New Income Tax Rules effective from 1st April, 2023 for Taxpayers

“Discover the impactful New Income Tax Rules effective from April 1, 2023. Changes in tax regime, slabs, rebates, standard deduction, surcharge, and more. Stay informed for efficient tax planning in the Financial Year 2023-24.”

Beginning from 1^st April, 2023 the new Financial Year 2023-24, will commence. Union Finance Minister Nirmala Sitharaman’s announcements from Budget will take effect from April 1. Some major changes in Income Tax Rules like changes in income tax slabs to tax rebate limit raised, default tax regime, No LTCG tax benefit on debt mutual funds, amongst others. Here are the brief income tax changes that will impact taxpayers in 2023-24.

1. New Income Tax Regime to be the default regime

Starting 1 April 2023, the new income tax regime will act as the default tax regime. However, taxpayers will still have the option to choose the old regime. If you are a salaried taxpayer, TDS will be deducted based on tax rates under the new tax regime. Therefore, while declaring investments, you must carefully choose between the Old regime and the new regime.

2. Changes in Income Tax Slabs in New Tax Regime

3. Rebate u/s 87A under New Tax Regime

Rebate u/s 87A is increased under New Tax Regime. The taxpayers having income upto Rs 7 lakhs are not required to pay any taxes. The maximum rebate under New Tax Regime is Rs 25,000. In short, any person whose income under the new tax regime is less than or equal to Rs. 7 lakhs, need not invest anything to claim any sort of exemption as the entire income would be tax-free irrespective of the quantum of investment made in such cases.

4. Standard Deduction

The standard deduction of Rs 50,000 under the old regime shall also be extended to the new regime. Under the new regime effective from April 2023, the benefit of Rs50,000 standard deduction will be allowed for salaried employees and for pensioners opting for new tax regime.

5. Surcharge

The highest surcharge rate of 37% is reduced to 25% under New Tax Regime. The taxpayers with income of more than 5 crore will be paying 25% surcharge instead of 37% under New Tax Regime.

6. Life Insurance Policies

W.e.f 1st April 2023, if aggregate of premium for life insurance policies issued on or after 1^st April, 2023 is above Rs. 5 Lakhs, proceeds from such policies over the annual premium of ₹5 lakh would be taxable (i.e Upto Rs. 5 lakh shall be exempt)

7. Leave Encashment Exemption

Leave Encashment exemption on retirement of non-government salaried employees is increased to Rs 25 lakhs from Rs 3 lakhs w.e.f 1st Apr 2023

8. Tax on Debt Mutual Funds

W.e.f 01st April 2023, investments in debt mutual funds will be treated as short term capital gain and taxable at slab rates even if they are held for more than 3 years subject to the equity exposure being less than 35%.

9. Senior Citizen Saving Scheme

Senior citizens can now deposit up to Rs 30 lakh under the senior citizens’ savings scheme as compared to the earlier deposit limit restricted to Rs 15 lakh. Also, the maximum deposit for the monthly income scheme has been increased to Rs 9 lakh from Rs 4.5 lakhs for single accounts. For joint accounts, the limit has been raised to Rs 15 lakhs from Rs 7.5 lakhs.

10. Claims under Section 54 and Section 54F will be limited

Taxpayers who sell their house property or any other capital asset and invest the sale amount in a new house receive a tax incentive under sections 54 and 54F. However, from 1st April, the incentives will be restricted to Rs 10 crores. Any gains above that will be taxed at 20% (with indexation benefit).

11. Increase in Threshold for MSME’s and Professionals u/s 44AD and 44ADA

There has been an increase in the threshold under presumptive scheme for MSME’s u/s 44AD from Rs 2 crores to Rs 3 crores and for professionals u/s 44ADA from Rs 50 lakhs to Rs 75 lakhs. However, cash receipts should not be more than 5%.

12. Conversion of Physical Gold to Electronic Gold Receipt to become Tax Free

Effective April 2023, there will be no capital gains tax implication if physical gold is converted to Electronic Gold Receipt (EGR) or the vice-versa.

13. Tax on Online Gaming

A new section, 115BBJ, was introduced to tax the winnings from online games. All forms of winnings, such as cash, kind, vouchers, or any other benefit, from online gaming, will attract tax at a flat 30%, which will be deducted at source immediately at the time of receiving the winning amount.