In this world, nothing is certain but death and taxes, said Benjamin Franklin and this adage holds ground even today.
Since there is nothing much that can be done regarding death, there can something be done for the taxes. All we can do is try to keep up with the latest developments to ensure that you are making the most of your money.
From April 1, 2023, the Indian government introducing some major changes to the tax system as per the announcement.
When it comes to the taxpayers’ tax obligations and tax planning strategies, there shall be significant changes brought by the new tax regime.
A comprehensive overview of the new tax rules that will be applicable from the new financial year. Following are some of the major changes in the new tax rules:
New tax regime as Default Tax Regime
Starting April 2023, the new income tax regime will be the default system for tax assessors. However, the taxpayers have an option to choose the prior system.
There shall be a standard deduction of ₹52,500 to those with taxable income exceeding Rs.15.5 lakhs. In order to make the tax regime more attractive, the basic exemption limit has been raised from ₹2.5 lakhs to ₹3 lakhs. Additionally, those with an annual salary of more than ₹15 lakhs are taxed at a rate of 30%.
Tax free Conversion of Gold to an Electronic Gold Receipt
In order to promote the electronic gold, government has taken a step towards allowing the conversion of physical gold into electronic gold receipt (EGR) and vice versa by a SEBI-registered vault manager as free from any capital gain. This move, starting from April, is anticipated to boost the digital gold market in India and make gold investments more accessible to Indian investors.
Life insurance policies will become taxable
Starting, 1st April 2023, the proceeds from life insurance premium over the annual premium of ₹5 lakhs will be taxable. This new income tax rule won’t be applicable to ULIP (unit-linked insurance plan). ULIP is a type of insurance policy that combines insurance and investment, where a part of the premium is invested in market instruments like equities and debt.
Gifts received by not-ordinary residents will be taxed
Any gift above ₹50,000 received by a resident individual who is not an ordinary resident (RNOR) is liable for taxation. According to the income tax act, an individual is deemed to be an RNOR if he has been a non-resident in India for nine out of the last ten years preceding the assessment year, or has been in India for a cumulative period of 729 days or less during the seven years preceding the assessment year. Hence, any gift over and above the prescribed limit received by an RNOR will be taxable in their hands.
Limited Benefits claimed under Section 54 and Section 54F
The Indian tax act provides tax incentives for those selling their residential houses under section 54 and long-term capital gains on any capital asset except a house property under section 54F. From the new financial year, however, the maximum exemption provided under both sections is restricted to ₹10 crore, and any gains above that amount will be taxed at a flat rate of 20 percent (with indexation). The maximum surcharge applicable to income from capital gains remains at 15 percent.
Tax on Winnings from online games
The new section 115BBJ of the income tax act makes winnings from online games taxable. Any winnings from such activities will be subject to a flat rate of 30 percent taxation, which will be deducted at source from the winnings. This rate of taxation will be applicable for all types of winnings, including cash, kind, vouchers, or any other form of benefit.
The new tax regime proposed in the union budget is set to bring about major changes to the taxation system in India. It is important to stay informed about the latest developments to ensure that you are making the most of your money.
