Budget 2023 Highlights (Direct Tax)

1. Budget 2023 Highlights
By CA Shahbaaj Khan

3. Changes in New Tax Regime
• The new tax regime is now the default tax regime. The government has taken 5
key measures to make the new tax regime more attractive. However, taxpayers
have an option to choose the old tax regime.
• Change in new tax regime slabs for FY 2023-24 (AY 2024-25):
Income Slabs Income Tax Rate
Up to ₹ 3,00,000 Nil
₹3,00,000 - ₹6,00,000 5%
₹6,00,000 to ₹900,000 10%
₹9,00,000 to ₹12,00,000 15%
₹12,00,000 to ₹1500,000 20%
Above ₹15,00,000 30%

4. Changes in New Tax Regime
• Tax rebate on an income of up to ₹7 lakhs has been introduced under the new tax
regime. This means that taxpayers with an income of up to ₹7 lakhs will not have
to pay any tax at all!
• Standard deduction:
• Salary income: ₹50,000 standard deduction under the new tax regime as well.
Effectively, ₹7.5 lakhs is your tax-free income under the new regime.
• Family pension: Standard deduction on such pension: ₹15,000 or 1/3rd of
pension, whichever is lower.
• Highest surcharge under the new tax regime has been reduced to 25% from 37%
for people earning more than ₹5 crore. This move brings down their tax rate
from 42.74% to 39%.

5. Presumptive Taxation Limits Revised for FY
2023-24
Category Previous
Limits
Revised
Limits
Sec 44AD: For small
businesses
₹2 crores ₹3 crores*
Sec 44ADA: For professionals
like doctors, lawyers,
engineers, etc.
₹50 lakhs ₹75 lakhs*
*The increase in limits is subject to a condition that the 95% of the receipts must be through online
channels.

6. Start-ups
Start-ups Previous limit Revised limit
Date of
incorporation for
income tax
benefits
31.03.2023 31.03.2024
Time limit for
set-off and carry
forward of losses
7 years from
incorporation
10 years from
incorporation
• Only condition is that shareholders who
hold at least 51% shareholding must
continue to hold the shares in the year such
loss is to be carried forward and set-off.

7. Co-operative Societies
• New manufacturing initiatives: The government has extended the benefit of
concessional tax rate of 15% to new co-operatives that commence manufacturing
by 31st March, 2024.
• Sugar co-operatives: Any expenditure that was disallowed to sugar co-operatives
prior to 2016-17, can be claimed now by making an application to the Assessing
Officer.
• Section 194N: TDS limit on cash withdrawals is increased to ₹3 crores for co-
operatives societies.
• Cash deposit limit: Limit for cash deposits and loans by Primary Agricultural Co-
operative Societies (PACS) and Primary Co-operative Agriculture and Rural
Development Banks (PCARDBs) is being increased to a maximum of ₹2,00,000 per
member.

8. Agniveer Corpus Fund
To promote Agnipath scheme, the following changes will take place from 1st April
2023:
• Contributions made by an Agniveer to the Agniveer Corpus Fund will be
considered a tax deduction from their income.
• The Central Government's contribution to the Agniveer Corpus Fund will be
considered as income for the Agniveer which will also be eligible for deduction.
• Any amount received by an Agniveer or their nominee from the Agniveer Corpus
Fund will be tax-free.

9. Other Direct Tax Updates
• Leave Encashment: The exemption threshold for Leave encashment has been increased to ₹25
lakh from ₹3 lakh for non-government employees. Thus, at the time of retirement, leave
encashment of up to ₹25 lakhs for a maximum period of 10 months is tax-free under Section
10(10AA).
• TDS on EPF Withdrawal: TDS rate has been reduced to 20% from 30% on taxable withdrawal of
EPF.
• Payment Based Deduction: Payments to MSMEs must be made within the time frame agreed
upon in writing, with a maximum limit of 45 days. If there is no written agreement, the time
frame is 15 days. Any payment made outside this time frame can only be deducted (as
expenditure) in the year it is actually paid.
• No Penalty: Where a loan is accepted or repaid by a primary agricultural credit society or a
primary co-operative agricultural and rural development bank to its members or vice versa, no
penalty would arise under Section 269SS or 269ST.

10. Other Direct Tax Updates
• Capital Gains Exemption limit: The capital gains tax exemption under Section 54 to 54F is
restricted to Rs. 10 crores. Earlier, there was no threshold.
• Online Gaming: Net winnings from online gaming will be taxed at 30%. From 1 July 2023, TDS will
be withheld on such net winnings (currently the rate is 30%).
• Section 80G donations: Donations made to the following funds will not be eligible for 80G
deductions:
• Jawaharlal Nehru Memorial Fund
• Indira Gandhi Memorial Trust and
• Rajiv Gandhi Foundation

11. Revised time limits for completing assessment
Assessment Time Limit
Scrutiny assessment & best judgment
assessment
Within 12 months from the end of the
assessment year (additional 12 months if
case referred to Transfer Pricing officer)
Scrutiny assessment & best judgment
assessment in case of updated return
Within 12 months from the end of the
financial year in which such return is filed
Fresh assessment post the ITAT order or
revision order in case of updated return
Within 12 months from the end of the
financial year in which the order is passed
Assessments pending on date of initiation
of search or requisition being made
Additional 12 months from regular due
date

13. Thank You !