Section 115BAC Explained: New Tax Regime Features & Benefits
- PRITI SIRDESHMUKH
- 20 hours ago
- 9 min read
Section 115BAC of the Income Tax Act, 1961, introduces India’s simplified “New Tax Regime,” offering lower tax rates but limited deductions compared to the traditional system. Applicable to individuals, HUFs, and NRIs, this regime aims to streamline tax computation and make compliance easier. With revised slab rates, enhanced standard deductions, and rebate limits, the government has further strengthened its appeal in Budget 2025. These reforms mark a strategic move toward a transparent, efficient, and technology-driven tax environment, where taxpayers can now make informed choices based on income, expenses, and deduction eligibility.
Table of Contents
Understanding Section 115BAC of the Income Tax Act
Section 115BAC of the Income Tax Act, 1961, represents India’s new tax regime, designed to simplify the taxation process. Introduced to reduce dependency on numerous exemptions and deductions, it offers lower tax rates in exchange for a streamlined filing process. The section applies to individuals, Hindu Undivided Families (HUFs), NRIs, AOPs, BOIs, and certain artificial juridical persons. Its main objective is to make taxation more transparent and easier to understand while giving taxpayers the freedom to choose between the old and new regimes based on their financial preferences and deductions.
Latest Updates in Budget 2025 under the New Tax Regime
The Union Budget 2025 brought several refinements to the new tax regime under Section 115BAC. The basic exemption limit has been raised to ₹4 lakh, while the highest slab now applies to income above ₹24 lakh. The standard deduction for salaried individuals and pensioners has increased from ₹50,000 to ₹75,000, and the rebate under Section 87A now covers taxable income up to ₹12 lakh. These updates ensure a more inclusive structure, benefiting middle-class taxpayers. Compliance has also become smoother, with simplified e-filing and pre-filled data reducing human error during return submission.
Features of Section 115BAC – New Tax Regime
The new tax regime is built on simplicity and efficiency. It offers lower slab rates and eliminates over 70 deductions and exemptions to make compliance easier. Taxpayers no longer need to track numerous investment proofs or claim-specific deductions. Since FY 2023–24, this regime has become the default option, meaning that taxpayers automatically fall under it unless they opt for the old regime while filing. It emphasizes uniformity, predictability, and ease of computation, reducing the need for complex tax planning.
Eligibility under Section 115BAC
The new tax regime under Section 115BAC applies to individuals, HUFs, NRIs, AOPs, and BOIs, except for co-operative societies. Salaried employees can switch between the old and new regimes each year based on which one offers better tax savings. However, individuals or entities with business or professional income can switch only once. This flexibility helps taxpayers make decisions annually while ensuring long-term consistency for those engaged in business or professions.
Tax Slab Rates under Section 115BAC for FY 2025-26
The revised tax slabs for FY 2025–26 are structured to provide equitable relief across income groups:
Up to ₹4,00,000: Nil
₹4,00,001 to ₹8,00,000: 5%
₹8,00,001 to ₹12,00,000: 10%
₹12,00,001 to ₹16,00,000: 15%
₹16,00,001 to ₹20,00,000: 20%
₹20,00,001 to ₹24,00,000: 25%
Above ₹24,00,000: 30%
This revised structure reduces the tax burden on middle-income taxpayers while ensuring progressive taxation for higher earners.
Benefits of the New Tax Regime under Section 115BAC
The primary advantage of Section 115BAC is simplified tax computation. Taxpayers benefit from lower slab rates without the burden of managing multiple deductions. The compliance process is quick and transparent, requiring minimal paperwork. Pensioners gain from the enhanced standard deduction, while NRIs can easily adopt this regime for non-business income. Platforms like TaxBuddy further simplify this process by providing automated comparisons between regimes, AI-driven calculations, and professional assistance for accurate filing and optimal tax savings.
Deductions Not Allowed under Section 115BAC
The new tax regime removes more than 70 deductions and exemptions to reduce complexity. Common deductions such as Section 80C (investments in PPF, ELSS, etc.), 80D (medical insurance), House Rent Allowance (HRA), Leave Travel Allowance (LTA), and home loan interest under Section 24(b) are not permitted. This change encourages uniformity and makes tax calculation straightforward without dependency on proof-based tax-saving investments.
