Topics Covered in the Presentation: 1. Impact of Covid-19 on Employees • Tax treatment in case of pay-cuts • Tax treatment in case of deferment of salary • Tax treatment of allowances during the lockdown period • Issues involved in withdrawal from Savings Scheme • Changes in the rules for contribution to Provident Fund 2.New Tax Regime under Section 115BAC • Introduction to the new or alternative tax regime • Tax rates in the new regime • Comparison between old and new tax regime • Conditions to opt the tax regime • Breakeven points • How to opt for the new tax regime? • Consequences in case of breach of conditions • TDS from salary as per new tax regime

1. Impact of Covid-19
and New Tax Regime
on Employees
28th May 2020
CA. Tarun Kumar | CA. Dipen Mittal

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3. TIPS FOR ATTENDEES.
Your mike is on mute. You will not be able to
communicate during the session.
However, you may post your questions in the chat box
given on your right-hand side.
Your questions will be answered by the speaker after
the session or during the session by the R&D Team.
After the session, you will get the copy of this
presentation for your future references.
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4. AGENDA FOR WEBINAR.
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Part 1- Impact of Covid-19 on Employees
Tax treatment in case of pay-cuts
Tax treatment in case of deferment of salary
Tax treatment of allowances during the lockdown period
Issues involved in withdrawal from Savings Scheme
Changes in the rules for contribution to Provident Fund
Part 2- New Tax Regime under Section 115BAC
Introduction to the new or alternative tax regime
Tax rates in the new regime
Comparison between old and new tax regime
Conditions to opt the tax regime
Breakeven points
How to opt for the new tax regime?
Consequences in case of breach of conditions
TDS from salary as per new tax regime

5. Part-1 :
Impact of Covid-19 on
Salaried Class

6. ISSUES TO BE COVERED.
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Tax implications of pay cuts
Implications in case of Deferment of Salary
Tax treatment of Allowances due to Lockdown
Issues involved in withdrawal from Savings Scheme
Changes in the rules for contribution to Provident Fund

7. Tax implications of Pay Cuts

8. POSSIBLE SITUATIONS IN PAY CUTS.
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Situations in Pay Cuts
Components of CTC are revised and
same is reflected in Salary Slip.
CTC is not adjusted and
components of CTC are not revised.
Net salary is taxable. Relief is available
for pay cuts
Gross salary is taxable. No tax relief
for the pay cuts

9. Insist on written communication from your employer.
Ensure that the pay cut is reflected in all components of the salary.
Ensure revision in the appointment letter and pay slip.
Salary is correctly reported in TDS certificate (Form 16) issued by the employer.
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POINTS TO BE TAKEN CARE IN CASE OF PAY CUT.

10. 10
CHANGE IN TAX REGIME.
Where an assessee has to undergo pay cuts and he faces liquidity crunch for investments, he should opt for new
tax regime of section 115BAC. When an assessee switches to new tax regime, he will have more money at his
disposal.
(In the next part of the presentation, Dipen will explain about the new tax regime and the break-even points).
Key Issues:
The intimation submitted to employer for the TDS cannot be changed during the year.
Employee can opt for different option at the time of filing of Income-tax Return.
Any excess or shortfall in deduction of tax, due to change in option, may be paid or can be
claimed as refund in the Income-tax return.

11. Implications in Case of
Deferment of Salary

12. Dictionary meaning of ‘deferment’ is the act of delaying something until a later time, or an occasion when
something is delayed until a later time. Deferred compensation is an arrangement in which a portion of an
employee's income is paid out at a later date after which the income was earned.
Meaning of Salary Deferment
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DEFERMENT OF SALARY.
Where payment of a portion of salary is deferred to the subsequent month, the same will be included in
the taxable salary on due basis irrespective of the fact that it is not yet received. Deferment will not affect
the ultimate taxability as the salary is still due and will be received subsequently.
Taxability of Deferred portion of Salary

