The Union government announced several significant changes and made major income tax announcements for the financial year 2023-24 for both salaried and non-salaried taxpayers. The changes range from deduction and exemption limits to making the new income tax regime the default one, impacting personal taxation, savings, and investment plans. With inflation at significantly higher levels, the changes in taxation policy had been both constrained and determined to meet the country’s needs.

Here are some major income tax announcements made in 2023. These rules apply only to the new tax regime, except for the regulations on leave encashment limit and life insurance premiums.

Default Tax Regime: The government has made the new income tax regime the default one starting April 1, 2023, although taxpayers can still avail of the old regime.

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Income Tax Slabs: The government announced new income tax slabs in its 2023 Budget. Zero tax on income up to Rs 3 lakh; 5 percent between Rs 3 lakh and Rs 6 lakh; 10 percent on Rs 6 lakh to Rs 9 lakh; 15 percent on Rs 9 lakh to Rs 12 lakh; 20 percent on Rs 12-15 lakh, and 30 percent on income over Rs 15 lakh.

Income Tax Rebate: Individuals with an annual income up to Rs 5 lakh were not required to pay any tax earlier. However, the 2023 budget has increased the limit to Rs 7 lakh. So, individuals earning up to Rs 7 lakh per annum are not required to pay any taxes.

Standard Deduction: The standard deduction available in the old regime has also been extended to the new income tax regime, providing salaried individuals with significant relief.

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Leave Encashment Exemption Limit: The leave encashment amount claimed as exemption has been increased to Rs. 25 lahks from Rs. 3 lahks for non-government employees, citing a general salary increase.

Life Insurance Premiums: The maturity proceeds from life insurance policies after April 1, 2023, where the total premium per annum exceeds Rs. 5 lakh will be taxable.

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Conclusion

The new tax rules are both forward-looking and thoughtful, accommodating the expectations of the common man. It tried to address the concerns raised about the new regime while allowing individuals to continue with the old regime if it was beneficial for them. For instance, most benefits under the old tax regime have been retained, including the limits under sections 80C and 80D of the Income-tax Act.