Highlights of Budget 2023 for Direct Taxation:
Revisions in the Tax System:
The new tax regime has taken the place of the old tax regime and serves as the standard for tax calculation and collection. Taxpayers have the option to continue using the old tax regime. The tax slabs for the fiscal year 2023-24 (the assessment year 2024-25) under the new tax system are outlined below:
Up to Rs. 3 Lakh: Nil
3 Lakh to Rs. 6 Lakh: 5% on income that exceeds Rs 3 Lakh
6 Lakh to Rs. 9 Lakh: Rs 15,000 + 10% on income more than Rs 6 Lakh
9 Lakh to Rs. 12 Lakh: Rs 45,000 + 15% on income more than Rs 9 Lakh
12 Lakh to Rs. 15 Lakh: Rs 90,000 + 20% on income more than Rs 12 Lakh
Above Rs. 15 Lakh: Rs 150,000 + 30% on income more than Rs 15 Lakh
The Default Tax Regime
The new tax system has taken the place of the previous one and is now the standard method for calculating and collecting taxes. This means that individuals or businesses must follow the rules of the new tax regime unless they opt out and choose a different system.
OLD Tax Regime vs NEW Tax Regime
Under the old tax regime, individuals could claim deductions under Chapter VI-A, such as 80C, 80CCC, and 80CCD for investment in specified funds and receive a deduction of up to INR 2 lakh. Other deductions were also available, including 80D for medical insurance and 80E for education loan interest. However, these deductions are not available under the new tax regime.
Presumptive Taxation Limits
The presumptive taxation limits for small businesses (Sec 44AD) and professionals (Sec 44ADA) have been revised to INR 3 crore and INR 75 lakh, respectively. This increase is subject to the condition that 95% of receipts must be made through online channels.
The date for receiving income tax benefits has been changed to March 31st, 2024, and the time limit for carrying forward losses has increased to 10 years from incorporation.
The government has introduced proposals for co-operative societies, such as offering a 15% tax rate to new co-operatives, allowing disallowance of expenditure prior to 2016-17 to be claimed, and increasing the TDS limit on cash withdrawals to INR 3 crore. The limit for cash deposits and loans by PACS and PCARDBs has been increased to INR 200,000 per member.
Other Direct Tax Updates
The exemption threshold for leave encashment has been raised to INR 25 lakh, the TDS rate has been reduced to 20% for taxable EPF withdrawals, and payment to MSMEs will only be considered expenditure when it is actually made. No penalty will arise under Section 269SS or 269ST, and the capital gains tax exemption under Section 54 to 54F is limited to INR 10 crore.