FY 2023-24 To Begin Soon: 10 Big Income Tax Rule Changes Effective From April 1

As the new financial year 2023-24 is set to begin this week on April 1, 2023, taxpayers in India will be affected by several changes to the income tax rules. The changes were announced by Union Finance Minister Nirmala Sitharaman during the Union Budget presented on February 1, 2023.

1. New income tax regime to be default regime

Starting with the upcoming financial year 2023-24 which begins on April 1, 2023, the new income tax regime will act as the default tax regime. But keep in mind that the old regime continues to exist and those wanting to choose the old one instead of the new regime can certainly do so Budget 2023 also made an annual income of up to 7 lakh tax-free.

2. Tax rebate limit raised from ₹5 lakh to ₹7 lakh

The enhancement of tax rebate limit to 7 lakh from 5 lakh from the new financial year 2023-24 means that those having income less than 7 lakh would have their entire income tax-free under the new income tax regime.

3. Standard deduction benefit extended to the new regime

The standard deduction was earlier not allowed in the new tax regime until FY 2022-23 AY 2023-24. However, this benefit of a standard deduction of Rs. 50,000 will now be allowed for salaried persons under new tax regime as well, from FY 2023-24 AY 2024-25 onwards.

4. Changes in Income Tax slabs for new regime

The new tax rates and slabs under new regime, as announced in Budget 2023, are as follows:

• 0-3 lakh – nil
• 3-6 lakh – 5%
• 6-9 lakh- 10%
• 9-12 lakh – 15%
• 12-15 lakh – 20%
• Above 15 lakh- 30%

5. LTA encashment limit raised from ₹3 lakh to ₹25 lakh.

 The new tax rates and slabs under new regime, as announced in Budget 2023, are as follows 0-3 lakh – nil 3-6 lakh – 5 6-9 lakh- 10 9-12 lakh – 15 12-15 lakh – 20 Above 15 lakh- 30 The leave encashment for non-government employees is exempt up to a certain limit

In the recently passed Finance Bill 2023, LTCG tax benefits on debt mutual funds have been taken away.

6. No more LTCG tax benefits on debt mutual funds

From April 1 2023, investments in debt mutual funds will be taxed as short-term capital gains.

7. No preferential taxation for market-linked debentures 

From April 1, 2023. taxation of income from listed market-linked debentures MLDs will no longer be favourable. MLDs will now be taxed as debt instruments, putting an end to the more benign equity-like taxation currently.

8.Life insurance proceeds taxable for premium over ₹5 lakh

Budget 2023 had also introduced a premium limit on traditional life insurance plans for claiming tax exemption on maturity proceeds. For life insurance policies issued on or after 1 April 2023, the tax exemption on maturity benefits under Section 1010D will only be applicable if the aggregate annual premium paid by an individual is up to 5 lakh.

9. Maximum deposit limit under SCSS increased to ₹30 lakh

For life insurance premiums beyond 5 lakh limit, the proceeds will be added to the income and taxed at applicable rates. So, if you purchase any life insurance plans other than ULIP on or after April 1, 2023, and the aggregate premium exceeds 5,00,000 in a fiscal year, the money received on maturity will be taxable.

10. No capital gains tax on physical gold conversion to e-gold receipt

In a move that seems to be aimed at encouraging the purchase of electronic gold, the government has removed capital gains tax if physical gold is converted to an Electronic Gold Receipt EGR and vice versa.