After the introduction of Section 115 BAC of the Income-tax Act, 1961, inserted by the Finance Act,2020 w.e.f. the AY 2021-22 (FY 2020-21), there was a dual income tax slabs available to the assessee with two Options
Option-1: Pay Tax according to old tax regime
Option-2: Pay Tax according to new concessional tax rates
The above selection of Option was to be made for AY 2021-22 (FY 2020-21) at the time of filling the return of Income under section 139 (1) of the Act.
This created a confusion for the employers who are required to deduct the TDS. As an employer would not know if the person, being an employee would opt for the old tax regime or the new concessional tax rates. Hence there was lack of clarity regarding
whether the provisions of section 115 BAC of the Act are to be considered at the time of
deducting tax under section 192 of the Income Tax Act, 1961
CBDT vide “Circular C 1 of 2020” dated April 13, 2020 has clarified that
FOR EMPLOYEE NOT HAVING INCOME FROM BUSINESS OR PROFESSION
1) Employee not having income from business or profession and intending to opt for the concessional rate under section 115BAC of the Act, may intimate their employers of such intention for each year and upon such intimation, the employer shall compute his total income, and make TDS thereon in accordance with the provisions of section 115 BAC of the Act.
2) If such intimation is not made by the employee, the employer shall make TDS without considering the provision of section 11SBAC of the Act.
3) Also, intimation once made to the employer cannot be modified during that year
4) And, such intimation made to the employer shall be only for the purposes of TDS and at the time of filling the return of Income, the employee can change the option. Thus, option at the time of filing of return of income could be different from the intimation made by such employee to the employer for that previous year
5) Employee exercising the option and filling the return of income with either selection i.e.
- option to pay tax as per section 115BAC or
- pay tax under the old tax regime,
can change the option of taxation in the next financial year
FOR EMPLOYEE HAVING INCOME FROM BUSINESS OR PROFESSION
1) Employee having income from business or profession, the above clarification would apply with the only modification that
2) Employee exercising the option and filling the return of income with either selection i.e.
- option to pay tax as per section 115BAC or
- pay tax under the old tax regime,
then they cannot change the option of taxation in the next financial year except in certain circumstances
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