Also Read: Everything To Know About the New Income Tax Regime 2023

What did Sitharaman announce?

The minister announced changes to tax slabs under the new regime, adding, however, that taxpayers will still be able to select the regime under which they want to file their returns. In case no choice was made, the new tax regime will be default, she said.

Also Read: Confused about old and new income tax regime? Here’s a dedicated calculator

What to know about the new tax rules?

Speaking to HT’s sister publication Mint, Abhishek Soni, co-founder and CEO, Tax2Win, explained what citizens must know about the new tax rules. “As we usher in the new financial year, and bid farewell to FY 2022-23, we can expect some significant changes coming into effect from April 1, 2023. These changes will involve the introduction of new rules or reforms to existing ones, as announced by the finance minister, in the Budget 2023,” said Soni.

Here are a few things one must know about the new rules, as per Abhishek Soni:

(1.) The increase of basic exemption limit (from ₹2.5 lakh to ₹3 lakh) is to make the new regime more ‘attractive.’ The highest rate of 30% will be levied on annual salary of more than ₹15 lakh.

(2.) The surcharge rate has been reduced from 37% to 25% for those earning more than ₹5 crore annually. Under the new regime, however, this 25% rate is for individuals with yearly income exceeding ₹2 crore.

(3.) Individuals and Hindu Undivided Families (HUFs) can choose between the regimes in every FY (if there is no business income). For those with business income, on the other hand, there will be only one chance to return to the old regime, if they opted for the new one.

(4.) Section 87A rebate is available under both. Also, for those confused which one to opt for, the Income Tax Department has launched a ‘calculator.’

(5.) Under a proposal to introduce a standard deduction in the new regime (no changes made for the old one), people will benefit from a standard deduction of ₹50,000.

MUMBAI: Economists are lowering their forecasts for India’s current-account shortfall, thanks to favorable trade trends that are proving to be a blessing for the rupee — currently among the worst performers in emerging Asia.
Barclays Plc expects the gap in current account — the broadest measure of trade in goods and services — to be 1.9% of gross domestic product in the year starting April 1, down from a 2.3% deficit it had estimated earlier. Citigroup Inc slashed its forecast even further to 1.4% of GDP from 2.2% previously, reflecting a steady drop in goods imports and strength in services exports.
The lower prints will provide a tailwind to the rupee, which is vulnerable to a selloff, given the twin deficits in the nation’s budget and current account make it more reliant on foreign inflows. A narrowing shortfall will also take the pressure off the central bank to sell foreign exchange from its reserves to stabilize the currency and check imported inflation.
“We are encouraged by the fact that the narrowing of the trade deficit has sustained and services exports remain strong,” said Ashish Agrawal, head of foreign-exchange and emerging-market macro strategy research at Barclays in Singapore. “The lower current account deficit reduces dependence on financing flows and RBI’s dollar sales at the margin.”
Lower trade gap is leading to hopes of better rupee fortunes | Goods trade deficit has declined to lowest in thirteen months
That’s an added positive for the rupee, which along with Asian peers gained against the dollar after a dovish interest-rate hike by the Federal Reserve.
Services surprise
What seems to have caught economists by surprise is the strong services exports print.
Services trade surplus was strong at $14.6 billion in February, building on January’s revised surplus of $13.8 billion. Services exports nearly touched $30 billion in both January and February, an increase of about 40% on-year.
HSBC Holdings Plc attributes a part of this rise to Global Capability Centres set up by large multinational corporations. India is home to about 40% of global GCCs, and this ratio is only expanding as they rise in scope, an HSBC report said.
“Services trade surplus is truly a hero in India’s foreign trade story right now,” said Dhiraj Nim, an economist and forex strategist at Australia and New Zealand Banking Group, who is confident the trend will continue.
Barclays expects the improving external sector fundamentals and relatively cheap valuations to help the rupee rally later as the dollar weakens. But most remain cautious amid global volatility and the Reserve Bank of India’s aim to build back reserves at every opportunity.
From the current account perspective, this augurs well for the rupee, said Madhavi Arora, lead economist at Emkay Global Financial Services Ltd. That said, the global situation is extremely fluid and could adversely impact global risk appetite for risk EM assets, including the rupee — emerging Asia’s worst performing currency last year and among the bottom this year.
“Thus the capital account side also needs a watch,” she said.