scorecardresearchIncome tax: 7 major changes in tax rules to come into effect from April

Income tax: 7 major changes in tax rules to come into effect from April 1

Updated: 28 Mar 2023, 12:15 PM IST
TL;DR.

The new tax regime is expected to bring significant changes to the taxpayers’ tax obligations and tax planning strategies. This article provides a comprehensive overview of the new tax rules that will be applicable from the new financial year.

It is important to stay informed about the latest developments to ensure that you are making the most of your money.

It is important to stay informed about the latest developments to ensure that you are making the most of your money.

Taxes are an inevitable part of life and it is important to keep up with the latest developments to ensure that you are making the most of your money. Through the announcements made in Budget 2023, the Indian government is introducing some major changes to the tax system that will come into effect from April 1, 2023.

The new tax regime is expected to bring significant changes to the taxpayers’ tax obligations and tax planning strategies. This article provides a comprehensive overview of the new tax rules that will be applicable from the new financial year.

New tax regime to become the default system

From April 2023, the new income tax regime will be the default system for tax assessors. Taxpayers, however, have the option to choose the prior system. This new system offers a standard deduction of 52,500 to those with taxable income exceeding Rs.15.5 lakhs. The basic exemption limit has been raised from 2.5 lakhs to 3 lakhs to make the new regime more attractive. Additionally, those with an annual salary of more than 15 lakhs are taxed at a rate of 30%.

Reduction in TDS for salaried employees

The new tax regime presented in the union budget kicks in from April 1 and could mean a reduction in the TDS for salaried employees. Taxpayers with a taxable income of up to 7,00,000 who have opted for the new tax regime, will receive an additional rebate under section 87A of the income-tax act and no TDS will be deducted. Additionally, individuals with taxable income of more than 5 crore will benefit from a reduced surcharge from 37 percent to 25 percent.

Converting gold to an electronic gold receipt to become tax-free

The government has taken a step to promote electronic gold by allowing the conversion of physical gold into electronic gold receipt (EGR) and vice versa by a SEBI-registered vault manager from April, free of any capital gain tax.It is hoped that this measure will boost the digital gold market in India and make gold investments more accessible to Indian investors.

Life insurance policies will become taxable

From the new financial year i.e. 1st April 2023, the proceeds from life insurance premium over the annual premium of 5 lakhs will be taxable. This new income tax rule won't be applicable to ULIP (unit-linked insurance plan). ULIP is a type of insurance policy that combines insurance and investment, where a part of the premium is invested in market instruments like equities and debt.

Gifts received by not-ordinary residents will be taxed

Any gift above 50,000 received by a resident individual who is not an ordinary resident (RNOR) is liable for taxation. According to the income tax act, an individual is deemed to be an RNOR if he has been a non-resident in India for nine out of the last ten years preceding the assessment year, or has been in India for a cumulative period of 729 days or less during the seven years preceding the assessment year. Hence, any gift over and above the prescribed limit received by an RNOR will be taxable in their hands.

Benefits claimed under Section 54 and Section 54F will be limited

The Indian tax act provides tax incentives for those selling their residential houses under section 54 and long-term capital gains on any capital asset except a house property under section 54F. From the new financial year, however, the maximum exemption provided under both sections is restricted to 10 crore, and any gains above that amount will be taxed at a flat rate of 20 percent (with indexation). The maximum surcharge applicable to income from capital gains remains at 15 percent.

Winnings from online games will be taxable

The new section 115BBJ of the income tax act makes winnings from online games taxable. Any winnings from such activities will be subject to a flat rate of 30 percent taxation, which will be deducted at source from the winnings. This rate of taxation will be applicable for all types of winnings, including cash, kind, vouchers, or any other form of benefit.

The new tax regime proposed in the union budget is set to bring about major changes to the taxation system in India. It is important to stay informed about the latest developments to ensure that you are making the most of your money.

 

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New tax regime
First Published: 28 Mar 2023, 12:15 PM IST