As we step into the new financial year 2023-24, India’s tax landscape has undergone some changes. The government has implemented new tax rules that taxpayers need to understand to avoid any legal or financial complications. In this post, we will cover some of the essential new tax rules in India for 2023-24 and their implications.
Higher TDS on cash withdrawal
From 1st July 2022, the government has introduced a new provision to deduct Tax Deducted at Source (TDS) at a higher rate of 2% on cash withdrawals above Rs. 1 crore in a financial year from a bank account. The aim of this rule is to promote digital transactions and reduce the use of cash in the economy.
The new tax rules for senior citizens
The government has introduced a new tax regime for senior citizens aged 75 years or above. Under this regime, senior citizens with only pension and interest income are exempted from filing income tax returns if they have deposited the TDS amount deducted by banks. This will reduce the compliance burden for senior citizens and make tax filing easier for them.
Reduction in the time limit for filing belated returns
Previously, taxpayers could file belated income tax returns within two years from the end of the relevant financial year. However, with effect from April 1, 2022, the time limit for filing belated returns has been reduced to one year. This means taxpayers must file their income tax returns within one year of the end of the relevant financial year to avoid any penalties or legal consequences.
The new tax rules for Cooperative Societies
The government has introduced a new tax regime for cooperative societies in the Union Budget 2022-23. Under this regime, cooperative societies will now be taxed at a flat rate of 30% on their income, irrespective of their turnover. This move is aimed at simplifying the tax system for cooperative societies and reducing their compliance burden.
Changes in tax treatment for ULIPs
Unit Linked Insurance Plans (ULIPs) have been a popular investment option for taxpayers looking for tax-saving options. However, the government has changed the tax treatment of ULIPs in the Union Budget 2022-23. Under the new rule, if the premium paid for ULIPs exceeds Rs. 2.5 lakh in a financial year, the maturity amount you receive is taxed as capital gains. This will affect high-net-worth individuals who invest large sums in ULIPs for tax-saving purposes.
New rules regarding tax on Salary Income
The government of India has introduced new rules regarding tax on salary income in the Budget 2021-22. These new rules aim to simplify the tax filing process and reduce the compliance burden for taxpayers. In this blog post, we will discuss the new rules regarding tax on salary income in FY 2023-24.
Standard Deduction for Salaried Employees
- Salaried employees can now claim a standard deduction of Rs. 50,000 from their salary income, previously Rs. 40,000 in the financial year 2022-23. This deduction is available to all salaried individuals, irrespective of their income level or profession. It compensates for expenses incurred in connection with employment.
Taxation of Interest on Provident Fund Contribution
- Interest earned on employee provident fund (EPF) contributions above Rs. 5 lakhs per year will now be taxable from 1st April 2022. This move will affect high-income earners who have contributed large sums to their EPF accounts. However, contributions to the EPF account up to Rs. 2.5 lakh per year will continue to be eligible for tax deduction under section 80C of the Income Tax Act.
Taxability of Voluntary Retirement Scheme (VRS) proceeds
- The voluntary Retirement Scheme (VRS) is a popular scheme among government employees and public sector employees. However, the taxability of VRS proceeds has been a matter of concern for taxpayers. As per the new rules, the VRS proceeds are part of the salary income in the year of receipt. However, a tax exemption of up to Rs. 5 lakhs will be available for employees of public sector companies who opt for VRS.
Deduction for Contribution to National Pension Scheme (NPS)
- The government has increased the deduction limit for contributions to the National Pension Scheme (NPS) from 10% to 14% of salary income for Central Government employees. This move will encourage taxpayers to invest in NPS and avail tax benefits.
Taxability of Perquisites and Allowances
- The government has introduced a new tax regime for perquisites and allowances in the Budget 2021-22. The new regime, also taxes certain allowances and perquisites, such as Leave Travel Allowance (LTA) and House Rent Allowance (HRA), based on their actual utilization. This move will provide relief to taxpayers who do not utilize their allowances and perquisites fully.
The income tax from rental property however has remained the same.
With the new tax rules in India for 2023-4, taxpayers need to be aware of the changes and take the necessary steps to comply with them to avoid any legal or financial complications. Additionally, seeking the guidance of a tax consultant or professional can help taxpayers make informed decisions and optimize their tax planning. The new tax rules regarding salary income aim to simplify the tax filing process and provide relief to taxpayers.