Deductions Still Allowed in the New Tax Regime
Certain deductions continue to be available under Section 115BAC. These include:
Standard deduction of ₹75,000 for salaried individuals and pensioners.
Employer’s contribution to NPS under Section 80CCD(2).
Savings account interest up to ₹10,000 under Section 80TTA.
Additional deduction under Section 80JJAA for new employment creation. These limited deductions ensure fairness while maintaining the regime’s simplicity.
Is Section 115BAC Mandatory or Optional?
Section 115BAC is optional but has been made the default regime since FY 2023–24. Taxpayers who wish to continue under the old regime must explicitly choose it while filing their returns by submitting Form 10-IEA. This ensures flexibility and allows individuals to evaluate their financial situation annually before deciding which regime offers the most tax benefits.
How to Choose Between Old and New Tax Regime
Selecting between the old and new regimes depends on individual income composition and deductions. The new regime is ideal for taxpayers with minimal deductions, while those claiming major exemptions such as HRA, home loan interest, or investments under Section 80C may find the old regime more beneficial. Online tools and expert guidance from platforms like TaxBuddy can compare both regimes based on your data and recommend the most tax-efficient option automatically.
Impact of Section 115BAC on NRIs and Pensioners
NRIs can opt for the new tax regime for non-business income and switch annually, while those with business income can change only once. Pensioners enjoy significant benefits under this regime due to the increased standard deduction, making it favorable unless they claim large deductions elsewhere. The simplified structure also helps retirees and overseas taxpayers manage compliance without professional complexity.
Step-by-Step Guide to Filing ITR under the New Tax Regime
Collect income details such as Form 16, TDS statements, and interest certificates.
Visit an authorized platform like TaxBuddy or the Income Tax Department portal.
Select the option for the new tax regime while filing.
The system automatically applies relevant slab rates and deductions allowed under Section 115BAC.
Review, verify, and e-verify your return for submission. Using TaxBuddy ensures AI-based accuracy checks, instant validations, and guided support throughout the filing process.
Advantages of Filing under Section 115BAC with TaxBuddy
TaxBuddy offers an AI-driven tax filing experience, comparing both regimes to identify the most suitable option. Its interface simplifies tax computation, automatically includes eligible deductions, and ensures compliance with current rules. Whether choosing self-filing or expert-assisted plans, users can rely on TaxBuddy for error-free filing, real-time updates, and a secure process designed for individuals, NRIs, and businesses alike.
Limitations and Considerations under Section 115BAC
While the new regime simplifies taxation, it may not suit taxpayers with significant deductions or exemptions under the old regime. Those with home loans, high insurance premiums, or multiple investments might save more under the traditional system. Additionally, taxpayers with business income can switch back to the old regime only once, limiting flexibility. A comparative analysis before filing ensures that the choice aligns with personal financial goals.
Conclusion
Section 115BAC streamlines the Indian tax structure by offering lower rates and reduced complexity. It suits those with straightforward income sources, minimal deductions, and a preference for transparent compliance. As the government continues enhancing the new regime, taxpayers can benefit from easier filing and better clarity. For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
TaxBuddy offers flexibility by providing both self-filing and expert-assisted plans. In the self-filing plan, users can upload documents such as Form 16, TDS certificates, and salary slips, and the platform’s AI automatically fills relevant fields for quick filing. For complex cases involving capital gains, business income, or foreign assets, expert-assisted plans connect taxpayers with professionals who handle the filing end-to-end. This dual model ensures that both simple and complex returns are managed efficiently with complete accuracy.
Q2. Which is the best site to file ITR?
The official Income Tax Department portal is the statutory platform for e-filing returns in India. However, many taxpayers prefer user-friendly private platforms like TaxBuddy for faster processing and guided assistance. TaxBuddy simplifies the entire process by using AI-powered auto-validation, real-time TDS matching, and pre-filled form features. It ensures error-free filing and offers expert help when needed, making it one of the best platforms for both individuals and small businesses.
Q3. Where to file an income tax return?
