New Income Tax Rules w.e.f 1st April 2023

Harsh Kaushik | Last updated: 01 April 2023

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Quick Summary

From 1st April 2023, a new tax regime becomes the default option, though the old regime remains available. Key changes include an increased income tax exemption limit to £7 Lakhs and an extended standard deduction for pensioners under the new regime. The article also details updated income tax slabs, a higher Leave Encashment limit for non-government employees, and new taxation rules for debt mutual funds and life insurance policies.

The Government has made some new rules which are applicable from 1st April 2023 i.e from the new financial year which are described below:

New Tax Regime: The New Tax Regime shall be treated as Default Regime. The taxpayers shall still have the option to choose from the prior regime (OLD TAX REGIME).
Change in Income Tax Exemption Limit: The Tax limit has been enhanced from Rs 5Lakhs to Rs 7 Lakhs which means individuals up to Rs 7 Lakh income shall be exempted and need not to make any investment to claim tax slab exemption.
Standard Deduction: No change in Standard Deduction of Rs 50,000 to employees in the previous Tax regime. For pensioner, such standard deduction has been extended in new tax regime.
Income Tax Slab: The income tax slab has been changed as under:

New Income Tax Rules 2023: What You Need to Know

0-3 Lakhs: Nil
3-6 Lakhs:5%
6-9 Lakhs:10%
9-12 Lakhs:15%
12-15 Lakhs :20%
Above 15 Lakhs: 30%

Leave Travel Allowance: The Leave encashment limit for non-government employees has been increased from Rs 3 Lakhs to Rs 25 Lakhs.
Taxation on Debt Mutual Funds: The Debt Mutual Gain shall be treated as Short Term Gain and will be taxed accordingly.
Life Insurance Policy: Where the Life Insurance Premium paid above Rs 5lakhs then such proceeds from the policy shall be taxable. But new income tax rule shall not be applicable on ULIPS.
Senior Citizens: Maximum Deposit Limit has been increased from Rs 15 Lakhs to Rs 30 Lakhs.
E-GOLD Receipt: No Tax on conversion of physical gold to e-gold receipt.
Tax on Lottery, Online Gaming: The TDS Limit has been removed and all receipts from Online gaming,lottery,etc shall be taxable at 30% and Tds will be deducted at the time of receiving the winning amount.
Gifts Received by Resident but not Ordinary Resident: Any gifts received by Resident but not ordinary resident above Rs 50,000 shall be taxable.
Restriction on Claim U/s 54 and 54F: Sale amount investment under section 54 and 54F has been restricted to 10 crores and any gain above this shall be taxed at 20% (with indexation benefits).
UPI Transaction Fee: 1.10% shall be charged on UPI Transactions above Rs 2000 for using PPI (Prepaid Payment Instruments) not for other customers.
Sale of Gold Jewellery: The Jewellery with 6 digit hallmark unique identification (HUID) will be sold.
Pan and Aadhaar Link: Pan and Aadhar linkage date has been extended to 30th June 2023.

The above said article is on the basis information gathered through various online sources, please refer the respective section, rules framed under respective revenue acts.

FAQ :

The New Tax Regime will be the default option for taxpayers from April 1st, 2023. However, individuals can still choose to opt for the previous (Old Tax Regime).

Yes, the income tax exemption limit has been enhanced from £5 Lakhs to £7 Lakhs. Individuals with an income up to £7 Lakhs will be exempt from tax and do not need to make any investments to claim this exemption.

Yes, the Leave Encashment limit for non-government employees has been increased significantly from £3 Lakhs to £25 Lakhs.

Under the new rules, gains from Debt Mutual Funds will be treated as Short Term Gains and taxed accordingly.

If the Life Insurance Premium paid is above £5 Lakhs, the proceeds from the policy will be taxable. However, this new rule will not apply to ULIPs.

Yes, the TDS Limit for online gaming and lotteries has been removed. All receipts from these sources will be taxable at 30%, with TDS deducted at the time of receiving winnings.