13. TDS will not be deducted by employer on deferred component of salary as the same is deductible at the
time of payment of salary. Thus, the employer shall deduct tax on deferred component at the time of
actual payment of salary.
No liability to deduct TDS
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TAX ISSUES IN DEFERMENT.
Where the employer has not deducted tax on a portion of salary, as it has been deferred for payment, the
employee is responsible to pay the advance tax on that portion. In other words, as salary is taxable on due
basis and if TDS is not deducted by the employer, the employee shall be liable to pay the advance tax/self-
assessment tax. Any failure will trigger levy of interest and penalty.
Payment of tax by employee on deferred component

14. Tax treatment of allowances due to
Lockdown

15. Allowances are additional components of salary which are given regularly to the employees for the
purpose of meeting expenditure for some particular purposes. Every employer in accordance with the term
of employment or condition of the work place or statutory requirement may provide various allowances to
the employees.
Meaning of Allowances
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TAXABILITY OF ALLOWANCES.
Allowances are generally fixed irrespective of actual expenditure and are taxable. However, some
exemptions are allowed by the Income-tax Act.
Tax Treatment of Allowances

16. Allowances are taxable unless specifically exempted. Certain allowances such as conveyance allowance and
per diems are exempt from tax to the extent spent by the employee. If the allowances are not spent, they
are taxable.
Exemption based on spending
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ISSUES DUE TO LOCKDOWN.
India is facing the prolonged lockdown in the country due to the global pandemic. Due to this situation
the employees are forced to work from home and it might not possible for them to spend these
allowances for the designated purpose. Given this situation, the allowances will attract tax.
Challenges due to Lockdown

17. Withdrawal from Savings Scheme

18. Recession has knocked hard on Indian economy. Many people have either lost their jobs or encountered
the unprecedented salary cuts or deferrals. So to fund their expenses, people are withdrawing from
investments made in various tax-saving deposits such as PPF, EPF, NPS, NSC, fixed deposits, etc.
Why withdrawals are happening?
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ISSUES IN WITHDRAWAL FROM SAVINGS SCHEME.
Government has allowed partial withdrawals from EPF account.
Premature withdrawal from other schemes may attract some penal charges and have tax implications as
well. No relaxation has been given for pre-mature withdrawal from small saving schemes.
Visit https://www.taxmann.com/small-saving-schemes.aspx to know about the new small savings schemes.
Issues in Pre-mature withdrawal

19. Changes in the Rules for
Contribution to EPF

20. Under Pradhan Mantri Garib Kalyan Yojna, Government is paying EPF contribution of all those
establishments which have employed up to 100 employees and about 90 per cent of which
earn `15,000 per month.
Key Points:
Government will pay 12% of employer as well as 12% of employee contribution.
This benefit was earlier provided for the months of March, April and May 2020.
This support is extended by another 3 months of June, July and August 2020.
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PAYMENT BY GOVERNMENT.

21. The statutory rate of EPF contribution of both employer and employee has been reduced to 10
percent of basic wages and dearness allowances from existing rate of 12 percent for all class of
establishments covered under the EPF & MP Act, 1952.
Key Points:
Reduced rate of contribution is applicable for contribution to be made in the months of
May, June and July 2020.
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REDUCED EPF CONTRIBUTION.
This benefit is not applicable for Central and State Public sector enterprises or establishments owned by
central or state government. The benefit is also not available to entities eligible for PMGKY package.
The reduced rate of contribution is minimum rate of contribution during period of package.
The employer, employee or both can contribute at higher rate also.

22. Part-2:
New Tax Regime
Under Section 115BAC

23. The Finance Act, 2020 has inserted a new section 115BAC under Income-tax Act to provide for an
alternative or new tax regime with effect from 01.04.2021. The scheme is applicable from Assessment
Year 2021-22 onwards.
The scheme shall be applicable only to an Individual or HUF.
This scheme is also called as Alternative or New Tax Regime because under this scheme, the
Government has provided an altogether new income-tax slab rates. This scheme is optional for the
assessees. Thus, an Individual or HUF has the option either to pay tax as per the new regime or
continue with existing one.
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INTRODUCTION TO ALTERNATIVE OR NEW TAX REGIME.

