10 major income tax rules changes from 1 April 2023.

10 major income tax rules changes from 1 April 2023

Quick list of Income Tax Updates 2023-24

1) New income tax regime to be default regime

The new income tax system will become the default tax regime on April 1, 2023. Tax assessors will continue to have the option of using the previous regime.Salaried and pensioners: the standard deduction under the new system for taxable income exceeding Rs.15.5 lakhs is Rs.52,500.

In Budget 2020-21, the government introduced an optional income tax regime that would tax individuals and Hindu Undivided Families (HUFs) at lower rates if they did not take advantage of certain exemptions and deductions, such as the house rent allowance (HRA), home loan interest, and investments made under Section 80C, 80D, and 80CCD. According to this, all income up to Rs. 2.5 lakh was free from tax.

2) The tax rebate limit has raised to to ₹7 lakh

The increase in the tax rebate limit from 5 to 7 lakhs means that individuals with incomes under 7 lakhs do not need to make any investments in order to qualify for exemptions; their whole income is tax-free regardless of the amount of investments they make.

3) Standard deduction

The standard deduction for employees of ₹500,000 under the old tax regime remains unchanged.The finance minister announced that the standard deduction will be extended to seniors under the new tax regime. Each and every salaried individual earning 15.5 lakh or more will gain by ₹52,500.

4) Changes in Income Tax slabs

The new tax rates are as follows: 0-3 lakh – 0%;  3-6 lakh – 5%. 6-9 lakh- 10%

5) Leave Travel Allowance (LTA)

For non-government employees, leave encashment is exempt up to a certain limit. This limit has been 3 lakh since 2002, however it is currently 25 lakh.

6) These mutual funds do not provide LTCG tax benefits

Investments in debt mutual funds will be subject to short-term capital gains tax beginning on April 1. The decision would remove investors of the long-term tax benefits that had made such investments so popular.

7) Market Linked Debentures (MLDs)

Additionally, investments in Market Linked Debentures (MLDs) will be considered short-term assets post April 1. As a result, grandfathering of older investments will come to an end, with slightly negative effects on the mutual fund sector.

8) Life Insurance policies

From the start of the new fiscal year, or 1 April 2023, the proceeds from life insurance premiums beyond the annual premium of 5 lakh would be taxed. During the presentation of Budget 2023, Finance Minister Nirmala Sitharaman also announced that the new income tax rule will not apply to ULIPs (Unit Linked Insurance Plans.

9) Elderly Citizens' Benefits

The maximum investment amount for senior citizen savings plans would increase from 15 lakhs to 30 lakhs. The maximum deposit amount for the monthly income scheme would rise from 4.5 lakh rupees for single accounts to 9 lakhs, and from 7.5 lakhs to 15 lakhs for joint accounts.

10) Physical gold conversion to e-gold receipt is exempt from capital gains tax

In Budget 2023, according to Sitharaman, no capital gains tax will be applied to gold conversions into Electronic Gold Receipts (EGRs) in Budget 2023. This will be effective from 1 April 2023.  And with that, we end this post on the major 10 changes to income tax rules from 1 April 2023. If you have any questions, drop them in the comment section below.