Even as the new financial year 2023-24 has started today, the income tax changes announced by Finance Minister Nirmala Sitharaman in the Budget 2023 have also become effective from today. Here’s the rules that have changed:
1) New Income Tax Regime Has Become A Default Regime
The new income tax regime has become the default 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.
2) Standard deduction
The standard deduction of Rs 50,000, which 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.
3) Tax Rebate Limit Raised to Rs 7 lakh
The increase in the tax rebate cap from Rs 5 to Rs 7 lakh means that individuals with incomes under Rs 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.
Non-government employees are exempt from the leave encashment requirement up to a certain amount. 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 today. Investors would lose the long-term financial advantages that had made such investments attractive.
6) Market Linked Debentures
From today, investments in Market Linked Debentures (MLDs) will be considered short-term financial assets. With this, grandfathering of previous investments has 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.
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%.