | Easy filing, few proofs | Proof-based, complex |
