2024 Income Tax Returns – How will the IT rules announced in 2023 impact 2024?

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Some significant changes were made in the income tax laws in budget 2023 and through the FY by the CBDT or the Central Board of Direct Taxes. A noteworthy Income Tax rule announced on personal taxation was the introduction of a New Income Tax Regime, which was made the default tax regime in 2023.

The new regime with six tax slab rates also slashed the surcharge rate for individuals with an income beyond 5 crores as well as introduced full tax rebates for individuals earning up to 7 lakhs as income as per section 87A.

In this post, let us look at some announcements on the income tax rules or the IT returns made in 2023 that will likely impact you in 2024.

Rules Under the New Income Tax Regime

In the union budget 2023, many announcements related to income tax were made, including one that made the New Income Tax Regime the default tax regime. It said that the new tax slab 2023 will allow people to gain better in terms of tax benefits. This will help the taxpayer to decide where to invest their money for better returns.

Read this articles for more information: Old vs New Income Tax Slab

The top changes in the income tax rules announced in the 2023 budget were:

1. New Regime of Income Tax Introduced:

The 2020 budget announced the introduction of the new tax slabs, and it applied to the taxpayer as a choice. So, the taxpayer had the choice of opting for the new tax regime or the old tax slab as per their preference till March 2023. However, in the 2023 budget announcements, the new tax regime was made the default tax regime. Although the old one was available for the taxpayer to choose from. However, for people who didn’t specify the particular tax regime at the time of filing tax returns, their taxes will be calculated as per the new income tax slab.

2. Income Tax Slabs were Modified:

With the change in the income tax regime, the government also changed the income tax slabs to make the new tax regime appealing to taxpayers.

Below are the modified tax slabs for 2023:

Income Slabs

Income Tax Rates 

Up to INR 3 lakh

Nil (Zero tax on income)
INR 3 lakh and INR 6 lakh

5% (Tax rebate u/s 87A)

INR 6 lakh to INR 9 lakh

10% (Tax rebate u/s 87A up to INR 7 lakh)
INR 9 lakh to INR 12 lakh

15%

INR 12 lakh to INR 15 lakh

20%
Above INR 15 lakh

30%

3. Rebates in Income Tax Act:

Earlier, zero tax was applied to individuals who earned up to 5 lakh annual income. However, the union budget for 2023 declared a hike in that slab, and the limit was raised to INR 7 lakh. Thus, people with annual incomes up to INR 7 lakh are not required to pay any tax.

4. Normal Deductions Allowed Under the New Tax Regime:

The standard deduction under the Old Tax Regime of INR 50,000 was extended to the new regime tax slabs in the budget 2023 announcements. Earlier, it was restricted to the old tax regime only. This inclusion extended the tax-free income, including the rebate, to INR 7.5 lakh.

5. Long-Term Capital Gain (LTCG) Benefits Removed on Debt Mutual Funds:

As per government orders, investments in mutual fund returns are not eligible for LTCG taxation after 31 March 2023. Thus, the tax will be imposed on capital gains of debt mutual fund units according to taxpayer tax slabs and not as LTCG indexation.

Before budget 2023, LTCG tax benefits were available on debt mutual funds. Hence, for debt MFs bought on or before 31 March 2023, the tax will be imposed as per the old regime.

6. Surcharge Reduced for Individuals with INR 5 Crores Plus Income:

Budget 2023 also reduced the surcharge from 37% to 25% for individuals with an annual income of INR 5 crores and above to bring the tax rate from 42.74% to 39% as per the new tax regime.
Earlier, a 37% surcharge was levied on taxpayers with an income of INR 5 crore and above
under both tax regimes – old and new, which pushed the tax rate to 42.74%, including surcharge.

7. Tax on Maturity amount of Life Insurance Policies:

Earlier, as per government decree, maturity amount of life insurance policies was not entirely exempted from income tax. However, the new rule stated that the maturity money would be taxable if a taxpayer pays INR 5 lakh and above on total premiums for non-ULIP life insurance plans in a budget year. In the case of ULIPs, if the premium paid is INR 2.5 lakh and above in a financial year, the maturity amount will be taxable.

8. Cap on Maximum Deduction Earned from Property Sale:

INR 10 crore cap is imposed by the government on the maximum deduction to be claimed from monetary gains received from residential property sale u/s 54 and 54F of IT Act. This rule impacts High Net Worth Individuals who sell residential property to use the fund in buying new property to save on LTCG taxes.

9. Discard Return Option:

The discard return option was announced in 2023 by the Income Tax department, allowing taxpayers to delete their unconfirmed ITR completely. Hence, taxpayers can remove or change any unverified ITR submitted earlier and rectify errors.

10. Deduction of TDS for Online Game Winnings:

2023 also saw the introduction of a new rule by the government. As per this rule, the deduction on TDS for online game winnings was reduced and fixed at 30%. Earlier, TDS was applied on an amount above INR 10,000 in a financial year. After the new rule declared on March 31, 2023, you can file an ITR to claim an income tax refund if tax is deducted beyond your taxable income.

So, Here’s How IT Rules Announced in 2023 Impacts in 2024?

As discussed above, even though changes in income tax rules were announced in 2023, they will impact the taxpayer in 2024 when filing an income tax return (ITR) in July 2024. This will simultaneously impact the taxpayer in the financial years to come.

Thus, when you file ITR in 2024 for FY2023-24 (AY 2024-25), you will have to be careful about which tax slab to opt for. If you opt for the new tax regime and you earn an annual income of not beyond INR 7 lakh, you will not pay any taxes. However, you may note that an INR 12,500 rebate is also available under the old tax regime and can be availed by taxpayers with an annual income that is not beyond INR 5 lakh.

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Jan 05, 2024
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