New Income tax rules applicable from April 1 – Check new tax slab, Reduction in TDS

 Union Finance Minister Nirmala Sitharman announced in the Union Budget 2023 that the new income tax regime will become the default for all taxpayers beginning from April 1, 2023. Not just that, the FM announced a slew of changes in this year’s budget speech fulfilling a longstanding demand of taxpayers, particularly the salaried class. Among the major changes announced were the increase in the tax rebate limit, changes in income tax slabs, raising the standard deduction limit for senior citizens, higher capital gain taxes under Section 24 of the Income Tax Act and a few more provisions related to winnings from online games, TDS, conversion of Gold to Electronic Gold Receipt.

Sitharaman’s move to make the new income tax regime default doesn’t mean the old income tax regime will be phased out. It simply means a taxpayer will have to opt for the old regime from the default new tax regime.

Let’s discuss these 6 major income tax rule changes in detail:

Income Tax: Tax rebate limit raised  

Under the new tax regime, the rebate income is increased from Rs 5 lakh to Rs 7 lakh.

Income Tax: Changes in income tax slabs

FM Sitharaman has introduced new changes in the tax slab.

New tax rates:

• 0-3 lakh – nil
• 3-6 lakh – 5%
• 6-9 lakh- 10%
• 9-12 lakh – 15%
• 12-15 lakh – 20%
• above 15 lakh- 30%

Income Tax: Standard deduction for senior citizens

Under the new regime, senior citizens will have a standard deduction of Rs 50,000 for pensioners as well including family pensioners. Each salaried person with an income of Rs 15.5 lakh or more will benefit by Rs 52,500. 

Salaried employees can calculate standard deductions for FY 2023?

Section 16(ia) of the Income Tax Act, 1961 (hereinafter referred to as ‘the IT Act’) provides that every salaried taxpayer could claim a flat deduction of upto Rs. 50,000. Further, even taxpayers deriving pension income would be eligible to claim such standard deduction. The quantum of such deduction would be restricted to lower of the salary/ pension amount or Rs. 50,000.

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It is pertinent to note that such standard deduction was allowed as a deduction only to those taxpayers opting for old tax regime. However, the Budget 2023 has now proposed to allow such standard deduction for taxpayers opting for the proposed new tax regime u/s 115BAC of the IT Act in Financial Year 2023-24.

Particulars	Taxpayer receiving Salary	Taxpayer receiving Pension
Gross Salary/ Pension	10,00,000	7,50,000
Less: Allowances exempt u/s 10
House Rent Allowance	(1,20,000)	–
Leave Travel Allowance	(80,000)	–
Net Salary	8,00,000	7,50,000
Less: Deductions u/s 16
Standard Deduction u/s 16(ia)	(50,000)	(50,000)
Professional Tax u/s 16(iii)	(2,500)	–
Income Taxable under the ‘Salary’ Head	7,47,500	7,00,000

Every taxpayer, while furnishing his tax return in ITR 1/ ITR 2 can claim the benefit of standard deduction. The quantum of standard deduction is auto-populated in the Income tax online return/ utility once the amount of gross salary/ pension is rightly entered by the taxpayers. However, the taxpayers should confirm whether the said deduction is rightly computed from Point iv (a) Standard deduction u/s 16(ia) of Part B – Gross Total Income schedule.

Income Tax: Higher capital gain taxes under Section 24   

Under Income Tax Act Section 24, homeowners can claim a deduction of Rs 2 lakh on the home interest if the family reside. The cost of acquisition and the cost of improvement shall not include the amount of interest claimed under Section 24. So, the capital gain on the sale of the property will be higher and double deductions claimed by the taxpayer will be eliminated.

Income Tax: Tax on net winnings from online games

30 per cent tax will be deducted from winnings online games. The amount will be deducted at source from the winnings.

Income Tax: Reduction in TDS  

Taxpayers who have opted for the new tax income regime will see no TDS deduction due to an additional rebate provided under section 87A of the Income-Tax Act,1961 (ITA).

Income Tax: Conversion of Gold to Electronic Gold Receipt 

Physical gold conversion into EGR and vice versa by a SEBI-registered Vault Manager will be done free of any capital gain tax.