New Delhi, April 13 (IANS) The Central Board of Direct Taxes has said that an individual would have the right to choose the tax rate at the time of filing his return but can tell his/her employer before hand on the tax system to follow for the purpose of deduction tax at source.
In a clarification on the new section 115 BAC introduced in Finance Act 2020-21, the CBDT has said that an employee having income, other than from profit and gains from business and profession, can declare whether he/she wants to go for lower rate for tax without exemptions as provided in this year's budget so that the employer deducts TDS accordingly.
If such option is not exercised by an employee, he/she will continue to be taxed at the older slabs present in the IT Act.
But the tax department had given flexibility to the taxpayer by allowing him/her to opt for preferred tax system at the time of filing of returns. The option exercised earlier may only be for the purpose of TDS. Such option at the time of filing of returns can exercised by an individual in each assessment year.
But for an individual with business or professional income, the option of lower tax has to be specified once and will be applicable subsequently. It can be changed only if department is satisfied on the grounds for such a change.
In the budget 2020-21, Finance Minister Nirmala Sitharaman gave option to taxpayers to pay lower rate of tax if they were willing to forego all deductions. Under this lower rates, different income slabs were fixed for income tax rate staring from 10 per cent and rising to 25 per cent. While giving this option, she retained old tax slabs rates ranging from 5 to 30 per cent with surcharges at higher income bracket. But in this system, the taxpayer get benefit of exemptions.