New Tax Rules effective from 1st Apr 2023

1. New Tax Slab rates in New Tax Regime

Budget 2023 has proposed the changes in New Tax Regime only w.e.f 1st Apr 2023. These rules are applicable from AY 2024-25 (FY 2023-24). The slab rates are as follows.

New   Budget 2023 announced on Feb 1st 2023 introduced new tax slabs for new IT Regime to make it attractive.

Refer Difference between Old Tax Regime and New Tax Regime

Also refer Old vs New Tax Regime | Explained for Salaried & Business Taxpayers

2. Rebate u/s 87A under New Tax Regime

Rebate u/s 87A is increased under New Tax Regime. The taxpayers having income upto Rs 7 lakhs are not required to pay any taxes. The maximum rebate under New Tax Regime is Rs 25,000. This is applicable from AY 2024-25 (FY 2023-24).

Marginal Relief has been introduced in New Tax Regime w.e.f FY 2023-24.Marginal Relief under New tax Regime means the tax payable should not exceed the income that exceeds Rs 7 lakhs.

For Example : Mr Ram has a net taxable income of Rs 7,15,000 for FY 2023-24. He wants to opt for New Tax Regime. In this case, he is not eligible for rebate u/s 87A as his income exceeded Rs 7 lakhs. He is required to pay a tax of Rs.26,500 (excluding Education Cess). In this case, the income exceeding Rs 7 lakhs (7,15,000-7,00,000 = 15,000) is less than the tax payable of Rs 26,500. Hence the marginal relief is applicable on his taxes payable for FY 2023-24.

After applying marginal relief, his tax payable is Rs. 15,000 (excluding educ.cess) which we will be a benefit to Mr Ram

3. Surcharge

The highest surcharge rate of 37% is reduced to 25% under New Tax Regime. The taxpayers with income of more than 5 crore will be paying 25% surcharge instead of 37% under New Tax Regime.

Learn more on Surcharge at Guide On Income Tax Surcharge Slab Rates

4. Standard deduction under New Tax Regime

There is no change in standard deduction of Rs 50000 provided to employees under Old Tax Regime. But Rs 50000 standard deduction is applied to salaried employees or pension income holders under the new tax regime. This is new compared FY 2022-23.

5. Increase in Threshold for MSME's and Professionals u/s 44AD and 44ADA

Budget 2023 increases the threshold under presumptive scheme for MSME's u/s 44AD from Rs 2 crores to Rs 3 crores and for professionals u/s 44ADA from Rs 50 lakhs to Rs 75 lakhs. However, cash receipts should not be more than 5%.

6. Startup Benefits

• The Period of incorporation of eligible start-up is extended by 1 more year i.e., 31st Mar 2024. The start-ups incorporated upto 31st Mar 2024 can avail the Tax benefits.
• Also, the benefit of carry forward of losses on change of shareholding of start- ups is extended to 10 years from 7 years.

7. Benefits to Senior Citizens

• The maximum deposit limit for senior citizen savings scheme will be increased to Rs 30 lakhs from Rs 15 lakhs.
• The maximum deposit limit for monthly income scheme will be increased to Rs 9 lakhs from 4.5 lakhs for single accounts and Rs 15 lakhs from Rs 7.5 lakhs for joint accounts.

8. Conversion of Gold to Electronic Gold receipt

Conversion from physical gold to electronic gold or vice versa will not be considered as transfer and will not attract any capital gain tax w.e.f 1st Apr 2023

9. Capital Gain Tax

Capital Gain Re-Investment in house property u/s 54 and 54F is limited to Rs 10 crores w.e.f 1st Apr 2023. This impacts very few people in the country.

10. Life Insurance Policies

W.e.f 01st Apr 2023, if aggregate of premium for life insurance policies issued on or after 01st Apr 2023 is above Rs 5 lakhs, income from only those policies with aggregate premium upto Rs 5 lakhs shall be exempt.

