Old vs New Tax Regime

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Old vs New Tax Regime

Income Tax Act 1961 - section 115 BAC

This year a historical change is announced by the Finance Minister along with the various provisions that keep changing in the Budget, 2020. A new Section 115 BAC is added in the Income Tax Act, 1961, and provided two different rates of income tax.

These dual tax slabs are provided the first time in the history of the direct taxation in India. According to this section 115BAC, an option is given to an individual to go either with the “New Tax The regime” or continue to be taxed their income by “Old Tax Regime”.


Exemptions, deductions, and rebates which are available to the employees:

  • Exemption u/s 10(5) related to the “Leave Travel Concession”
  • Exemption u/s 10(13A) “House Rent Allowance”
  • Traveling allowance,
  • Conveyance allowance,
  • Helper allowance,
  • Academic, Research, and Training Allowance in educational and research institute.
  • Uniform allowance.
  • Some special compensatory allowances: Hill area allowance, High altitude allowance, snowbound area allowance, Border area allowance, Tribal area allowance, Difficult area allowance, Disturbed area allowance, Remote area allowance, Field area allowance, Counter-insurgency allowance, Underground allowance.
  • Allowance available to the person works in transport companies, to meet personal expenditures during the performance of duty. Children education allowance, Hostel expenditures allowance for children, transport allowance available to the persons who are permanently disabled.
  • Standard Deduction u/s 16(ia), the deduction for entertainment allowance u/s 16(ii) and deduction for professional or employment tax u/s 16(iii) of Income Tax Act.

Deductions and allowance related to the Business and Profession head:

  • Additional depreciation allowable u/s 32(1)(iia) on purchases of new plant and machinery.
  • Accelerated depreciation u/s 32AD on purchases of the new plant and machinery in some of the backward areas
  • Deduction related to the ‘Tea Development Account’ and ‘Coffee Development Account’ u/s 33AB. The deduction is available on carrying on business consisting of prospecting for or extraction or production of petroleum or natural gas in India u/s 33ABA.
  • Scientific research donation to National Laboratory, University, IIT allowable u/s 35(2AA)
  • Deduction available u/s 35AD to specified businesses of the full amount of expenditure incurred towards plant and machinery. A weighted deduction allowable u/s 35CCC for an agricultural project.

Deductions available under chapter VI-A of the Income Tax Act:

  • The major deductible deduction by most of the people is for Life Insurance Premium, Provident Fund, Investment in Mutual fund, Payment of tuition fees of the dependent, repayment of housing loan, etc. available u/s 80C of the Income Tax Act.
  • Deduction u/s 80CCC in respect of contribution to Pension Fund.
  • Deduction u/s 80CCD in respect of contribution to National Pension Scheme except the contribution made by the employer which is allowable u/s 80 CCD(2) to the extent of 10% (14% in the case of Central Government Employees) of salary.
  • Deduction u/s 80D in respect of medical and health premiums.
  • Deduction u/s 80DD in respect of maintenance and medical treatment of physically handicapped or blind dependent.
  • Deduction u/s 80DDB with respect to the medical treatment of specific diseases.
  • Deduction u/s 80E in respect of payment of interest on education loan.
  • Deduction u/s 80EE in respect of payment of interest of housing loan.
  • Deduction u/s 80EEA in respect of payment of interest of housing loan.
  • Deduction u/s 80EEB in respect of payment of interest of loan taken to purchase of the electric vehicle.
  • Deduction u/s 80G in respect of donations.
  • Deduction u/s 80GG in respect of payment of rent of the residential house.
  • Deduction u/s 80GGA in respect of donation for rural development, scientific research, etc.
  • Deduction u/s 80GGc in respect of contribution to Political parties.
  • Deduction u/s 80JJA in respect of profit from collecting and the procession of bio-degradable waste.
  • Deduction u/s 80QQB in respect of royalty received by authors.
  • Deduction u/s 80RRB in respect of royalty income from patents.
  • Deduction u/s 80TTA in respect of saving bank interest from banks, post office, and co-operative societies engaged in banking services.
  • Deduction u/s 80TTB in respect of interest received by senior citizens from the deposits with banks, post office, and co-operative societies engaged in the banking business.
  • Deduction u/s 80U to a person who is disabled or blind.

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