October 10, 2025
7 mins read
Section 115BAC of the Income Tax Act was introduced in 2020 to offer taxpayers an optional new tax regime with lower tax rates. Under this regime, individuals and HUFs can choose reduced slab rates but must give up most deductions and exemptions. Taxpayers can opt for the old regime instead when filing returns if it suits them better. The choice affects how taxable income is calculated.
The new tax regime with lower income tax slab rates for individuals and Hindu Undivided Families was introduced by Section 115BAC of the Income Tax Act. In this system, taxpayers are charged at fewer, lower slab rates, but most of the deductions and exemptions that are available in the old system are given up.
The change was implemented for the financial year 2020-21 and is the default tax regime under recent tax law updates. While filing their returns, taxpayers may opt for the old regime if it is more beneficial to them. The purpose of the new regime is to simplify tax calculations and make filing easier by eliminating the need to claim numerous deductions.
Section 115BAC of the Income Tax Act introduces a new tax regime with lower tax slab rates for individuals and Hindu Undivided Families (HUFs). Taxpayers who opt for this regime must give up most deductions and exemptions that are available under the old tax structure. This provision was added by the Finance Act of 2020 and applies from the fiscal year 2020-21 onwards, offering a simpler way to compute tax based on income.
Under this section, the new tax regime becomes the default option, but taxpayers can still choose the old regime when filing their returns if it benefits them more. Individuals and HUFs should compare the two regimes to decide which gives lower tax liability.
This section is available to:
Individual taxpayers (residents and non-residents)
Hindu Undivided Families (HUFs)
Both salaried and self-employed individuals can use this system. However, it does not apply to companies or partnership firms.
For salaried individuals, this option can be chosen every financial year while filing the return. But for those who have income from a business or profession, switching regimes is allowed only once. After that, the old regime cannot be selected again unless the business income stops.
Here is the latest tax slab pattern under Section 115BAC for the new tax regime (Financial Year 2025-26 / Assessment Year 2026-27):
Annual Income | Tax Rate |
Up to ₹4,00,000 | Nil |
₹4,00,001 – ₹8,00,000 | 5% |
₹8,00,001 – ₹12,00,000 | 10% |
₹12,00,001 – ₹16,00,000 | 15% |
₹16,00,001 – ₹20,00,000 | 20% |
₹20,00,001 – ₹24,00,000 | 25% |
Above ₹24,00,000 | 30% |
These slab rates are applicable under the default new tax regime introduced under Section 115BAC of the Income Tax Act, subject to applicable surcharge and health & education cess.
House Rent Allowance (HRA) and Leave Travel Allowance (LTA) cannot be claimed under the new regime. You also lose exemptions on many salary-related allowances and perks that were available in the old tax system.
Chapter VI-A deductions such as Section 80C (investments like PPF, ELSS), Section 80D (health insurance), and similar deductions are not permitted under Section 115BAC’s new tax regime.
Home loan interest deduction under Section 24 for a self-occupied or vacant property cannot be claimed, and most other investment-linked and expense deductions are also excluded.
Under Section 115BAC, most traditional exemptions and deductions are not available if you choose the new tax regime. However, a few specific benefits remain or are permitted:
You cannot claim deductions such as Section 80C (investments like PPF, ELSS, life insurance), 80D (health insurance), HRA (House Rent Allowance), LTA (Leave Travel Allowance), or home loan interest. These are excluded in the new tax regime.
A standard deduction (e.g., ₹75,000 for salaried individuals) is available even under the new regime, making computation simpler.
Certain allowances and employer-related perquisites may still be considered, as per specified rules.
You lose many old-regime deductions aimed at encouraging savings and investments, which may affect overall tax liability.
Additional Read: What is Section 194IB
Share this article: 
No, it is not compulsory. While it is the default option from FY 2023–24, you can choose the old regime while filing your return.
You can select it while filing your Income Tax Return (ITR) on the official tax portal. The choice must be made before submitting your return.
From the financial year 2023–24 onwards, a standard deduction of ₹50,000 is allowed even under the new regime.
Yes. Salaried taxpayers can switch every year. Those with business or professional income can change only once.
Disclaimer :
The information on this website is provided on "AS IS" basis. Bajaj Broking (BFSL) does not warrant the accuracy of the information given herein, either expressly or impliedly, for any particular purpose and expressly disclaims any warranties of merchantability or suitability for any particular purpose. While BFSL strives to ensure accuracy, it does not guarantee the completeness, reliability, or timeliness of the information. Users are advised to independently verify details and stay updated with any changes.
The information provided on this website is for general informational purposes only and is subject to change without prior notice. BFSL shall not be responsible for any consequences arising from reliance on the information provided herein and shall not be held responsible for all or any actions that may subsequently result in any loss, damage and or liability. Interest rates, fees, and charges etc., are revised from time to time, for the latest details please refer to our Pricing page.
Neither the information, nor any opinion contained in this website constitutes a solicitation or offer by BFSL or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.
BFSL is acting as distributor for non-broking products/ services such as IPO, Mutual Fund, Insurance, PMS, and NPS. These are not Exchange Traded Products. For more details on risk factors, terms and conditions please read the sales brochure carefully before investing.
Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
For more disclaimer, check here : https://www.bajajbroking.in/disclaimer
Level up your stock market experience: Download the Bajaj Broking App for effortless investing and trading
Open Your Free Demat Account
Enjoy low brokerage on delivery trades
|
Please Enter Mobile Number
Open Your Free Demat Account
Enjoy low brokerage on delivery trades
|
