Finance Bill 2023, was presented by Hon’ble Finance Minister in the parliament on 01.02.2023 and we had provided live updates of important announcement made by our Finance Minister.
Now that we have the Finance Bill let’s discuss what are the important amendments announced:
Changes in the tax rate for individuals:
No amendment has been proposed in the old Tax regime for Individual and HUF but amendments have been only proposed in New Tax regime.
New tax regime will now be the default tax regime.
Revised New Tax regime for individuals and HUF under section 115BAC:
| OLD Slab Rates (as per sub section 1) | REVISED Slab Rates (as per sub section 1A) | ||
| Up to Rs. 2,50,000 | Nil | Up to Rs. 3,00,000 | Nil |
| From Rs.2,50,001 to Rs.5,00,000 | 5% | From Rs. 3,00,001 to Rs.6,00,000 | 5% |
| From Rs.5,00,001 to Rs.7,50,000 | 10% | From Rs.6,00,001 to Rs.9,00,000 | 10% |
| From Rs.7,50,001 to Rs.10,00,000 | 15% | From Rs.9,00,001 to Rs.12,00,000 | 15% |
| From Rs.10,00,001 to Rs.12,50,000 | 20% | From Rs. 12,00,001 to Rs.15,00,000 | 20% |
| From Rs.12,50,001 to Rs.15,00,000 | 25% | Above Rs.15,00,000 | 30% |
| Above Rs.15,00,000 | 30% | ||
Hence, now tax rate has been reduced in the revised tax regime and also number of slabs has been reduced from 6 to 5.
New Rebate Provision under section 87A:
| Particulars | Current scenario | Amendments |
| Tax rebate under the provisions of section 87A | Total income not exceeding Rs 5 lakh, rebate of 100% tax upto Rs. 12500. | Total income not exceeding Rs. 7 lakh, rebate of 100% tax upto Rs. 25000 |
| This rebate is available only to the persons opting for new regime under section 115BAC. | ||
Standard deduction to salaried employee under New Regime:
A standard deduction of Rs. 50,000 will now be available even to salaried employee who have opted for new tax regime.
Considering the above standard deduction and new tax slabs it was mentioned in the Parliament that a salaried employee will now get relief of Rs.52,500 under the revised new tax regime as now with increase slab rate he will now save Rs.2500 at 5% on increased slab rate by Rs.50,000.
Changes in Income Tax for High Net Worth Individuals:
Surcharge reduced from 37% to 25%:
Highest Rate of surcharge has been reduced for persons opting for new regime u/s 115BAC from 37% to 25%. Hence, now any HNI earning more than Rs.2 crore will have to pay surcharge at 25% only.
Taxability of Insurance Policies:
In relation to insurance policies other than ULIP policies where the premium of a single policy or aggregate of all policies issued on or after 01.04.2023 exceeds Rs 5 Lakhs, any amount received from such policies to the policyholder shall not be exempt u/s 10(10D) of the Income Tax Act.
However, the amount received in relation to death of a person will still be exempt.
Please note that ULIP policies were also removed from such exemption if the amount of policies exceed Rs.2.5 lakh.
Exemption of Sec 54 and 54F:
Limit on the maximum exemption that can be claimed by the assessee by investment in house property u/s 54 and 54F to Rs. 10 Crores each.
Taxability of Market Linked Debenture:
New section 50AA introduced where the capital gains arising from MLD shall be considered as Short Term Capital Gain (STCG) irrespective of its period of holding and shall be chargeable to tax at slab rate.
Changes proposed in the Budget for Business owners and Professionals:
Increase in the limit of turnover u/s 44AD and 44ADA:
- It has been proposed in provision of Section 44AD to increase turnover limit from Rs.2 crore to Rs.3 crore provided receipt in cash in the business is less than 5% of total turnover to be eligible to claim benefit of Section 44AD.
- Similar amendment has been made in provisions of Section 44ADA where limit of receipts has been increased from Rs.50 lakh to Rs.75 lakh provided receipt in cash is less than 5% of total turnover to be eligible to claim benefit of Section 44ADA.
- Cash receipt has been defined in the provision as any amount received in cash or bank overdraft or bank cheque other than account payee cheque.
Applicability of Section 43B on transaction with MSME:
Any sum payable to micro and small enterprise shall be allowed only on payment basis and shall be disallowed u/s 43B if the payment is not made.
Generally, 43B allows expense to be claimed if payment is made before filing of return. However this benefit is not available in relation to above sum. Hence, deduction shall be allowed only in the year of payment.
If the time limit of payment (not exceeding 45 days) is post the financial year end, it appears that such expense could be allowed on accrual basis in the same year if payment is made within prescribed time as required under MSME Act.
This are the major Amendment under Direct Tax announced in the Budget 2023 which we have discussed. We shall try and cover other amendments in our upcoming articles.
To download Finance Bill CLICK ME.
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Guidance on above article by:
Naman Maloo (C.A., B.Com)
He is currently working as Partner – Direct Tax with a renowned firm in Jaipur having experience in dealing Assessments before Income Tax authority, Tax Audit, International Taxation, Tax planning for NRI, Business planning and consultation.
E-mail: naman.maloo@jainshrimal.in | LinkedIn: Naman Maloo
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