24. Under the new tax regime, the maximum exemption limit is Rs. 2,50,000.
The tax rates are increased by 5% on every additional income of Rs. 2,50,000
Income above Rs. 15,00,000 shall be taxable at the rate of 30%
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TAX RATES UNDER NEW TAX REGIME.
Income Slab Tax Rate
Up to Rs. 2,50,000 Nil
Rs. 2,50,001 to Rs. 5,00,000 5%
Rs. 5,00,001 to Rs. 7,50,000 10%
Rs. 7,50,001 to Rs. 10,00,000 15%
Rs. 10,00,001 to Rs. 12,50,000 20%
Rs. 12,50,001 to Rs. 15,00,000 25%
Above Rs. 15,00,000 30%

25. 25
TAX RATES UNDER OLD VIZ-A-VIZ NEW TAX REGIME.
Income Slab Old Regime New Regime
Up to Rs. 2,50,000 Nil Nil
Rs. 2,50,001 to Rs. 5,00,000 5% 5%
Rs. 5,00,001 to Rs. 7,50,000 20% 10%
Rs. 7,50,001 to Rs. 10,00,000 20% 15%
Rs. 10,00,001 to Rs. 12,50,000 30% 20%
Rs. 12,50,001 to Rs. 15,00,000 30% 25%
Above Rs. 15,00,000 30% 30%
It is to be noted that rate of surcharge, health & education cess and tax rates in respect of special income shall
remain same. Further, rebate under section 87A shall be available both under the new and old tax regime.
Please refer Tax calculator available at www.taxmann.com to compute tax as per old and new regime.

26. Deductions or exemptions not available
under the new tax regime

27. 27
SALARY.
Leave Travel Allowance
[Section 10(5)]
House Rent Allowance
[Section 10(13A)]
Official Allowances except
Conveyance, Travelling and Daily
allowance [Section 10(14)]
Personal Allowances except
Transport Allowance granted to
Divyang Employee
[Section 10(14)]
Free Food or Vouchers
[Section 17]
Allowance to MPs/MLAs
[Section 10(17)]
Standard Deduction
[Section 16(ia)]
Deduction for
Entertainment Allowance
[Section 16(ii)]
Deduction for Professional Tax
[Section 16(iii)]

28. No deduction under section 24(b) shall be allowed for interest on loan taken in respect of self-occupied
house property or property which is lying vacant due to employment or business/profession of
assessee at any other place.
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HOUSE PROPERTY.
Interest on loan in respect of self-occupied house property
If there is carried forward loss under the head house property which is attributed to the self-occupied
house property, then assessee cannot claim such loss.
Carry forward loss attributable to self-occupied house property
Loss under the house property loss cannot be set-off against income under any other head.
Inter-head set-off of house property loss

29. Assessee opting for section 115BAC shall not be entitled for following deductions while computing income
under the head business or profession:
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BUSINESS OR PROFESSION.
Additional depreciation [Section 32(1)(iia)]
Investment allowance in respect of new plant or machinery in notified backward areas [Section 32AD]
Tea, Coffee or Rubber development account [Section 33AB]
Site Restoration Fund [Section 33ABA]
Deduction in respect of payments to research association, university, college, national laboratory, etc.
[Section 35(1)(ii)/(iia)/(iii) or section 35(2AA)]
Investment linked deduction [Section 35AD]
Expenditure on agricultural extension project [Section 35CCC]
Carry forward loss attributable to aforesaid deductions- If there is carried forward loss under the head
Business or Profession which is attributed to the aforesaid deductions, then assessee cannot claim such loss.
Special mechanism for computation of depreciation- Depreciation under section 32 would be computed in
the prescribed manner. Accordingly, Rule 5 and New Appendix-I may be amended by CBDT.

30. Employer’s contribution to National Pension System (NPS) [section 80CCD(2)]
Deduction for additional employee cost [Section 80JJAA]
Deduction in respect of income of an unit located in International Financial Service Centre (IFSC)
[Section 80LA]
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DEDUCTION UNDER CHAPTER-VIA.
No deduction under chapter-VIA, that, section 80C to 80U, shall be allowed except following:

31. Exemption in respect of minor’s income clubbed in the hands of his parents [section 10(32)]
Deduction from family pension [Section 57(iia)]
Deduction in respect of income of an unit located in Special Economic Zones (SEZs) [Section 10AA]
Any exemption or deduction for allowance or perquisite, by whatever name called, provided under any
other law for the time being in force.
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OTHER EXEMPTIONS OR DEDUCTIONS.
Following exemptions or deduction shall not be allowed to the assessee opting for section 115BAC:
Alternate Minimum Tax (AMT): If a person opts for Section 115BAC, he shall not liable to pay AMT.
Further, he shall not be able to utilize the unused amount of AMT credit.

