The Budget 2020 announced by our Finance Minister Mrs. Nirmala Sitharaman introduced a new tax regime for individuals and HUFs by widening the income tax slabs and reducing rates while taking away most of the exemptions and deductions being availed. Section 115BAC has been introduced with a paradigm shift in the way individuals and HUFs will be taxed. The provisions of the section are tabulated below for easy reference.

Sl. No.	Particulars	Details
1.	Applicability	Optional scheme for Individuals and HUFs w.e.f AY 2021-22
2.	Tax rates	Total Income Rate Upto 250,000 Nil 250,001 – 500,000 5% 500,001 – 750,000 10% 750,001 – 1,000,000 15% 1,000,001 – 1,250,000 20% 1,250,001 – 1,500,000 25% 1,500,001 onwards 30%
3.	Deductions forgone (illustrative)	Any deduction under Chapter VI-A except with respect to employer’s contribution to NPS and deduction under section 80JJAA Section 16 deductions such as standard deduction, professional tax and entertainment allowance House rent allowance Leave travel concession Interest on loan for self-occupied property
4.	Other conditions	No loss can be set off or carried forward except loss from let out property which can be carried forward No deduction or exemption for allowances or perquisite by whatever name called
5.	Time for availing new regime

Illustration:

1. Taxpayer with fewer deductions and exemptions:
   

   Particulars	Old regime	New Regime
   Annual Income	800,000	800,000
   Standard deduction	(50,000)	–
   HRA	(30,000)	–
   LTA	(25,000)	–
   Chapter VI-A –          EPF contribution	(25,000)	–
   Taxable income	670,000	800,000
   Taxes	46,500	45,000
   Cess	1,860	1,800
   Total taxes	48,360	46,800
   Total taxes saved	1,560

   
   
2. Taxpayer with major deductions and exemptions:
   

   Particulars	Old regime	New Regime
   Annual Income	20,00,000	20,00,000
   Standard deduction	(50,000)	–
   HRA	(50,000)	–
   LTA	(25,000)	–
   Chapter VI-A- 80C 80D 80CCD	(150,000) (25,000) (30,000)	–
   Taxable income	16,70,000	20,00,000
   Taxes	3,13,000	3,37,500
   Cess	12,540	13,500
   Total taxes	3,26,040	3,51,000
   Excess tax payable	24,960

In summary, the new tax regime is beneficial for that taxpayer who has not significantly invested in tax-saving schemes. However, taxpayers who have invested in various tax-saving schemes may continue to opt the old tax regime as it allows to claim all various deductions and exemptions. The new regime has given an option to taxpayers to plan their taxes judiciously.

Conclusion: Calculate all your deductions and exemptions carefully to opt the better tax saving scheme. However, the new tax regime does not provide incentive to save and such individuals loose on the financial safety and security and end up saving less.