From April 1, 2023, there will be a new tax regime that will greatly affect taxpayers.
Below are some of the changes that will take place.
New Income Tax Slabs
Updated income tax slab for the new tax regime:
Yearly income up to ₹3 lakh: Nil
₹3 lakh- ₹6 lakh: 5 percent
₹6 lakh to ₹9 lakh: 10 percent
₹9 lakh to ₹12 lakh: 15 percent
₹12 lakh to Rs15 lakh: 20 percent
Above ₹15 lakh: 30 percent
Tax Regime changes
In the financial year 2023-24, salaried taxpayers can opt for the new tax regime and inform their employer of their choice. If no declaration is made, the new tax regime will be the default option for salaried individuals. However, once the choice is made, it cannot be changed during the financial year. The option to change the tax regime will only be available when filing the income tax return in July 2024.
Individuals and Hindu Undivided Families (HUFs) with business income will have the option to choose the new regime only once in their lifetime. If they choose to switch back to the old regime, they will not be able to opt for the new regime again in the future. However, individuals and HUFs without business income can choose between the old and new tax regimes every financial year.
Senior citizens can now avail the benefits of an increased maximum deposit limit of ₹30 lakh under the Senior Citizens Savings Scheme, ₹9 lakh for the Monthly Income Scheme (single account), and ₹15 lakh for the Monthly Income Scheme (joint account).
Revised surcharge rates
Under the new tax regime, individuals earning over 5 crores will benefit from a reduced surcharge rate of 25%. Moreover, for those who opt for this new tax regime, a surcharge rate of 25% will apply to any income exceeding ₹2 crores.
The revised surcharge rates under the new tax regime are as follows:
10% for taxable income above 50 lakhs but up to ₹1 crore
15% for taxable income above 1 crore but up to ₹2 crore
25% for taxable income exceeding ₹2 crores.
The proceeds from life insurance premium exceeding ₹5 lakh annually will be subject to taxation. On the other hand, no capital gains tax will be applicable if physical gold is converted to Electronic Gold Receipt (EGR) or vice-versa.
The limit on leave travel allowance (LTA) encashment has been raised from ₹3 lakh to ₹25 lakh
Winnings from online games will be subject to a 30 percent tax
Only capital gains up to ₹10 crore will be exempted under Sections 54 and 54F of the Income Tax Act. Any remaining capital gains exceeding ₹10 crore will be taxed at a rate of 20 percent.
Section 87A rebate
Section 87A rebate is available under both the old and new tax regimes, with a rebate of ₹12,500 for incomes up to ₹5 lakh under the old regime and a rebate of ₹25,000 for taxable limits not exceeding ₹7 lakh under the new regime. The latest budget announcement has raised the rebate limit to ₹7 lakh from ₹5 lakh under the new tax regime
There have been some changes to the tax laws regarding market-linked debentures. Previously, capital gains from their transfer, redemption, or maturity were considered equity and taxed at rates of 10%-15% based on the holding period. However, now these gains will be treated as short-term capital gains and taxed based on applicable income tax slab rates.
Section 44AD limits revised
The turnover limits under section 44AD have been revised for certain businesses, including MSMEs, from ₹2 crore to ₹3 crore. Section 44ADA has also been amended to increase the presumptive taxation limits of gross receipts from ₹50 Lakhs to ₹75 Lakhs for specified professions.
LTCG tax benefits stopped
There will no longer be any long-term capital gains tax benefits for investment in debt mutual funds. Instead, these investments will be taxed as short-term capital gains
Conversion of Gold to Electronic Gold Receipt
No capital tax gain if physical gold is converted to Electronic Gold Receipt (EGR), or vice-versa.