The income tax rules have changed significantly as of this fiscal year. Changes in income tax slabs, no LTCG tax advantage on some debt mutual funds and increased tax rebate limit are among the significant changes that will take effect on 1 April 2023. The new regime tax slab 2023-24 updates are as follows:
The new tax regime (2023-24) will become the default tax regime on 1 April 2023. Tax assessors will be allowed to continue using the previous regime. For pensioners and salaried, the standard deduction under the new system for taxable income exceeding ₹15.5 Lakhs is ₹52,500. Hindu Undivided Families and individuals were to be taxed at lower rates if they did not take advantage of specified deductions and exemptions, such as interest on home loans, house rent allowance (HRA) and investments made under Section 80D, 80C and 80CCD. Total income up to ₹2.5 Lakhs was tax-free under this scheme.
The standard deduction of ₹50,000 offered to employees under the previous tax scheme remains unchanged. For retirees, the finance minister assured that the basic deduction would be extended to the new tax structure.
The increase in the tax rebate level from ₹5 Lakhs to ₹7 Lakhs means that a person whose income is less than ₹7 Lakhs does not need to invest in various financial instruments to claim exemptions, and the overall income is tax-free regardless of the amount of investment made by such an individual.
Investments in debt mutual funds will be taxed as short-term capital gains beginning 1 April. The decision would deprive investors of the long-term tax advantages that have made such investments attractive.
Non-government employees are excluded from leave encashment up to a specific limit. This ceiling has been raised from ₹3 Lakhs to ₹25 Lakhs since 2002.
Proceeds from premiums of life insurance policies over ₹5 Lakhs would be taxable beginning with the new fiscal year on 1 April 2023. While presenting Budget 2023, Finance Minister Nirmala Sitharaman stated that the updated taxation regulation would not apply to ULIPs.
During the announcement of Budget 2023, the Finance Minister mentioned that there would be zero capital gains tax if physical gold is converted to an Electronic Gold Receipt and vice versa. This will be implemented on 1 April 2023.
Returning to the old tax regime may be more profitable if you have made significant tax-saving investments. However, if your investments are minor, it is best to stick with the default new tax regime to save more.
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The Union Budget 2023 proposes many changes to the present TDS rules to provide transparency and clarity in taxation while reducing the burden on taxpayers. The government proposed removing the exemption from TDS deductions on listed debentures' interest payments. This means that all interest payments on listed debentures will now be taxed.
A full tax rebate of up to ₹7 Lakhs has been introduced. Under the previous tax regime, this threshold was set at ₹5 Lakhs. This means that taxpayers earning up to ₹7 Lakhs will not have to pay any tax under the new regime.
