What is Section 115BAC Tax Rates, Deductions & Eligibility Criteria

Section 115BAC has reshaped how Indian salaried individuals and HUFs (Hindu Undivided Families) are taxed. This new system, confirmed in Budget 2025, gives you a simpler, lower-rate tax regime, but you'll have to give up most deductions and exemptions the old system offered.

What is Section 115BAC?

• Started in FY 2020-21. As of FY 2023-24, it’s the default tax regime.
• You can still pick the old regime, but only if you file the right form (Form 10-IEA), especially if you have business income.
• Slab rates are lower, but you can’t claim most traditional tax breaks.

New Tax Slabs (FY 2025-26)

A standard deduction of ₹75,000 (for salaried taxpayers) applies, ensuring incomes up to ₹12.75 lakh can now be tax-free, after adjusting for the higher rebate limit.[3]

Deductions in 115BAC Regime

• Deductions under Section 80C (like PPF, ELSS, LIC), 80D (health insurance premium), HRA, LTA, home loan interest, professional tax, and education loan interest aren’t allowed.
• Set-offs for house property losses don’t work.
• No more additional depreciation and most business deductions.

Tax Rates under 115BAC (FY 2025-26)

• Standard deduction of ₹75,000 is allowed for salaried taxpayers.
• Rebates and marginal relief apply, so incomes up to ₹12.75 lakh can be tax-free after deductions and rebates.
• No surcharge up to ₹50 lakh; surcharge applies beyond this income as per regular rules.

Who Should Opt for 115BAC?

• If you don’t claim much in tax benefits (like investment deductions), or want no-fuss filing, it’s usually better.
• If you have substantial deductions (home loan, insurance, investments), calculate under both regimes before deciding.

2025 Latest Update on Section 115BAC

• From FY 2025-26 onwards, Section 115BAC provisions are moving to Section 202 (no rate changes yet).
• Rebate threshold is ₹12 lakh, boosting middle-class relief.
• Marginal relief applies if your income just crosses limits.