Income Tax News: Important, Big Changes on Cards! Check What's Changing Starting April 1st

Income Tax News: The start of a new fiscal year on April 1st is always noteworthy in terms of personal finances since it signifies the implementation of the majority of the budget's income tax plans. Furthermore, as of this day, additional modifications are also applicable that can have an effect on people's personal finances. Finance Minister Nirmala Sitharaman made these announcements during this year's budget speech. Here are some of the most significant adjustments that you should be aware of, including increased basic exemption limitations.

New Tax Regime Default Adoption

One noteworthy change is the default acceptance of the new tax structure. Its goal is to expedite the tax filing process and encourage more people to file under the new tax system, which has lower tax rates but fewer exemptions and deductions. In the event that it is more advantageous for them, taxpayers will still be able to continue under the previous tax system.

Increased Basic Exemption Level

The basic exemption level under the new tax system was raised to ₹ 3 lakh from ₹ 2.5 lakh, as indicated in the most recent Budget, while the refund under Section 87A of the Income Tax Act, 1961 was increased to ₹ 7 lakh from ₹ 5 lakh. These changes took effect on April 1, 2023. Therefore, under the new regime, individuals with taxable income up to ₹ 7 lakh will receive a full tax rebate, thereby avoiding paying any income tax.

New Tax Slabs

• A portion of income between ₹ 3 lakh and ₹ 6 lakh is subject to 5% tax.
• 10% of the first Rs 6 lakh to Rs 9 lakh will be taxed.
• Taxation will range from ₹9 lakh to ₹12 lakh at 15%.
• Taxes range from Rs 12 lakh to Rs 15 lakh.
• Taxes on amounts beyond Rs 15 lakh would be 30%.

Inclusion of ₹50000 Standard Deduction

The ₹ 50,000 standard deduction, which was only available under the previous tax system, is now included under the current tax system. As a result, the taxable income under the new system is further reduced.

Reduction in Penalty Rates

The maximum 37% penalty on revenue over ₹ 5 crore was lowered to 25%. Those with high earnings who select the new system thereby pay an effective tax rate that is lower.

Taxation on Life Insurance Policy Maturity Proceeds

The Finance Minister announced that if a life insurance policy is written on or after April 1, 2023, and the total premium amount exceeds ₹ 5 lakh, the maturity proceeds will be taxed.

Increase in Leave Encashment Tax Exemption

Non-government employees' leave encashment tax exemption maximum was ₹ 3 lakh in 2022; it has subsequently been raised to ₹ 25 lakh.