Budget 2023: How Income Tax Rules Have Changed Over The Past 7-8 Years
As Budget 2023 nears, let’s take a look at the changes that have been introduced in the Income Tax laws over the past few years.
Over the past few years, the country has seen some major changes in Income Tax laws that have financially impacted the citizens. For the most part, the government has implemented these changes with the aim of simplifying the tax system and increasing compliance with the larger public. As the Union Budget for 2023-24 is going to be announced soon, let’s take a look at some of the key changes made to income tax rules in India over the past few years.
Major Changes To Income Tax Rules Over The Past Few Years
Here are some of the major changes that have been introduced in Income Tax rules over the past 7-8 years that you should be aware of:
Increase In The Tax Exemption Limit
Until 2013, people who earned up to ₹2 lakh in a year did not have to pay any income tax on it. However, in 2014, the government changed the Income Tax laws and increased this amount by 50,000 rupees. This effectively meant that since this change was introduced, people who earned an annual income of up to ₹2.5 lakh were exempt from paying any income tax, rather than the previous limit which was just ₹2 lakh.
Additional Deduction Through Section 80CCD
In 2015, the government introduced a new section to the Income Tax Act called 80CCD(1b) that allowed people to save more money for their retirement. As per section 80CCD(b1), people can save up to 50,000 rupees in the government's National Pension Scheme and still not pay tax on it. This is in addition to the maximum deduction of ₹1.5 lakh on various investments allowed under section 80C, which brings the total combined deduction to ₹2 lakh.
Increase in House Rent Allowance (HRA)
In 2016, the government also introduced a change to the House Rent Allowance (HRA). Previously, employees who did not get an HRA allowance from their employers were only allowed a deduction of ₹24,000. However, since 2016, this limit has been increased up to ₹60,000 allowing renters to get higher deductions for HRA.
Reduction In Income Tax Rate
Back in 2017, the government introduced another major change, which was the reduction in the rate of income tax from 10% to 5% for the income tax slab of ₹2.5 lakh to ₹5 lakh. This essentially meant that people within this tax bracket could now save up to a maximum of ₹12,500 on the reduced income tax rate.
Standard Deduction
In 2018, the government introduced a standard deduction in Income Tax, which replaced the earlier medical reimbursement of ₹15,000 and transport allowance of ₹19,200. With this rule of deduction, employees and pensioners can get a standard deduction of up ₹40,000 per year without having to show any documentation or proof of expenses.
Also Read: Budget 2023: Date, Time, Where And How To Watch It Live
Other Changes To Income Tax
While we have looked at the major changes to Income Tax rules above, let’s take a look at some other smaller changes that were also introduced during this period:
Deduction of up to ₹50,000 under 80CCG for RGESS funds was removed in 2017.
Long-term capital gains beyond ₹1 lakh from stocks, and equity funds are to be taxed at 10% as of 2018.
Up to Rs 50,000 interest earned by senior citizens to be tax-free, including savings bank interest as introduced in 2018.
Dividends from stocks and mutual funds are to be taxed as regular income as introduced in 2020.
Interest from PF contributions above ₹2.5 lakh a year is to be taxed as regular income as of 2021.
ULIPs with premiums of ₹2.5 lakh and above have lost tax-free status and to be be taxed as mutual funds as of 2021.