Whether AOP Trust CAN also opt for the New Taxation Regime?

1. There are various cases where the trust and AOP are subject to the tax rates as are applicable to Individual i.e., the taxation is done on the basis of applicable  tax slab rate for Individual & HUF.

2. The slab and rate of taxation is normally governed by the relevant Finance Act. Part I of the first schedule of the every Finance Act incorporates the tax slab and applicable tax rate. Every year, tax is require be paid as per this part of the Finance Act.

3. However, the new emerging trend in the Income Tax Legislation is to incorporate the tax rate in Chapter XII of the Income Tax Act-1961.

   Chapter XII of the Income Tax Act is titled as “Determination of Tax in Certain Special Circumstances”. It may be noted that Chapter XII starts with section 110 and ends with section 115BBF. This section contains the special rate of tax for certain special income. If the income is of a special nature and the same is covered in Chapter XII then the taxation shall be as per the relevant section of Chapter XII and not as per Part I of the first schedule to the Finance Act. Few example of such special rate of income are income by way LTCG, STCG, Royalty, etc.

4. The new regime of taxation as was announced by Finance Act 2020 is contained in section 115BAC which is forming the part of Chapter XII of the Income Tax Act-1961.

5. Section 115BAC is applicable to Individual & HUF Only. In short, it is not applicable to other categories of the taxpayers.

6. If the trust or AOP is taxable at the rate applicable to individual then it will be compulsorily be taxed at old tax regime and cannot be subject to new tax regime.

7. The key features of new taxation regime as incorporated in section 115BAC (which provides for taxation at a special tax rate) is as under:

Total Income	Rate of tax
Upto Rs. 2,50,000	NIL
From Rs. 2,50,001 to 5,00,000	5%
From Rs. 5,00,001 to 7,50,000	10%
From Rs. 7,50,001 to 10,00,000	15%
From Rs. 10,00,001 to 12,50,000	20%
From Rs. 12,50,001 to 15,00,000	25%
Above 15,00,000	30%

 

For above new tax rate and slab, the following points may be noted:

1. The new tax regime is applicable from A.Y. 2021-22 onwards.

2. The new tax regime is optional.

3. The new income tax regime is applicable to only Individual & HUF. It is applicable irrespective of their age means the tax slab is also applicable for Senior Citizen and super senior citizens.

4. Rebate u/s 87 A is available for individual having Total Income less than Rs 5 lakh.

5. Most importantly, following deduction are avaiale only if the taxpayer is opting for old regime and is not Allowed if the person is opting for new tax regime:

• Standard deduction to salaried taxpayers;

• Leave Travel Allowance (LTA);

• House Rent Allowance (HRA);

• Children education allowance;

• Other special allowances [Section10(14)];

• Deduction from family pension income;

• Interest on housing loan on the self-occupied property or vacant property (Section 24);

• Chapter VI-A deductions;

• Exemption or deduction for any other perquisites or allowances;

• Without setting off any loss carried forward or unabsorbed depreciation of earlier year;

• No Depreciation u/s 32 [except clause (iia) of sub-section (1)] allowed;

• Exemption for SEZ unit u/s 10AA;

• Deductions u/s 32AD, 33AB, 33ABA, 35, 35AD, 35CCC;

• In case of a Self-occupied property, you cannot claim a deduction on interest for a housing loan.

Deduction Allowed while Opting NEW TAX REGIME: –

• Deduction u/s 80CCD (2) (employer’s contribution to your pension account);

• Deduction u/s 80JJAA (additional employee cost);

• Transport Allowance for Differently Abled Employees (Divyang);

• Conveyance Allowance for performance of office duties;

• Any Allowance for the cost of Travel/ Tour/ Transfer;

• Daily Allowance given to employees under certain conditions.