Several income tax rule changes will be effective from April 1, 2023. Changes in income tax slabs, increased tax rebate limit and no LTCG tax benefit on some debt mutual funds are some of the major tax changes effective from Saturday.
From April 1 onwards, the new income tax regime will act as the default tax regime. Tax payers will still be able to choose from the prior regime. For salaried people and pensioners, the new system's standard deduction for taxable income exceeding Rs 15.5 lakh is Rs 52,500.
Under the new regime, tax rebate limit has been hiked to Rs 7 lakh. From April 1 onwards, a person whose income is Rs 7 lakh or less need not invest anything to claim tax exemptions. The amount of tax rebate has doubled to Rs 25,000 from Rs 12,500.
For salaried people and pensioners, the new system's standard deduction for taxable income exceeding Rs 15.5 lakh will be Rs 52,500 from April 1. There is no change in the standard deduction of Rs 50,000 provided to employees under the old tax regime.
Revised income tax slabs under the new tax regime will be effective from April 1 onwards.
New income tax rates
Income - Tax rate
Rs 0-3 lakh - Nil
Rs 3-6 lakh - 5%
Rs 6-9 lakh- 10%
Rs 9-12 lakh - 15%
Rs 12-15 lakh - 20%
Above Rs 15 lakh- 30%
The leave encashment for non-government employees is exempt up to a certain limit. This limit was Rs 3 lakh since 2002 but it was increased to Rs 25 lakh in Budget 2023-24. This increase will be effective from April 1
From April 1, investments in debt mutual funds will be taxed as short-term capital gains (STCG). The long-term capital gains provision and 20% tax with indexation benefit will not be available on debt Mutual Funds
Post April 1, investment in Market Linked Debentures (MLDs) will be short-term capital assets. MLD will now be taxed at the investor’s slab rate as compared to earlier taxation of 10%. With this, grandfathering of earlier investments will end
From April 1 onwards, proceeds from life insurance premium over the annual premium of Rs 5 lakh would be taxable The new income tax rule is not applicable on ULIPs (Unit Linked Insurance Plan)
From April 1, the maximum deposit limit for senior citizen savings scheme will increase to Rs 30 lakh from Rs 15 lakh. The maximum deposit limit for the monthly income scheme will increase to Rs 9 lakh for single accounts and Rs 15 lakh for joint accounts.
From April 1, the highest surcharge rate will reduce from 37% to 25% for High Net Worth Individuals who would choose the new tax regime. This would reduce the maximum rate for those with income more than Rs 5 crore from 42.7% to about 39%