CBDT Circular C 1 of 2020
[ Note this circular is withdrawn and new circular issued from FY 2023-24 onwards refer Circular 4/2023 issued by CBDT Dated 05-04-2023 Clarification regarding deduction of TDS from salary under New Tax Regime ]
F. No. 370142/13/2020-TPL
Government of India
Ministry of Finance
Department of Rcvenue
Central Board of Direct Taxes
New Delhi, April 13,2020
Clarification in respect of option under section 115BAC of the Income-tax Act, 1961
Section 115BAC of the Income-tax Act, 1961 (the Act), inserted by the Finance Act, 2020 wef the assessment year 202 1-22, infer alia, providcs that a person, being an individual or a Hindu undivided family having income other than income from business or profession”, may exercise option in respect of a previous year to be taxed under the said section 115BAC
alongwith his return of income to be furnished under sub-section (I) of section 139 of the Act for each year. The concessional rate providcd under section 115BAC of the Aet is subject to the condition that the total income shall be computed without specified exemption or deduction, setoff of loss and additional depreciation.
2. Representations expressing eoncern regarding tax to be deducted at souree (TDS) has been received stating that as the option is required to be exercised at the time of filing of return the deductor, being an employer, would not know if the person, being an employee, would opt for taxation under section 115BAC of the Act or not. llcnce, there is laek of clarity regarding whether the provisions of section 115BAC of the Act are to be considered at the time of deducting tax.
3. In order to avoid the genuine hardship in such cases, the Board, in exercise of powers conferred under section 119 of the Act, hereby clarifies that an employee, having income other than the income under the head “profit and gains of business or profession” and intending to opt for the concessional rate under section 115BAC of the Act, may intimate the deductor, being his employer, of such intention for each previous year and upon such intimation, the deductor shall
compute his total income, and make TDS thereon in accordance with the provisions of section 115BAC of the Act. If such intimation is not madc by the employee, the employer shall mak TDS without considering the provision of section 115BAC of the Act.
4. It is also clarified that the intimation so madc to the deductor shall be only for the purposes of TDS during the previous year and cannot be modified during that year. However, the intimation would not amount to exercising option in terms of sub-section (5) of section 115BAC of the Act and the person shall be required to do so a aongwith the return to be furnished under sub-section (1) of section 139 of the Act for that previous year. Thus, option at the time of filing of return of income under sub-section (1) of section 139 of the Act could be different from the intimation made by such cmployee to the employer for that previous year.
S. Further, in case of a person who has income under the hcad “profit and gains of business or profession” also, the option for taxation under section 115BAC of the Act once exercised for a previous year at the time of filing of return of incomc under sub-section (1) of section 139 of the Act cannot be changed for subsequcnt previous years except in certain circumstances.
Accordingly, the above clarification would apply to such person with a modification that the intimation to the employcr in his casc for subsequcnt previous years must not deviate from the option under section 115BAC of the Act once cxcrcised in a previous year.
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