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Highlights of Budget 2023 For Direct Taxation- Mainly For Understanding The Computing The Individual Tax Liability- Tax Slab For The Financial Year 2023-24

The Union Budget 2023 was presented by the Finance Minister, Nirmala Sitharaman, on 1st February 2023. The Budget aimed to address the ongoing challenges and fortify the nation for the next few decades. One of the key highlights of the budget was the changes related to Direct Taxation.

1. Changes in the New Tax Regime: The new tax regime is now the default tax regime, and the government has taken 5 measures to make it more attractive. Taxpayers have an option to choose the old tax regime. The new tax regime slabs for FY 2023-24 (AY 2024-25) are as follows:

  • Up to Rs. 3,00,000: Nil
  • 300,000 to Rs. 6,00,000: 5% on income which exceeds Rs 3,00,000
  • 6,00,000 to Rs. 900,000: Rs 15,000 + 10% on income more than Rs 6,00,000
  • 9,00,000 to Rs. 12,00,000: Rs 45,000 + 15% on income more than Rs 9,00,000
  • 12,00,000 to Rs. 1500,000: Rs 90,000 + 20% on income more than Rs 12,00,000
  • Above Rs. 15,00,000: Rs 150,000 + 30% on income more than Rs 15,00,000

Individual Tax Slabs For Financial Year 2023-24

What is Default Tax Regime – The new tax regime is now the default tax regime” means that the new system of taxation has replaced the previous one and is now the standard method for calculating and collecting taxes. It implies that individuals or businesses are now required to follow the rules and regulations of the new tax regime unless they specifically opt out and choose to follow a different system. The term “default” suggests that the new tax regime is the default choice and the default setting for taxation, and it is automatically applied unless otherwise specified.

2. As per the previous tax regime, individuals with a net taxable income of up to INR 5 lakh were eligible for income tax exemption under Section 87A. However, in the new budget, this limit has been increased to INR 7 lakh, but only for those who opt for the new tax regime. If you opt for the old tax regime, the limit for income tax exemption under Section 87A remains unchanged at INR 5 lakh.

What is the difference in OLD Tax Regime and New Tax Regime -In the old tax regime, you can avail of deductions under Chapter VI-A such as 80C, 80CCC, and 80CCD for making investments in specified funds and can claim a deduction of up to INR 2 lakh. You can also avail of other deductions such as 80D for medical insurance, 80E for interest paid on education loans, House Rent Allowance, LTA, etc.

In the new tax regime, however, you cannot avail of any of the deductions mentioned above.

3. Presumptive Taxation Limits Revised: The presumptive taxation limits for Sec 44AD (for small businesses) and Sec 44ADA (for professionals) have been revised to Rs 3 crore and Rs 75 lakh respectively. The increase in limits is subject to a condition that 95% of the receipts must be through online channels.

4. Start-ups: The date of incorporation for income tax benefits has been revised to 31.03.2024, and the time limit for set-off and carry forward of losses has been increased to 10 years from incorporation.

5. Co-operative Societies: The government has introduced several proposals for co-operative societies such as the extension of the benefit of the concessional tax rate of 15% to new co-operatives, disallowance of expenditure prior to 2016-17 can now be claimed, increase in the TDS limit on cash withdrawals to Rs 3 crores and the limit for cash deposits and loans by Primary Agricultural Co-operative Societies (PACS) and Primary Co-operative Agriculture and Rural Development Banks (PCARDBs) has been increased to Rs 200,000 per member.

6. Other Direct Tax Updates: The exemption threshold for Leave encashment has been increased to Rs 25 lakh, TDS rate has been reduced to 20% on taxable withdrawal of EPF, payment made to MSMEs is now allowed as expenditure only when payment is actually made, no penalty would arise under Section 269SS or 269ST, and the capital gains tax exemption under Section 54 to 54F is restricted to Rs 10 crores.

I hope this article gives a comprehensive understanding of the budget highlights related to Direct Taxation. If you have any questions or require further clarification, please do not hesitate to reach out.

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I am a Qualified Chartered Accountant who passed my exams in May 2008 and have since gained extensive experience in various areas of accounting and taxation, including international taxation, direct taxation, indirect taxation, and handling audits. In addition, I have expertise in handling MCA compl View Full Profile

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12 Comments

    1. Nitin Arora says:

      Section 80TTB of the Income Tax Act, 1961, provides for a deduction for senior citizens for interest income from deposits with banks, co-operative banks, and post offices. This deduction is not available in the new tax regime for senior citizens who are resident individuals in India, who are of the age of 60 years or more.

  1. AK Bansal says:

    Dear Sir
    I have sold out my old inherited house on 25.01.2022
    My query is:
    1. Am I come under the purview of capital gain since the property is inherited…
    2. if yes, how much time do I get to invest in new property
    Thanks

    1. Nitin Arora says:

      As per the applicable laws, the capital gain on a property inherited from your ancestors will not be calculated based on the current market value of the property. Instead, the capital gain would be calculated based on the cost of acquisition in the hands of the ancestors and the sale proceeds received from the sale of the property to a third person.

      Additionally, if you meet the eligibility criteria, the capital gain could be saved under Section 54 of the Income Tax Act. This section provides for the exemption of capital gain on the transfer of a long-term capital asset, if the proceeds from the transfer are invested in a residential house property.

    1. Nitin Arora says:

      As per the Income Tax Act in India, for individuals who are 60 years old or above (senior citizens), the tax slab starts from INR 3 lakhs. For individuals who are 80 years old or above (super senior citizens), the tax slab starts from INR 5 lakhs. However, it is important to note that these figures are subject to change based on the provisions of the budget and any amendments made to the Income Tax Act.

  2. Prafulla Chandra Sahu says:

    Suppose my income from pension is 7 lakhs and other income like interest in fixed deposit, dividends from shares etc is 50000. Total income Rs.750000. Whether standard deduction of Rs.50000 is applicable in such case, to make NIL tax upto 7 lakes under NEW tax regime.

    1. Nitin Arora says:

      Yes, that is correct. As per the current proposal, the standard deduction of Rs.50,000/- for salaried individuals which was previously only available under the old regime, will now be allowed under the new regime as well.

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