income tax

Understanding Section 115BAC(6): Opting Out of the New Tax Regime

Understanding Section 115BAC(6)

Section 115BAC(6) addresses the conditions under which an individual taxpayer, excluding companies, firms, and cooperative societies, can opt out of the New Tax Regime (NTR). This section specifies that:

  • If a taxpayer chooses to opt out, they must do so using Form 10-IEA.
  • The option must be exercised:
    • (i) On or before the due date specified in subsection (1) of section 139 for filing the income tax return for the relevant assessment year if the taxpayer has income from business or profession (ITR 3/4).
    • (ii) Along with the income tax return filed under subsection (1) of section 139 for the relevant assessment year if the taxpayer does not have the income referred to in clause (i) (ITR 1/2).

Additionally, the section includes important stipulations regarding withdrawing the opted choice.

First Proviso of Section 115BAC(6)

The first proviso of section 115BAC(6) can be divided into three parts for clarity:

Part I

The first part states that if a taxpayer with income from business or profession opts out of the New Tax Regime for any previous year, they can withdraw this option only once in a subsequent previous year. This means that once a taxpayer has made their choice, they have one opportunity to reverse it in a later year, but not in the year immediately following the choice.

Part II

The second part indicates that once this withdrawal has occurred, the taxpayer will no longer be eligible to exercise the option to opt out of NTR again. Thus, a permanent choice is established after the withdrawal is executed unless special conditions apply.

Part III

The final part states that if the taxpayer ceases to have any income from business or profession, they will fall under clause (ii) and would regain the ability to exercise the option each year thereafter. This implies that a taxpayer’s income situation can influence their choices under this law.

Conclusion

This article provides a comprehensive overview of section 115BAC(6) and its first proviso, emphasizing the conditions for opting out of the New Tax Regime.