10 things individual taxpayers should know
New Delhi, Feb 2, 2023
Union finance minister Nirmala Sitharaman on Wednesday went out of her way to woo the middle class, particularly the salaried. She announced changes in the personal tax regime that effectively meant anybody with a taxable income below Rs 7 lakh per annum would now have to pay no income tax. The changes also nudged taxpayers towards the new income-tax regime introduced in 2020-21 by offering a slew of concessions under this scheme while leaving the old tax regime unchanged.
Here are top 10 things individual taxpayers should know:
1. To provide relief to the middle class, FM has further reduced income-tax rates under the new regime and allowed standard deduction of 50,000. Taxpayers should note that the new regime will now be a default option unless they opt for the old tax regime.
2. Currently, taxpayers with income up to 5 lakh do not pay any income tax as there is a rebate available. Now this rebate will be available to those with income up to 7 lakh under the new tax regime. With standard deduction of 50,000 available on salary income under the new regime, there will be no tax for salaried individuals on income up to 7.5 lakh.
3. Surcharge for taxpayers with taxable income more than 5 crore has been reduced to 25% from 37% under the new tax regime. The highest tax rate for such taxpayers would now be 39% instead of 42.7% earlier.
4. Increase in tax-free leave encashment! Tax exemption ceiling on leave encashment received by nongovernment employees has been enhanced to 25 lakh from the current limit of 3 lakh. This would provide additional tax benefit to employees eligible for higher leave encashment at the time of retirement, whether on superannuation or otherwise.
5. Presumptive taxation scheme for specified professionals is presently applicable only where gross receipts are up to 50 lakh. As per the scheme, 50% of the gross receipts can be considered as taxable business profits. In order to further ease compliance and promote non-cash transactions, the scheme is now extended to such professionals earning gross receipts up to 75 lakh but only if their cash receipts are up to 5% of total receipts.
6. The conversion of gold to Electronic Gold Receipt and vice versa will not attract any capital gains tax. This will promote investments in electronic form of gold.
7. Capital gains tax deduction on purchase of new residential house restricted! Longterm capital gains arising on sale of an asset is exempt from tax if the capital gain/sale consideration is reinvested in a new residential house. Many HNIs were taking advantage of this exemption by purchasing very expensive residential houses. In order to prevent this, a cap of 10 crore has been introduced on calculating the exemption.
8. Sum received under a life insurance policy (including bonus on such policy) is exempt from tax if the premium amount does not exceed 10% of the actual capital sum assured in any year. This tax exemption will now not be available where the aggregate annual premium payable by the individual for life insurance policies issued on or after April 1, 2023 exceeds 5 lakh. Proceeds received on death of the insured person will continue to be tax exempt.
9. Foreign remittances and sale of overseas tour packages will have higher TCS rates! There is a requirement to collect tax at source (TCS) on certain foreign remittances and on sale of overseas tour packages. The current rate of 5% TCS on these remittances has been enhanced to 20%. Also, the limit of 7 lakh for TCS to be applicable on foreign remittances (other than for education and medical treatment) has been removed.
10. Game over! It is clarified that net winnings from any online gaming platform is taxable and subject to TDS. From July 1, 2023, the minimum threshold of 10,000 for deducting TDS does not apply to winnings from online games. This will result in transparency in taxation of online gaming.
[The Times of India]