CBDT clarifies in respect of option under section 115BAC of the Income Tax Act, 1961

Apr 15, 2020 | by Avantis RegTech Legal Research Team

Finance & Taxation Compliance

The Central Board of Direct Taxes (CBDT) on April 13, 2020, clarifies in respect of option under section 115BAC of the Income Tax Act, 1961, which specifies new and optional income tax regime for individuals and Hindu Undivided Families (HUFs).

CBDT received representation that whether deductor (employer) shall consider the provisions of section 115BAC at the time of deducting tax of the employee. Because, the option is required to be exercised at the time of filing of return, the deductor would not know if the person (employee), would opt for taxation under section 115BAC or not.

Therefore, it is clarified that an employee, having income other than the income under the head “profit and gains of business or profession” and intending to opt for the concessional rate u/s 115BAC, may intimate the deductor (employer), of such intention for each previous year and upon such intimation, the deductor shall compute his total income, and make TDS thereon in accordance with the provisions of section 115BAC. If such intimation is not made by the employee, the employer will make TDS without considering the provision of section 115BAC. It is also clarified that the intimation so made will be only for the purposes of TDS during the previous year and cannot be modified during that year.

Further, if a person opt for taxation u/s 115BAC and exercised the same for previous year at the time of filing of return of income u/s139(1), he cannot changed the decision for subsequent previous years except in certain circumstances.

Accordingly, the above clarification would apply to such person with a modification that the intimation to the employer in his case for subsequent previous years must not deviate from the option u/s 115BAC once exercised in a previous year.

[Circular No. C1 of 2020]


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