Budget is something that we all eagerly wait for and here are we to share hey highlights of the same that will help you as an individual to make changes in your financial decisions:
Changes in New Tax Regime:
In budget 2023, it was observed that the government is trying to make the New Regime more attractive and nudge you into moving to the new tax regime. Here are the following changes you should know about:
1. Tax-free income - Under the old and new tax regimes, income up to INR 5 lakhs was tax-free. But from the 2023-24 financial year, the tax-free limit has been increased to INR 7 lakhs. This tax exemption is only available under the New Tax Regime i.e if your total income (without any deductions) is 7 lakhs or less, you do not have to pay any taxes.
Actionable: Despite choosing the new tax regime, it is still important to have your insurance and retirement investments in place. The old regime pushes you to have a financial plan and investments through tax exemptions and reductions, such as the Public Provident Fund (PPF) with a 15-year lock-in for retirement savings or health insurance for hospitalization coverage. However, the new regime offers no such exemptions, requiring individuals to pay taxes on all income without deductions such as under 80C or 80D, which may discourage investment and insurance purchases. It is crucial to maintain these important financial aspects despite the tax regime choice.
2. Changes in Income Tax Slabs for New Regime - This will lead to tax payout reducing because the slab rates are more paced out.
3. Standard deduction for the New Regime - A deduction of INR 50,000 is now available under the new regime as well. However, please note no other deductions under the new regime are allowed. Actionable: A review of your tax work to know whether you should go under the old regime or the new regime in the following year. Where you are making investments (like NPS) or buying a house on loan - only for tax saving purposes. It's time to pause and review the same.
As we always say, tax planning is a small part of your financial planning and not vice versa.
1. Post office deposit Scheme update: FM has proposed to raise the deposit limit under Post Office Monthly Income Scheme to Rs 9 lakh for a single account and Rs 15 lakh for joint accounts.
2. SCSS Scheme Update - Currently, the maximum limit for Senior Citizen Savings Scheme or SCSS limit is Rs.15 lakh. This is now enhanced to Rs.30 lakh. This I think is a big booster for senior citizens.
PS - Interest from SCSS is taxable and is still a great investment option for people above 6.
3. New Saving Scheme for Women - A new saving scheme called "Mahila Samman Saving Patra" has been introduced, offering a deposit facility of up to INR 2 lakhs for 2 years at a fixed interest rate of 7.5%. The certificates are to be issued till 2025. We will soon come up with more details on it.
General Tax Changes:
1. Section 54 and 54F Limit - Exemption from Long Term Capital gains is now capped at INR 10 crore on investment in residential houses under sections 54 and 54F.
2. Tax exemption on Insurance Premium - Income from traditional insurance policies other than unit-linked insurance plans (ULIPs) where the aggregate premium is over INR 5 lakh in a year is now taxable for policies purchased after 31 March 2023. Basically, the maturity amount that one receives from such policies will be taxable. Actionable: This a welcome move as the tax benefits on Traditional (endowment Plans) was a big sale and with that gone, Investors will evaluate it for other features. Also, there could be an increase in sale offers from Insurance companies to make the best of tax benefits on these policies for the next 2 months. Please be careful and consult someone before Investing in these randomly (only for tax reasons).
3. TDS on EPF - Earlier during the withdrawal of EPF (within 5 years), if you do not provide a PAN number, then the TDS was at 30%. Now it is red.
Also, for any help with tax planning and Investment planning hit us at firstname.lastname@example.org