Income Tax changes for FY 23-24 announced in union Budget 2023

Budget 2023 was announced on 1st February, so this may feel little late. But better late than never. We are receiving many questions from users like you, confused about the changes in tax slabs and its effective date. You must be thinking that you can take advantage of the lower income tax rates under the new tax regime for the current filing season as it gets underway? If that’s how you’re thinking, you’re mistaken.

For FY 2022-23, you will be required to file your ITR as per the budget 2022 announcements. This means you will pay tax as per the existing slab rates for the income earned between 1st April 2022 and 31st March 2023.

Slab rates for FY 2022-23/AY 2023-24 for resident individuals below 60 years:

Income Tax slabs (in ₹) Income Tax Rates (Old Regime ) Income Tax Rates (New Regime)
0 - 2,50,000 0 0
2,50,001 - 5,00,000 5% 5%
5,00,001 - 7,50,000 20% 10%
7,50,001 - 10,00,000 20% 15%
10,00,001 - 12,50,000 30% 20%
12,50,001 - 15,00,000 30% 25%
Above 15,00,001 30% 30%

The budget 2023 announced changes in the new tax regime to make it attractive for individuals. The old regime remains the same. These changes are applicable for the current FY 2023-24. Meaning, you can choose to file with the changes announced in the budget 2023 when you file your ITR next year for FY 2023-24/AY 2024-25.

Let’s have a look at the updates of budget 2023:

Income Tax Updates

  1. New tax Regime:

The New Tax Regime shall be set as the default tax regime. This means you will have to explicitly opt for the old regime while filing your ITR for FY 2023-24 onwards.

There is no tax payable for income up to ₹7 lakhs as the rebate u/s 87A has been increased to ₹25,000 under the new tax regime.

  1. Revised slab rates for New Tax regime:

The income slabs under the new tax regime have been reduced to five from six as shown below. Also, the basic exemption limit has been increased from ₹2.5 lakhs to ₹3 lakhs. These are applicable from FY 2023-24/AY 2024-25 onwards.

Income Tax Slabs (in ₹) Income Tax Rates (New Regime )
Upto 3,00,000 0
3,00,001 - 6,00,000 5%
6,00,001 - 9,00,000 10%
9,00,001 - 12,00,000 15%
12,00,001 - 15,00,000 20%
Above 15,00,000 30%
  1. Standard Deduction

Introduction of standard deduction of ₹50,000 for Salaried individuals/ pensioners/ family pensioners under the new tax regime.

Thus, for salary income up to ₹7.5 lakhs, there is no tax payable.

  1. Reduced surcharge rate

The highest surcharge rate has been reduced to 25% from 37% under the new tax regime.

  1. Increased limit for leave encashment

Leave encashment limit increased to 25 lakhs from ₹3 lakhs u/s 10(10AA) for non-government employees.

  1. Revision of turnover limit under the Presumptive Taxation Scheme
  • For businesses → Turnover limit increased to ₹3 cr from ₹2 cr
  • For professionals → Turnover limit increased to ₹75 lakhs from ₹50 lakhs

(Note: If total cash receipts are not more than 5% of receipts)

  1. Capital Gains
    • No capital gains will be attracted on the conversion of electronic gold to physical gold or vice versa
    • Exemption under sections 54 and 54F (Investment in Residential House) capped to ₹10 Cr
  2. TDS updates
    • On winning from online games, the TDS threshold of 10,000 has been abolished. This means that a TDS of 30% u/s 194BA will be deducted from any payment from winning in online games.
    • TDS on withdrawal of EPF: Reduced to 20% from 30% for non-PAN holders.

Other Updates

  1. Introduction of a one-time small saving scheme “Mahila Samman Savings Certificate” for women till March 2025.
    • Deposits of up to ₹2 lakhs can be made for a period of 2 years with a fixed interest rate of 7.5%, along with the option of partial withdrawal.
  2. The limit for investment in Senior Citizen Savings Scheme is increased to ₹30 lakhs from ₹15 lakhs
  3. The limit for investment in Monthly Income Account Scheme (MIS) is increased to ₹9 lakhs from ₹4.5 lakhs for a single account and to ₹15 lakhs from ₹9 lakhs for a joint account.
  4. DigilLocker will become a one-stop solution for reconciliation and updating of identity & address across documents.
  5. In FY 2022, digital payment transactions rose to 76% and about 91% in value. Hence to be given a boost.
  6. Reduce the compliance burden: Processing time has been reduced to 16 days from 93 days, strengthening the grievance redressal system & common ITR forms to be rolled out soon.

We are here to answer all your tax-related queries about Equity, Intraday, F&O, or Commodities Trading.

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What’s the new tax on deb funds

Hi @Manu_Manjunath.K.R

For investments made on the debt mutual fund, on or after April 1, 2023, no indexation benefit will be available. Whether the units are redeemed before or after 36 months, the tax implications are going to be the same.

So, now, the taxes on these debt funds will be levied as per the individual’s slab rate. Let’s say you’re falling under the highest tax bracket, then, will be required to pay 30% income tax rather than the current 20% with indexation.

You can read more about Tax on Mutual Funds in India - Learn by Quicko.

Is it same for reit and invits funds or funds. Even international funds.

Any mutual fund with less than 35% exposure to Indian equity will be taxed as per IT slab right. Based on my understanding

Hi @Manu_Manjunath.K.R

It is not the same for reit and invits.
For foreign/international funds and any mutual fund with less than 35% exposure to Indian equity will be taxed as per IT slab right.

May I know tax of reits and invits funds of funds.

Both those mutual invest in domestic market and that investment in international reits and invits