1. The new tax regime is now the standard system
The Finance Act, 2020 has introduced a new tax regime which is now the default regime for Individuals, HUF, AOP (other than co-operatives), BOI & AJP. Under this new regime, TDS (tax deducted at source) will be deducted from employees' salaries unless they inform their employers that they want to opt for the Old income tax regime. Employees can change their option while filing their Income Tax Return (ITR).
2. New Tax Regime to Result in TDS Reduction for Taxpayers with Salary Income
Starting from April 1st, a new tax regime will be implemented which could result in a reduction of TDS for salaried taxpayers. Those who have opted for the new tax regime and have a taxable income below Rs. 7,00,000 will not have any TDS deducted. This is due to an additional rebate provided under section 87A of the Income-Tax Act, 1961. For individuals whose taxable income exceeds Rs. 5 crore, the applicable surcharge will be reduced from 37% to 25% under the new tax regime. The exact reduction in TDS will depend on the taxpayer's chosen scheme and taxable income. However, it is expected that taxpayers who opt for the new tax regime will experience some relief from TDS.
3. TDS on EPF Withdrawal Without PAN to be Charged at 20%
If someone withdraws money from their Employee Provident Fund (EPF) account but doesn't provide their PAN number, then the Tax Deducted at Source (TDS) on the withdrawal will be 20%, instead of the maximum marginal rate that is currently applied.
4. Tax exemption on life insurance proceeds limited to premiums below Rs 5 lakh
Starting from April 1, 2023, if you buy a new life insurance policy and pay an annual premium of more than Rs 5 lakh, you will not get a tax exemption on the maturity benefit. This means that if you receive money on maturity from such policies, it will be added to your income and taxed as per the applicable tax rates. However, this rule will not apply to the death benefits received from the policy. Until now, all life insurance policies were tax-free for maturity benefits and death benefits, as long as the premium paid was within a certain limit based on the sum assured.
5. Taxpayers to See Higher Capital Gains on Sale of Property from this Financial Year
When selling a property, the cost of acquisition or improvement will no longer include the amount of interest claimed under Section 24 or Chapter VIA. This means that the capital gain on the sale of the property will be higher and taxpayers will no longer be able to claim double deductions. As we enter the new financial year, it's important to be aware of these changes and make informed decisions regarding our finances. It's recommended to seek advice from a financial expert to understand how these changes may impact your specific situation.
6. Exemption Limit for Capital Gains Reduced to Rs. 10 Crore
Starting from the new financial year, gains up to Rs. 10 crore will be exempt under Section 54 and 54F of the ITA. Any capital gains exceeding Rs. 10 crore will be taxed at a flat rate of 20% (with indexation). It's important to note that the maximum surcharge applicable on income from capital gains is limited to 15% under both the old and new tax regimes. Section 54 provides a tax benefit for taxpayers who sell their residential house and use the sale proceeds to acquire another residential house. Meanwhile, Section 54F provides tax benefits for long-term capital gains earned from the sale of any capital asset, except for a house property.
7. No Capital Gains Tax on Conversion of Physical Gold into EGR by SEBI-Registered Vault Managers Starting April
Starting from April, the conversion of physical gold into electronic gold receipts (EGR) and vice versa can be done without any capital gain tax by a Vault Manager registered with the Securities and Exchange Board of India (SEBI). This step has been taken to promote the use of electronic gold and make the conversion process smoother.
8. Tax Implications of Gift Received by RNOR from Resident
Any Gift Over Rs. 50,000 is Taxable- If a resident but not ordinary resident (RNOR) receives a gift valued at over Rs. 50,000 from a resident, it will be taxable as per the Income Tax Act, 1961. An individual is considered to be an NOR if they have been a non-resident in India for nine out of the 10 years before the current year, or if they have been in India for a period of 729 days or less in the seven previous years before the current year.
9. New Reduced Income Tax Rates for Manufacturing Co-operatives and Non-Manufacturing Income
A new section 115BAE is added which reduces the income tax rates for certain cases. Manufacturing co-operative societies established after April 1, 2023, and starting production before March 31, 2024, will be taxed at 15% (plus surcharge of 10% & cess) without certain incentives or deductions. Other income that is not related to manufacturing or production will be charged at 22%.
10. New Limit for Cash Transactions by Agricultural Credit Societies and Rural Development Banks
Agricultural Credit Societies (PACS) and Primary Co-Operative Agricultural and Rural Development Bank (PCARD) will not face penalties for accepting or repaying loans for transactions below Rs. 2,00,000 in cash, using any mode of payment with banking companies. Earlier, the limit for such transactions was Rs. 20,000.
11. TDS on lottery and horse race winnings to apply to annual amounts over Rs 10,000, not transaction-wise
TDS will be deducted from winnings from lotteries, game shows, puzzles, and horse races only if the amount or total amount received by an individual in a financial year exceeds Rs 10,000. The limit of Rs 10,000 will be checked person-wise instead of transaction-wise by the payer.
12. Co-operative Societies get TDS Relief
Threshold limit for cash withdrawal increased to Rs 3 Crores- The threshold limit for co-operative societies to withdraw cash from banks without incurring TDS (Tax Deducted at Source) has been increased from Rs 1 crore to Rs 3 crore.
13. TDS relief for non-residents
Tax to be deducted at lower of 20% or treaty rate with tax residency certificate from 01.04.2023-Non-residents or foreign companies receiving certain income will have TDS deducted at a rate of 20% or the rate specified in a tax treaty, whichever is lower. To avail of this relief, the payee must provide a tax residency certificate from 01.04.2023.
14. Amendments to Section 206AB and 206CCA exclude certain non-filers from higher TDS deduction
The Indian government has made changes to two sections of the Income Tax Act: Section 206AB and Section 206CCA. These changes exclude certain individuals from the scope of these sections, provided they meet certain criteria. Specifically, individuals who are not required to file an income tax return and have been notified by the government are now exempt from the provisions of Section 206AB and Section 206CCA.This means that these individuals will not be subject to higher deductions of tax at source, which would have previously applied under the old rules. In simpler terms, they will not have to pay as much tax upfront, as they will not be subject to the same deductions as other taxpayers who are required to file a return of income.
15. Exemption of TDS on interest payments for listed securities to be withdrawn from April
Under the Income Tax Act, there is a provision (called Section 193) that allows certain types of securities to be exempt from tax deduction at source (TDS) when interest is paid on them. Clause (ix) of this provision specifically exempts the payment of interest on securities issued by a company, as long as the security is in dematerialized form and listed on a recognized stock exchange in India. This means that no tax would be deducted from the interest payments made on such securities. However, starting from April, this exemption will no longer apply, and TDS of 10% will be deducted from all payments of interest, including listed debentures. In other words, individuals who receive interest payments on securities, including those that were previously exempt, will now have to pay a 10% tax on the interest they receive.
The author is a Chartered Accountant with 2 decades of experience into Accounting, Taxation, Auditing, Risk & Compliance, Credit Controls, Due diligence. Currently the author is founder and managing partner at RRL Global services.
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