Income Tax Guide 2023 - News Updates, Tax Slabs, Laws

The new tax regime 2023-24 was launched to simplify the taxes in India and reduce the burden of different compliances from the head of taxpayers. The major differences between the new and old tax regimes are income tax slab rates and the ability to claim exemptions and deductions.

In the budget 2023, significant changes are introduced to streamline the taxation process and promote economic growth that ensures effective tax governance in the country. Below are all the changes made in the income tax to file by individuals in the financial year 2023.

What is the Income Tax of India?

The income tax of India is a way for the government to collect revenue from businesses and individuals. These funds are used for public services such as creating bridges, roads, hospitals, etc. Other than these, it is used to provide services to citizens and pay government obligations. 

Every year taxpayers have to file their income tax return as per their tax liability. The taxpayer has different benefits from filing taxes in India as it provides certain exemptions.

Taxes mainly have two types; direct taxes and indirect taxes. The tax earned directly from income is called direct tax and tax calculation depends on the income slab as per the financial year. Direct tax has two types - Income tax and Corporate tax.

Income Tax Slabs Under New Regime 2023

Below are the new tax regimes under the new tax slabs:

Income Tax Slabs for Individual Below 60 Years and HUF 

Income Tax Slabs for Individual Between 60 Years and 80 Years 

Income Tax Slabs for Individual Above 80 Years

• In the new tax regime, a tax rebate has been introduced on income up to Rs. 7 lakhs. This means you don’t have to pay an income tax of India if your annual income is less than 7 lakh rupees as per the new regime.
• For salaried taxpayers the standard deduction of Rs. 50 thousand has been introduced.
• The highest surcharge is reduced to 25% from 37% for people who are earning more than 5 crore. This change will reduce the tax rates from 42.74% to 39%.
• The new IT tax regime is the default, the taxpayers can choose the old regime.
• Leave encashment has been introduced for non-government employees from Rs 3 lakhs to Rs 25 lakhs.
• On withdrawal of EPF, the TDS rate has been reduced to 20% from 30%.

Surcharge for the Financial Year 2023-24

As per the tax rates, the following surcharge is applicable across all the categories mentioned above

• 10% of income tax > Rs 50 lakhs
• 15% of income tax > Rs 1 crore
• 25% of income tax > Rs 2 crore
• 37% of income tax > Rs 5 crore

The 25% or 37% surcharge, which depends on the circumstance, is not applied to the taxable income under sections 111A, 112A, and 115AD. The maximum rate of additional tax that can be charged on such incomes is 15%.

The maximum rate of additional tax that can be charged on capital gains or dividend income covered by Section 112 is 15%. The maximum surcharge for an Association of Persons (AOP) that treats each member as a separate legal entity is 15%.

Note: There is applicable marginal surcharge relief available.

Who is Required to Pay Income Tax?

There are different types of taxpayers who fall into different tax slabs. The individuals are divided into two categories, residents and non-residents. The taxpayers are categorized below:

• Individual
• Hindu Undivided Family
• Firms
• Companies
• Association of Persons (AOP)
• Body of Individuals (BOI)
• Local Authority
• Artificial Judicial Person

Highlights of Budget 2023 for Income Tax

The highlights of the 2023 Union Budget for taxpayers are as follows:

• There is no change in corporate tax or capital gains tax rates.
• The basic exemption limit has increased up to Rs. 3 lakhs under the new tax regime for individuals and certain taxpayers, along with changes in income slabs.
• Cap of Rs. 100 million on the relief from capital gains on investment in residential.
• The new government income taxes system has increased tax rebates for residents with incomes up to INR 7,00,000 to up to 100% of tax. Under the new tax system, the standard deduction benefit was extended to pensioners and members of the salaried class.
• For MSMEs, the presumptive taxation threshold has increased to INR 30 million, and for some professionals, it has decreased to INR 7.5 million. Deduction on payment made to MSMEs are allowed only when the payment is made. 
• Date of incorporation for a start-up that qualifies to take advantage of income-tax benefits through March 31, 2024. The benefit of carryover of losses for qualified start-ups on shareholding change increased from seven to ten years.
• To decrease the number of pending appeals, a new Joint/ Additional Commissioner (Appeals) position has been created, and 100 new Joint Commissioners will be employed.
• Rationalization of customs duty rate structure: Basic customs duty on some goods, excluding agriculture and textiles, would be reduced.
• Input tax credits are not available for costs incurred to fulfill CSR1 obligations.
• According to GST provisions, specific non-compliance by e-commerce operators is to be treated as a crime subject to harsh punishment.
• Regardless of the level of automation or human intervention, OIDAR2 services offered by foreign residents to unregistered Indians are subject to government income tax. Additionally, the definition of unregistered persons will be broadened.

Exceptions of Income Tax Slabs

It must be understood that all the income is not taxable under the slabs. The taxable income from Capital gains is an exception to the rule. The capital gains and taxability of income depend on the assets you own and for how long you hold them. The holding period can be short-term or long-term. The holding period will decide the nature of the asset and it can differ from the other assets.

How Registrationwala Can Help You?

The changes in new tax regimes are many such as higher tax rebate limits, and streamlined tax slabs. Individuals with lower earnings and investments will result in fewer deductions and exemptions with new income tax laws.

At Registrationwala, we help individuals to file an ITR and assist them with ways to save tax by applying for required deductions and exemptions. Reach out to us to know the best possible ways to save tax from the start of the financial year.

Frequently Asked Questions

Q. Do I need to file ITR if my income is below the taxable limit? 

A. Yes, you can file an ITR which is called a nil income tax return. It will provide you with income proof for the Visa application, to apply for loans, or for any other type of credit. Also, if the TDS is deducted from your income despite your income being below the tax limit, you need to file an ITR to claim a refund.

Q. What documents are required to file ITR?

A. No document is required to file an income tax return. However, one should retain the documents to produce any competent authority as and when required in the future.

Q. Is it necessary to show income from other sources in ITR?

A. Yes, the taxable income from all sources must be disclosed while filing an ITR. Even the exempt income must be shown, similarly, it can be shown under the Schedule EI.

Q. Should I e-verify to get the IT refund?

A. Electronic verification is important to complete the process of ITR filing. One should e-verify the ITR within the stipulated time. Non-verified ITR will be treated as invalid. There are multiple ways to e-verify ITR such as Aadhaar OTP, Bank ATM, Electronic Verification Code, and net banking.