There are several changes to income tax rules that will come into effect in the next financial year, starting from April 1, 2023. From changes in income tax slabs under the new regime to higher tax rebate, here is a recap of all the tax-related changes that individuals should know before the start of the financial year.
Announcements made by Union finance minister Nirmala Sitharaman in the annual Feb 1 Union budget will come into effect as soon as FY23 kicks in. It is, however, the changes to income tax rules, that will affect taxpayers the most.
Major Income Tax Rule changes effective from April 1:
Tax rebate limit Raised: The rebate limit has been increased from Rs 5 lakh to Rs 7 lakh. This means that an individual, who has a salary of less than Rs 7 lakh a year, need not make investments to claim exemptions.
Default tax regime: As announced by the finance minister, the new tax regime will be the default regime if, while submitting returns, a person does not state which of the two regimes old or new will they submit the return under.
Benefits for senior citizens: Maximum deposit limit under senior citizens savings scheme extended to Rs 30 lakh from Rs 15 lakh, to Rs 9 lakh from Rs 4.5 lakh and to Rs 15 lakh from Rs 7.5 lakh for monthly income scheme (single and joint accounts respectively).
Standard deduction: The deduction of Rs 50,000 under the old regime remains unchanged. This facility has now been extended to the new regime, and, therefore, a salaried person with an yearly income of Rs 5.15 lakh or more, will benefit by Rs 52,500.
Income tax new slabs:
Yearly salary up to Rs 3 lakh: Nil
Rs 3 lakh- Rs 6 lakh: 5%
Rs 6 lakh to Rs 9 lakh: 10%
Rs 9 lakh to Rs 12 lakh: 15%
Rs 12 lakh to Rs15 lakh: 20%
Above Rs 15 lakh: 30%
LTA: The leave travel allowance encashment limit, which was Rs 3 lakh since 2002, now raised to Rs 25 lakh.
No LTCG tax benefits: Investment in debut mutual funds will be taxed as short-term capital gains, instead of the existing long-term capital gains. This means investors will no longer have access to long-term tax benefits.
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Market-linked debentures: Post April 1, investment in MLDs will be short-term capital assets. According to experts, the impact of such a move on the mutual fund industry will be ‘slightly negative.’
Life insurance policies: Proceeds from life insurance premium over the annual premium of Rs 5 lakh, will be taxable.
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