In any universe, doing taxes is a complicated process and people will start rushing to their chartered accountant as the last date for filing approaches. This year, technology might play its part, with ChatGPT-4 being touted as an AI solution that can help people with taxation.
But before that is put to the test, a set of updates to tax norms will come into effect from April 2023, starting with new income tax slabs.
The modifications were announced by Nirmala Sitharaman as part of the Union Budget 2023 in February, and were lauded as friendly for the salaried classes.
Whether these reforms make taxation more or less complicated remains to be seen, but here's a look at the changes that taxpayers need to keep in mind.
Higher rebate limit, relief for salaried citizens
One of the major highlights from the budget speech was an increase in the tax rebate limit, which went up from Rs 5 lakh to Rs 7 lakh.
This means that people earning less than or up to Rs 7 lakh per annum, won't have to pay any income tax.
This will be applicable under the new tax regime, which will become default if not specified otherwise.
New rates for calculating taxes
Apart from the rebate limit hike, new tax rates will apply with income up to Rs 3 lakh attracting zero income tax, while anything between Rs 3 lakh and Rs 6 lakh will be taxed at five per cent.
Those with an income of Rs 6 lakh to Rs 9 lakh will pay 10 per cent income tax, while those earning Rs 9 lakh to Rs 12 lakh will attract 15 per cent income tax.
Income between Rs 12 lakh to Rs 15 lakh will be taxed at 20 per cent, and anything beyond that will attract 30 per cent tax.
More travel allowance
Under the new rules, a much awaited reform has been brought, increasing the leave travel allowance limit to Rs 25 lakh per year for non-government employees.
This is the first time the limit has been hiked since 2002, when it had been set at Rs 3 lakh a year.
Tax benefits on debt mutual funds to go
The new tax rules from April 1, 2023 will tax mutual funds in line with a person's income level.
This means that debt mutual funds with less than 35 per cent exposure to equity, will be taxed according to the investor's income tax slab.
Both mutual funds and market linked debentures will also be treated as short term capital gains for taxation.
Tax on proceeds from insurance
From April, any income from insurance premiums above Rs 5 lakhs a year, will be taxed.
Only Unit Linked Life Insurance Plans (ULIPs) will be exempted from this new rule.
Senior citizens can deposit more savings
Under the changed tax norms, limits on maximum deposits in senior citizen savings schemes will be doubled from Rs 15 lakh to Rs 30 lakh.
For monthly income schemes, this limit will go up from Rs 4.5 lakh to Rs 9 lakh and from Rs 7.5 lakh to Rs 15 lakh for combined accounts.
Easier to generate e-gold
The conversion of physical gold into e-gold for digital trading and storage of the yellow metal, will also become tax-free from April 1, 2023.
