F. No. 370142/13/2020-TPL
Government of India
Ministry of Finance
Department of Rcvenue
Central Board of Direct Taxes
Circular C 1 of 2020 New Delhi, April 13,2020
Clarification in respect of option under section II5BAC of the Income-tax Act, 1961
Section 115 BAC of the Income-tax Act, 1961 (the Act), inserted by the Finance Act,
2020 wef the assessment year 202 1-22, infer alia, providcs that a person, being an individual or
a Hindu undivided family having income other than income from business or profession”, may
exercise option in respect of a previous year to be taxed under the said section 115 BAC
alongwith his return of income to be furnished under sub-section (I) of section 139 of the Act
for each year. The concessional rate providcd under section 115 BAC of the Act is subject to the
condition that the total income shall be computed without specified exemption or deduction, setoff of loss and additional depreciation.
2. Representations expressing concern regarding tax to be deducted at souree (TDS) has
been received stating that as the option is required to be exercised at the time of filing of return,
the deductor, being an employer, would not know if the person, being an employee, would opt
for taxation under section 115 BAC of the Act or not. llcnce, there is laek of clarity regarding
whether the provisions of section 115 BAC of the Act are to be considered at the time of
3. In order to avoid the genuine hardship in such cases, the Board, in exercise of powers
conferred under section 119 of the Act, hereby clarifies that an employee, having income other
than the income under the head “profit and gains of business or profession” and intending to opt
for the concessional rate under section 115 BAC of the Act, may intimate the deductor, being his
employer, of such intention for each previous year and upon such intimation, the deductor shall
compute his total income, and make TDS thereon in accordance with the provisions of section
115 BAC of the Act. If such intimation is not madc by the employee, the employer shall make
TDS without considering the provision of section 115 BAC of the Act.
4. It is also clarified that the intimation so made to the deductor shall be only for the
purposes of TDS during the previous year and cannot be modified during that year. However,
the intimation would not amount to exercising option in terms of sub-section (5) of section
115BAC of the Act and the person shall be required to do so along with the return to be furnished
under sub-section (5) of section 139 of the Act for that previous year. Thus, option at the time of
filing of return of income under sub-section (5) of section 139 of the Act could be different from
the intimation made by such cmployee to the employer for that previous year.
S. Further, in case of a person who has income under the hcad “profit and gains of business
or profession” also, the option for taxation under section 115BAC of the Act once exercised for
a previous year at the time of filing of return of incomc under sub-section (5) of section 139 of
the Act cannot be changed for subsequcnt previous years except in certain circumstances.
Accordingly, the above clarification would apply to such person with a modification that the
intimation to the employcr in his casc for subsequcnt previous years must not deviate from the
option under section 115 BACof the Act once cxcrcised in a previous year.