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New rules explained here: TDS on salary and new income tax rates

The income tax department has come up with clarifications for those who want to opt for new tax slabs. The lower income tax rates, as announced in Budget 2020, came into effect from April 1, 2020. The old tax slabs will also continue to remain in effect, giving choice to taxpayers to opt between the two. Tax experts say whether an individual should choose the new tax regime or the old one depends on a case-to-case basis as under this new lower tax rates, the individual will have to give up on a lot of deductions that could help reduce taxable income.

Income tax slabs under the new tax regime for all individuals for FY 2020-21 (AY 2021-22)




Income Tax Slab
Tax Rate
Up to Rs 2.5 lakh
NIL
Rs 2.5 lakh to Rs 5 lakh
5% (Tax rebate of Rs 12,500 available under section 87A)
Rs 5 lakh to Rs 7.5 lakh
10%
Rs 7.5 lakh to Rs 10 lakh
15%
Rs 10 lakh to Rs 12.5 lakh
20% 
Rs 12.5 lakh to Rs 15 lakh
25%
Rs 15 lakh and above
30%

Here is what the income tax department clarified:

1) Employees, not having income from business or profession, will have to inform their employers about their intention to opt for the new tax regime for the purpose of deduction tax at source or TDS from salaries.

2) If such option is not exercised by an employee, he/she will continue to be taxed at the older slabs present in the IT Act.

3) Once intimated to the employer about the intention to opt for the new concessional tax rates, for TDS purpose it will be applicable for the year and can't be modified.

4) The income tax department said that the employee can change the option of tax structure at the time of filing income tax return and the amount of TDS payment will get adjusted accordingly.

"The deductor shall compute his total taxable income and shall make the TDS payment (tax deducted at source) thereon in accordance with the provision of Section 115 BAC of the IT Act. If such intimation is not made by the employee, the employer shall make TDS without considering the provision of Section 115 BAC of the Act," the income tax department said.

5) Now, it's clear that the employee (only those not having income from business or profession) cannot change the option once exercised for the purpose of getting TDS deducted but can always change it at the time of filing the tax return.
Download Clarification in respect of Section 115BCA of IT Act, 1961 here!
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Location: New Delhi, Delhi, India

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