New Income Tax rules to kick in from April 1; all you need to know about the changes

 

As we approach the new financial year, it is important to know beforehand about the changes in income tax rules, as this is also when the proposed finance bill comes into force. It keeps us prepared and ready for the changes needed to fine-tune our portfolio. 

Based on the proposals made in Budget 2023, Neeraj Agarwala, Partner, Nangia Andersen India, shared some new tax rules to kick in from April 1: 

Reduction in TDS for salaried employees 

The new tax regime kicks in from April 1 and as a result taxpayers with income from salaries may see a reduction in the TDS. For taxpayers who have taxable income below Rs 7,00,000 and who have opted for the new tax regime, no TDS will be deducted due to the additional rebate provided for under section 87A of the Income-Tax Act,1961 (ITA). 

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Further, for individuals whose taxable income exceeds Rs 5 crore, the applicable surcharge is reduced from 37 per cent to 25 per cent under the new tax regime. The reduction in overall TDS will depend on the scheme opted for by the taxpayer and the taxable income, however, some relief may be expected especially for taxpayers opting for a new tax regime. 

Conversion of Gold to Electronic Gold Receipt (EGR) not taxable  

From April, conversion of the physical form of gold into EGR and vice versa by a SEBI-registered Vault Manager can be done free of any capital gain tax. This measure is aimed at promoting the concept of electronic gold and encourage smooth conversion. 

Gift received by not-ordinary residents will become taxable 

Any gift above Rs 50,000 received by a resident but not ordinary resident (RNOR) from a resident will become taxable in their hands. As per Income Tax Act, 1961 an individual is a NOR if an individual has been a non-resident in India in 9 out of 10 previous years preceding that year, or has been in India for a period of 729 days or less during the seven previous years preceding that year. 

TDS on listed debentures  

The proviso to section 193 of the ITA provides an exemption from TDS in respect of payment of interest on certain securities. Clause (ix) of the proviso to the aforesaid section provides that no tax is to be deducted in the case of any interest payable on any security issued by a company, where such security is in dematerialiSed form and is listed on a recogniSed stock exchange in India. However, from April, this exemption is withdrawn and TDS of 10 per cent will be deducted from all payments of interest including listed debentures. 

TDS and taxability on net winnings from online games 

The taxability of winnings from online games will be under the provisions of new section 115BBJ of the ITA and flat 30 per cent tax will be applicable on such winnings. The amount of taxes will be deducted at source from the winnings.  

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Limiting the benefit claimed under section 54 and section 54F 

From the new financial year, only gains up to Rs 10 crore would be exempt under the provisions of Section 54 and 54F of the ITA. The balance capital gains, i.e., above Rs 10 crore, will now be taxed at a flat rate of 20 per cent (with indexation). It may be noted that the maximum surcharge applicable on income from capital gains is restricted to 15 per cent under both old regime and new tax regime. 

Under Section 54 a tax benefit is given to a taxpayer who sells his residential house and acquires another residential house from the sale proceeds. Under section 54F tax benefits are given on the long-term capital gains earned from selling any capital asset other than a house property.

Higher capital gains on market linked debentures 

Market-linked debentures (MLD) are instruments that offer fixed returns to their investors based on the underlying market index’s performance. From FY23, the capital gains as a result of the transfer or redemption or maturity of such instruments shall deem to be short-term capital gains and taxable at applicable slab rates. Earlier the gains were claimed to be equity in nature and taxed at 10 per cent/15 per cent depending on the holding period of the instrument.  

Higher capital gain taxes under Section 24     

The cost of acquisition or the cost of improvement, shall not include the amount of interest claimed under Section 24 or Chapter VIA. Accordingly, capital gain on sale of property will be higher and erstwhile double deductions claimed by the taxpayer will be eliminated. 

Hence, as you step into the new financial year be mindful of the above-mentioned changes to take the right decision when it comes to your money.