Here are 15 income tax changes that came into effect from April 1, 2022, along with a brief explanation of each:
New income tax slabs under new tax regime:
The government has introduced new income tax slabs under the new tax regime, which will be optional for taxpayers to choose. The new slabs are designed to be more simplified and beneficial for taxpayers with lower income levels.
No LTCG tax on debt mutual funds:
Long-term capital gains (LTCG) tax on debt mutual funds has been abolished, which means that investors will not have to pay tax on the profits made from selling their debt mutual fund investments after holding them for a certain period.
No tax on maturity proceeds of ULIPs:
The government has also announced that maturity proceeds from Unit Linked Insurance Plans (ULIPs) will not be taxed if the annual premium paid is up to Rs 2.5 lakh.
Interest income from EPF to be taxed:
Interest income earned on contributions made to the Employees Provident Fund (EPF) will now be taxable for individuals who contribute more than Rs 2.5 lakh annually.
TDS threshold for senior citizens raised:
The threshold for Tax Deduction at Source (TDS) on interest income for senior citizens has been raised from Rs 50,000 to Rs 75,000, which means that senior citizens will not have to pay tax on their interest income up to Rs 75,000.
No deduction for medical reimbursement:
The government has abolished the tax deduction for medical reimbursement, which was previously available to salaried employees.
Tax exemption for ULIPs with annual premium up to Rs 2.5 lakh:
ULIPs with an annual premium of up to Rs 2.5 lakh will now be exempt from tax under Section 10(10D) of the Income Tax Act.
Higher TDS for non-filers of ITR:
The TDS rate for individuals who do not file their income tax returns (ITR) has been increased from 5% to 10%.
Increase in standard deduction:
The standard deduction for salaried employees has been increased from Rs 50,000 to Rs 75,000, which means that they can now claim a higher deduction while calculating their taxable income.
Changes in NPS tax treatment:
The government has made changes to the tax treatment of contributions made to the National Pension System (NPS), which will now be taxed at the time of withdrawal.
New tax regime for dividend income:
Dividend income will now be taxed under a new tax regime, which will be applicable to individuals who earn more than Rs 5 lakh in dividend income.
Increased tax on interest income from PF:
The tax on interest income from Provident Fund (PF) contributions has been increased from 9.5% to 10%.
Deduction for rental income:
Salaried employees who receive rental income will now be able to claim a standard deduction of 20% of the rent received.
TDS on cash withdrawals:
TDS will now be applicable on cash withdrawals of more than Rs 1 crore in a financial year from a bank account.
New tax regime for senior citizens:
The government has introduced a new tax regime for senior citizens, which provides additional benefits and exemptions for individuals aged 75 years or above.
The 15 changes in the Indian income tax regime that took effect from April 1, 2022, include new tax slabs, an option to choose tax regimes, exemptions on various gratuities and leave encashment, lower tax on NPS withdrawal, and more. While some deductions have been removed and certain contributions are now taxable, taxpayers can make an informed decision on which tax regime to choose based on their personal financial situation. These changes aim to make the tax system more efficient, beneficial, and streamlined for taxpayers in India.