CBDT Amends IT Rules | Introduces Rule 21AGA and Form 10-IEA for Opting Old Tax Regime

Notification No. 43/2023, dated 21-06-2023

The Finance Act 2023 amended provisions of section 115BAC to provide the reduced tax rates under the new tax scheme for the assessment year 2024-25 and onwards. The new tax scheme is made the default scheme for taxpayers, and its scope also extended to the Association of Persons (AOP), Body of Individuals (BOI) and Artificial Juridical Person (AJP).

The Central Board of Direct Taxes (CBDT) has notified Income-tax (Tenth Amendment) Rules, 2023 to implement consequential changes. These rules modify the existing rules 2BB, 3, and 5, and also introduce a new Rule 21AGA.

1. Amendments in Rule 2BB, 3 and 5

Rule 2BB and Rule 3 pertain to the exempt allowance and the valuation of perquisites. Previously, it was stated that a person who exercised the option under section (5) of section 115BAC would not be eligible for the benefits available under these rules (subject to certain conditions).

However, as the new tax regime under section 115BAC is now the default tax regime for taxpayers, the rules have been amended to specify that person whose income is taxable under section 115BAC(1A); the benefits of these rules will not be available.

Further, Rule 5, which talks about depreciation, has been amended to provide a ceiling limit on depreciation allowance. It has been provided that the rate of depreciation of any block of assets entitled to more than 40% is restricted to 40%.

Further, if the income of an assessee is chargeable to tax under section 115BAC(1A), the unabsorbed depreciation (attributable to the additional depreciation) would be allowed to be added to the written down value (WDV) of the block of assets as on 01-04-2023.

2. Insertion of new Rule 21AGA

A) Opting out from the new tax regime

A new rule 21AGA has been inserted prescribing manners for opting out from the new tax regime under section 115BAC.

Starting from the Assessment Year 2024-25, a person who wants to exercise option to opt-out from new tax regime must furnish Form 10-IEA on or before the due date specified under section 139(1). Form 10-IEA is to be furnished by the person who has income from business or profession.

Form 10-IEA is to be furnished electronically either under a digital signature or electronic verification code.

If a person does not have income from business or profession, he can opt-out from the new tax regime by exercising the option in the return of income to be furnished under section 139(1).

B) Re-entering into new tax regime

If a person wants to re-enter the new tax regime, then the same is done by furnishing Form 10-IEA if such has income from business or profession. If the person doesn’t have income from business or profession, he can re-enter the new tax regime while furnishing return of income.

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