CBDT vide Notification No. 43/2023 dated 21.06.2023 in G.S.R. 452(E) through Income-tax (Tenth Amendment) Rules, 2023 notified Form No. 10-IEA to exercise the option to opt out of the new tax regime and to opt for old tax regime as per section 115BAC(6) of the Income-tax Act, 1961 (‘Act’) by an individual or Hindu undivided family, or an association of persons, or a body of individuals, whether incorporated or not, or an artificial juridical person.
For this purpose, a new Rule 21AGA is inserted in the Income-tax Rules, 1962 and it shall be applicable from 1st April, 2024 or assessment year 2024-25.
Rule 21AGA prescribes the following-
1. The option to opt-out of the new regime of taxation as per section 115BAC shall be exercised in accordance with the provisions of section 115BAC(6) by an individual or Hindu undivided family (HUF), or an association of persons (other than a co-operative society) or a body of individuals, whether incorporated or not, or an artificial juridical person.
2. The option to be exercised for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2024.
3. Where the person has income from business or profession, the option shall be exercised in Form No. 10-IEA on or before the due date specified under section 139(1) for furnishing the return of income for such assessment year.
4. Where the person does not have income from business or profession, the option to remain in the new regime or opt out of the new regime to continue the old regime shall be exercised in the return of income to be furnished under section 139(1) of the Act.
5. As such, persons having salary income and/or capital gains, income from other sources, and income from house property are not required to file any form to exercise the option. In these cases where the person does not have busniess/professional income, the option needs to be exercised in the return of income only.
6. There is a difference in exercising the option between a person having business/professional income and a person not having business/professional income. Once the former exercises the option in a particular assessment year then such a person needs to continue the same option in the subsequent assessment years. However, such person having business/professional income can move out the chosen option once and can never change the option.
7. On the contrary, persons not having business/professional income say a salaried individual, has the flexibility to change the option every assessment year as per his tax planning to reduce the tax burden. It should be noted that a salaried individual having business income from future and options trading comes under the category of a person having business income and hence such a salaried person will be covered by the default new regime. In case, he wishes to switch to the old regime then he has to exercise the option in Form 10-IEA and once the old option is opted, he has to continue the old tax regime in subsequent assessment years. However, he can, in the future, switches to the new tax regime by withdrawing the option to switch to the old tax regime and thereafter he can never opt for the old tax regime.
8. The withdrawal of option under the proviso to section 115BAC(6) shall also be in Form No. 10-IEA.
9. Form No. 10-IEA shall be furnished electronically either under digital signature or electronic verification code.
10. The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) shall specify the procedure for furnishing Form No. 10-IEA and shall be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the Form so furnished.
Finance Act, 2023 has amended the provisions of section 115BAC compared to the provisions of section 115BAC as introduced by the Finance Act, 2020.
After the amendment from AY 2024-25, in the alternate tax regime under Section 115BAC, a revision to the basic exemption limit and the number of slabs have been made. The revised basic exemption limit is Rs. 3,00,000 (compared to Rs. 2,50,000 in the old tax regime) and for every additional Rs. 3,00,000 of income, the next slab rate will be applicable. The highest slab rate of 30% shall continue to apply to income above Rs. 15,00,000.
Further, the threshold limit for total income eligible for rebate under Section 87A has been increased from Rs. 5,00,000 to Rs. 7,00,000 for assessees opting for the new tax regime. In the old tax regime, the same threshold limit of Rs. 5,00,000 for rebate under section 87A shall continue to apply.
Under the new tax regime, the highest surcharge rate of 37% on income above Rs. 5,00,00,000 has been reduced to 25%.
The alternate tax regime of Section 115BAC is made applicable to the Association of Persons (AOP)[(other than a co-operative society], Body of Individuals (BOI), and Artificial Juridical Persons (AJP). Prior to the amendment, these provisions were applicable to Individuals and HUF only.
