10 Major Income Tax Changes for FY 2023-24 You Need to Know About
Introduction:
There are several important changes to the income tax laws that taxpayers need to be aware of as the new fiscal year is about to start on April 1, 2023. These modifications include the removal of the Long-Term Capital Gains (LTCG) benefit on some debt mutual funds as well as updates to the income tax slab rates. Understanding these changes is crucial for taxpayers in order to ensure timely and accurate tax filings. Let’s examine the ten main income tax changes for the fiscal year 2023–2024 in more detail.
New Income Tax Regime:
Budget 2020–21 introduced the new income tax system as an optional income tax system. The new income tax system will take effect as the default tax system on April 1, 2023.
Up to Rs. 2.5 lakhs in total annual income will be exempt from taxation under the new tax system. By forgoing deductions and exemptions, taxpayers can take advantage of lower tax rates. Taxpayers can still choose the old system, in which case they can make use of all the deductions and exemptions allowed by the Income Tax Act.
Raised Tax Rebate Limit:
Taxpayers may be entitled to a refund if their tax payments exceed their tax obligations. In Budget 2023, the government raised the threshold for tax rebates from Rs. 5 lakh to Rs. 7 lakh. This means that taxpayers with incomes up to Rs. 7 lakh in a fiscal year need not make any investments to qualify for exemptions; regardless of the amount of investments made by such a person, the entire income is tax-free. Small taxpayers who are struggling to make ends meet will benefit from this action.
Standard Deductions:
A taxpayer’s standard deduction is a set amount that is subtracted from their gross income. Employees are given a standard deduction of ₹. 50,000 under the previous tax system. A standard deduction of ₹. 52,500 will be offered to salaried individuals and pensioners with taxable income exceeding ₹. 15.5 lakhs under the new tax system. This will lower the taxpayer’s taxable income and enable them to save on taxes. The benefit of the standard deduction will now be included in the new pensioner tax system, according to the finance minister.
Changes in Income Tax Slabs:
Tax slabs have been altered under the new income tax regime, and taxpayers will now pay lower rates of tax. The new tax rates are as follows for the fiscal year 2023–2024:
| Income Slab | Tax Rate |
| 0-3 lakh | nil |
| 3-6 lakh | 5% |
| 6-9 lakh | 10% |
| 9-12 lakh | 15% |
| 12-15 lakh | 20% |
| Above 15 lakh | 30% |
According to their income, taxpayers are subject to taxation at various rates under the previous tax system. Tax rates have been lowered under the new tax system, which is advantageous to taxpayers. Both the old and new tax systems still permit tax refunds for taxpayers with incomes up to Rs. 5 lakhs.
LTA:
Employers pay their workers a type of allowance called a Leave Travel Allowance (LTA) to cover their travel costs while they are on leave. The government increased the non-government salaried employee tax exemption on leave encashment from Rs. 3 lakh to Rs. 25 lakh. The employees who are retiring and want to use their vacation time will benefit from this action.
Certain Debt Mutual Funds Have No LTCG Benefit:
The tax known as Long-Term Capital Gain (LTCG) is levied on long-term gains. The LTCG benefit on a few debt mutual funds has been eliminated by the government. Investments made in these funds will be subject to short-term capital gains tax starting on April 1, 2023. This implies that the long-term tax advantages that made these investments popular will be eliminated, and investors will be required to pay tax on any gains made on such investments.
MLDs, Or Market-Linked Debentures:
Market-Linked Debentures (MLDs) will be short-term capital assets after April 1, 2023. As a result, investors will be required to pay tax on gains from investments like short-term capital gains. As a result, earlier investments will no longer be grandfathered, which will have a slight negative effect on the mutual fund sector.
Taxation of Life Insurance Policy Maturity Proceeds:
Beginning on April 1, any life insurance premium maturity proceeds that exceed Rs. 5 lakhs will be subject to taxation. ULIPs will not be subject to this new income tax rule. (Unit Linked Insurance Plan). This action is anticipated to contribute to the reduction of tax evasion through life insurance policies.
Senior Citizens’ Benefits:
A government-sponsored savings program called the Senior Citizen Savings Scheme (SCSS) offers regular income and tax benefits to senior citizens. From this point forward, the Senior Citizen Savings Scheme’s maximum deposit amount will rise from Rs. 15 lakhs to Rs. 30 lakhs.
The Monthly Income Scheme (MIS), on the other hand, is a post office savings plan that gives investors a consistent income. Investors who are looking for options for consistent income will gain from this action. The maximum deposit amount for the Monthly Income Scheme will rise from 4.5 lakh rupees for single accounts to 9 lakhs and from 7.5 lakhs to 15 lakhs.
Converting Physical Gold into an E-Gold Receipt:
In India, gold is a well-liked form of investment. The government has declared that there will be no capital gains tax on the conversion of physical gold into e-gold receipts. This action will increase the number of gold investment opportunities available to investors and contribute to the reduction of tax evasion involving gold investments.
Conclusion:
The new income tax laws that go into effect on April 1, 2023, will have a big effect on investors and taxpayers. Taxpayers and investors will benefit from changes in tax slabs, the extension of the tax rebate limit, and increased maximum deposit limits for senior citizen savings plans and monthly income plans, but investors will suffer from the removal of the LTCG benefit on some debt mutual funds and the taxation of maturity proceeds from life insurance policies exceeding ₹. 5 lakhs. To understand how these changes will affect their finances and investment portfolios, investors and taxpayers should speak with their tax advisors or financial planners.
Happy Investing!
This article is for education purpose only. Kindly consult with your financial advisor before doing any kind of investment.
