New Income Tax Rules effective from 1st April, 2023

• Posted By Amritesh
• On April 19th, 2023
• Comments: 13 responses

Budget 2023 was tabled on 01^st February, 2023, the last full-fledged budget of the current Government ahead of the upcoming General Election. The budget not only aimed at providing relief to the taxpayers but also emphasized on strengthening the infrastructure for economic growth. The FY 2023-24 Budget focused on addressing the economic concerns post pandemic while incorporating reforms to ensure that India remains a favorable investment destination for the business entities. During the Budget presentation, New Income Tax Rules was also proposed for new financial year which has come into effect from 01^st April, 2023. The Finance Bill, 2023 was approved by both the Houses of Parliament post amendments to the original bill presented on 01^st February, 2023.

Slabs & Rates for Financial Year 2023-24

Budget did not only propose changes to Income Tax rules but also laid down proposals for robust economy amid global uncertainties. Budget 2023 lists seven priorities which will facilitate efforts to build a resilient economy for the future which includes, Green Growth, Youth Power, Infrastructure and Investment, Financial Sector, Unleashing the Potential, Reaching the Last Mile & Inclusive Development. In view of the same, let’s quickly browse through the key highlights of the Budget 2023.

Indian Economy: Key Notes

#Per Capita Income rose to Rs 1.97 lakhs (more than double) in around nine years, impact of inflation also needs to be evaluated during the concerned period.

#During the last nine years, Indian economy has progressed to become the 05^th largest economy in the world.

#Fiscal Deficit for the FY 2022-23 stands at 6.4% of the GDP, in line with Budget estimate.

#Fiscal Deficit is estimated at 5.9% for the current FY 2023-24.

#Target set of restricting fiscal deficit below 4.5% by FY 2025-26.

#National Data Governance Policy to be brought out to usher digital transformation & research by new age startups and academia.

#Impetus on Artificial Intelligence, three centers of excellence to be set-up in top academic institutions to embark upon “Make AI in India and Make AI Work for India”.

#E-Court project to be provided with capital outlay of Rs 7000 crore for effective administration of justice, in the third phase.

#National Digital Library for Children and Adolescents to be set-up to make quality e-books accessible across geographies, languages, genres and levels.

#Agriculture Accelerator Fund to be set-up to facilitate agri-startups by young entrepreneurs in rural areas.

#Digital Public Infrastructure for Agriculture to be introduced with the purpose to encourage start-ups and support growth of agri-tech industries.

#Launching 30 new Skill India International Centers across States to equip youth for international opportunities.

#Lakhs of youth to be trained for new age industry courses in the next three years, under the Pradhan Mantri Kaushal Vikas Yojana 4.0.

#New Infrastructure Finance Secretariat introduced to encourage private investment in Infrastructure.

#State Governments to be provided 50-year interest free loans to incentivize infrastructure and complimentary policy actions.

#Aspirational Blocks Program expanding to 500 blocks to be launched for saturation of essential government services across multiple domains such as health, nutrition, education, agriculture, water resources, financial inclusion, skill development and basic infrastructure.

#Investment of Rs 75,000 crore, inclusive of Rs 15,000 crore from private sources, towards 100 critical transport infrastructure projects, including first and last mile connectivity of ports, coal, steel, food grain and fertilizers sector.

#Urban Infrastructure Fund Development Fund (UIDF) to be set-up through priority Sector Lending shortfall, managed by the National Housing Bank to be used by public agencies to create urban infrastructure in Tier 2 & 3 cities.

#National Financial Information Registry (NFIR) to be set-up to serve as central Repository of Financial and Ancillary information for facilitating optimum flow of credit, acceptance of financial inclusion and promoting financial stability.

Personal Finance: New Income Tax Rules effective from 01^st April, 2023

#New Income Tax Regime to be the default regime, replacing the old regime. However, taxpayers have the option to opt for old regime. Tax Deducted at Source (TDS) will be as per the tax slabs & rates under the new regime.

#Standard Deduction of Rs 50,000/- extended to new tax regime as well.

#Tax Rebate increased for Salaried Taxpayers under the new tax regime, income up to Rs 7.5 lacs (inclusive of standard deduction) is exempted from tax. However, under the old tax regime the exemption limit remains unchanged at Rs 5.5 lacs (including standard deduction).

#Surcharge Rate has been reduced from 37% to 25% on income above Rs 5 crore.

#Leave Encashment exemption for non-government employees has been increased from Rs 3 lacs to Rs 25 lacs.

#Proceeds from Life Insurance Policies with annual premium exceeding Rs 5,00,000/- will be taxable. However, same will not be applicable on Unit Linked Insurance Plans (ULIP).

#Section 115BBJ has been introduced to levy tax at flat 30% of the winnings from online games, includes all forms of winning such as cash, vouchers or any other form of benefits. Furthermore, the tax needs to be deducted at source out of the winning amount.

Old Income Tax Slabs & Rates for the Financial Year 2023-24

#Long Term Capital Gains (LTCG) indexation benefit on investments in debt mutual funds has been removed. Any gains on such investment will be taxed at normal income tax slab rates, similar to short term capital gains (STCG).

#Conversion of physical gold to electronic gold receipts (EGRs) and vice-versa by SEBI registered vault managers will be tax free.

#Retired Individuals may now deposit up to Rs 30 lacs in the Senior Citizen Savings Scheme (SCSS). Earlier, the amount was capped at Rs 15 lacs. Similarly, maximum deposit under Monthly Income Scheme (MIS) has been raised to Rs 9 lacs from Rs 4.5 lacs and Rs 15 lacs from Rs 7.5 lacs for joint accounts.

#Market Linked Debentures (MLD) will be treated as short term capital assets and will be taxed at normal slab rate, similar to debt mutual funds.

#Gifts received by Resident but not-ordinarily residents (RNOR) in excess of Rs 50,000/- will be taxable in the hands of the receiver.

#Tax Benefit under Section 54 and 54F will be limited to Rs 10 crore on Capital Gains, with effect from 1^st April, 2023.  Any gains in excess of Rs 10 crore will be taxed 20% with the indexation benefit. Taxpayers who sell their house property and again invest in new property are eligible to avail this exemption.

#National Stock Exchange has rolled back 6% transaction charge introduced earlier in the Equity Cash and Derivative segment.

New Regulations Introduced by SEBI

#National Payments Corporation of India (NPCI) to levy fee of 0.5% to 1.1% on UPI merchant transactions in excess of Rs 2,000/-. However, Retail Consumers won’t be affected by this new change.

The above-mentioned changes have come into effect from 01^st April, 2023. Any further revisions if any, will be updated soon.

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