Also, Standard Deduction from salary income and deduction from family pension is extended to assessee/employees who opt for the new tax regime under section 115BAC.
The new tax regime under Section 115BAC is made the default regime. Hence, one has to furnish Form 10-IEA to move back to the old tax regime if the person has business/professional income. In other cases, the person has to indicate his option of moving out of the default new tax regime in the ITR form only.
Further amendments were also carried out in Rule 2BB and Rule 3 of the Rules to continue the restrictions of allowance of exemptions from salary income to an Individual under the default tax regime and the income is chargeable to tax under section 115BAC(1A). Prior to the amendment, the new tax regime was optional and was chargeable to tax under section 115BAC(1). Hence, a reference to section 115BAC(1A) is added to substitute these two existing rules.
A similar amendment is also carried out in Rule 5 of the Rules to restrict the deduction of additional depreciation under the new tax regime.
Read the relevant Rule 21AGA from CBDT Notification No. 43/2023 dated 21.06.2023 on New Rule 21AGA and Form No. 10-IEA
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 21st June, 2023
INCOME-TAX
G.S.R. 452(E).—In exercise of the powers conferred by clauses (i) and (iii) of sub-section (2), second proviso to sub-section (3) and sub-section (6) of section 115BAC, sub- clause (iii) of clause (c) of sub-section (2) of section 115BAE read with section 295 the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely: -
1. Short title and commencement.—(1) These rules may be called the Income-tax (Tenth Amendment) Rules, 2023.
(2) Save as otherwise provided in these rules, they shall come into force from the date of their publication in the Official Gazette.
2. In the Income-tax Rules, 1962 (hereafter referred to as the principal rules),—
(a) in rule 2BB, for sub-rule (3), the following sub-rule shall be substituted, namely:-
“(3) Notwithstanding anything contained in sub-rule (1) and (2), an employee, being an assessee, -
(i) who has exercised option under sub-section (5) of section 115BAC; or
(ii) whose income is chargeable to tax under sub-section (1A) of section 115BAC, shall be entitled to exemption only in respect of the allowances mentioned in sub-clauses (a) to (c) of sub-rule (1) and at serial no. 11 of the Table below sub-rule (2) to the extent and subject to the conditions, if any, specified therein.”;
(b) in rule 3, in sub-rule (7), in clause (iii), for the second proviso, the following proviso shall be substituted, namely:-
“Provided further that the provisions of the first proviso in respect of free food and non-alcoholic beverage provided by the employer through paid voucher shall not apply to an employee, being an assessee, who has exercised an option under sub-section (5) of section 115BAC or whose income is chargeable to tax under sub-section (1A) of section 115BAC.”;
(c) in rule 5, in sub-rule (1) -
(a) for the first proviso, the following proviso shall be substituted, namely: -
“Provided that the allowance under clause (ii) of sub-section (1) of section 32 in respect of depreciation of any block of assets shall not exceed forty per cent. of the written down value of such block of assets in case of -
(i) a domestic company which has exercised option under sub-section (4) of section 115BA, or under sub-section (5) of section 115BAA, or under sub-section (7) of section 115BAB; or
(ii) an individual or a Hindu undivided family which has exercised option under sub-section (5) of section 115BAC; or
(iia) an individual or a Hindu undivided family, or an association of persons (other than a co-operative society) or a body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 whose income is chargeable to tax under sub-section (1A) of section 115BAC; or
(iii) a co-operative society resident in India which has exercised option under subsection (5) of section 115BAD; or
(iv) a co-operative society resident in India which has exercised option under subsection (5) of section 115BAE:”;
(b) in the third proviso, for the words, figures and letters “for the purposes of section 115BAC”, the words, figures, letters and brackets “for the purposes of section 115BAC [as it stood immediately before its amendment by the Finance Act, 2023]” shall be substituted;
(c) after the third proviso, the following proviso shall be inserted, namely:-
