New Tax Slabs, Increase in Income Tax Rebate in New Tax Regime and More, Here’s a List of Changes in Income Tax Laws in 2023 That Will Impact You in 2024

New Delhi, December 30: In 2023, significant amendments were made to the income tax laws, announced in the Budget 2023 and throughout the financial year by the Central Board of Direct Taxes (CBDT). These changes, although announced in 2023, will affect taxpayers when they file their income tax return (ITR) in July 2024 and in subsequent financial years.

Here we take a look at these income tax changes and how they will impact you in 2024.

Modification of income tax slabs in the new tax regime: The income tax slabs under the new tax regime were revised to make it more appealing. The alterations in the income tax slabs have made the new tax regime more attractive compared to the old one, particularly benefiting those who were unable to make tax-saving investments and expenditures under the old regime. Income Tax Returns: Income Tax Department Processed About 88% of Verified ITRs for AY 2023-24, Says CBDT.

Increase in basic exemption limit under the new tax regime: The basic exemption limit under the new tax regime was raised to Rs 3 lakh from the previous Rs 2.5 lakh, an increase of Rs 50,000. This means that if your gross taxable income does not exceed Rs 3 lakh in a financial year, you are not required to file an income tax return for FY2023-24 if you choose the new tax regime. This increase will also result in savings of up to Rs 15,000 for those opting for the new tax regime in FY 2023-24. Income Tax Department Launches Mobile App for Viewing Annual Information Statement, Taxpayer Information Summary.

New tax regime becomes the default: From April 1, 2023, the new tax regime became the standard. If an individual does not specify their preferred tax regime for TDS from salary or while filing an income tax return, the income tax liability will be calculated based on the new tax regime’s income tax slabs. Therefore, when filing your income tax return for FY2023-24 in June/July 2024, you will need to specifically opt for the old tax regime if you do not wish to file ITR under the new tax regime.

Increase in income tax rebate in the new tax regime: The rebate amount under section 87A in the new tax regime has been increased from Rs 12,500 to Rs 25,000. This means that an individual with a taxable income of up to Rs 7 lakh will not be required to pay any taxes at the time of filing ITR if they opt for the new tax regime. However, the rebate of Rs 12,500 is also available under the old tax regime but only if the taxable income does not exceed Rs 5 lakh.

Standard Deduction: Under the new tax regime, a standard deduction of Rs 50,000 will be available for salary and/or pension income. This deduction was previously only available under the old tax regime. As a result, salaried individuals will now have two deductions: the standard deduction and the deduction under section 80CCD (2) for the employer’s contribution to the National Pension System (NPS). This could lead to zero tax for individuals with taxable income up to Rs 7.5 lakh.

No LTCG Benefit in Debt Mutual Funds: Investments in debt mutual funds made after March 31, 2023, will not be eligible for Long Term Capital Gains (LTCG) taxation upon withdrawal. This means that any capital gains, short or long term, will be taxed at the same rate as interest earned from fixed deposits. However, investments made until March 31, 2023, will still be subject to the old LTCG tax rules.

Marginal Tax Relief for Small Taxpayers: A new marginal tax relief has been introduced for those with taxable income slightly exceeding Rs 7 lakh. This relief was previously only available for taxpayers with taxable income exceeding Rs 50 lakh. If the tax on income exceeding Rs 7 lakh is more than the amount by which the income exceeds Rs 7 lakh, the individual can claim marginal relief.

Reduction in Highest Surcharge Rate: The highest surcharge rate, applicable to individuals with taxable income exceeding Rs 50 lakh, has been reduced from 37% to 25% under the new tax regime. This change will primarily benefit High Net Worth Individuals (HNIs), especially those earning Rs 5 crore, reducing the maximum tax rate from 42.744% to 39%.

Increased Tax Exemption on Leave Encashment: The tax exemption limit on leave encashment for non-government employees has been increased from Rs 3 lakh to Rs 25 lakh. This means that individuals will be able to receive more tax-exempted leave encashment income than before. This limit applies to the total amount received in an individual’s lifetime.

Rent-Free House Salary Rules: The Central Board of Direct Taxes (CBDT) introduced new rules for employees receiving rent-free accommodation from their employers, effective from September 1, 2023. These rules are expected to reduce the Tax Deducted at Source (TDS) on rent-free accommodation, resulting in a higher take-home pay for salaried individuals.

Taxation on Life Insurance Maturity Money: The 2023 Budget announced that if the total premium paid on all non-ULIP life insurance policies exceeds Rs 5 lakh in a financial year, the maturity amount will be taxable. However, life insurance policies issued until March 31, 2023, will continue to have tax-exempt maturity proceeds.

Capital Gains Deductions Limit: The government has set a Rs 10 crore limit on the maximum deduction that can be claimed from capital gains arising from the sale of residential property. This change will primarily impact High Net Worth Individuals (HNIs) who sell their old house and reinvest the amount in a new property to save tax on Long Term Capital Gains (LTCG).

Discard Income Tax Return (ITR) Option: The income tax department introduced the ‘Discard return’ option in 2023. This feature allows individuals to delete their unverified ITR, facilitating the revised ITR filing process if a mistake is discovered after the ITR is submitted but before it is verified.

TDS on Online Game Winnings: The government has abolished the previous threshold for tax deduction on winnings from online games. Until March 31, 2023, Tax Deducted at Source (TDS) was applicable on winnings exceeding Rs 10,000 in a financial year. However, starting from April 1, TDS will apply to every rupee won, with no threshold. This means that a 30% TDS will be deducted from online game winnings and deposited with the government. If the deducted tax exceeds your taxable income, you will need to file an Income Tax Return (ITR) to claim a refund.

Relief on Higher TDS for Non-ITR Filers: The 2023 Budget announced a relief on higher TDS for individuals who are not required to file an ITR. The definition of ‘Specified persons’ was revised to exclude those individuals. This is a significant relief for individuals who were not required to file an ITR but were subject to higher TDS on their income due to non-filing. Such individuals will no longer face higher tax deductions due to non-filing of ITR. In 2024, to avoid higher TDS, they will not be required to file an ITR.

These changes will have implications for your income tax return filing for FY 2023-24 (AY 2024-25). It’s advisable to consult with a tax advisor to understand how these changes may affect your personal tax situation.

(The above story first appeared on LatestLY on Dec 30, 2023 08:30 AM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).