Customers 
Distributor 
Partner with Us 
Employee 
If you have looked at your salary structure lately and felt that tax planning has become more about choosing the right regime than chasing every deduction, you are not alone. That is exactly why Section 115BAC matters. It changed the way many taxpayers think about income tax. Instead of building your tax calculation around exemptions and deductions, this provision offers lower slab rates in exchange for giving up most common tax breaks. The result is a simpler framework on paper, but not always a cheaper one in practice.
The biggest mistake you can make is to assume that the new regime is automatically better just because it is now the default for many taxpayers. It is not that simple. Whether Section 115BAC of the Income Tax Act works in your favour depends on your salary structure, deductions, investments, rent status, and insurance costs.
What is Section 115BAC**
Section 115 of the Income Tax Act is the legal provision that governs the new tax regime. It was introduced to offer concessional slab rates with fewer exemptions and deductions. In simple terms, you pay tax under lower slab rates, but you give up most of the deductions that many taxpayers traditionally use under the old regime.
The Income Tax Department’s guidance confirms that the new regime under Sec. 115BAC of the Income Tax Act is the default regime for eligible taxpayers from AY 2024-25 onward, including individuals and HUFs, while also allowing them to opt for the old regime if they prefer and meet the filing conditions.
That is the core trade-off. The old regime rewards you for structuring deductions well. The new regime rewards you for having fewer deductions to begin with. So, if you are asking what Section 115BAC really changes, the answer is this- it changes the basis of tax planning from deduction-heavy optimisation to slab-based simplicity.
The regime under Section 115BAC applies to eligible individual taxpayers and HUFs.
The process of switching between regimes depends on the type of taxpayer and the return form used, especially in cases involving business or professional income.
- For salaried taxpayers, employers may calculate TDS under the default regime unless you declare a preference for the old regime within the employer’s process.
- Your final tax regime choice is confirmed only at the time of filing your income tax return.
- Your monthly TDS deductions and final tax liability may differ if you do not review and choose your tax regime carefully before filing.
New tax regime and Section 115BAC**
The key appeal of Section 115BAC lies in its concessional income tax slab structure (as compared to the old regime).
- The new regime offers reduced tax rates but removes most popular deductions available under the old system. It operates as the default tax regime for eligible taxpayers, as per official guidance.
- Lower slab rates may look attractive, but the real decision depends on whether your lost deductions outweigh the tax savings. If you claim significant deductions, the old regime may result in lower tax liability. If you have minimal deductions, the new regime can lead to lower taxes and simpler compliance.
- Using an income tax calculator can help you compare both regimes accurately instead of relying on assumptions. A side-by-side comparison often provides clearer insights than general advice and helps you choose the most suitable regime.
What deductions are not available under Section 115BAC**
The biggest impact of Section 115 of the Income Tax Act is the removal of most deductions.
- Under the new regime, Chapter VI-A deductions are largely not allowed.
- As per Income Tax Department guidance, only a few exceptions remain, such as Section 80CCD(2), Section 80CCH, and Section 80JJAA.
This means you can no longer rely on common tax-saving options like life insurance premiums, provident fund contributions, or tuition fees to reduce your taxable income.
If your earlier tax-plans depended on these deductions, the new regime changes your approach significantly.
It also impacts those who usually claim Section 80D for health insurance premiums, as Section 80D is not part of the standard deductions available here.
What is still allowed under Section 115BAC**
While most deductions are removed, Section 115 of the Income Tax Act still allows a few specific benefits.
- The standard deduction of Rs. 50,000 for salaried individuals and pensioners continues to be available under the new regime.
- Employer contributions to the National Pension System under Section 80CCD(2) are still allowed as a deduction.
- Deductions under Section 80CCH for contributions to the Agniveer Corpus Fund are also permitted.
- Deductions under Section 80JJAA for additional employee cost (for eligible businesses) remain available.
- Family pension income still qualifies for a deduction under Section 57, subject to prescribed limits.
- Transport allowance for specially-abled individuals and conveyance allowance for official duties are still allowed.
Section 115BAC and HRA, Section 80D, and common tax planning
Under Section 115 of the Income Tax Act, popular tax-saving components like HRA and deductions are treated very differently compared to the old regime.
- House Rent Allowance (HRA) exemption is not available under the new tax regime, which means your full salary component becomes taxable without this relief.
- Section 80D deductions for health insurance premiums are not allowed, removing a key benefit that many taxpayers use every year.
Other common deductions such as Section 80C (PF, life insurance, ELSS), tuition fees, and housing principal repayment are also not permitted.
This directly impacts traditional tax planning, where you would invest or spend specifically to reduce taxable income.
Under the new regime, tax-planning shifts away from “saving tax through investments” to simply “optimising income and choosing the right regime.”
Why an income tax calculator matters more now
Earlier, tax planning often meant collecting proofs and estimating deductions. Now it also means choosing the right regime. That makes an income tax calculator more important than before. You need to compare the old regime and Section 115BAC using your exact income, not a rough guess.
For example, if you only look at lower income tax slabs, the new regime may appear cheaper. But once you add deductions under the old regime, the picture may change. Similarly, an HRA calculator helps if rent exemption is a serious factor in your salary structure. These tools do not choose the regime for you, but they stop you from choosing blindly.
The real story of Section 115 of the Income Tax Act is not that it is better or worse than the old regime. It is that it rewards a different kind of taxpayer. If your finances are clean, deduction-light, and salary-driven, 115BAC of the Income Tax Act can make tax filing simpler and, in many cases, cheaper. If your tax planning depends on exemptions, rent benefits, insurance deductions, and a structured old-regime approach, the answer may be different.
So, before you commit to Sec. 115BAC of the Income Tax Act, do one thing properly. Run the numbers. Use an income tax calculator, check your rent position with an HRA calculator, review whether Section 80D and other deductions matter in your case, and then choose the regime that leaves you with the lower tax outgo, not the one that sounds easier in theory.
** Tax exemptions are as per applicable tax laws from time to time.
