The government has announced a slew of changes in the income tax rules that will come into effect from the new financial year 2023-24. Union Finance Minister Nirmala Sitharaman announced these changes while presenting the Union Budget on February 1.
From changes in the income tax slabs to no long-term capital gains (LTCG) benefits on debt mutual funds, here are some of the major changes coming into effect from April 1, 2023:
1. Changes in income tax slabs
Finance Minister Sitharaman, while presenting the Union Budget, announced that the tax rebate limit under the new tax regime has been increased from Rs 5 lakh to Rs 7 lakh. She also said that the new regime will become the default regime if the taxpayer does not state under which regime they will submit their income tax returns.
From April 1, new income tax rates will come into effect which ranges from 0 to 30 per cent. For individuals earning a yearly salary up to Rs 3 lakh, tax is nil; for a salary between Rs 3 lakh and Rs 6 lakh, tax is 5 per cent; for Rs 6 lakh and Rs 9 lakh, 10 per cent; for Rs 9 lakh to Rs 12 lakh, tax is 15 per cent; Rs 12 lakh to Rs 15 lakh, tax is 20 per cent, while for individuals earning above 15 lakh, tax is 30 per cent.
The standard deduction limit of Rs 50,000 under the old regime has been kept unchanged and extended to the new regime.
2. Encashment limit of leave travel allowance
From April 1, the encashment of leave travel allowance (LTA) for non-government employees has been increased to Rs 25 lakh per annum. The limit for the same was Rs 3 lakh since 2002.
3. No LTCG tax benefits on debt mutual funds
The indexation benefits on LTCG on debt mutual funds will be gone from April 1, 2023. From the new financial year, debt mutual funds (MFs) will be taxed at income tax rates as per an individual’s income. The changes were introduced by the government in the Finance Bill 2023 which has been passed earlier this week.
From April 1, all gains from debt MFs, which have less than 35 per cent exposure to equity, would be treated as short-term capital gains and taxed as per the investor’s income tax slab.
4. Market Linked Debentures
Investments in Market Linked Debentures (MLDs) from April 1 will be considered as short term capital assets.
5. Changes in proceeds from life insurance premium
From April 1, proceeds from life insurance premiums over the annual premium of Rs 5 lakh will be taxable. The rule does not apply to ULIP (Unit Linked Insurance Plan).
6. Changes in Senior Citizen Savings Scheme
The government has raised the maximum deposit limit for the Senior Citizen Savings Scheme (SCSS) to Rs 30 lakh from Rs 15 lakh. Under the new rules, the monthly income scheme’s maximum deposit limit for single accounts has also been raised to Rs 9 lakh from Rs 4.5 lakh. For combined accounts, the limit has been increased from Rs 7.5 lakh to 15 lakh.
7. No capital gain tax on physical gold conversion to e-gold receipt
Sitharaman, while presenting the Budget, also announced that from April 1, the conversion of physical gold to an Electronic Gold Receipt (EGR) and vice versa, will attract no capital tax.
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
