Income Tax Act 01-04-2024 Changes on the Way

Income Tax Act 01-04-2024 Changes on the Way and New Tax Regime Now slowly becoming Default regime with alluring benefits.

The biggest change is the new tax regime becoming the default option starting April 1, 2023 (FY 2023-24). Taxpayers will now need to specifically choose the old regime if they prefer it.

New Tax Regime Changes Overview

Default Option Change

- The new tax regime will become the default option from April 1, 2023 (FY 2023-24).

- Taxpayers must now actively choose the old regime if they wish to opt for it.

Revised Income Tax Slabs (New Regime)

- No tax payable for income up to Rs. 3 lakh (increased from Rs. 2.5 lakh).

- Graduated tax rates apply, with a maximum of 30% for income exceeding Rs. 15 lakh.

Reduced Surcharge Rates (New Regime)

- The high surcharge rate of 37% for incomes above Rs. 5 crore has been revised:

- New surcharge now applies to incomes exceeding Rs. 2 crore.

- Surcharge rates: 10% for Rs. 50 lakh - Rs. 1 crore, 15% for Rs. 1 crore - Rs. 2 crore, and 25% for above Rs. 2 crore.

Increased Rebate Limit (New Regime)

- Tax rebate under Section 87A has been raised:

- Rs. 25,000 rebate for income up to Rs. 7 lakh (previously Rs. 12,500 with a Rs. 5 lakh limit).

Standard Deduction for New Regime

- Salaried individuals and pensioners choosing the new regime will benefit from a Rs. 50,000 standard deduction effective April 1, 2023

Benefits for Senior Citizens

- The investment limit for the Senior Citizen Savings Scheme (SCSS) has been doubled to Rs. 30 lakh, offering enhanced income streams and tax advantages.

Taxation on Life Insurance Proceeds

- Life insurance policy proceeds will be taxable if the annual premium surpasses Rs. 5 lakh (excluding Unit Linked Insurance Plans) from April 1, 2023.

Revised Income Tax Slabs (New Regime)

Budget 2023 introduced updated income tax slabs for the new regime:

No tax up to Rs. 3 lakh (increased from Rs. 2.5 lakh)

Graduated rates up to 30% for income exceeding Rs. 15 lakh

Reduced Surcharge Rate (New Regime)

The high surcharge rate of 37% for incomes above Rs. 5 crore has been significantly reduced:

New surcharge applies to incomes exceeding Rs. 2 crore

10% surcharge for Rs. 50 lakh - Rs. 1 crore

15% surcharge for Rs. 1 crore - Rs. 2 crore

25% surcharge for above Rs. 2 crore

Increased Rebate Limit (New Regime)

The tax rebate under Section 87A has been increased for the new regime:

Rs. 25,000 rebate for income up to Rs. 7 lakh (increased from Rs. 12,500 and Rs. 5 lakh limit)

Standard Deduction for New Regime

Salaried individuals and pensioners opting for the new regime will now benefit from a standard deduction of Rs. 50,000 starting April 1, 2023.

Benefits for Senior Citizens

The investment limit for the Senior Citizen Savings Scheme (SCSS) has been doubled to Rs. 30 lakh, offering them a better income stream and tax benefits.

Highlights of Senior Citizen Savings Scheme (SCSS)

Eligibility: Available to individuals aged 60 years and above.

Investment Limit: Maximum investment allowed is Rs. 30 lakh per individual.

Interest Rate: The interest rate is fixed and paid quarterly. Rates are set by the government and subject to change.

Maturity: The scheme has a maturity period of 5 years, which can be extended for an additional 3 years.

Tax Benefits: Investments in SCSS qualify for tax benefits under Section 80C of the Income Tax Act.

Withdrawal: Premature withdrawal is allowed after one year with a penalty. After 2 years, withdrawals are permitted without penalties but with reduced interest rates.

Joint Account: SCSS allows for joint accounts with a spouse, but only the first account holder must meet the age criteria.

Income Stream: Provides regular income in the form of interest payments, making it a popular choice for retirees seeking steady returns.

Safety: Backed by the government, SCSS is considered a safe investment option for senior citizens.

Interest Payment: Interest is credited directly to the investor's savings account.

Taxation on Life Insurance Proceeds

Life insurance policy proceeds will be taxable if the annual premium exceeds Rs. 5 lakh (except for Unit Linked Insurance Plans) starting April 1, 2023.

These changes aim to streamline the tax structure, enhance benefits for certain groups like senior citizens, and ensure a more efficient and equitable tax system for taxpayers in the upcoming financial year.

@IncomeTaxIndia

@InfosysIndiaBiz

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