An income tax return can be filed online through the official e-filing portal of the Income Tax Department (www.incometax.gov.in) or through trusted e-filing platforms like TaxBuddy. Filing through TaxBuddy offers added benefits such as auto-calculation of taxable income, comparison between old and new regimes, and personalized support. The platform ensures compliance with all filing guidelines and helps taxpayers avoid common mistakes that could lead to notices or delays in processing.
Q4. Can I claim Section 80C deductions under Section 115BAC?
No, deductions under Section 80C, such as investments in PPF, ELSS, life insurance premiums, and fixed deposits, are not allowed under Section 115BAC. The new tax regime focuses on lower tax rates instead of deductions to simplify the system. Taxpayers who wish to claim these deductions should continue with the old regime. Platforms like TaxBuddy can help evaluate which regime results in a lower tax outflow based on your income and deduction profile.
Q5. Is home loan interest allowed in the new regime?
No, the deduction on home loan interest under Section 24(b) for self-occupied property is not available in the new tax regime. However, if the house is let out, the taxpayer can claim deductions on the rental income as per standard rules. The removal of this deduction simplifies calculations but may reduce benefits for individuals paying large EMIs. A pre-filing comparison through TaxBuddy helps determine whether the old or new regime is financially more beneficial.
Q6. What are the latest slab rates under Section 115BAC?
For the financial year 2025–26, the new tax regime under Section 115BAC follows the updated slab structure:
Income up to ₹4,00,000: Nil
₹4,00,001 – ₹8,00,000: 5%
₹8,00,001 – ₹12,00,000: 10%
₹12,00,001 – ₹16,00,000: 15%
₹16,00,001 – ₹20,00,000: 20%
₹20,00,001 – ₹24,00,000: 25%
Above ₹24,00,000: 30% This structure reduces the overall tax burden for middle-income taxpayers while promoting uniformity in taxation.
Q7. Can NRIs opt for Section 115BAC every year?
Yes, NRIs earning non-business income such as salary, interest, or rental income can opt for the new tax regime every year. However, if the NRI earns business or professional income, they can switch to or from the new regime only once in their lifetime. Section 115BAC simplifies compliance for NRIs, allowing them to manage taxes efficiently on Indian income sources.
Q8. What is the new standard deduction under Section 115BAC?
As per Budget 2025, the standard deduction has been increased to ₹75,000 for salaried individuals and pensioners under the new tax regime. This adjustment helps offset the removal of various other deductions and provides meaningful relief to middle-income earners. It ensures that even without claiming 80C or 80D benefits, taxpayers enjoy some deduction benefit before computing taxable income.
Q9. How do I switch between old and new regimes while filing?
Salaried taxpayers can switch between the old and new tax regimes every financial year based on which provides better savings. This choice can be made while filing the income tax return or when submitting tax declarations to the employer. For individuals with business or professional income, the switch is permitted only once; thereafter, the chosen regime continues for subsequent years. TaxBuddy’s platform automatically compares both regimes and suggests the optimal one based on real-time data.
Q10. Are pensioners eligible for Section 115BAC benefits?
Yes, pensioners are fully eligible to opt for the new tax regime under Section 115BAC. They can avail of the enhanced standard deduction of ₹75,000, which helps lower their taxable income. Since pension income is treated as salary income, pensioners can benefit from reduced rates without the need to claim other deductions. The new regime is especially convenient for retired individuals who prefer simple compliance over complex tax-saving investments.
Q11. Does Section 115BAC apply to business income?
Yes, Section 115BAC applies to individuals and HUFs having business or professional income. However, once a taxpayer with business income opts for the new regime, they can switch back to the old regime only once in their lifetime. This condition ensures consistency and prevents frequent changes in tax treatment. TaxBuddy’s filing system clearly highlights this rule during selection, preventing errors during return submission.
Q12. Can TaxBuddy help choose the better regime automatically?
Yes, TaxBuddy uses AI-driven tax computation tools that automatically compare both the old and new regimes. It factors in income, deductions, and exemptions to suggest the more tax-efficient option before filing. This intelligent recommendation system minimizes human error and ensures taxpayers never miss potential savings. Combined with expert-assisted filing, TaxBuddy provides a seamless and secure way to choose and file under the most beneficial regime.
