The recent budget of 2024 was an interim budget and hence, there were no changes on the income tax front.
However, there were some significant changes announced in the 2023 Budget, especially in the new regime, which came into effect from FY 2023-24. As the ITR filing for FY 2023-24 will commence in this AY, which is AY 24-25, those changes would affect your tax liability.
Let’s have a look at them.
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New regime becomes the default regime: From 1st April 2023, the new regime was made the default tax regime. You can still switch and choose the regime based on which one is more beneficial to you. However, if you have income from business/profession, you can switch the regimes only once and Form 10IEA needs to be filed to opt for the old regime.
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Increased tax rebate under the new regime: The tax rebate limit has increased to ₹25,000. You’d be eligible for a rebate if your income is up to ₹7 lakhs.
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Change in the tax slabs for new regime: The tax slabs and rates for the new regime were revised and the basic exemption limit was increased to ₹3 lakhs from ₹2.5 lakhs.
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Standard Deduction of ₹50,000 was made available under the new regime.
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Reduction in surcharge rates: A surcharge is applicable on your tax liability if your total income exceeds ₹50 lakhs in a financial year. The surcharge rates also vary based on the income level and the highest surcharge of 37% is applicable on an income of over ₹5 crores. This surcharge was reduced to 25% under the new regime.
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Increased turnover limit to opt for Presumptive Taxation Scheme: This scheme can be opted by small businesses or professionals who are unable to maintain their books of accounts.
- For Businesses: Turnover limit increased from ₹2 crores to ₹3 crores.
- For Professionals: Turnover limit increased from ₹50 lakhs to ₹75 lakhs.
However, these limits are subject to a condition that not more than 5% of the gross receipts are in cash.
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Increased exemption on leave encashment: If you had received leave encashment on retirement/resignation after 1st April 2023, you’ll have to pay no taxes on amounts up to ₹25 lakhs. Earlier this limit was just ₹3 lakhs.
The filing season for FY 2023-24 will soon start and this list should help you understand the changes and make an informed decision.