Today, i.e. 01st February, 2023, Honorable Finance Minister, Smt. Nirmala Sitharaman Ji has presented finance budget for financial year 2023-2024. During her budget speech she has proposed numerous changes so far as direct tax is concerned. Some of them has been enlisted here in a very concise manner:
1. Filing of Income Tax Return will now be easier as simplified ITR form is proposed.
2. Section 44AD of the Income Tax Act, 1961, Computation of Profits or Gains from Business on a presumptive basis:
In order to avail the benefits of the provisions of this section assessee’s total turnover or gross receipts should not exceed Rs. 2 crores in the previous year, now this limit has been proposed to be increased to Rs. 3 crores.
3. Section 44ADA of the Income Tax Act, 1961, Computation of Profits or Gains from Profession on a presumptive basis:
In order to avail the benefits of the provisions of this section assessee’s total gross receipts should not exceed Rs. 50 lakhs in the previous year, now this limit has been proposed to be increased to Rs. 75 lakhs.
4. Expense deduction to MSME to be allowed on payment basis.
5. Section 194N of the Income Tax Act, 1961, TDS on cash withdrawal:
After the second proviso following proviso has been inserted in section 194N:
“Provided also that where the recipient is a co-operative society, the provisions of this section shall have effect, as if for the words “one crore rupees”, the words “three crore rupees” had been substituted.”.
6. Section 79 of the Income Tax Act, 1961, Carry forward and set off of losses:
Where a change in shareholding has taken place during the previous year in the case of an eligible start-up as referred to in section 80-IAC, losses can be carried forward for 7 years, now, it is proposed to increase the period from 7 years to 10 years.
7. Section 54 of the Income Tax Act, 1961, Profit on sale of property used for residence:
In section 54 of the Income-tax Act, with effect from the 1st day of April, 2024,
(a)in sub-section (1), after the second proviso, the following proviso shall be inserted, namely:
“Provided also that where the cost of new asset exceeds ten crore rupees, the amount exceeding ten crore rupees shall not be taken into account for the purposes of this sub-section.”
8. Section 54F of the Income Tax Act, 1961, the capital gain arises from the transfer of any long-term capital asset, not being a residential house:
In section 54F of the Income-tax Act, with effect from the 1st day of April, 2024,
(a)in sub-section (1), after the proviso and before the explanation, the following proviso shall be inserted, namely:
“Provided further that where the cost of new asset exceeds ten crore rupees, the amount exceeding ten crore rupees shall not be taken into account for the purposes of this sub-section.”
9. Life insurance proceeds taxable for premium over Rs 5 lakh:
For life insurance policies issued on or after April 1, 2023, the tax exemption on maturity benefits under Section 10(10D) will only be applicable if the aggregate premium paid by an individual is up to Rs 5 lakh.
10. Tax exemption on leave encashment on retirement of non-government salaried employees increased:
If a person is employed in the private sector, their leave encashment following retirement or resignation is taxable as “Income from Salary”. However, Section 10 (10AA) (ii) of the Income-Tax Act, 1961, provides for exemptions up to Rs 3 lakh. The limit of Rs 3 lakh for tax exemption on leave encashment on retirement of non-government salaried employees has been increased to Rs 25 lakh.
11. TDS rate on EPF withdrawals reduced:
Tax deducted on EPF withdrawals has been reduced to 20 per cent from 30 per cent in non-PAN cases.
12. Section 87A of the Income Tax Act, 1961, Rebate of income-tax in case of certain individuals:
Provisions of section 87A talks about the rebate of Income Tax. A resident individual tax payer have two options to file his ITR, i.e. either under old income tax regime or new income tax regime.
Pre Budget-
- Such individual can claim rebate of Rs. 12500 if his total income does not exceed 5 lakhs rupees. This rebate is available to him under both regimes.
Post Budget-
- Under Old Regime such individual can claim rebate of 12500 if his total income does not exceed 5 lakhs rupees.
- Under New Regime such individual can claim rebate of 25000 if his total income does not exceed 7 lakhs rupees.
13. Major changes in the Income Tax Slabs:
Tax payer have two options to file his ITR, i.e. either under old income tax regime or new income tax regime.
