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Business News/ News / India/  New tax regime, other rules to roll out from April 1. Here's what taxpayers need to know

New tax regime, other rules to roll out from April 1. Here's what taxpayers need to know

From April 1st, the new tax regime which was announced in Budget 2023 will come into effect. Finance Minister Nirmala Sitharaman in her budget speech announced new income tax slabs and decided to make it a default tax regime. However, the old income tax slabs regime has not been abolished as well.

For the financial year FY24, there will be significant changes in taxpayers income tax rules.

The tax rates which a taxpayer needs to pay on their income and income from other sources will be changing from April 1st, 2023. In Budget 2023, Finance Minister Nirmala Sitharaman announced key major changes for hard-working middle-class citizens who pay taxes. A new tax regime has been formed, while the old tax regime still continues. But the taxpayer has an option from old and new tax rules. For those who don't choose between the two, the new tax regime will become a default tax rate for them.

Abhishek Soni, Co-founder & CEO of Tax2win, a Fisdom company said, "as we usher in the new financial year (FY 2023-24) and bid farewell to FY 2022-23, we can expect some significant changes coming into effect from April 1, 2023. These changes will involve the introduction of new rules or reforms to existing ones, as announced by the finance minister, Nirmala Sitharaman, in the Budget 2023."

Here's what taxpayers need to know about new tax rules from April 1st, as per Soni:

1. The updated income tax slab for the new tax regime will be as follows:

- Above 15 lakh income, the tax rate would be 30%

- Between 12 lakh to 15 lakh income, the tax rate would be 20%

- Between 9 lakh to 12 lakh income, the tax rate would be 15%

- Between 6 lakh to 9 lakh income, the tax rate would be 10%

- Between 3 lakh to 6 lakh income, the tax rate would be 5%

- From NIL to 3 lakh income, there will be no taxes levied.

2. The basic exemption limit has been increased to 3 lakh from 2.5 lakh to make the new tax regime more attractive. The highest tax rate of 30% will be levied on income above 15 lakh.

3. The surcharge rate has been reduced to 25% from 37% under the new tax regime for individuals earning more than 5 crores. Previously, the high surcharge rate of 37% applied to people whose income exceeded 5 crores. However, under the new tax regime, the surcharge rate is reduced to 25% for any income over 2 crores for individuals who opt for this new tax regime.

The revised surcharge rates under the new tax regime are as follows:

- Taxable income above 50 lakhs but up to 1 crore: 10%

- Taxable income above 1 crore but up to 2 crore: 15%

- Taxable income above 2 crores: 25%.

4. The new tax regime will be the default tax regime for salaried individuals who have not declared their choice.

- However, individuals and HUFs will have the option to choose between the old and new tax regimes every financial year, provided they do not have any business income.

- Individuals and HUFs with business income will have the option to choose once-in-a-lifetime. This means that once they have opted for the new regime, they will have one chance to return to the old regime. They cannot choose the new income tax regime again in future years once they have chosen the old one.

5. Section 87A rebate is available under both income tax regimes. Under the old tax regime, a rebate of 12,500 is available for incomes up to 5 lakh. For the new tax regime, the rebate has been increased to 25,000 if the taxable limit does not exceed 7 lakh. The budget 2023 announcement raises the rebate limit to Rs. 7 lakh from 5 lakh under the new tax regime.

7. The introduction of the new tax regime has caused much confusion regarding which option to choose. Therefore, the Income Tax Department has launched an 'Income tax calculator' to assist taxpayers in determining which income tax regime will be better for them in FY 2023-24.

8. The proposal to introduce a standard deduction in the new tax regime has been made in Budget 2023. Under this, salaried individuals, pensioners, and family pensioners will benefit from a standard deduction of 50,000/-. There is no change in the standard deduction provided under the old tax regime.

9. The finance minister has revised the turnover limits under section 44AD from 2 crore to 3 crore for specified businesses, including Micro, Small, and Medium Enterprises (MSMEs). The Budget 2023 has also amended section 44ADA and revised the presumptive taxation limits of gross receipts from previous limits of 50 Lakhs to 75 Lakhs for specified professions.

In conclusion, Soni said, "the new tax rules that will come into effect from April 1, 2023, will have a significant impact on taxpayers. The revised income tax slabs, the reduced surcharge rate, and the new standard deduction will benefit taxpayers."

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Updated: 26 Mar 2023, 02:48 PM IST
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