11. Leave Encashment Exemption

Leave Encashment exemption on retirement of non-government salaried employees is increased to Rs 25 lakhs from Rs 3 lakhs w.e.f 1st Apr 2023

12. TDS on EPF for Non PAN Cases

TDS Rate on EPF withdrawal in Non-PAN cases is reduced to 20% from 30%. This will be applicable from 01st Apr 2023

13. Increase in levy of STT on Derivative Contracts

Generally, Securities Transaction tax (STT) is levied on every stock market transaction. To control the trading in Derivative contracts like futures and options, STT has been increased from 01 st April 2023.

*Turnover refers to Trading Turnover and not the turnover computed as per Income Tax Rules.

14. Taxation of Debt Mutual Funds

1. Mutual Funds whose investment in domestic equity is less than 35% is taxable as Short-Term Capital gain irrespective of the holding period. Indexation does not apply to these mutual funds, and these are taxable at applicable rates of the individual.
2. Earlier (upto 31st March 2023), if the debt mutual funds are held for more than 36 months, it is treated as Long term capital gain and taxed at 20%
3. W.e.f 01st April 2023, above debt mutual funds will be treated as short term capital gain and taxable at slab rates. As the debt mutual funds are fixed income instruments like Bank fixed deposits, Government has made this rule applicable similar to Bank FD’s.
4. Debt Funds, Gold Funds, International Funds will be treated as short term capital gains even if the holding period is more than 36 months

15. Credit Card Payments for Foreign Tours to be brought under LRS

• Earlier Credit card payments on foreign tours are outside the scope of LRS and TCS is being collected.
• Now, Credit card payments for Foreign tours will be brought under LRS and TCS at 20% without any threshold will be levied.

16. Marginal Relief for taxpayers under New Tax Regime

• The concept of Marginal Relief will be introduced under New Tax Regime.
• For example, if the taxpayers are having an income of Rs 7,00,500, they are required to pay a tax of Rs 26,052 including education cess.
• Now with the introduction of marginal relief, the taxpayers will get the big relief when their income is around the border of Rs 7 lakhs.
• Marginal relief is introduced with a intent that the tax paid should not exceed the income in excess of Rs 7 lakhs

17. TDS on payments of Royalty and Fees from Technical services to Foreign Companies

The rate of TDS on payments of Royalty and Fees from Technical services to Foreign Companies will be increased to 20% from 10% w.e.f 01st April 2023

Earlier the tax rate as per Income Tax Act is 10% and DTAA is 15% and the companies used to take the benefit of Income Tax Act for deduction of TDS on payments to Foreign Companies. Now the rate of TDS as per DTAA is beneficial

18. Amended TDS provisions on Online Gaming, Lottery etc will be applicable from 01st April 2023 instead of 01st July 2023

Budget 2023 has amended the threshold of Rs 10,000 on winnings from online gaming, lottery etc. W.e.f 01st April 2023 there is no threshold for the TDS deduction and TDS needs to be deducted on net winnings at the end of the financial year.

19. Linking of PAN with Aadhar

The due date for linking of PAN with Aadhar is extended to 30th June 2023 from 31st March 2023

20. Form 10F filing by NRI's

Non Resident Indians (NRI's) who dont have PAN or who are not required to obtain are required to file form 10F manually by 30th September 2023. This due date was extended from March 31 2023

21. Tax regulations that will expire on March 31, 2023

1. Section 80 EEB : The last date to purchase an electric vehicle and take the interest benefit on loans is 31st March 2023. This benefit is not available for the purchase of electric vehicles on loan from 1st April 2023

   Observation: It is interesting to note that the government has not extended the benefit, despite the fact that many individuals plan to invest in electric vehicles in order to receive a tax credit. This may be a tradeoff to reintroduce a much more favourable tax regime.

2. The due date for filing updated income tax returns for FY 2019-20 (AY 2020-21) is March 31st 2023. w.e.f 1st April 2023, taxpayers cannot file AY 2020-21 income tax returns
3. The taxpayers who wish to convert to composition schemes from regular GST can convert before 31st March 2023. W.e.f 1st April 2023, they cannot convert to composition scheme
4. Advance Tax for FY 2022-23 needs to be paid before March 31st 2023. w.e.f 01st April 2023, taxpayers needs to pay interest u/s 234B
5. Tax saving investments like ELSS, LIC, Term Insurance etc for FY 2022-23 needs to be done before March 31st 2023.