New Income Tax Rules w.e.f 1st April 2023

new income tax rules

New Tax Rules in India: What You Need to Know

As of April 1, 2023, the Indian government has introduced several new income tax  rules related to accounting, taxation, and compliance. These new rules have important implications for individuals, businesses, and other entities operating in India. In this article, we’ll take a closer look at the most significant changes and what they mean for you.

New Tax Regime 

The most significant change introduced by the new income tax rules is the default tax regime. The new tax regime will be considered the default, but taxpayers can still choose the old tax regime if they prefer. The new regime comes with lower tax rates but fewer deductions and exemptions. Taxpayers will need to carefully evaluate which regime is best for them based on their individual circumstances.

Change in Income Tax Exemption Limit 

The income tax exemption limit has been raised from Rs 5 Lakhs to Rs 7 Lakhs. This means that individuals earning up to Rs 7 Lakhs are exempt from tax and do not need to invest to claim the tax slab exemption. This change will benefit many individuals and reduce the tax burden for those with lower incomes.

Standard Deduction 

There is no change in the standard deduction of Rs 50,000 for employees in the Old Tax Regime. For pensioners, this standard deduction has been extended in the new tax regime. This means that pensioners will be able to claim a higher standard deduction, which will reduce their taxable income.

Income Tax Slab

The income tax slab has been revised, with different tax rates applying to different income brackets. The new income tax slabs are as follows:

  • 0-3 Lakhs: Nil
  • 3-6 Lakhs: 5%
  • 6-9 Lakhs: 10%
  • 9-12 Lakhs: 15%
  • 12-15 Lakhs: 20%
  • Above 15 Lakhs: 30%

Leave Travel Allowance

The leave encashment limit for non-government employees has been increased from Rs 3 Lakhs to Rs 25 Lakhs. This means that employees will be able to claim a higher leave travel allowance, which will reduce their taxable income.

Taxation on Debt Mutual Funds

Debt mutual fund gains will be considered as short-term gains and will be taxed accordingly. This means that investors in debt mutual funds will need to carefully evaluate their tax liability and adjust their investment strategy accordingly.

Life Insurance Policy

If the life insurance premium paid is above Rs 5 Lakhs, then the proceeds from the policy will be taxable. However, this new income tax rule will not apply to ULIPS. This means that individuals with large life insurance policies will need to carefully evaluate their tax liability and adjust their investment strategy accordingly.

Senior Citizens

The maximum deposit limit for senior citizens has been raised from Rs 15 Lakhs to Rs 30 Lakhs. This means that senior citizens will be able to deposit a higher amount in their accounts, which will help them earn more interest income.

E-GOLD Receipt

There will be no tax on the conversion of physical gold to e-gold receipt. This means that individuals who convert physical gold to e-gold will not need to pay any tax on the conversion.

Tax on Lottery, Online Gaming

The TDS limit has been removed, and all receipts from online gaming, lottery, etc. will be taxable at 30%, and TDS will be deducted at the time of receiving the winning amount. This means that individuals who win in lotteries, online gaming, etc. will need to pay tax at the rate of 30%.

Gifts Received by Resident but not Ordinary Resident

Any gifts received by a resident but not an ordinary resident above Rs 50,000 will be taxable. This change will bring more transparency and accountability to gift transactions.

Restriction on Claim U/s 54 and 54F

Sale amount investment under section 54 and 54F has been restricted to 10 crores, and any gain above this will be taxed at 20% (with indexation benefits). This change will provide relief to small taxpayers and prevent misuse of tax exemptions.

UPI Transaction Fee

 The Indian government has announced that a transaction fee of 1.10% shall be charged on UPI transactions above Rs 2000 for using Prepaid Payment Instruments (PPI). This fee will not be applicable to other customers.

Sale of Gold Jewellery

According to the new regulations, only jewellery with a 6 digit hallmark unique identification (HUID) can be sold. This move is aimed at promoting transparency and curbing the sale of counterfeit gold jewellery in the market.

Pan and Aadhaar Link

 The government has extended the deadline for linking PAN and Aadhaar to 30th June 2023. This means that taxpayers now have more time to complete the mandatory process of linking their PAN and Aadhaar cards.

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