Taxmann's Budget Marathon | Personal Taxation | Saraswathi Kasturirangan – Partner | Deloitte India

Content

1. Tax rates for FY 2023-24

2. Amendments to certain exemptions and Deductions

3. New Provisions under the Act

4. Miscellaneous

Tax rates for FY 2023-24

Tax rates for FY 2023-24

The tax slabs under the old regime and new regime applicable for individuals are as under:

Proposed changes to the simplified tax regime

• Basic exemption limit to be increased from INR 2.5 Lakhs to INR 3 Lakhs.

• The simplified tax regime will be the default tax regime. However, assessee to opt between old tax regime and simplified tax regime before filing the original tax return for the previous year.

• Maximum surcharge proposed to be capped at 25% (from earlier 37%). This will result in lowering the highest marginal tax rate from 42.74% to 39%.

• Rebate under 87A applicable for taxable income up to INR 7 lakhs (from earlier INR 5 lakhs)

• Standard deduction of INR 50,000 for salary income and up to INR 15,000 for family pension are proposed to be allowed No change in tax rates under the old tax regime

Individuals availing deduction of INR ~4L will find old regime beneficial if income level is up to INR 5 crores

Simplified tax regime

Simplified tax regime or New tax regime – Slab Rate comparison

If the total taxable income for salaries employee is INR 750,000 there would be no taxes payable considering standard deduction and rebate u/s 87A

For individuals with incomes over INR 5 crores, the top rate under this regime is reduced to 39% as against 42.74%

Exemptions and Deductions –

Proposed amendments

Amendments to certain exemptions and Deductions

The below amendments have been proposed in the Union Budget 2023

Capital gain exemptions

The exemption available u/s 54 and 54F of the Income Tax Act 1961 towards investment in new residential property has been proposed to be capped at INR 10 crore. Hence any gain made from sale of original long term capital asset (residential property for sec 54 and any long term capital asset for Sec 54F) in excess of INR 10 crore would now be subject to tax.

Taxation of insurance polices.

it is proposed to tax income from life insurance policies (other than ULIP for which provisions already exists) having premium or aggregate of premium above INR 5,00,000 in a year. Income is proposed to be exempt if received on the death of the insured person. Section 10(10D)

The proposed provision shall apply for policies issued on or after 1st April, 2023.

Double deduction in case of interest on borrowed capital for house property

• Interest on housing loan taken for acquisition/renewing or reconstruction of house property claimed as deduction earlier U/s 24 of the Act cannot be added to cost of acquisition/improvement at the time of computing the capital gain incomeas proposed under section 48 of the Act

New Provisions under the Act

New Provisions under the Act

Electronic gold receipt

• Conversion of physical gold into EGR (issued by a Vault Manager) and vice versa not to be considered as a “transfer” for capital gains purposes

• Holding period of EGR/gold to include the holding period of the gold prior to conversion/EGR, respectively

• Cost of acquisition of EGR/gold to be deemed to be the cost of the gold prior to conversion/EGR, respectively

Taxation of market linked debentures

‘Market Linked Debentures’ are listed securities. They are currently being taxed as long term capital gain at the rate of 10% without indexation

However going forward it has been proposed to treat any gain from sale or redemption of these debentures as Short Term Capital Gain and shall be taxed at applicable rates –Section 50AA

Miscellaneous

Miscellaneous

Deemed taxation of gifts

It is proposed that any gifts received by a Resident But Not Ordinarily Resident (RBNOR) from an Indian resident exceeding INR 50,000 shall be deemed to accrue or arise in India. Earlier this provision was applicable only for gifts received by non residents

Presumptive taxation

TCS on foreign remittance

The limit for total turnover or the gross receipts to avail presumptive taxation U/s 44AD of the Income tax Act in case of business has been proposed to increase from INR 2 crore to INR 3 Crore. Hence businesses having turnover/gross receipts up to INR 3 crore can now opt for presumption basis of taxation provided the aggregate of amounts received during the previous year in cash does not exceed 5% of turnover or gross receipts. This limit for assesses having profession has been proposed to increase from INR 50 Lakhs to 75 Lakhs -Section 44ADA.

Exemption towardsleave encashment

It is proposed to increase the rates of TCS from 5% to 20% without any threshold in case of foreign remittance towards purchase of overseas tour program and any other purpose (other than education, medical treatment and education loan obtained from financial institutions) under Liberalised Remittance Scheme (LRS)

Currently the exemption towards leave encashment at the time of resignation/retirement is exempt from taxes which is capped to a maximum of INR 3 lakhs. However it has been proposed to increase the limit from INR 3 lakhs to INR 25 Lakhs for non-government salaried employees-Section 10(10AA) of the Act

Time limit for completion of assessment proceedings

In a situation where the refund is due to the assessee for the financial year and the proceedings for assessment or reassessment is pending for such year, it has been proposed that the Assessing Officer can withhold the refund payable until such proceedings are completed-Section 245 (2) of the Act. In such cases the period from the date on which refund is withheld and until completion of assessment proceedings will be excluded.

It has been proposed to reduce TDS rate from 30% to 20% in case of taxable PF withdrawal (in case continuous contribution is less than 5 years) where PAN is not available- Section 192A

The time limit for completion of assessment proceedings U/s 143(3) of the Act has been proposed to increase to 12 months from the end of relevant assessment year in which income was assessed from the current time limit of 9 months. This change is applicable for the assessment proceedings to be completed from AY 2022-23 onwards.

Applies in case any income has been included in the return of income furnished by the taxpayer under section 139 of the Act for any assessment year and tax has been deducted at source on such income and paid to the credit of the Central Government in a subsequent financial year

In such a case the assessee can make application in the prescribed form to the Assessing Officer within two years from the end of the financial year in which such tax was deducted at source Then Assessing Officer shall amend the order of assessment or any intimation allowing credit of such tax deducted at source in the relevant assessment year

The Assessing Officer shall make rectification within 4 years under section 154 of the Act shall be reckoned from the end of the financial year in which such tax has been deducted.

TDS credit for income already disclosed in the return of income for past year

The amendment proposed to be effective from 1st October 2023.

It may also be noted that any refund arises on account of the rectification as mentioned above- the interest on refund due would be paid from the date of filing of application to the date on which refund is granted