Finance

Published: Apr 3, 2023
Updated: Apr 3, 2023

Brace Yourself! Major Income Tax Rule Changes You Need to Know for FY 2023-24

Are you ready for the new financial year 2023-24 starting from April 1? The Union finance minister Nirmala Sitharaman's announcements from the annual Feb 1 Budget will take effect from April 1. Brace yourself as some significant changes in income tax rules will kick in from 1st April 2023, affecting taxpayers like you. Here are ten significant income tax changes that you need to know for FY 2023-24:

Default New Tax Regime

From 1 April 2023, the new income tax regime will be considered the default tax regime. However, taxpayers will have the option to choose the old regime. As a salaried taxpayer, TDS will be deducted based on tax rates under the new tax regime. Thus, while declaring investments, you must carefully choose between the old regime and the new regime.

Standard Deduction

The standard deduction of Rs 50,000 under the old regime will also extend to the new regime. Thus, salaried taxpayers can benefit from the same standard deduction amount regardless of their tax regime choice.

Tax-Free Income

The tax rebate under the new regime has been increased from Rs 5 lakh to Rs 7 lakh. Salaried taxpayers under the old regime have a tax-free limit of Rs 5.5 lakhs, while those opting for the new regime have a tax-free limit of Rs 7.5 lakhs. This means that individuals with a salary of less than the tax-free limit will not have to make any investments to claim deductions. Consequently, no TDS will be deducted if the salary income falls within the tax- free limit.

Taxation of Life Insurance Policies

From 1st April 2023, the proceeds from life insurance policies will be taxable if the annual premium is more than Rs 5 lakhs. This new income tax rule won't apply to the ULIPs (unit- linked insurance plan).

Tax on Online Gaming

A new section, 115BBJ, was introduced to tax the winnings from online games. All forms of winnings, such as cash, kind, vouchers, or any other benefit, from online gaming, will attract a flat 30% tax, which will be deducted at source immediately at the time of receiving the winning amount.

Higher Tax on Debt Mutual Funds

Investments in debt mutual funds will be taxed at normal slab rates as short-term capital gains. This will strip investors of the indexation benefits that made these investments popular.

Conversion of Gold

The government has introduced a measure to encourage the use of electronic gold by permitting SEBI-registered vault managers to convert physical gold into electronic gold receipts (EGRs) and vice versa, starting from April 1. This conversion process will be exempt from capital gains tax, enhancing the digital gold market in India and making gold investment opportunities more widely available to Indian investors.

Senior Citizens Savings Scheme

Senior citizens can now deposit up to Rs 30 lakhs under the senior citizens' savings scheme. The maximum deposit for the monthly income scheme has also increased for both single and joint accounts.

Tax on Gifts Received

Any gift received by an RNOR over and above Rs 50,000 will be taxable in their hands.

Claims under Section 54 and Section 54F

From 1st April, the incentives for taxpayers who sell their house property or any other capital asset and invest the sale amount in a new house will be restricted to Rs 10 crores. Any gains above that will be taxed at 20% (with indexation benefit). These income tax rule changes will significantly impact taxpayers from FY 2023-24. Therefore, taxpayers must understand the changes and plan.