Pre Budget-
| Sl. No. | Old Income Tax Regime* | New Income Tax Regime | |||
| Total Income (Rs.) | Tax Rate | Total Income (Rs.) | Tax Rate | ||
| 1 | 0-250000 | Nil | 0-250000 | Nil | |
| 2 | 250001-500000 | 5% | 250001-500000 | 5% | |
| 3 | 500001-1000000 | 20% | 500001-750000 | 10% | |
| 4 | More than 1000000 | 30% | 750001-1000000 | 15% | |
| 5 |
– |
1000001-1250000 | 20% | ||
| 6 | 1250001-1500000 | 25% | |||
| 7 | More than 1500000 | 30% | |||
Post Budget-
| Sl. No. | Old Income Tax Regime* | New Income Tax Regime | |||
| Total Income (Rs.) | Tax Rate | Total Income (Rs.) | Tax Rate | ||
| 1 | 0-250000 | Nil | 0-300000 | Nil | |
| 2 | 250001-500000 | 5% | 300001-600000 | 5% | |
| 3 | 500001-1000000 | 20% | 600001-900000 | 10% | |
| 4 | More than 1000000 | 30% | 900001-1200000 | 15% | |
| 5 |
– |
1200001-1500000 | 20% | ||
| 6 | More than 1500000 | 30% | |||
* In case of an Individual (resident or non-resident) or HUF or Association of Person or Body of Individual or any other artificial juridical person (Other than senior and super senior citizen).
14. The new income tax regime will now become the default option, but people will still have the option to go for old income tax regime.
15. Section 16 of the Income Tax Act, 1961, Standard deduction:
As per the provisions of section 16 (ia) there is a standard deduction of Rs. 50000 (the amount of the salary, whichever is less) has been provided. It may be noted that such deduction is only available to a tax payer opting old income tax regime.
Pre Budget-
Standard Deduction of Rs. 50000 is only available to a tax payer opting old income tax regime. No such deduction is available to a tax payer opting new income tax regime.
Post Budget-
- Standard Deduction of 50000 is available to a tax payer opting old income tax regime.
- Standard Deduction of 52500 is available to a tax payer opting new income tax regime if his salary income is Rs. 15.5 lakh or more.
16. Surcharge:
Surcharge is an additional charge calculated on Income Tax of a tax payer at following rates if total income of an individual (resident or non-resident) or HUF or Association of Person or Body of Individual or any other artificial juridical person exceeds specified limits: –
Pre Budget-
| Sl. No. | Old Income Tax Regime | New Income Tax Regime | |||
| Total Income | Surcharge Rate | Total Income | Tax Rate | ||
| 1 | Rs. 50 Lakhs to Rs. 1 Crore | 10% | Rs. 50 Lakhs to Rs. 1 Crore | 10% | |
| 2 | Rs. 1 Crore to Rs. 2 Crores | 15% | Rs. 1 Crore to Rs. 2 Crores | 15% | |
| 3 | Rs. 2 Crores to Rs. 5 Crores | 25% | Rs. 2 Crores to Rs. 5 Crores | 25% | |
| 4 | More than Rs. 5 crores | 37% | More than Rs. 5 crores | 37% | |
Post Budget-
| Sl. No. | Old Income Tax Regime | New Income Tax Regime | |||
| Total Income | Surcharge Rate | Total Income | Tax Rate | ||
| 1 | Rs. 50 Lakhs to Rs. 1 Crore | 10% | Rs. 50 Lakhs to Rs. 1 Crore | 10% | |
| 2 | Rs. 1 Crore to Rs. 2 Crores | 15% | Rs. 1 Crore to Rs. 2 Crores | 15% | |
| 3 | Rs. 2 Crores to Rs. 5 Crores | 25% | More than Rs. 2 crores | 25% | |
| 4 | More than Rs. 5 crores | 37% | – | ||
Author Bio
There is a confusion among people regarding standard deduction for new regime. Many sites and explanations state that Rs 50000 standard deduction for new regime and Rs.52500 under new regime for income beyond 15.5 lacs. Kindly clarify