India’s tax laws undergo periodic changes to address evolving economic conditions, government priorities, and taxpayer concerns. For individuals and businesses alike, staying updated on these changes is essential to ensure compliance and make the most of available tax-saving opportunities. In this blog, we will cover the recent changes in India’s tax laws, including updates to personal income tax, corporate taxes, and other important areas that may impact taxpayers for the current financial year.
1. Changes in Personal Income Tax Slabs
One of the most notable changes in India’s tax laws in recent years has been the introduction of a new tax regime. The new tax system, which was introduced in the Budget 2020 and tweaked in subsequent years, offers reduced tax rates but without the option to claim exemptions and deductions that are available in the old tax regime.
For the financial year 2023-24, the new tax slabs under the Income Tax Regime are as follows:
| Income Range | Tax Rate |
|---|---|
| ₹0 to ₹2.5 Lakh | Nil |
| ₹2.5 Lakh to ₹5 Lakh | 5% |
| ₹2.5 Lakh to ₹5 Lakh | 10% |
| ₹5 Lakh to ₹7.5 Lakh | 10% |
| ₹7.5 Lakh to ₹10 Lakh | 10% |
| ₹10 Lakh to ₹12.5 Lakh | 20% |
| ₹12.5 Lakh to ₹15 Lakh | 20% |
| Above ₹15 Lakh | 30% |
The new tax regime is optional, and taxpayers can choose between the old and new regimes. Those opting for the old tax regime can continue claiming deductions such as those under Section 80C (for PPF, EPF, life insurance premiums), Section 80D (health insurance), and others. However, the new regime is ideal for those who do not have significant deductions to claim, as it offers simplified taxation with lower tax rates.
2. Tax Deduction Limit for Senior Citizens (80TTB)
For senior citizens aged 60 years or above, the limit for deduction on interest income under Section 80TTB has been increased. The deduction limit for interest income from savings accounts, fixed deposits, and post-office deposits has been raised to ₹50,000 for senior citizens. This is a significant relief for retirees and senior citizens who rely on interest income.
This provision is separate from Section 80TTA, which provides deductions of up to ₹10,000 for interest earned on savings accounts for individuals below 60 years of age.
3. Increase in Taxable Limit for Homeowners
Under Section 24(b) of the Income Tax Act, a taxpayer can claim a deduction of up to ₹2 lakh on interest paid on home loan repayments for self-occupied property. This remains unchanged for the current financial year. However, there has been a growing trend of offering more concessions or deductions for the middle-class homebuyers as part of government efforts to promote housing.
4. Corporate Tax Rate Changes for Domestic Companies
In a bid to make India a more attractive destination for business and investment, the government had announced a reduction in corporate tax rates in previous budgets. For the current year, the corporate tax rate for domestic companies has remained competitive:
- The tax rate for domestic companies opting for the new tax regime is 22%, provided they do not avail of exemptions and incentives.
- For new manufacturing companies set up after October 1, 2019, the tax rate is 15%.
These rate reductions are intended to incentivize businesses to invest more in India, boost manufacturing, and contribute to job creation.
5. Changes to Taxation of Virtual Assets and Cryptocurrencies
India has taken significant steps towards regulating virtual assets like cryptocurrencies. In the Union Budget 2022, the government introduced a 30% tax on income from virtual assets and cryptocurrencies. This year, the government has clarified that the taxation on transfer of digital assets will be subject to a 1% TDS (tax deducted at source) on transactions exceeding ₹10,000.
Additionally, the tax treatment applies to all forms of virtual assets like non-fungible tokens (NFTs), cryptocurrencies, and other digital tokens. This move is part of the government’s effort to regulate the cryptocurrency space while collecting revenue from its growing popularity.
6. Expanded Scope of TDS for Digital Transactions
The government has expanded the scope of Tax Deducted at Source (TDS) for digital transactions under Section 194R. As per the recent changes, businesses making digital transactions (such as online sales, payments through digital wallets, etc.) are required to deduct TDS at a rate of 1% on payments made to residents if the total payment exceeds ₹50,000 in a financial year. This change helps ensure that individuals and businesses comply with tax obligations on digital transactions.
7. Reduction in Income Tax Filing Time
In an effort to streamline the tax filing process and encourage timely compliance, the deadline for filing Income Tax Returns (ITR) has been reduced. Taxpayers are now required to file their returns by July 31 for individual taxpayers, with an extended deadline of December 31 for businesses. These deadlines aim to expedite the return processing and minimize the backlogs faced by the Income Tax Department.
8. Tax Benefits for Electric Vehicle (EV) Purchases
The government has introduced several incentives under Section 80EEB for individuals who purchase electric vehicles. Taxpayers can claim a deduction of up to ₹1.5 lakh on the interest paid for loans taken to purchase electric vehicles. This initiative is part of the government’s push to promote green energy and reduce carbon emissions.
9. Additional Deductions for MSMEs
To support Micro, Small, and Medium Enterprises (MSMEs), the government has introduced several changes that provide greater tax relief. For instance, MSMEs are now eligible for additional deductions under Section 80M for dividends received by them. This is aimed at improving the liquidity position of MSMEs, helping them grow and contribute to the economy.
Conclusion
India’s tax laws have seen a range of important changes for the current financial year, from updates to personal tax regimes and corporate tax rates to new deductions for senior citizens, electric vehicle purchases, and virtual assets. These reforms reflect the government’s efforts to simplify taxation, promote investments, support businesses, and ensure fair taxation in emerging sectors like cryptocurrency.
Taxpayers should stay informed and consider these changes when planning their finances. With the right planning, individuals and businesses can optimize their tax savings and make the most of these reforms. Always consult with a tax professional if you’re uncertain about how these changes affect you.