The honorable Finance Minister Ms. Nirmala Sitharaman has announced the Union Budget for the Financial year 2023-2024 on February 1, 2023. The Budget 2023 introduced bountiful amendments pertaining to the provisions of Income Tax Act, 1961. However, New Tax Regime undoubtedly walked away with the limelight in the Budget, 2023 considering the noteworthy tax concessions and exemptions extended to not only the common man but also the co-operatives, small businesses, MSMEs, professionals, and start-ups.
Here’s a sneak peek into the prominent provisions of the Finance Bill, 2023 and their probable impact on the direct and indirect taxes.
Impact on Personal Income Tax
- The Government of India has accentuated the benefits of opting for the New Tax Regime with the Union Budget, 2023, which is detailed as under:
- Basic exemption limit to be revised to INR 3,00,000 as compared to INR 2,50,000 earlier
- Increase in the threshold limit for total income eligible for rebate under Section 87A from INR 5,00,000 to INR 7,00,000
- Reduction in the highest surcharge rate to 25% from the existing rate of 37% on income above INR 5,00,00,000
- Allowing the benefit of standard deduction from salary income, deduction in respect of income in the nature of family pension and deduction in respect of the amount paid or deposited in the Agniveer Corpus Fund to the employees opting for New Tax Regime.
- The tax rates applicable for the current Assessment Year 2023-24 as per First Schedule of the Finance Bill, 2023 is as under:
|S. No.||Total Income||Rate of Tax|
|1||Up to Rs. 2,50,000||NIL|
|2||From Rs. 2,50,001 to Rs. 5,00,000||5 per cent|
|3||From Rs. 5,00,001 to Rs. 10,00,000||20 per cent|
|4||Above Rs. 10,00,000||30 per cent|
- Please refer Annexure – A (Rates of Taxes) for detailed information about slabs of rates of taxes for different categories of assesses.
- Introduction of default tax rates which shall be applicable effective from Assessment Year 2024-25, for individual or Hindu undivided family or association of persons (other than a cooperative society), or body of individuals, whether incorporated or not, or an artificial juridical person (Refer Section 50 of the Finance Bill, 2023):
|S. No.||Total Income||Rate of Tax|
|1||Up to Rs. 3,00,000||NIL|
|2||From Rs. 3,00,001 to Rs. 6,00,000||5 per cent|
|3||From Rs. 6,00,001 to Rs.9,00,000||10 per cent|
|4||From Rs. 9,00,001 to Rs. 12,00,000||15 per cent|
|5||From Rs. 12,00,001 to Rs. 15,00,000||20 per cent|
|6||Above Rs. 15,00,000||30 per cent|
- Income chargeable under the head “Income from Other Sources” shall also include any sum, received by a unit holder from a business trust, effective from April 01, 2024, which:
- is not in the nature of income as referred to in the clauses of Section 10 (Incomes not to be Included in Total Income) of the Act
- is not chargeable to tax under sub-section (2) of section 115UA (Tax on Income of Unit Holder and Business Trust) of the Act.
- A limit of Rupees Ten crores has been imposed as the maximum deduction that can be claimed by the assessee under the below stated sections of the Act, effective from April 01, 2024:
- section 54 which states that in case capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head “Income from house property”, and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the provisions of this section, and
- section 54F which states that in case capital gain arises from the transfer of any long-term capital asset, not being a residential house, and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India then the capital gain shall be dealt with in accordance with the provisions of this section.
- The cost of acquisition or the cost of improvement shall not include the amount of interest claimed by the assessee under section 24 which states the provisions in respect of deductions from Income from House Property or Chapter VIA (Deductions to be made in computing Total Income) effective from April 01, 2024.