TAX PAYERS QUERY - QUESTION OF THE WEEK (w-01)

QUERY

I am a salaried employee. I have paid my taxes for the financial year 2020-21 in accordance with section 115BAC of the income tax act, 1961. Further, I have also filed a declaration with my employer to deduct the TDS for the Financial Year 2021-22, electing to pay taxes as per the provisions under section 115BAC.

Now,

a)    Can I opt-out of section 115BAC while filing my Return of Income for the Financial year 2021-22 as I have already chosen to pay taxes u/s 115BAC in the Financial Year 2020-21?

b)    I have already filed a declaration with my employer electing to pay taxes in accordance with section 115BAC. Can I still file my Return of Income under normal provisions by opting out of section 115BAC?

c)    If I opt-out now, can I opt back in for 115BAC in future years?

 

REPLY

Section 115BAC has been introduced by the finance act, 2020 which allows assessees, who are individuals and HUFs, to pay taxes at lower rates while foregoing some of the exemptions and deductions stated therein. This section is completely optional.

 

It is important to note that the choice to pay taxes under section 115BAC has to be chosen before the due dates for filing the Return of Income. Assessees are required to choose this option by filing form 10-IE.

 

a)    In your case, if you are having income under salary, you are free to opt-out of Section 115BAC and chose to pay taxes as per the normal provisions of the income tax act. The fact that you have chosen to pay taxes under section 115BAC for the Financial Year 2020-21 will not mandate you to pay taxes under section 115BAC for the financial year 2021-22 as well.

 

b)    Option to pay taxes under section 115BAC shall be exercised by filing the form 10-IE. A declaration to the employer will not be tantamount to exercising the option u/s 115BAC. You can choose to pay taxes under normal provisions of the income tax act though you have filed a declaration with your employer to pay taxes u/s 115BAC.

 

c)    Furthermore, there are no restrictions for you to opt-in to section 115BAC in future years. However, you need to file Form 10-IE before the due dates of the relevant assessment years to opt-in section 115BAC.

 

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CA Ramakrishna Sanjay