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TMI BlogIntroducing a new tax regime with revised tax slabs and by eliminating various exemptions and deductions : Clause 202 of Income Tax Bill, 2025 Vs. Section 115BAC of the income tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... 202 lies in its comprehensive approach towards rationalizing the tax structure, broadening the tax base, and reducing the administrative burden both for taxpayers and the tax authorities. It reflects the government's ongoing policy direction to move towards a more transparent, equitable, and less exemption-driven tax system. Objective and Purpose The legislative intent behind Clause 202 is to further the government's agenda of tax simplification and to incentivize compliance by offering lower tax rates in exchange for foregoing a host of exemptions and deductions. The clause seeks to: * Consolidate and rationalize the tax slabs for individuals, HUFs, and other specified entities. * Eliminate the complexities associated with numerous exemptions and deductions, thereby making the tax system more straightforward and less prone to litigation. * Provide clarity and certainty to taxpayers regarding their tax liabilities. * Reduce the compliance burden by minimizing the need to track and claim various deductions and exemptions. * Align the Indian tax system with international best practices, where lower rates are often paired with a broader tax base. Historically, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy of broadening the tax base and simplifying compliance. 4. Treatment of Losses and Depreciation Clause 202(3) stipulates that losses and depreciation referred to in sub-section (2)(b) are deemed to have been given full effect to, and no further deduction is allowed in subsequent years. This provision is aimed at preventing the carry-forward of losses and depreciation attributable to disallowed deductions under the new regime, ensuring a clean break from the old regime's tax treatment. 5. Exercise of Option Clause 202(4) sets out the mechanism for exercising the option to opt into or out of the new regime: * For persons with business or professional income: * Option must be exercised on or before the due date for filing the return (section 263(1)). * Once exercised, the option applies to subsequent years. * Option can be withdrawn only once (other than the year of exercise), after which re-entry is barred except in cases where the person ceases to have business/professional income. * For persons without business or professional income: * Option is exercised along with the return of income for the year. This structure is designed to prevent frequent switching b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o include AOPs, BOIs, and artificial juridical persons, aligning with Clause 202. * Tax Slabs: The slab structure u/s 115BAC has evolved: * For AY 2026-27 onwards, the slabs mirror those in Clause 202 (up to Rs. 4 lakh: Nil Rs. 4-8 lakh: 5%, etc.), ensuring continuity and predictability. * Denial of Deductions/Exemptions: Both Clause 202 and Section 115BAC(2) deny a similar range of deductions and exemptions, though the specific references differ due to legislative drafting. Both prohibit set-off of losses attributable to such deductions and bar house property loss set-off. * Deeming Provisions: The deeming provision for losses and depreciation is present in both, preventing carry-forward of disallowed losses/depreciation. * Option Mechanism: Section 115BAC(5)/(6) and Clause 202(4) are substantially similar in prescribing how and when the option to opt in/out must be exercised, with similar restrictions on withdrawal and re-exercise. * IFSC Carve-out: Both contain special provisions for IFSC units, allowing continued deduction u/s 80LA, subject to conditions. * Procedural Rules: Section 115BAC is supplemented by Rules 21AG (for sub-section 5) and 21AGA (for sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then 5% to 30% above Rs. 15 lakh * 2024-2025: Nil up to Rs. 3 lakh, then 5% to 30% above Rs. 15 lakh * 2026 onwards: Nil up to Rs. 4 lakh, then 5% to 30% above Rs. 24 lakh (as per latest amendments) * Nil up to Rs. 4 lakh * 5%: Rs. 4,00,001-Rs. 8,00,000 * 10%: Rs. 8,00,001-Rs. 12,00,000 * 15%: Rs. 12,00,001-Rs. 16,00,000 * 20%: Rs. 16,00,001-Rs. 20,00,000 * 25%: Rs. 20,00,001-Rs. 24,00,000 * 30%: Above Rs. 24,00,000 Exemptions/Deductions Broadly disallows most exemptions/deductions under specified sections (e.g., section 10, 10AA, 16, 24, 32, 35, 80C, etc.), with some exceptions (e.g., employer contribution to NPS, 80JJAA) Disallows exemptions/deductions under specified Schedules/Sections, with some carve-outs (e.g., IFSC units) Loss Set-off No set off of losses or depreciation attributable to disallowed deductions; no set off of house property loss with other heads Same principle, with explicit deeming provision for losses/depreciation Option Mechanism Option exercised via prescribed forms (Form 10-IE/10-IEA); business/professional income assessees have stricter withdrawal/re-entry rules Similar mechanism, with reference to procedural rules and ..... 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