List of changes effective from the new financial year

List of changes effective from the new financial year April

April is considered to be an important month from a financial perspective. Let’s see what are the major changes that will be effective from the new financial year starting from 1st April 2023 

As the new financial year 2023-24 is set to begin this week on April 1, 2023, taxpayers in India will be affected by several changes to the income tax rules. The changes were announced by Union Finance Minister Nirmala Sitharaman during the Union Budget presented on February 1, 2023. The recently passed Finance Bill 2023 too introduced some changes which are likely to affect some sections of taxpayers and investors.

April is an important month from a financial perspective as several new rules kick in for taxpayers. Apart from new tax slabs and changes in savings scheme benefits, here are the major changes that will be effective from the new financial year.

  • New income tax regime to become default tax regime for salaried individuals. Others can still opt for the old one if needed.
  • The leave encashment for non-government employees is exempt up to a certain limit. This LTA encashment limit was ₹3 lakhs for two decades (since 2002). It has now increased to ₹25 lakh w.e.f FY 2023-24.
  • PAN will be deactivated if it’s not linked to Aadhaar by June 30, 2023.
  • Budget 2023 also introduced a premium limit on traditional life insurance plans for claiming tax exemption on maturity proceeds. For life insurance policies issued on or after 1 April 2023, the tax exemption on maturity benefits under Section 10(10D) will only be applicable if the aggregate annual premium paid by an individual is up to ₹5 lakhs. For life insurance premiums beyond ₹5 lakh limit, the proceeds will be added to the income and taxed at applicable rates.
  • In a boost for senior citizens, the maximum investment limit for the Senior Citizen Savings Scheme (SCSS) has been doubled from Rs 15 lakh to Rs 30 lakh, effective April 1, 2023. SCSS is a government-backed retirement benefits programme for senior citizens to invest a lump sum in the scheme, individually or jointly, and get access to regular income along with tax benefits. 
  • In a move that seems to be aimed at encouraging the purchase of electronic gold, the government has removed capital gains tax if physical gold is converted to an Electronic Gold Receipt (EGR) and vice versa. Effective April 1, 2023, conversion of the physical form of gold into EGR and vice versa by a SEBI-registered Vault Manager will be excluded from the purview of ‘transfer’ for capital gains.
  • Only gold jewelry hallmarked with a 6- digit alphanumeric HUID will be allowed for sale.
  • From April 1, 2023. taxation of income from listed market-linked debentures (MLDs) will no longer be favourable. MLDs will now be taxed as debt instruments, putting an end to the more benign equity-like taxation currently. 
  • In the recently passed Finance Bill 2023, LTCG tax benefits on debt mutual funds have been taken away. From April 1 2023, investments in debt mutual funds will be taxed as short-term capital gains.
  • The price of LPG cylinders likely to be increased.
  • Winning proceeds from online gaming would be subject to 30% TDS.
  • The standard deduction was earlier not allowed in the new tax regime until FY 2022-23 (AY 2023-24). However, this benefit of a standard deduction of Rs.50,000 will now be allowed for salaried persons under new tax regime as well, from FY 2023-24 (AY 2024-25) onwards.
  • Budget 2023 also made an annual income of up to ₹7 lakh tax-free. The enhancement of tax rebate limit to ₹7 lakh from ₹5 lakh from the new financial year 2023-24 means that those having income less than ₹7 lakh would have their entire income tax-free under the new income tax regime. 
  • The turnover limits under section 44AD will be increased to Rs3 crore for particular business.

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