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The government has introduced several significant changes in the income tax rules for the financial year 2023-24. These changes aim to simplify the tax system, make it more beneficial for taxpayers, and encourage more people to invest in digital gold.
New Default Income Tax Regime
Starting from 1st April 2023, the new income tax regime will become the default one. However, taxpayers will still have the option to choose the old regime. Under the new system, the standard deduction for salaried and pensioners with taxable income exceeding Rs.15.5 lakhs will be ₹52,500.
Optional Income Tax Regime
The government introduced an optional income tax regime in Budget 2020-21, under which individuals and Hindu Undivided Families (HUFs) could be taxed at lower rates if they did not avail of specified exemptions and deductions, like house rent allowance (HRA), interest on a home loan, investments made under Section 80C, 80D, and 80CCD. Under this, total income up to ₹2.5 lakh was tax-exempt.
Tax Rebate Limit Raised to ₹7 Lakh
The tax rebate limit has been raised to ₹7 lakh from ₹5 lakh. It means that individuals with income less than ₹7 lakh need not invest anything to claim exemptions. The entire income would be tax-free irrespective of the quantum of investment made by such an individual.
Changes in Income Tax Slabs
The new tax rates are as follows:
- Income up to ₹3 lakh - nil tax
- Income between ₹3-6 lakh - 5%
- Income between ₹6-9 lakh - 10%
- Income between ₹9-12 lakh - 15%
- Income between ₹12-15 lakh - 20%
- Income above ₹15 lakh - 30%
LTA
The leave encashment for non-government employees is exempt up to a certain limit. This limit was ₹3 lakh since 2002 and has now been increased to ₹25 lakh.
No LTCG Tax Benefit on Some Debt Mutual Funds
From April 1, 2023, investments in debt mutual funds will be taxed as short-term capital gains. This move would strip investors of the long-term tax benefits that had made such investments popular.
Market Linked Debentures (MLDs)
Investment in Market Linked Debentures (MLDs) post April 1, 2023, will be considered as short-term capital assets. With this, grandfathering of earlier investments will end, and the impact on the mutual fund industry will be slightly negative.
Life Insurance Policies
Proceeds from life insurance premium over the annual premium of ₹5 lakh would be taxable from the new financial year, i.e. from 1st April 2023. However, the new income tax rule won't be applicable to ULIP (Unit Linked Insurance Plan).
Benefits for Senior Citizens
The government has announced some benefits for senior citizens in the latest budget. The senior citizen savings scheme is a popular investment option, and the maximum deposit limit has been increased from ₹15 lakhs to ₹30 lakhs. In addition, the monthly income scheme has also been enhanced for senior citizens. The maximum deposit limit for single accounts has been increased from ₹4.5 lakhs to ₹9 lakhs, and for joint accounts, it has been increased from ₹7.5 lakhs to ₹15 lakhs.
No Capital Gains Tax on Physical Gold Conversion to E-Gold Receipt
As per the latest budget announcement, individuals can now convert their physical gold into Electronic Gold Receipts (EGR) without attracting any capital gains tax. This change will come into effect from 1 April 2023. The EGR is a digital certificate representing gold ownership stored in a secure vault by a depository. This move is expected to boost the popularity of digital gold and encourage more people to invest in it.