Union Budget, 2023 – Direct Taxes

Our Finance Minister, Mrs. Nirmala Sitharaman presented the budget speech for the upcoming financial year on 1st February, 2023 and in this blog I’ll be covering the key points relating to Direct Tax.

There was a major change proposed in the Personal Income Tax slabs for which I’ll be posting a separate blog.

For the full budget speech, please click on the following link: https://www.indiabudget.gov.in/doc/Budget_Speech.pdf

Full Finance Bill: https://www.indiabudget.gov.in/doc/Finance_Bill.pdf

Key points relating to Direct Tax:

• Average processing period of returns has been reduced from 93 days since financial year 2013-14 to 16 days.
• The government intends to roll out a next-generation Common IT Return Form for tax payer convenience.
• Till now, micro enterprises with turnover up to ₹2 crore and certain professionals with turnover of up to ₹50 lakh could avail the benefit of presumptive taxation. Our Finance Minister has proposed to increase the above limits to ₹3 crore and ₹75 lakh respectively, to the tax payers whose cash receipts are up to 5% of the total receipts.
• Proposal to allow deduction for expenditure incurred on payments to MSME’s only when payment is actually made, so as to support the MSME’s in timely receipt of payments.
• Now, new co-operatives which commence manufacturing activities till 31.3.2024 will get the benefit of lower tax rate of 15% as is currently available to new manufacturing companies under section 115BAB.
• Proposal to extend the date of incorporation of startups for income tax benefits from 31.3.2023 to 31.3.2024. And another proposal to provide the benefit of carry forward of losses on change of shareholding of start-ups from 7 years of incorporation to 10 years.
• Increase in the deduction from capital gains on investment in residential house under sections 54 and 54F from ₹2 crore to ₹10 crore.
• Currently, the highest personal income tax rate in the country is 42.74%. Proposal to reduce the maximum rate of surcharge from 37% to 25%, thereby reducing the maximum tax rate to 39%.
• Currently, the limit for leave encashment for tax exemption in case of retirement of non-government employees is ₹3 Lakh, which is proposed to be increased to ₹25 Lakh.
• Now, the new tax regime will be the default, but the citizens will continue to have the option of old tax regime.

These were the brief points that were proposed by our Finance Minister, Mrs. Nirmala Sitharaman during the Union Budget.