03/04/2023
Income tax changes wef fy 2023-24
1. New income tax slabs under new tax regime:
Budget 2023 has revised the income tax slabs under the new tax regime. As per the announcement made, the income tax slabs have been reduced from six to five. The new income tax slabs under the new tax regime comes into effect from April 1, 2023 for FY 2023-24. Do note that new income tax slabs under the new tax regime will be applicable to all the incomes earned in FY 2023-24, provided you opt for new tax regime in FY 2023-24.
2. No income tax payable for incomes up to Rs 7 lakh under new tax regime:
If an individual having taxable income up to Rs 7 lakh opts for the new tax regime in FY 2023-24, then he/she is not liable to pay tax. This is because tax rebate under Section 87A of the Income-tax Act, 1961 has been doubled under the new tax regime from Rs 12,500 to Rs 25,000. Thus, if an individual's taxable income (after claiming all the eligible deductions) does not exceed Rs 7 lakh under the new tax regime, then no tax will be payable.
3. Basic exemption limit hiked under new tax regime:
With the changes in the income tax slabs under the new tax regime, the basic exemption limit has been hiked to Rs 3 lakh - an increase of Rs 50,000. Till FY 2022-23, the basic exemption limit was Rs 2.5 lakh for all individuals irrespective of their age. Thus, individuals opting for the new tax regime in FY 2023-24 will not have to pay taxes or file income tax return if their income does not exceed Rs 3 lakh in a year.
4. Standard deduction benefit under new tax regime:
Budget 2023 has also extended the benefit of standard deduction of Rs 50,000 to salaried individuals and pensioners under the new tax regime from FY 2023-24. Similarly, family pensioners opting for the new tax regime will also be eligible for standard deduction of Rs 15,000 under the new tax regime.The standard deduction for salaried individuals will help them reduce their taxable income. For instance, individual having income of Rs 7.5 lakh will pay zero tax under the new tax regime by claiming the benefit of standard deduction.
5. New tax regime becomes default option:
Budget 2023 has made the new tax regime as the default option. This would mean that if you do not specifically opt for the old tax regime, then income tax on your incomes will be calculated based on the new tax regime. Thus, while submitting your investment declaration to your employer for FY 2023-24, then ensure that you have opted your choice of tax regime. If no option is chosen, then the employer will deduct the tax on the basis of the new income tax slabs under the new tax regime. This would also mean that if an individual does not file income tax return (ITR) on or before the expiry of the deadline, then they will not be able to opt for the old tax regime to file ITR
6. Lower surcharge rate under new tax regime:
The government has lowered the surcharge rate under the new tax regime in Budget 2023. As per the new law, for an individual having taxable income exceeding Rs 5 crore and opting for new tax regime, surcharge levied will be at 25% instead of 37%. This reduction in surcharge rate will help high-net worth individuals to lower their income tax.
7. No LTCG benefit in debt mutual funds:
Budget 2023 has removed the indexation benefit available on debt mutual funds. From April 1, 2023, any investment made in debt mutual funds (with those where equity investment does not exceed Rs 35%), then capital gains from such investments will be taxed at the income tax rates applicable to your income. In a nutshell, capital gains from debt mutual funds will be taxed in the same manner as interest earned from bank fixed deposit.Indexation benefit has been taken away from gold and international mutual fund schemes as well.
8. Marginal tax relief for small taxpayers:
The government has offered marginal relief benefit to small taxpayers under the new tax regime. As per the income tax law, an individual opting for the new tax regime in FY 2023-24, will be eligible for marginal relief provided taxable income exceeds Rs 7 lakh.
9. TDS on online gaming winnings
The government has removed the threshold earlier available for the deduction of tax from online game winnings. Till March 31, 2023, the TDS on winning amounts from online game was applicable if the winnings amount exceeded Rs 10,000. However, from April 1, 2023, every rupee earned from playing online games will be subjected to TDS. The TDS will be deducted at 30 per cent on net winnings amount (i.e., online winnings amount less of entry fee paid).
10. Limit on tax-free proceeds from life insurance policies (except Ulips):
Budget 2023 has put a limit on the tax-free proceeds one can get from life insurance policies (except Ulips). As per the announcement made, if the total amount of premium paid on life insurance policies (other than Ulip) exceeds Rs 5 lakh in a financial year, then maturity proceeds will be taxable. However, taxation will be applicable for insurance policies bought on or after April 1, 2023. For life insurance policies purchased till March 31, 2023, the life insurance proceeds will continue to be tax-free irrespective of the premium amount paid.
11. Limiting capital gains from property sale to Rs 10 crore:
The government has put the limit on the maximum deduction that can be claimed from capital gains arising from sale of residential property under Section 54 and Section 54F. Under these two sections, an individual can claim tax exemption on the capital gains arising from sale of residential house, provided the capital gains are invested in another house property. Till FY 2022-23, there was no limit on the amount of capital gains that can be claimed as exemption by buying another residential property. However, from April 1, 2023, the maximum amount of capital gains exemption that can be claimed is Rs 10 crore. Apart from this, the government has also put a cap on investment in Capital Gains Account Scheme. The new law will come into effect from April 1, 2023 for FY 2023-24 and future financial years.
12. Tax exemption limit on leave encashment hiked for non-government employees:
The government has hiked the tax exemption limit on leave encashment for non-government employees. Earlier, the maximum amount for tax exemption was Rs 3 lakh which was fixed in 2002. Now the maximum limit has been hiked to Rs 25 lakh.
13. Lower TDS on EPF withdrawal in certain cases:
TDS on EPF withdrawal has been reduced to 20% from 30% in certain cases. As per the announcement made in Budget 2023, tax on EPF withdrawals, where PAN is not available, has been reduced to 20%. The new TDS law will come into effect from April 1, 2023. Do note that TDS on EPF withdrawal is applicable if the withdrawal is made before the completion of five years. If the EPF withdrawal is made after the completion of five years, then TDS is not applicable.
14. Relief for on higher TDS for non-ITR filers:
Budget 2023 has offered relief to certain non-ITR filers from higher TDS. The relief is offered to those individuals who are not obligated to file ITR. The definition of 'Specified Person' under section 206AB and section 206CCA has excluded the individuals who are not required to file ITR. Hence, from April 1, 2023, an individual who is not required to file ITR will not be subjected to higher TDS.
15. Limit hiked under presumptive scheme:
The government has hiked limit under presumptive scheme for professionals and self-employed individuals subject to certain conditions. As per the announcement, professionals and self-employed individuals having gross receipts of up to Rs 75 lakh will be eligible to opt for presumptive taxation scheme. However, this limit will be applicable only if their total cash proceeds does not exceed 5% of the total receipts. In case of MSMEs, the presumptive taxation limit has been to Rs 3 crore.