“Provided also that, where income is chargeable to tax under sub-section (1A) of section 115BAC, the written down value of the block of asset as on the 1st day of April, 2023 shall be increased by such depreciation which is attributable to clause (iia) of sub-section (1) of section 32 and which is not allowed to be set off under sub-clause (a) of clause (ii) of sub-section (2) of section 115BAC if both the following conditions are satisfied, namely: -
(i) the assessee has not exercised option under sub-section (5) for any previous year relevant to the assessment year beginning on or before the 1st day of April, 2023; and
(ii) there is a depreciation allowance in respect of a block of assets which has not been given full effect to prior to the assessment year beginning on the 1st day of April, 2024, and is attributable to the provisions of clause (iia) of sub-section (1) of section 32.”;
(d) after rule 21AG, the following rule shall be inserted, namely:-
“21AGA. Exercise of option under sub-section (6) of section 115BAC.-(1) The option to be exercised in accordance with the provisions of sub-section (6) of section 115BAC by a person, being an individual or Hindu undivided family, or an association of persons (other than a co-operative society) or a body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2024, shall be, -
(a) in Form No. 10-IEA on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for such assessment year, in the case of a person having income from business or profession;
(b) in the return of income to be furnished under sub-section (1) of section 139 for such assessment year, in the case of a person not having income from business or profession as referred to in clause (I).
(2) The withdrawal of option under the proviso to sub-section (6) of section 115BAC shall also be in Form No. 10-IEA.
(3) Form No. 10-IEA shall be furnished electronically either under digital signature or electronic verification code.
(4) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall, -
(a) specify the procedure for furnishing of Form No. 10-IEA;
(b) specify the data structure, standards and manner of generation of electronic verification code, referred to in sub-rule (3), for verification of the person furnishing the said Form; and
(c) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the Form so furnished.
Explanation.—For the purposes of this rule "electronic verification code" means a code generated for the purpose of electronic verification of the person furnishing the Form as per the data structure and standards specified by the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) as the case may be.”
(e) In the principal rules, in the Appendix, after Form No. 10IE, the following form shall be inserted, namely:-
“FORM No. 10-IEA
[See rule 21AGA]
Application for exercise of option under clause (i) of sub-section (6) of section 115BAC or withdrawal of option under the proviso to sub-section (6) of section 115BAC of the Income-tax Act, 1961
To,
The Assessing Officer
……………..
……….........
…………..
……………
Undertaking
I ……………(Name in full and in block letters) having PAN…………..son/daughter/wife of………………. (in case of individual) do hereby declare that to the best of my knowledge and belief what is stated in the Form above is correct and complete. I further declare that I am furnishing such statement in my capacity as…………………(designation) and that I am competent to make this declaration and furnish this Form.
I further declare that the person referred to at serial no. 1 having PAN at serial no. 2 has income under the head “Profits and gains from business or profession” during the assessment year referred to at serial no. 4.
I also declare re-entering sub-section (1A) of section 115BAC of the Act shall render the person referred to at serial no. 1 having PAN at serial no. 2 ineligible for opting out of sub-section (1A) of section 115BAC.
Place:
Date:
Yours faithfully,
Signature*…………….……………….
Name…………………………………
Designation………………………….
Address…………………….…………
*Signature of the person competent to verify the return of income of the Individual/ HUF / association of persons (other than a co-operative society)/body of individuals, whether incorporated or not/ an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 in accordance with the provisions of section 140 of the Act.
Note: For status of the person one of the following codes to be selected:
[Notification No. 43/2023/F. No. 370142/15/2023-TPL]
KAMLESH CHANDRA VARSHNEY, Jt. Secy.
Note : The principal rules were published vide notification number S.O. 969(E), dated the, 26th March, 1962 and last amended vide notification number G.S.R. 432 (E) dated the 12th June, 2023.
Download CBDT Notification No. 43/2023 dated 21.06.2023 on New Rule 21AGA and Form No. 10-IEA in PDF format
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