Explore the new tax regime under Section 202 of the Income Tax Bill, 2025. Understand tax rates, eligibility, exemptions, and more for a simplified tax filing experience.
What is Section 202 of the Income Tax Bill, 2025?
Tax Rates Under the New Tax Regime
Eligibility for the New Tax Regime
Unavailable Exemptions and Deductions
Available Exemptions and Deductions
Unabsorbed Depreciation and Business Loss
FAQs on Section 202
Section 202 introduces a simplified tax regime for individuals, HUFs, and other specified taxpayers, effective from April 1, 2026.
Key Features of Section 202
Section 202 aims to simplify tax compliance by offering a streamlined tax regime.
Effective from April 1, 2026, for FY 2025-26.
Applies to individuals, HUFs, and specified taxpayers.
Default regime unless opted out.
Simplifies tax filing by reducing exemptions.
Objectives of the New Regime
The new regime aims to reduce tax complexities and compliance burdens.
Lower tax rates for middle-income groups.
Eliminates most deductions to simplify filing.
Encourages voluntary compliance.
Aims to broaden the tax base.
The new tax regime offers reduced tax rates across various income slabs.
Income Tax Slabs and Rates
The new regime features progressive tax rates based on income levels.
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%
Rebate and Marginal Relief
Rebate and marginal relief provisions help reduce tax liability for eligible taxpayers.
Rebate up to ₹60,000 for income up to ₹12,00,000.
Ensures zero tax liability for income up to ₹12,00,000.
Marginal relief prevents excessive tax burden.
Example: Income of ₹12,50,000 results in tax of ₹55,000 after rebate.
Eligibility criteria for filing under the new tax regime.
Eligible Taxpayers
The new regime is applicable to specific categories of taxpayers.
Individuals, including salaried and self-employed.
Hindu Undivided Families (HUFs).
Associations of Persons (AOPs) excluding co-operative societies.
Bodies of Individuals (BOIs), whether incorporated or not.
Artificial Juridical Persons.
Opting Out of the New Regime
Taxpayers can choose to opt out of the new regime if desired.
Must explicitly opt out to continue with the old regime.
Decision to opt out must be made annually.
Form 10-IE required for opting out.
Deadline for opting out is the due date for filing ITR.
Despite the simplified regime, some exemptions and deductions are still available.
Permitted Exemptions
Certain exemptions are allowed under the new regime.
Transport allowance for specially-abled persons.
Conveyance allowance for employment-related travel.
Compensation for travel on tour or transfer.
Daily allowance for absence from regular duty.
Permitted Deductions
A few deductions can still be claimed under the new regime.
Standard deduction of ₹75,000.
Interest on home loan for let-out property.
Gifts up to ₹50,000.
Employer's contribution to NPS under Section 124(1).
Handling of unabsorbed depreciation and business loss under the new regime.
Unabsorbed Depreciation
Treatment of unabsorbed depreciation in the new regime.
Carried forward and set off against business income.
No set-off against salary income.
Utilized within 8 assessment years.
Requires detailed computation in ITR.
Business Loss
Handling of business loss under the new regime.
Carried forward for 8 years.
Set off against business income only.
No set-off against salary or capital gains.
Requires Form 3CD for audit cases.
What is the effective date for Section 202?
Section 202 is effective from April 1, 2026, applicable for FY 2025-26.
Can I claim HRA under the new regime?
No, House Rent Allowance (HRA) is not available under the new tax regime.
How do I opt out of the new regime?
To opt out, submit Form 10-IE by the ITR filing due date for the relevant assessment year.
Is standard deduction available in the new regime?
Yes, a standard deduction of ₹75,000 is available under the new regime.
What is the rebate limit under the new regime?
A rebate of up to ₹60,000 is available for income up to ₹12,00,000.
Are deductions under Section 80C allowed?
No, deductions under Section 80C, such as PPF and NSC, are not allowed in the new regime.
Can business losses be carried forward?
Yes, business losses can be carried forward for 8 years and set off against business income.
What is the tax rate for income above ₹24,00,000?
The tax rate for income above ₹24,00,000 is 30% under the new regime.
Is interest on home loan deductible?
Interest on home loan for let-out property is deductible, but not for self-occupied property.
Are gifts taxable under the new regime?
Gifts up to ₹50,000 are exempt from tax under the new regime.