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New Financial Year, New Tax Rules: 8 Big Income Tax Changes to Take Effect on 1st April
As we approach the start of the new financial year (FY 2023-24), we will witness some great changes which will come into effect from April 1, 2023.? These changes will be the addition of new rules or reforms to existing ones.
The finance minister, ?Shrimati Nirmala Sitharaman,? has introduced several tax amendments in the Budget 2023.?
Here are some major changes that will impact the taxpayers Starting April 1, 2023
New income tax regime to be the default regime
The new tax regime has been announced as the default tax regime. From FY 2023-24, i.e., 1 April 2023 onwards, taxpayers will be required to opt for the old tax regime, and the new tax regime will be the default option.
Changes in Income Tax Slabs?
As per the announcement under Budget 2023, the updated income tax slab for the new tax regime will be.
Basic Exemption Limit Increased?
The basic exemption limit has been raised to Rs 3 lakh from Rs 2.5 lakh to make the new tax regime more attractive. Also, the highest tax rate of 30% will be levied above Rs 15 lakh income. It will be effective from April 1, 2023.?
Reduction in Surcharge Rate
The surcharge rate is slashed to 25% from 37% under the new tax regime for people earning more than 5 crores. Previously the high surcharge rate, i.e., 37%, applied to people whose income exceeds Rs. 5 crores; now, it is reduced to 25% for any income over Rs. 2 crores for individuals opting for the new tax regime. So, the revised surcharge rate under the new tax regime is as follows
- Taxable income above 50 lakhs but upto Rs. 1 crore:10%?
- Taxable income above 1 crore but upto Rs. 2 crore: 15%?
- Taxable income above 2 crores: 25%.
Rebate limit increased
Section 87A rebate is available under both income tax regimes. Under the old tax regime, a rebate of Rs 12,500 is available for incomes up to Rs 5 lakh. For the new tax regime, the rebate has been increased to? Rs 25,000 if the taxable limit does not exceed Rs 7 lakh. The budget 2023 announcement raises the rebate limit to Rs 7 lakh from Rs. 5 lakh under the new tax regime.
The proposal to introduce the standard deduction in the new tax regime has been proposed in Budget 2023.? From 1 April 2023, the salaried class and the pensioners (including family pensioners) who opted for the new tax regime will benefit from a standard deduction of Rs. 50,000. The standard deduction provided under the old tax regime remains the same.?
Benefits for Senior Citizens
The maximum investment limit for the Senior Citizen Savings Scheme (SCSS) has been increased from Rs. 15 lakh to Rs. 30 lakh, effective April 1, 2023. This move is expected to benefit senior citizens, as the SCSS provides a regular income stream and high safety and tax-saving benefits.?
Life Insurance Policies
As per the Budget 2023 announcement by Finance Minister Nirmala Sitharaman, from April 1, 2023, proceeds from life insurance policies with an annual premium of more than Rs. 5 lakh will be taxable in the hands of the policyholder. However, this new rule will not apply to Unit Linked Insurance Plans (ULIPs).