Income tax vide Circular No. C1/2020 dated 13th April 2020 issues clarifications raised regarding exercising of Section 115BAC of the income tax act, 1961.
Section 115BAC of the income tax act, 1961 provides that a person, being an individual or a Hindu undivided family having income other than income from business or profession, may exercise an option in respect of a previous year to be taxed under the said section 115BAC
for each year at the concessional rate provided under section 115BAC of the Act is subject to the condition that the total income shall be computed without specified exemption or deduction, set-off of loss, and additional depreciation.
Representations have been received by the board regarding tax to be deducted at source (TDS), stating that as the option is required to be exercised at the time of filing of the return, the deductor, being an employer, would not know if the person, being an employee, would opt for taxation under section 115BAC of the Act or not. Hence, there is a lack of clarity regarding whether the provisions of section 115BAC of the Act are to be considered at the time of deducting tax.
In order to avoid the genuine hardship in such cases, the Board hereby clarifies that an employee, having income other than the income under the head "profits and gains of business or profession" and intending to opt for the concessional rate under section 115BAC 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 115BAC of the Act. If such intimation is not made by the employee, the employer shall make TDS without considering the provision of section 115BAC of the Act.
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 the option in terms of section 115BAC of the Act. Thus, the option at the time of filing of return of income could be different from the intimation made by such employee to the employer for that previous year.
https://www.incometaxindia.gov.in/communications/circular/circular_c1_2020.pdf