Overview of the New Tax Rules for filing ITR for the FY 2023-24


Overview of the New Tax Rules for filing ITR for the FY 2023-24


Income tax return (ITR) forms for FY 2023-24 have been notified by the CBDT well in advance. Taxpayers now can start the process of compiling all the relevant details for filing the ITR. There are sweeping changes in the tax landscape for the FY 2023-24 which may have major implications for personal finances. Here’s a breakdown of the key changes in the tax rules which may be relevant while filing the ITR for the FY 2023-224:

  1. New Tax Regime to be the default tax Regime:
    a) New tax regime has become the default tax regime. If any taxpayers now want to opt for the old tax regime then such taxpayers will need to specifically choose the old regime. Such taxpayers would be required to do so by filing the Form No. 10IE before the due date of filing the ITR.
    b) If anyone plans to switch back to the old tax regime, submitting a form (Form 10-IEA) is vital before filing ITR.
    c) The frequency of switching between old and new tax regimes depends on the type of your income. If taxpayers have income from business or profession then only once switch during the lifetime is permissible. But if the income type is other than professional/business income then the taxpayers will have free entry and exit every year in any tax regime without any restrictions.
  2. Change in the Tax Rate – New Vs. Old Tax Regime:
    Income Tax slab for the FY 2023-24 shall be as under:
    a) For the taxpayers under the New Tax Regime:
    – Income up to Rs. 3 Lakh – Nil
    – Income between Rs. 3 to 6 Lakh – 5%.
    – Income between Rs. 6 – 9 Lakh – 10%
    – Income between Rs. 9 – 12 lakh – 15%.
    – Income between Rs. 12-15 lakh – 20%.
    – Income above Rs. 15 lakh- 30
    b) For the taxpayers opting for the Old Tax Regime:
    – Income up to Rs. 2.50 Lakh – Nil
    – Income between Rs. 2.50 to 5 Lakh – 5%.
    – Income between Rs. 5 – 10 Lakh – 20%
    – Income above Rs. 10 lakh- 30%.
  3. Change in the Tax Rebate Limit:
    One may note that rebate under section 87A is applicable under both income tax regimes. Tax rebate has been increased for the taxpayers for the taxpayers opting for a new tax regime. As per the old tax regime, the applicable rebate limit under section 87A is Rs.12,500/- for incomes up to Rs. 5 lakhs. However, under the new tax regime, this rebate limit has increased to Rs. 25,000/- if the taxable income is less than or equal to Rs. 7 lakhs.
  4. Standard Deduction:
    Salaried individuals are now entitled for standard deduction of Rs.50,000/-under both the regime. Earlier, the benefit of standard deduction was not available to the taxpayers opting for a new tax regime.
  5. Exemption on Leave Encashment:
    Under the new tax regime, the exemption limit for leave encashment is raised from Rs. 3 lakhs to Rs. 25 lakhs for non-government employees. So, at retirement, the leave encashment amounting up to Rs. 25 lakhs is free from tax under section 10(10AA).
  6. Life Insurance Policies:
    Amount received from life insurance policies with a yearly premium of over Rs. 5 lakhs (issued on or after 01.04.2023) will be taxable in the hands of the recipient. It may be noted that the corresponding income tax rule for Unit Linked Insurance Plans (ULIPs) is of Rs. 2.50 Lakh.
  7. Changes in the Presumptive Taxation:
    a) The presumptive scheme of taxation allows taxpayers to declare income at a prescribed rate based on certain presumptions rather than maintaining detailed books of accounts and undergoing complex calculations, allowance or disallowances provisions. The presumptive tax rate is the same under both the old and new tax regimes.
    b) Earlier, there was a maximum turnover limit of Rs. 2 Cr for opting the presumptive scheme of taxation under section 44AD for businesses. The same has been enhanced to Rs. 3 Cr for FY 2023-24.
    Similarly, the limit of Rs. 50 Lakh has been enhanced to Rs. 75 Lakh for professionals opting for presumptive scheme under section 44ADA.
    c) Both the enhanced limit of Rs. 3 Cr / Rs. 75 Lakh is subject to a condition that 95% of the receipts must be through online modes.
  1. Reduced Highest Surcharge Rate:
    One of the biggest benefits will be reduced rate of surcharge for the taxpayers in higher tax brackets of income exceeding Rs. 5 Cr. The rate of surcharge in such case has been reduced from 37% to 25%.
  1. Change in the mode of Taxation of Debt Mutual Fund & Market Linked Debentures:
    Income of FY 2023-24 from all investment in the debt fund will be subject to taxation as short-term capital gains. It is now almost at par with FDs. The holding period will not at all be relevant for taxation of the debt fund & income from Debt fund will be just added to other income & taxable according to the applicable income tax slab.
  1. Cap for claiming Capital Gain Exemption:
    Effective from 01.04.2023 (i.e., FY 2023-24), there is a ceiling on the amount which would be eligible for exemption from capital gain. All LTCG accruing or arising after 01.04.2023 will be subject to the cap of investment in the new house property of Rs. 10 Cr only. Amount invested in the new house property of an amount exceeding Rs. 10 Cr will not be considered while computing capital gain exemption amount.

Why Taxpayers should not file Return before 31st May:
Although the ITR forms have been released and taxpayers may commence filing immediately, it is recommended to wait for a while longer. The due date of filing TDS Return for March Quarter, Statement of Financial Transactions (SFT) incorporating high value transactions & 80G donation statement by trust is 31st May. Consequently, Form No. 26AS & Annual Information Statement (AIS) for every taxpayer may not accurately reflect relevant information until after this date. It would be advisable to wait and file the return after 7th June after verifying Form No. 26AS & AIS.

[Views expressed are the personal view of the author. Readers are advised to seek professional advice before taking any decisions. Readers may forward their feedback & queries at nareshjakhotia@gmail.com Other articles & response to queries are available at www.theTAXtalk.com]

CA Naresh Jakhotia
Partner – M/s. SSRPN & Co.
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