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RECENT CHANGES IN INCOME TAX

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Income Tax Changes From April 1, 2023

 

1)    New income tax regime to be default regime-Starting with the upcoming financial year 2023-24 which begins on April 1, 2023, the new income tax regime will act as the default tax regime. But keep in mind that the old regime continues to exist and those wanting to choose the old one instead of the new regime can certainly do so.

 

2) Tax rebate limit raised from ₹5 lakh to ₹7 lakh

Budget 2023 also made an annual income of up to ₹7 lakh tax-free. The enhancement of tax rebate limit to ₹7 lakh from ₹5 lakh from the new financial year 2023-24 means that those having income less than ₹7 lakh would have their entire income tax-free under the new income tax regime.

 

But before you hop onto the new regime, it'll be wise to compare the new and old one as per your existing as well as expected income for FY2023-24.

 


3) Standard deduction benefit extended to the new regime

The standard deduction was earlier not allowed in the new tax regime until FY 2022-23 (AY 2023-24). However, this benefit of a standard deduction of Rs.50,000 will now be allowed for salaried persons under new tax regime as well, from FY 2023-24 (AY 2024-25) onwards.

 

4) Changes in Income Tax slabs for new regime

The new tax rates and slabs under new regime, as announced in Budget 2023, are as follows:

0-3 lakh - nil

3-6 lakh - 5%

6-9 lakh- 10%

9-12 lakh - 15%

12-15 lakh - 20%

Above 15 lakh- 30%

 

5) LTA encashment limit raised from ₹3 lakh to ₹25 lakh

The leave encashment for non-government employees is exempt up to a certain limit. This LTA encashment limit was ₹3 lakh for two decades (since 2002). It has now increased to ₹25 lakh w.e.f FY 2023-24.

 

6) No more LTCG tax benefits on debt mutual funds

 In the recently passed Finance Bill 2023, LTCG tax benefits on debt mutual funds have been taken away. From April 1 2023, investments in debt mutual funds will be taxed as short-term capital gains.

 

7) No preferential taxation for market-linked debentures

From April 1, 2023. taxation of income from listed market-linked debentures (MLDs) will no longer be favourable. MLDs will now be taxed as debt instruments, putting an end to the more benign equity-like taxation currently.

 

At present, capital gains from such listed debentures are taxed at 10% after a holding period of more than a year, as per ET. And now, debt taxation from April 1 means this will now be taxed as short-term capital gains at the slab rate similar to comparable debt investments.

 

 

 

8) Life insurance proceeds taxable for premium over ₹5 lakh

Budget 2023 had also introduced a premium limit on traditional life insurance plans for claiming tax exemption on maturity proceeds. For life insurance policies issued on or after 1 April 2023, the tax exemption on maturity benefits under Section 10(10D) will only be applicable if the aggregate annual premium paid by an individual is up to ₹5 lakh. For life insurance premiums beyond ₹5 lakh limit, the proceeds will be added to the income and taxed at applicable rates.

 

So, if you purchase any life insurance plans (other than ULIP) on or after April 1, 2023, and the aggregate premium exceeds ₹5,00,000 in a fiscal year, the money received on maturity will be taxable.

 

9) Maximum deposit limit under SCSS increased to ₹30 lakh

In a boost for senior citizens, the maximum investment limit for the Senior Citizen Savings Scheme (SCSS) has been doubled from Rs 15 lakh to Rs 30 lakh, effective April 1 2023.

 

For the unversed, Senior Citizens Savings Scheme (SCSS) is primarily for the senior citizens of India. The scheme offers a regular stream of income with a high degree of safety and tax-saving benefits.  SCSS is a government-backed retirement benefits programme for senior citizens to invest a lump sum in the scheme, individually or jointly, and get access to regular income along with tax benefits.

 

10) No capital gains tax on physical gold conversion to e-gold receipt

In a move that seems to be aimed at encouraging the purchase of electronic gold, the government has removed capital gains tax if physical gold is converted to an Electronic Gold Receipt (EGR) and vice versa. Effective April 1 2023, conversion of the physical form of gold into EGR and vice versa by a SEBI registered Vault Manager will be excluded from the purview of ‘transfer’ for the purposes of capital gains.

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