The new income tax regime will take over as the primary tax regime on April 1, 2023. Tax assessors will still have the option of using the previous regime.
The income tax laws have undergone numerous changes, and they will take effect this fiscal year. Some of the main changes that will take effect on April 1, 2023, include raised tax rebate limits, changes to income tax slabs, and the elimination of the LTCG tax benefit on certain debt mutual funds. Let’s examine the changes:-
1) New income tax regime to be a default regime:
The new income tax regime will take over as the primary tax regime on April 1, 2023. Tax assessors will still have the option of using the previous regime. The standard deduction under the new scheme for taxable income is over Rs. 15.5 lakh is Rs. 52,500 for salaried individuals and pensioners.
In Budget 2020-21, the government introduced an optional income tax regime that would tax individuals and Hindu Undivided Families (HUFs) at lower rates. The exemption is only valid if they did not take advantage of certain exemptions and deductions, such as the house rent allowance (HRA), home loan interest, and investments made under Sections 80C, 80D, and 80CCD. According to the clause, all revenue up to Rs. 2.5 lakh was exempt from tax.
2) Tax rebate limit raised to ₹7 lakh
The increase in the tax rebate cap from 5 to 7 lakh means that individuals with incomes under 7 lakh do not need to make any investments to qualify for exemptions. Such individuals’ income is completely tax-free regardless of the number of investments they make.
Read More: Income Tax recap: These important changes come into effect from April 1
3) Standard deduction
The standard deduction of Rs 50,000 that was offered to workers under the previous tax regime remains unchanged. The finance minister stated that the standard deduction would be extended to the new tax regime for pensioners.
4) LTA
Up to a certain amount, non-government workers are exempt from the leave encashment requirement. The limit is now Rs 25 lakh.
5) No LTCG tax benefit on these Mutual Funds
Investments in debt mutual funds will be subject to short-term capital gains tax beginning on April 1. Investors would lose the long-term financial advantages that had made such investments attractive.
6) Market Linked Debentures (MLDs)
Additionally, after April 1 investments in Market Linked Debentures (MLDs) will be considered short-term financial assets. With this, grandfathering of previous investments will come to an end, with slightly negative effects on the mutual fund sector.
7) Life Insurance policies
With the start of the new fiscal year, or 1 April 2023, the proceeds from life insurance premiums over the yearly premium of Rs 5 lakh will be taxable. While presenting the Budget 2023, Finance Minister Nirmala Sitharaman also stated that the ULIP will not be subject to the new income tax regulation. (Unit Linked Insurance Plan).
Read More: How To Calculate Income Tax On IT Department’s Tax Calculator?
8) Benefits to Senior Citizens
The Senior Citizen Savings Scheme’s highest deposit limit will rise from Rs 15 lakh to Rs 30 lakh. The monthly income scheme’s highest deposit limit will rise from 4.5 lakh to 9 lakh for single accounts and from 7.5 lakh to 15 lakh for joint accounts.
9) Physical gold conversion to e-gold receipt not to attract capital gains tax:
According to Finance Minister Nirmala Sitharaman, when physical gold is changed to an Electronic Gold Receipt (EGR) or vice versa, there won’t be any capital gains tax. This will take effect on April 1st, 2023.
10) Changes in Income Tax slabs
0-3 lakh – nil
3-6 lakh – 5%
6-9 lakh- 10%
9-12 lakh – 15%
12-15 lakh – 20%
above 15 lakh- 30%
