Changes in Income Tax | Finance Bill, 2023


    The Finance Bill, 2023 has proposed changes in Income Tax Act, 1969. The highlights of the changes are explained briefly in this post

    To read about changes in GST , visit our other blogpost 

    Rebate u/s 87A increased to ₹ 7 Lakhs

    At present, those with income up to ₹5 lakh do not pay any income tax under both old and new tax regimes. It is proposed to raise this rebate limit to ₹7 lakh in the new tax regime.


    New Personal income tax rates proposed under the new regime

    ₹0 to 3 lakhNil
    ₹3 to 6 lakh 05 %
    ₹6 to 9 lakh10 %
    ₹9 to 12 lakh15 %
    ₹12 to 15 lakh20 %
    Above ₹15 lakh30 %


    Standard deduction benefit extended in the new tax regime

    It is proposed for the salaried class and the pensioners including family pensioners to extend the standard deduction of ₹50,000 benefits in the new tax regime.

    Reduction in the maximum tax rate to 39%

    The highest tax rate, currently stands at 42.74 per cent. It proposed to reduce the highest surcharge rate from 37% to 25% in the new tax regime. It would result in a reduction of the maximum tax rate to 39 per cent.


    Tax exemption limit on leave encashment increased to ₹25 lakh on the retirement of non-government salaried employees

    The limit of ₹3 lakh was last fixed in 2002 when the highest basic pay in the government was ₹30,000 per month. In line with the increase in government salaries, it is proposed to increase this limit to ₹25 lakh.

    Increasing threshold limits for presumptive taxation schemes

    The threshold limits for presumptive schemes of taxation for eligible businesses from ₹2 crore to ₹3 crore and for specified professions from ₹50 lakh to ₹75 lakh.

    Capping of deduction for Capital Gains

    Deduction from capital gains on investment in residential house under sections 54 and 54F to be capped at ₹10 Crore.

    Maturity proceeds of life insurance policies with an annual premium of over ₹5 lakhs are to be taxed

    Proceeds from life insurance premiums over the annual premium of ₹5 lakhs would be taxable from 1st April 2023. The new income tax rule won’t be applicable on ULIP (Unit Linked Insurance Plan)


    Benefit to Co-operative Societies

    • Lower income tax rate of 15% to new manufacturing co-operative societies commencing its manufacturing activities before 31st March 2024.
    • Higher limit of ₹3 Crores for TDS on cash withdrawal


    Benefit to certain start-ups

    • It is proposed to extend income tax benefits to certain startups incorporated till March 2024.
    • Also proposes to increase the benefit of carrying forward losses for certain startups to 10 years from existing 7 years.


    No capital gain on conversion of gold

    Conversion of Gold to Electronic Gold will not be treated as a transfer and hence no capital gain on the same.


    An amendment is proposed to facilitate taxpayers to claim credit of TDS relating to income which was reported in the earlier year.




    Feb 02, 2023 - Blog - Team SSB

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