New personal taxation regime under Section 115BAC for reduced tax rates without exemption – Certain allowance exempted

New Personal Income Tax at reduced rates with no exemption under Section 115BAC of Income Tax Act when opted, only limited allowances will be exempted – Perquisites allowed by Employee are not to considered

Section 115BAC of Income Tax Act when opted, only limited allowances will be exempted as provided below

• Employer’s contribution to pension account (NPS) – Section 80 CCD (2)
• Allowance to meet cost of tour / Travel
• Transport Allowance to Divyang (Differently Abled)
• Conveyance Allowance for Office Duties
• Additional Employee Cost (Section 80JJAA)
• Daily Allowance to meet Daily Charges when working out of the office

Now, Income Tax provide certain additional allowances / perquisites originally exempted under Rule 2BB of Income Tax Rules, which are also exempted when opted for new tax regime under section 115BAC

Click here to read Rule 2BB of Income Tax Rules

Additional Allowance exempted now

(a) any allowance granted to meet the cost of travel on tour or on 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 :

MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)

Notification

New Delhi, the 26th June, 2020

INCOME-TAX

G.S.R. 415(E).—In exercise of the powers conferred by sub-section (2) of section 115BAC read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules,1962, namely:‒

Option u/s 115BAC under New Tax Regime: Amendment Notification No. 38/2020

1. Short title and commencement: -(1) These rules may be called the Income-tax (13th Amendment) Rules, 2020.

(2) They shall come into force from the 1st day of April, 2021 and shall accordingly apply in relation to the assessment year 2021-22 and subsequent assessment years.

2. In the Income-tax Rules, 1962,-

(a) in rule 2BB, after sub-rule (2), the following sub-rule shall be inserted, namely:—

“(3) Notwithstanding anything contained in sub-rule (1) and (2), 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 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.”;

(b) in rule 3, in sub-rule (7), in clause (iii), after the proviso, the following proviso shall be inserted, namely:—

“Provided further that the exemption provided in the first proviso in respect of free food and non-alcoholic beverage provided by such employer through paid voucher shall not apply to an employee, being an assessee, who has exercised option under sub-section (5) of section 115BAC.”.

[Notification No. 38/2020/F. No.370142/15/2020-TPL]

GUDRUN NEHAR, Director (Tax Policy and Legislation)

Note: The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section-3, Sub-section (ii) vide number S.O. 969 (E),dated the 26th March, 1962 and last amended by the Income-tax (12th Amendment) Rules, 2020, vide notification number G.S.R. 338 (E) dated 29.5.2020.

Click here to view/download the pdf

Calling Of Option For New Personal Taxation Regime Of Reduced Tax Rates With No Exemptions

Income Tax 2020-21 – Employees Availing New Rates Under Section 115BAC To Intimate DDO In Prior

Also check the following links related to this topic:

Last Date for filing Income Tax Return for FY 2019-20 (AY-2020-21) extended till 30th November 2020

Exercising Option for deduction of TDS under Old or New Rates of Income Tax

Income Tax 2020-21 – Employees availing new rates under Section 115BAC to intimate DDO in prior

Income Tax Alert: Step by Step guide to file revised ITR

Corrigendum: Income Tax Deduction from Salaries during the FY 2019-2020

Income Tax Deduction from Salaries during Financial Year 2019-20