April marks a significant milestone as it heralds the implementation of several Budget 2023 proposals concerning income tax. With the commencement of the new financial year on April 1, 2024, it’s essential to reflect on past investments and prepare for the changes that will impact your finances in the upcoming fiscal year.
Finance Minister Nirmala Sitharaman outlined various changes in her last Union Budget speech, which are set to come into effect from this month onward, affecting our financial landscape. Here’s a breakdown of some key changes to be aware of:
- New Tax Regime Default Option: The default adoption of the new tax regime from April simplifies the tax filing process. While offering reduced tax rates, this regime involves fewer deductions and exemptions. Taxpayers have the flexibility to revert to the old tax regime if it proves more advantageous, but they must submit Form 10-IEA while filing their tax return.
- Basic Exemption Limit and Rebate: The basic exemption limit under the new tax regime has been raised to Rs 3 lakh, with the rebate under Section 87A increased to Rs 7 lakh. Individuals with a taxable income of up to Rs 7 lakh under the new regime will benefit from a full tax rebate, eliminating their income tax liability.
- New Tax Slabs: Revised tax slabs under the new regime are as follows:
- Income between ₹3 lakh and ₹6 lakh: Taxed at 5%
- Income between ₹6 lakh and ₹9 lakh: Taxed at 10%
- Income between ₹9 lakh and ₹12 lakh: Taxed at 15%
- Income between ₹12 lakh and ₹15 lakh: Taxed at 20%
- Income above ₹15 lakh: Taxed at 30%
- Restoration of Basic Deduction: The standard deduction of Rs 50,000, previously applicable only to the old tax regime, has now been incorporated into the new regime, further reducing taxable income.
- Reduction In Surcharge: The highest surcharge rate on income exceeding Rs 5 crore has been reduced to 25%, resulting in a reduced effective tax rate for high-income individuals under the new regime.
- Life Insurance Taxation: Maturity proceeds from life insurance policies with total premiums exceeding Rs 5 lakh will be subject to taxation.
- Leave Encashment: The tax exemption limit for leave encashment on retirement of non-government employees has been increased to Rs 25 lakh.
These changes signal a new financial landscape, emphasizing the importance of staying informed and proactive in managing personal finances in the new financial year. As the fiscal year unfolds, being aware of these alterations will help optimize financial planning and tax strategies effectively.
Sources Of Information: FINANCIAL EXPRESS
