A new financial year will begin from Saturday (April 1) and many changes will come into effect. Among these are the changes in income tax rules that will directly impact many people in India. New tax slabs too will come into effect, which the government says will benefit several taxpayers. Notably, the new tax regime will be the default tax regime unless a taxpayer chooses the old regime while filing the income tax return (ITR). These changes were announced by Finance Minister Nirmala Sitharaman in her Budget speech this year.
Here are the big changes in income tax rules coming into effect from April 1:
New tax regime to be the default regime: The government will make the new income tax regime the default from the new financial year. However, taxpayers will still have the option to choose the old tax regime, but they will now have to specifically indicate this preference. Under the old tax regime, taxpayers were allowed to claim benefits under house rent allowance (HRA), interest on home loan, children education allowance and deduction for professional tax.
According to Forbes, those opting the new tax regime won't be allowed to claim these common exceptions.
Those who go with the new tax regime will be taxed as per new slabs. Under the new regime, the tax rebate limit will be enhanced to Rs 7 lakh from the existing Rs 5 lakh. This means that no tax would be levied on individuals with annual income of up to Rs 7 lakh under the new tax regime. Experts say the move will push salaried class taxpayer to switch to new tax regime.
The new tax slabs will be as follows:
- Income part from Rs 3 lakh and Rs 6 lakh will be taxed at 5 per cent
- Rs 6 lakh to Rs 9 lakh will be taxed at 10 per cent
- Rs 9 lakh to Rs 12 lakh will be taxed at 15 per cent
- Rs 12 lakh to Rs 15 lakh will attract a 20 per cent tax
- Rs 15 lakh and above will be taxed at 30 per cent
But it doesn't mean a person will be charged a flat 15 per cent if he/she earns Rs 10 lakh. HDFC Bank explained the deduction of tax under the new regime on its website. According to it, income up to Rs 3 lakh will attract zero tax, while the income between Rs 3 lakh and 6 lakh will be charged 5 per cent (Rs 15,000 tax). Further, income between Rs 6 lakh and Rs 9 lakh will attract 10 per cent tax (Rs 30,000 tax) while the remainder Rs 1 lakh will attract 15 per cent tax rate (another Rs 15,000), So, the total tax levied on the person will be Rs 60,000.
Apart from these, the exempt limit for leave encashment under Leave Travel Allowance (LTA) has been increased to Rs 25 lakh per annum. The limit for the same was Rs 3 lakh since 2002.
Also, the indexation benefit in LTCG tax will go away from April 1, 2023. The indexation benefit will no longer apply to debt funds that are held for longer than three years.
Senior citizens will get more benefit as the limit for savings scheme will be increased to Rs 30 lakh from Rs 15 lakh.