As the new financial year 2023-24 starts today (April 1), individuals will be affected by several changes. These amendments were announced by Union Finance Minister Nirmala Sitharaman during the Union Budget presented on February 1, 2023. The recently passed Finance Bill 2023 also introduced a slew of changes which will likely affect one's personal finances.

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Here we list all personal finance changes that take place from today:

Income tax changes

New tax slabs under new tax regime

Budget 2023 introduced several changes to the 'new income tax slab', which will be effective from April 1, 2023. As part of this, the tax rebate has been extended on income up to Rs 7 lakh as per Section 87A, as against Rs 5 lakh. The basic exemption limit has been raised to Rs 3 lakh from Rs 2.5 lakh.

As per the revision, an individual with an annual income up to Rs 3 lakh will not have to pay any tax (as against an earlier limit of Rs 2.5 lakh). Further, it has put 5 percent tax for income between Rs 3 – 6 lakh, 10 percent for income between Rs 6-9 lakh, 15 percent for income between Rs 9-12 lakh, 20 percent for income between Rs 12 – 15 lakh and 30 percent above Rs 15 lakh.

The new slab, with changes, will also become default option.

Standard deduction in new tax regime

Standard deduction for salaried employees will be a part of 'new tax slab' from April 1, 2023. Additionally, each salaried person with an income of Rs 15.5 lakh or more will stand to benefit by Rs 52,500 as standard deduction.

Reduced surcharge under new tax regime

The surcharge will be lowered from 37 percent to 25 percent for those earning more than Rs 5 crore a year under the 'new income tax regime'. This means that, with effect from April 1, 2023, all income above Rs 2 crore would be subject to 25 percent surcharge. This also brings down the highest tax rate from 42.74 percent to 39 percent.

TDS on online gaming

The tax deducted at source (TDS) on online gaming applications will be effective from April 1, 2023. TDS on winnings from online games will be deducted for every rupee earned, net of entry fees (if any).

No LTCG and indexation benefits on debt funds

The investment in mutual fund where not more than 35 percent is invested in equity shares of Indian company (which is debt funds) will be considered as short-term capital gains. This means long-term capital gains will go away.

Also, debt funds held for more than three years will no longer enjoy indexation benefits. Additionally, they won't be eligible for a 20 percent tax rate.

Reduced TDS on EPF withdrawals for non-PAN cases

In case of withdrawals, where EPF account is not seeded with account holders' PAN card, TDS rate will come down to 20 percent from April 1, 2023 or from the beginning of FY24.

Tax exemption up to Rs 25 lakh on leave encashment

The limit of tax exemption on leave encashment on retirement of non-government salaried employees will be raised to Rs 25 lakh from April 1, 2023.

Changes in insurance sector

Insurance taxation changes

If premium paid by an individual for a savings life policy is more than Rs 5 lakh than on maturity the income from policy will be taxed. The threshold of Rs 5 lakh will be applicable on first year premium and not first year + renewal.

This will, however, not impact taxation of unit-linked insurance plans (ULIPs), term insurance and old policies, The income from insurance policies with aggregate premium up to Rs 5 lakh shall be exempt. This will not affect the tax exemption provided to the amount received on the death of person insured.

Removing sub-limits on expenses and commissions of policies

The insurance regulator has revised Expenses of Management (EOM) and commission limits for the industry, which will come into effect from April 1, 2023. This will replace the earlier cap on commission payments with an overall cap on expenses of management of insurers.

Capital gains changes

No capital gains on converting physical gold to digital gold

Converting physical gold to Electronic Gold Receipt and vice versa will not be considered a transfer and not attract any capital gains from April 1, 2023. This would promote investments in the electronic equivalent of gold.

New cap on reinvestment of capital gains from the sale of housing property

From April 1, the government will impose a Rs 10 crore cap on the reinvestment of capital gains from the sale of housing property under the provisions of Sections 54 and 54F of the income tax act.

Section 54 lets a taxpayer claim benefits on selling a residential house and acquiring another from the sale proceeds. On the other hand, Section 54F offers tax on the long-term capital gains from the sale of any capital asset other than a house property.

Higher capital gains on market linked debentures

The capital gains as a result of the transfer or redemption or maturity of market-linked debentures will be considered deemed as short-term capital gains and taxable at applicable slab rates from April 1, 2023. These gains were earlier claimed to be equity in nature and taxed depending on the holding period of the instrument.

Market-linked debentures are non-convertible in nature where the returns are not fixed but linked to the market.

Higher capital gain taxes under Section 24 of the Income Tax Act

Section 24 allows a deduction on the interest paid on a house loan up to a maximum of Rs 2 lakh in a given fiscal year in case of self-occupied property. From April 1, the cost of acquisition and the cost of the improvement will not include the amount of interest claimed under Section 24. So, the capital gain on the sale of the property will be higher and double deductions claimed by the taxpayer will be removed.

Major changes in small savings schemes

Small savings schemes are likely to get a major lift from today as the government has made some changes to the existing plans and introduced a fresh one. While the maximum deposit limit for Senior Citizen Savings Scheme (SCSS) has been hiked to Rs 30 lakh, the maximum deposit limit for Monthly Income Scheme (MIS) has been enhanced from Rs 4.5 lakh to Rs 9 lakh for a single account and from Rs 9 lakh to Rs 15 lakh for a joint account, effective from today.

The government has also launching a one-time new small savings scheme — the Mahila Samman Bachat Patra — from April 1.

New NPS rule

New rule for National Pension System (NPS) come into effect from April 1, 2023 as Pension Fund Regulatory and Development Authority (PFRDA) has mandated uploading withdrawal or Know Your Customer (KYC) documents for subscribers willing to exit and receive annuity payments. This would speed up and simplify annuity payments after exiting NPS.

UPI transactions new rule

Any Unified Payments Interface (UPI) transaction of more than Rs 2,000 via prepaid payment instruments (PPI) like online wallets or pre-loaded gift cards, etc., will carry an interchange fee of up to 1.1 percent from April 1, 2023 i.e. today. The interchange fee is typically associated with card payments and is levied to cover the costs of accepting, processing, and authorising transactions.

The fees will, however, not be applicable to consumer for UPI payments from bank account or from wallets (or from RuPay credit cards). Merchants also won't pay until and unless they agree to accept and okay to pay any charge levied by the QR company.

(Edited by : Abhishek Jha)

First Published:Apr 1, 2023 8:34 AM IST