Income Tax Modifications from April 2023

Income Tax
  • TDS on payment of interest on listed debentures to a resident: Section 193 of the Income Tax Act now requires the deduction of TDS on payment of any income to a resident by way of interest on securities, including listed debentures.
  • Interest on housing loan not treated as cost of improvement: Interest on housing loans claimed as a deduction while computing taxable income will no longer be included in the cost of acquisition/improvement for the purposes of capital gains.
  • Capital gains deduction on residential property: The maximum deduction that can be claimed by the assessee under Section 54 and 54F has been increased to Rs. 10 crores in place of all available long-term gain.
  • Foreign remittances for overseas tour packages: The TCS rate has been increased from 5% to 20% for the purchase of overseas tour packages, without any threshold.
  • Taxation of capital gains in case of market-linked debentures: Long-term capital gains arising from market-linked debentures are currently taxed at a concessional rate of 10%. It is proposed to tax such gains as short-term capital gains at normal rates.
  • Leave Encashment: The exemption limit for leave encashment received on retirement by non-government salaried employees has been increased from INR 3 lakh to INR 25 lakh.
  • Deemed Gift: If a non-resident receives money exceeding INR 50,000 without consideration from a person resident in India, it will now be deemed to be income accruing or arising in India.
  • Taxation of Income from Life Insurance Policies: Income received from life insurance policies issued on or after 1 April 2023 will be taxed if the aggregate annual premium exceeds INR 5 lakh, except in case of the death of the assured.
  •  Changes in New Tax Regime: The standard deduction has been increased to INR 50,000, and family pension and Agniveer corpus fund are now allowable for computation of income under the new tax regime. Section 115BAC is now applicable to an association of persons (other than a cooperative society), or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2. There is also a new slab rate for the new tax regime.
Up to Rs. 3,00,000 Nil
Rs. 3.00,000 to Rs. 6,00,000 5% on income which exceeds Rs. 3,00,000
Rs. 6,00,000 to Rs. 900,000 Rs. 15,000 + 10% on income more than Rs. 6,00,000
Rs. 9,00,000 to Rs. 12,00,000 Rs. 45,000 + 15% on income more than Rs. 9,00,000
Rs. 12,00,000 to Rs. 1500,000 Rs. 90,000 + 20% on income more than Rs. 12,00,000
Above Rs. 15,00,000 Rs. 150,000 + 30% on income more than Rs. 15,00,000
  •  The new income tax regime will now be the default tax regime on the tax portal: This means that in cases where an employee has not opted for any tax regime, the default TDS deduction will be as per the new tax regime. This is an important consideration for companies.

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