Starting on April 1, the new financial year: FY 2023-24, will commence. Union finance minister Nirmala Sitharaman’s announcements from the annual Feb 1 Budget will take effect from April 1. Some major changes in Income Tax rules will kick in from 1st April 2023, like changes in tax slabs, default tax regime and taxation of debt mutual funds, among many others. Here are ten big income tax changes that will impact taxpayers in FY 2023-24:
- New income tax regime to be set as default regime
Starting 1 April 2023, the new income tax regime will be considered as the default tax regime. However, taxpayers will 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.
- Standard Deduction
The standard deduction of Rs 50,000 under the old regime shall also be extended to the new regime.
- Tax-free income for salaried employees
Tax rebate under the new regime has been increased from Rs 5 lakh to Rs 7 lakh. Along with standard deduction, the tax-free limit for salaried taxpayers under the old regime is Rs 5.5 lakhs and Rs 7.5 lakhs if they opt for the new tax regime. This also means that an individual with a salary of less than this tax-free limit will not have to make any investments to claim deductions. Consequently, no TDS will be deducted if the salary income is within the tax-free limit.
- Life insurance policies will become taxable
From 1st April 2023, proceeds from life insurance will be taxable if the annual premium is more than Rs 5 lakhs. This new income tax rule won’t apply to the ULIPs (unit-linked insurance plan). ULIP policy is one that offers the dual benefit of insurance and investment. A certain amount of premium is invested in market instruments like equities and debt, and the remaining is contributed for the life cover.
- 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.
- Higher tax on Debt Mutual Funds
Investments in debt mutual funds will be taxed at normal slab rates as short-term capital gains. The move will strip investors of the indexation benefits which made these investments popular.
- Conversion of gold to electronic gold receipt to become tax-free
The government has introduced a measure to encourage the use of electronic gold by permitting SEBI-registered vault managers to convert physical gold into electronic gold receipts (EGRs) and vice versa, starting from April 1. This conversion process will be exempt from capital gain tax, and it is anticipated that it will enhance the digital gold market in India and make gold investment opportunities more widely available to Indian investors.
- Senior Citizens Savings Scheme
Senior citizens can now deposit up to Rs 30 lakh under the senior citizens’ savings scheme. Earlier, the deposit limit was restricted to Rs 15 lakh.
Likewise, 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.
- Gifts received by Resident but not-ordinarily residents (RNOR) will be taxed
Any gift received by an RNOR over and above Rs 50,000 will be taxable in their hands.
- 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).
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