Top 7 Changes proposed in Budget 2023

Topics covered

1. Changes in Slab Rates under New Tax Regime
2. Change in the highest rate of Surcharge
3. Deductions available under New Tax Regime
4. Process to opt New Tax Regime
5. Changes in Section 44AD-Presumptive Taxation Scheme for Businesses
6. Changes in Section 44ADA-Presumptive Taxation Scheme for Professionals
7. Capital Gains Exemption Limit capped to Rs 10 crores

1. Change in Slab rates- Budget 2023 has changed the Slab rates under the New Tax Regime. The new slab will reduce Tax liability

  Important Changes

• Slabs have been reduced from 6 to 5
• Basic tax exemption limit increased from Rs 2.5 lacs to Rs 3 lacs

Question 1  Will the change in slab rates under New Tax Regime reduce tax outflow of taxpayers

Yes definitely. See the chart below

In the above table you can see the changes in slab rates would give decent tax savings to the taxpayers.

Question 2  From when will these Tax rate changes be applicable?

The Tax rates changes will be applicable from the Financial Year starting on 01.04.2023

2. Change in the Highest Rate of Surcharge

If the taxpayer is opting for the New Tax Regime, then the Surcharge rate for Taxpayers having Taxable  income between above Rs 5 crores will be 25%. The earlier Surcharge rate was 37%

This is a benefit given to High Networth Individuals. Below table will show their Tax Savings due to this change

Main point to noted is the benefit of reduced rate of Surcharge will be applicable only to those individuals who are opting for the New Tax Regime.

Considering the whopping savings in Tax Outflow due to reduced surcharge rate, it is evident that for HNI’s , having income above Rs 5 crores – New Tax Regime is beneficial

3. Deductions available under New Tax Regime

Budget 2023 has also announced 3 deductions which can be claimed under the New Tax Regime

• Standard Deduction- Standard deduction of Rs 52,500 is available to salaried individuals and pensioners
• Deduction under Section 80CCD (2) for employer's contribution to employee's National Pension System (NPS) account.
•  Contributions to the Agniveer Corpus Fund by the Agniveers. The important point to be noted here is who will be considered Agniveer. Agniveer is a separate rank in the armed forces i.e individuals who would be joining as Agniveers would be eligible to make this contribution and then claim deduction

4. How to opt for the New Tax Regime?

Budget 2023 , clearly specifies that from the financial year 01.04.23 , the default Tax filing option will be considered as the New Tax Regime. However , if an assesse wants to opt for the Old Tax Regime he has to choose the Old Tax Regime option while filing his ITR before the due date of 31’st July.

5. Changes in Presumptive Taxation Scheme- Section 44AD

The scheme of Presumptive Taxation  gives benefits to individuals and HUF by allowing them to compute taxable business income at a flat rate of gross receipts or turnover. This saves the assesses from maintaining books of accounts and filling complicated tax forms .

The turnover limit for claiming the benefits of this section is currently Rs 2 crores.

Budget 2023 has revised the turnover limit to Rs 3 crores. This is a welcome move and will help businesses registered as proprietorship to file taxes with ease.

6. Conditions to claim Benefit of Presumptive Taxation with increased turnover

Cash collections should be less than 5% of the Turnover.

Changes in Presumptive Taxation Scheme- Section 44ADA

The scheme of Presumptive Taxation  gives benefits to Professionals like Doctors, Lawyers, Architects, CA’s, CS’s, IT Professionals, Management consultants etc by allowing them to compute taxable professional income at a flat rate of gross receipts or turnover. This saves the assesses from maintaining books of accounts and filling complicated tax forms .

The turnover limit for claiming the benefits of this section is currently Rs 50 lacs.

Budget 2023 has revised the turnover limit to Rs 75 lacs. This was a much awaited amendment  and will help professionals to  file taxes with ease.

7.Capital Gains Exemption Limit Capped to Rs 10 crores

This is a major amendment proposed in the current budget.

You are aware that by taking advantage of Section 54 and Section 54F Long term capital gains tax on sale of residential and commercial property can be reduced under the respective sections. As per the new rule, the seller cannot take exemption more than Rs 10 Crores  under Section 54 or 54F with regard to a property.

Let’s understand this with the help of an example

Mr. X Sold property for Rs 20 crores. The Indexed cost of acquisition is Rs 8 crores. He invested Rs 25 crores in a new property. How much tax is he liable to pay?

This is a move to bring the rich class pay more tax on transfer of property assets .