HIGHLIGHTS ON DIRECT TAX - BUDGET 2023

The Finance Minister, Nirmala Sitharaman, unveiled the Union Budget 2023 on 1st February 2023.

THE BUDGET MENTIONED: Inclusive development, reaching the last mile, infrastructure, and investment, unleashing the potential, green growth, youth power, financial sector as its seven priorities. Let’s discuss Budget 2023.

BUDGET 2023 HIGHLIGHTS ON DIRECT TAX:

The new tax regime is now the default tax regime. However, taxpayers have an option to choose the old tax regime.

            Income

Slab Rate

Up to Rs. 3,00,000

Nil Rate

Rs. 300,000 to Rs. 6,00,000

 5%

Rs. 6,00,000 to Rs. 900,000

10%

Rs. 9,00,000 to Rs. 12,00,000

15%

Rs. 12,00,000 to R

s. 1500,000

20%

Above Rs. 15,00,000

30%
THE GOVERNMENT HAS TAKEN SOME MEASURES TO MAKE THE NEW TAX REGIME MORE EFFECTIVE:

1.A tax rebate on income of Rs 7 lakhs has been introduced under the new tax regime. Therefore, you do not have to pay tax if your taxable income is below 7 lakhs under the new tax regime.

2.The standard deduction of Rs 52,500 has been introduced under the new tax regime as well.

3.The highest surcharge under the new tax regime has been reduced to 25% from 37% for people earning more than Rs 5 crore. This move brings down their tax rate from 42.74% to 39%.

4.Leave Encashment: The exemption threshold for Leave encashment has been increased to Rs 25 lakh from Rs 3 lakh for non-government employees. Thus, at the time of retirement, leave encashment of up to Rs. 25 lakhs for a maximum period of 10 months are tax-free under Section 10(10AA).

5.TDS on EPF Withdrawal: TDS rate has been reduced to 20% from 30% on taxable withdrawal of EPF.

6.Payment Based Deduction: Any payment made to MSME shall be allowed as expenditure only when payment is made. This move brings ‘payments to MSME’ under the purview of Section 43B.

7.Capital Gains Exemption limit: The capital gains tax exemption under Section 54 to 54F is restricted to Rs. 10 crores. Earlier, there was no threshold.

8.No Penalty: Where a loan is accepted or repaid by a primary agricultural credit society or a primary co-operative agricultural and rural development bank to its members or vice versa, no penalty would arise under Section 269SS or 269ST.

PRESUMPTIVE TAXATION LIMITS REVISED FOR FY 2023-24:

Category

Previous limits

Revised limits

Sec 44AD: For small businesses

Rs 2 crore

Rs 3 crore

Sec 44ADA: For professionals like doctors, lawyers, engineers, etc.

Rs 50 lakh

Rs 75 lakh
The increase in limits is subject to a condition that the 95% of the receipts must be through online channels. 

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