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Relief for taxpayers: Income tax rebate increased to Rs 7 lakh

Relief for taxpayers: Income tax rebate increased to Rs 7 lakh

The rebate limit of personal income tax in the Union Budget 2023-24 is proposed to be increased to Rs 7 lakh from the current Rs 5 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to Rs 7 lakh will not have to pay any tax. Tax structure in the new personal income tax regime, introduced in 2020 with six income slabs, will change by reducing the number of slabs to five and increasing the tax exemption limit to Rs 3 lakh. These changes come as a major relief to taxpayers. Finance Minister Nirmala Sitharaman made a number of major announcements while presenting the Budget in the Parliament on Wednesday.

To further improve taxpayer services, the Budget proposed to roll out a next-generation Common IT Return Form for taxpayer convenience, along with plans to strengthen the grievance redressal mechanism.

  • Proposal to extend the benefit of standard deduction of Rs 50,000 to salaried individuals, and deduction from family pension up to Rs 15,000, in the new tax regime.
  • Highest surcharge rate to reduce from 37 per cent to 25 per cent in the new tax regime. This will further result in the reduction of the maximum personal income tax rate to 39 per cent.
  • The limit for tax exemption on leave encashment on the retirement of non-government salaried employees to increase to Rs25 lakh.
  • The new income tax regime to be made the default tax regime. However, citizens will continue to have the option to avail the benefit of the old tax regime.
  • Enhanced limits for micro-enterprises and certain professionals for availing the benefit of presumptive taxation proposed.
  • Deduction for expenditure incurred on payments made to MSMEs to be allowed only when payment is actually made in order to support MSMEs in timely receipt of payments.
  • Deduction from capital gains on investment in residential houses under sections 54 and 54F to be capped at Rs 10 crore for better targeting of tax concessions and exemptions.
  • Where aggregate of premium for life insurance policies (other than ULIP) issued on or after 1 April, 2023 is above Rs 5 lakh, income from only those policies with aggregate premium up to Rs 5 lakh shall be exempt.
  • Minimum threshold of Rs 10,000 for TDS to be removed and taxability relating to online gaming to be clarified. Proposal to provide for TDS and taxability on net winnings at the time of withdrawal or at the end of the financial year.
  • Conversion of gold into electronic gold receipt and vice versa not to be treated as capital gain.
  • TDS rate to be reduced from 30% to 20% on taxable portion of EPF withdrawal in non-PAN cases.
  • Income from Market Linked Debentures to be taxed.
  • Period of tax benefits to funds relocating to IFSC, GIFT City extended till March 31, 2025.
  • Carry forward of losses on strategic disinvestment including that of IDBI Bank to be allowed.
  • The payment received from the Agniveer Corpus Fund by the Agniveers enrolled in Agnipath Scheme, 2022 proposed to be exempt from taxes.
  • Number of basic customs duty rates on goods, other than textiles and agriculture, reduced to 13 from 21.

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