ITR Application: New Tax System May Cause Lower Tax Liability – Check Expert Calculation

The Financial Act of 2023 has been created as a default tax system for individuals/HUFS/AOPS (except for cooperatives)/BOI and artificial legal persons under the new tax of Section 115BAC (1A). Since then, the video Continuous Finance Act, Volume 2 Act No. 2 and the Financial Act of 2025 –

Income Tax Rate on AY 2024-25, AY 2025-26, AY 2026-27

Reduced tax liability under the new or default tax system

CA Charanjot Singh Nanda, President of ICAI. Note that, under the default tax system of Section 115BAC (1A), total income is calculated without the need to provide exemptions/deductions, other allowances for LTC (U/s 10(5)), HRA U/S 10(13A), Article 10(14), contributes additional scientific research, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, chapters, 80C/80CC/80CCD(1)/(1A)/80D(Medical Insurance Premium)/80DD(Deduction for maintenance, including medical treatment for dependents)/80DDB)/80DDB (used to pay for medical expenses for designated diseases)

However, under the conventional provisions of the Act, the default tax U/S 115BAC (1A) under the default tax regime U/S 115BAC (1A) can be obtained from AY2025-26 with a higher standard deduction.

Similarly, starting from AY2026-27, the total revenue of U/S 87A will be entitled to Rs 1.2 lakh in accordance with the default tax system U/S 115BAC (1A); the maximum rebate is Rs 60,000.

However, under the conventional provisions of the bill, the total revenue returning to U/S 87A is Rs 5 lakh; the maximum rebate is Rs 12,500.

Even though most tax incentives are not available under the default tax regime U/S 115BAC (1A), the system has much lower tax liability than taxes calculated under normal provisions of the bill. This is due to preferential tax boards and interest rates under the default tax system.

According to the normal provisions of this law, the tax board and tax rate of AY2024-45/2025-26/2026-27 are as follows –

If the assessee does not deduct (under the conventional provisions of the Act), the above is an interest.

example

Let’s take the salary employee Mr. A, who took AY2026-27 box office revenue of Rs 3 million. He was interested in the self-occupied property of Rs. Rs 20 lakh, he has deposited Rs 15 lakh in the PPF, paid Rs 25,000 in the health insurance premium, and had Rs 20,000 in interest on the savings bank. We can calculate its total income based on the default tax system and normal regulations of AY2026-27

It can be seen that despite the deduction of interest of Rs 20,000 and the deduction of Chapter 6 is Rs 1.85 crore, the tax paid by Mr. A is Rs 6,11,520 Rs 6,11,520 Rs 1,29,480 which should be paid under the conventional provisions.

Additionally, since there is no need to force investments to impose tax relief, income salaries will be higher under the default tax regime U/S 115BAC (1A).

In short, even if total income is calculated without deductions and exemptions, the default tax regime U/S 115BAC (1A) is more beneficial to taxpayers if he chooses to exit and pays taxes according to conventional regulations. This is because of preferential tax boards and interest rates under the default tax system.

After careful evaluation, a case that should be decided to choose the old and new tax system

It can be noted that in some cases, such as in the case of assessing high rents, eligible for exemption of U/S 10 (13A) and benefiting LTC from U/S 10 (5), as well as deductions in Chapter VI-A, they must be calculated based on the default tax regime and optional tax laws and find what is more beneficial to them.