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The Finance Minister, Nirmala Sitharaman, presented the Union Budget 2023 on 1st February 2023. Let’s discuss the impact/changes made in Direct Taxation by budget 2023 in brief:

1. Revision in Presumptive Taxation:

Sl. No. Categories Old Limits Revised Limits
1. Sec 44AD: For small taxpayer engaged in business Rs. 2 crores Rs. 3 crores

(Subject to a condition that at least 95% of the receipts must be through prescribed online modes)

2. Sec 44ADA: Professionals Rs. 50.00 lakhs Rs. 75 lakhs

(Subject to a condition that at least 95% of the receipts must be through prescribed online modes)

2. Co-operative Sectors:

1. Amendment to section 194N: TDS is deducted by banks (private, public, and co-operative) or post offices. The tax is deducted when making any cash payment to any person in excess of Rs. 20 lakh or 1# crore (as the case may be) from his/her account maintained with such banks or post offices.(# the limit has been increased to 3 cores for Co-operatives societies by Union budget 2023)

2. New manufacturers: New co-operatives that commence manufacturing on or before 31st march, 2024 can avail the benefits of concessional tax rate of 15%.

3. Sugar co-operatives: Sugar co-operatives can claim expenditure (payment to sugar cane farmers) which was disallowed to them prior to AY 2016-17.

3. Personal Taxation: The government has made few changes (mentioned below) in new tax regime to make it more beneficial for taxpayers. The government has also made new tax regime as default tax regime. However, the taxpayer has an option to choose any one out of old and new regimes.

1. Changes in Slab rates:

Sl. No. Slab Tax Rates
1. Upto Rs. 300,000 Nil
2. Rs. 300,000 to Rs. 600,000 5% on income exceeding Rs. 300,000
3. Rs. 600,000 to Rs. 900,000 Rs. 15,000 + 10% on income exceeding Rs. 600,000
4. Rs. 900,000 to Rs. 12,00,000 Rs. 45,000 + 15% on income exceeding Rs. 900,000
5. Rs. 12,00,000 to Rs. 15,00,000 Rs. 90,000 + 20% on income exceeding Rs. 12,00,000
6. Above Rs. 15,00,000 Rs. 1,50,000 + 30% on income beyond Rs. 15,00,000

2. Tax Rebate on income up-to Rs. 7,00,000: e you don’t have to pay income tax if your taxable income is up-to Rs. 7,00,000 under new tax regime.

3. Standard Deduction has been introduced in new tax regime also.

4. The threshold limit for exemption of Leave encashment has been increased to Rs 25 lakh from Rs 3 lakh for non-government employees.

4. Other Misc. changes:

1. MSME- Deduction on payment basis: as per my understanding, the government has covered payment to MSME under section “43B certain deductions to be only on actual Payment” of the act.”FM Mrs. Nirmala Sitharam described that deduction for expenditure incurred to MSME are allowed only when payment actually made to them”.

2. 10 crores deduction limits imposed on capital gains on re-investment in residential properties. “FM Mrs. Nirmala Sitharam states that, “For better targeting of tax concessions and exemptions. I propose to cap deduction from capital gains on investment in residential houses under sections 54 and 54F to ₹10 crore””

3. TDS on EPF withdrawals: TDS rate has been reduced to 20% from 30% on taxable withdrawal of EPF.

4. Previously if each online game’s winnings reach Rs 10,000, TDS becomes applicable. Additionally, winnings are subject to a 30 percent TDS deduction. However, from April 1, 2023, any amount won via online gaming will be subjected to TDS as per income tax law.

5. Date of incorporation for income tax benefits has been revised from 31st March, 2023 to 31st March, 2024 in case of start-ups.Also, the provision allowing private start-ups to carry forward and use their past losses to reduce their taxable income has been extended from 7 years after the company’s incorporation to 10 years.

6. The highest surcharge under the new tax regime has been reduced to 25% from 37% for people earning more than Rs 5 crore. This move brings down their tax rate from 42.74% to 39%.

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