32. Breakeven point is the point where tax under old and new tax regime would be same. It is computed on
the basis of amount of income of assessee and incentives that he has to forego (i.e., blocked incentives) on
opting for new tax regime
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BREAKEVEN POINTS.
Income before Blocked
Incentives
Amount of Blocked Incentives Tax under Old
Regime
Tax under New
Regime
5,00,000 Nil Nil Nil
7,50,000 1,25,000 39,000 39,000
10,00,000 1,87,500 78,000 78,000
12,50,000 2,08,333 1,30,000 1,30,000
15,00,000 2,50,000 1,95,000 1,95,000
If blocked incentives is more than the amount of blocked incentives given in the table then assessee
should opt for old tax regime otherwise he may opt for new tax regime.
Please refer Taxmann’s Direct Tax Ready Reckoner for complete Break-Even Table. https://bit.ly/3c2hxRj

33. Exercise or withdrawal of option of
new tax regime

34. 34
HOW TO OPT FOR THE NEW TAX REGIME?
Year An Individual or HUF can opt for new tax regime from Assessment
Year 2021-22 onwards.
Time-limit for
exercising the
option
If assessee having income from business or profession – option should be
exercised on or before the due date of filing of return specified under section
139(1). Further, option once exercised shall be valid for subsequent years
also.
If assessee doesn’t have any income from business or profession – option
should be exercised along with the return of income to be furnished under
section 139(1). Further, assessee can exercise the option on year to year basis.
Manner of
exercising of
option
CBDT shall notify rules and form for this purpose.

35. Where an assessee, having income from business or profession, has exercised the option, he can withdraw
the option only once for the previous year other than the year in which the option is exercised. Once he
opts out of the option, he shall not be eligible to exercise the option again unless he ceases to carry on his
business or profession.
Withdrawal of option by assessee having income from business or profession
An assessee who doesn’t have any income from business or profession can opt for new tax regime on year
to year basis. Thus, he can withdraw from new tax regime from any previous year other than the year in
which the option is exercised.
Withdrawal of option by any other assessee
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WITHDRAWAL FROM THE NEW TAX REGIME.

36. If an assessee after opting for section 115BAC doesn’t compute his total income in the manner prescribed
under that section in any previous year then the consequences shall be as follows:
If the assessee doesn’t have any income from business or profession - option shall become invalid for the
relevant previous year.
If the assessee is having income from business or profession- option shall become invalid for the relevant
previous year as well as subsequent years.
Once the option becomes invalid, total income of the assessee and tax thereon for the relevant
previous year or subsequent assessment years, as the case may be, shall be computed as per
normal provisions of the Act. However, deductions/allowances like carry forward of certain losses,
unabsorbed additional depreciation, AMT credit, etc. which has lapsed may not revive again.
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CONSEQUENCES IN CASE OF BREACH OF CONDITIONS.

37. The CBDT vide Circular No.. C 1 OF 2020 [F. NO. 370142/13/2020-TPL], Dated 13-4-2020 has clarified that
an employee may intimate his employer if he intends to opt for new tax regime. Upon such intimation,
employer shall be required to compute total income of the employee and deduct tax thereon in
accordance with the provisions of section 115BAC. However, if no intimation is given by the employee then
total income and tax thereon shall be computed as per normal provision of the Act.
Intimation may be given by the employee every year. However, if the employee is having any income from
business or profession then he cannot deviate from the option to pay tax under new regime in subsequent
years.
Further, it has been clarified that option at the time of filing of return of income by the employee could be
different from the intimation made to the employer for that previous year.
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INTIMATION TO EMPLOYER FOR PURPOSE OF TDS.

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