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Highlights of Direct Tax Proposals in Budget , 2023
The much-anticipated Budget 2023 has laid the foundation for economic rejuvenation, and at its core are direct tax proposals that promise to reshape the financial landscape. As the fiscal year unfolds, it's essential for individuals and businesses alike to understand the key highlights of the direct tax proposals and their potential implications. In this blog post, we'll explore the significant changes and opportunities that Budget 2023 brings in direct taxation.
1. New Tax Regime Under Section 115BAC Slab Rates from AY 2024-25 onwards
| Total Income (Rs) | Rates |
| 0-3,00,000 | Nil |
| 3,00,000 - 6,00,000 | 5% |
| 6,00,001 - 9,00,000 | 10% |
| 9,00,001 - 12,00,000 | 15% |
| 12,00,001 - 15,00,000 | 20% |
| Above 15,00,000 | 30% |
The above-mentioned rates shall apply to all individual or Hindu undivided family or association of persons , or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2, unless an option is exercised under proposed sub-section (6) of section 115BAC.
The option is required to be exercised -
-
on or before the due date specified under sub section (1) of section 139 of the Act for furnishing the return of income for such assessment year, in case of a person having income from business or profession, and such option once exercised shall apply to subsequent assessment years or
-
along with the return of income to be furnished under sub section (1) of section 139 of the Act for such assessment year, in case of a person not having income referred above.
Note - No change in Old Tax Regime
Old V/S New Tax Regime slab rates before Budget 2023 i.e for AY 21-22 to AY 23-24
Old V/S New Tax Regime slab rates before Budget 2023 i.e for AY 21-22 to AY 23-24
| OLD Tax Regime |
New Tax Regime u/s 115BAC | ||
| Income Tax Slab | Income Tax Rate | Income Tax Slab | Income Tax Rate |
| Up to Rs 2,50,000 | Nil | Up to Rs 2,50,000 | Nil |
| Rs 2,50,001 - Rs 5,00,000 | 5% above Rs 2,50,000 | Rs 2,50,001 - Rs 5,00,000 | 5% above Rs 2,50,000 |
| Rs 5,00,001 - Rs 10,00,000 | Rs 12,500 + 20% above Rs 5,00,000 | Rs 5,00,001 - Rs 7,50,000 | Rs 12,500 + 10% above Rs 5,00,000 |
| Above Rs 10,00,000 | Rs 1,12,500 + 30% above Rs 10,00,000 | Rs 7,50,001 - Rs 10,00,000 | Rs 37,500 + 15% above Rs 7,50,000 |
| Rs 10,00,001 - Rs 12,50,000 | Rs 75,000 + 20% above Rs 10,00,000 | ||
| Rs 12,50,001 - Rs 15,00,000 | Rs 1,25,000 + 25% above Rs 12,50,000 | ||
| Above Rs 15,00,000 | Rs 1,87,500 + 30% above Rs 15,00,000 | ||
2. Rebate Under Section 87A
As per section 87A of the Income Tax Act 1961, an assessee having total income not exceeding Rs 5 lakh, is provided a rebate of 100 percent of the amount of income tax payable i.e., an individual having income till Rs 5 lakh is not required to pay any income tax.
From assessment year 2024-25 onwards, an assessee, being an individual & resident in India whose income is chargeable to tax under the proposed sub-section (1A) of section 115BAC, shall now be entitled to a rebate of 100 percent of the amount of income tax payable on a total income not exceeding Rs 7 lakh.
The new income tax regime to be made the default tax regime. However, citizens will continue to have the option to avail the benefit of the old tax regime.
3. Increasing Limits For Presumptive Taxation Scheme
Section 44AD & 44ADA provides for presumptive taxation for small businesses & professions as per section 44AA (1). It is now proposed to provide that:
- Under section 44AD of the Act, for eligible business, where the amount or aggregate of the amounts received during the previous year, in cash, does not exceed five percent.
- The total turnover or gross receipts, a threshold limit of 3 Crore rupees will apply.
- Under section 44ADA of the Act, for professionals where the amount received during the previous year, in cash, does not exceed five percent of the total gross receipts, a threshold limit of 75 Lakh rupees will apply.
- Provision of section 44AB i.e, Tax Audit shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub section (1) or
- section 44AD of the Act or sub section (1) of section 44ADA of the Act, as the case may be.
4. Amendment in Section 54 and section 54F
The existing provisions of section 54 and section 54F of the Income-tax allows deduction on the Capital gains arising from the transfer of long term capital asset if an assessee, within a period of 1 year before or two years after the date on which the transfer took place purchased any residential property in India, or within a period of three years after that date constructed any residential property in India.
However, it has been observed that claims of huge deductions by high net worth assessees are being made under these provisions, by purchasing very expensive residential houses. In order to prevent this, it is proposed to impose a limit on the maximum deduction that can be claimed by the assessee under section 54 and 54F to Rs. 10 Crore.
5. Blocking Double Deduction claimed Under Section 24 (b) & Chapter VIA
- Under the existing provisions of the Act, the amount of any interest payable on borrowed capital is allowed as a deduction under the head "Income from house property" under section 24 of the Act.
- Section 48 of the Act provides that the income chargeable under the head "Capital gains" shall be computed, by deducting the cost of acquisition of the asset and the cost of any improvement thereto from the full value of the consideration received or accruing as a result of the transfer of the capital asset.
- It has been observed that some assessees have been claiming double deduction of interest paid on borrowed capital for acquiring, renewing or reconstructing a property.
- Firstly, it is claimed in the form of deduction from income from house property under section 24. Secondly while computing capital gains on transfer of such property this same interest also forms a part of cost of acquisition or cost of improvement under section 48 of the Act.
- In order to prevent this double deduction, it is proposed to insert a proviso after clause (ii) of the section 48 so as to provide that the cost of acquisition or the cost of improvement shall not include the amount of interest claimed under section 24 or Chapter VIA.
6. TDS on PF withdrawal to an employee not having PAN
TDS rate to be reduced from 30 percent to 20 percent on taxable portion of EPF withdrawal in case of Non-PAN Assessees.
7. Amendment In TCS Rate On Certain Remittances
Section 206C of the Act provides for TCS on business of trading in alcohol, liquor, forest produce, scrap etc. Sub section (1G) of the aforesaid section provides for TCS on foreign remittance through the Liberalized Remittance Scheme and on sale of overseas tour package. Now it is proposed to levy TCS @ 20% (without any threshold limit) on Overseas tour packages & other cases. Earlier the rate was 5%.
8. Highest Surcharge rate reduced from 37% to 25%
Currently, the highest rate is 42.74% income tax under the new regime. The FM has proposed to reduce the highest surcharge from 37% to 25% in the new tax regime, as a result the Maximum income tax rate will be 39%.
9. Non Govt. Employees ‐ On Retirement
Leave encashment earlier was exempt upto Rs. 3 Lakh, now it is proposed to be raised upto Rs. 25 Lakh for which notification will be issued.
For more details, Please watch our video
Disclaimer: Although all provisions, notifications and updates, are analyzed in-depth by our team before writing to the public. Any change in detail or information other than fact must be considered a human error. The Guide, Articles, Blogs, FAQ and videos is to provide updated information. Tax matters are always subject to frequent changes hence advisory is only for the benefit of the general public. Hence neither TaxSmooth nor any of its Team members is liable for any consequence that arises on the basis of these write-ups.
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