We are budgeting all the time, knowingly, and unknowingly, as it helps us in keeping our expenses in tandem with our income. Every year the finance minister of the country along with the team prepares a budget for the nation which decides on how much taxes are to be collected or other non-tax sources of revenue. Most people assume that these are government activities that have no bearing on their lives. However, the truth is, budget announcements are one of the most significant aspects of your budget and financial management. Consider this, when you buy products or avail services, buy fuel or pay for cooking gas, you are paying indirect taxes or availing subsidies, embedded in the product price which goes/comes, straight to/from the Government; when you receive salary or such income, the tax deducted also goes to the Government. All these tax rates are decided by the Government. Meanwhile, the public amenities you use such as roads, railways, bridges, police etc. are all affected by the Government policies which are decided and announced during the annual budgeting activity. If you are a business person, these policies may favourably or adversely impact your business as well, apart from your finances. Allowing foreign players, subsidising rates, granting more licenses or providing more liquidity to the economy, all bear a huge impact on the businesses – directly and indirectly. Following are the key changes announced in Budget 2023 relating to your investment income –

Life insurance proceeds to be taxable if the premium exceeds INR 5 lakh

Under section 10(10D), maturity proceeds from a life insurance policy are exempt, if the premium does not exceed 10% of the sum assured. The purpose of the exemption was to promote the social welfare of the common citizens. To avoid this benefit to high net worth individuals, in Budget 2022, Unit Linked Insurance Policies (ULIP) where annual premiums exceeded INR 2,50,000 were excluded from such exemption. If a taxpayer had multiple unit-linked policies, this limit was to be considered in aggregate, and only proceeds from policies up to an aggregate premium of INR 2,50,000 were exempt. This is applicable for policies issued from February 1, 2021, onwards. Now, another amendment has been introduced to tax the proceeds from all other policies apart from unit-link policies where the aggregate annual premium is more than INR 5,00,000. This is applicable for policies issued from April 1, 2023, onwards. Thus, going forward, maturity proceeds from ULIPs with premiums up to INR 2,50,000 and from other policies with premiums up to INR 5,00,000 would be tax-exempt. In the case of multiple policies, if the premium exceeds the aforesaid limits, the aggregate proceeds from policies up to the threshold specified would be exempt, and those exceeding the threshold would be taxable. Keyman insurance policies would not be covered by these rules. Such maturity proceeds would be taxable under section 56(2)(xiii). These amendments would be applicable from FY 2023 onwards.

Conversion of physical gold to electronic gold will not be taxable

The establishment of Gold Exchanges in India was announced during the previous budget and the Securities and Exchange Board of India (SEBI) has been appointed as its regulator. SEBI has drawn a detailed regulatory framework for the Gold Exchanges and is authorising vault managers to manage the physical gold. To promote Electronic Gold Receipts (EGR) which are traded on these exchanges, the conversion of physical gold into EGR through the SEBI registered vault managers is being excluded from the purview of Capital Gains tax. The same would not be considered a ‘transfer’ and therefore, would not be taxable. Further, the cost of acquisition and holding period for the EGR would be reckoned from the date the physical gold was originally purchased. Necessary changes have been introduced in section 2(42A), section 47 and section 49. These provisions are applicable from FY 2024 onwards.

The new threshold for deduction under sections 54 and 54F

Under section 54, a deduction can be claimed against capital gains from the sale of residential property, if a taxpayer purchases or constructs another residential property. For capital gains arising from any other asset, a similar deduction is available under section 54F. These deductions were introduced to promote housing for all citizens. Until now, there was no maximum limit of deductions under this section. However, such deductions are now restricted to a maximum of INR 10 crore, to ensure high net worth individuals do not get the benefit of the same. This amendment is effective from FY 2024 onwards.

Interest on a housing loan cannot be claimed twice

Interest on housing loans is allowed as a deduction under section 24 while calculating income from house property and in certain cases under Chapter VIA. Some taxpayers when selling the property, after claiming such deduction over the years, were adding the interest cost to the purchase value, and reclaiming the same once again while calculating capital gains. This resulted in a double deduction of the same expense. Therefore, section 48(ii) has been amended to provide that interest cost claimed under section 24 or Chapter VIA will not be included in the Cost of acquisition or cost of improvement while calculating capital gains. This amendment is effective from FY 2024 onwards.

Taxability of winnings from online games

Since there has been a rise in online gaming, taxation of the same has been reviewed. Section 194B has been amended to include gambling or betting of any kind, however, would exclude online games from July 1, 2023, onwards. A new section 194BA has been introduced, with effect from July 1, 2023, to provide for TDS on online games, on net winnings in the user account at the end of the financial year, or at the time of withdrawal of such winnings. Section 194B and 194BB are also amended to clarify that the deduction under these sections is applicable on the aggregate amount exceeding INR 10,000 and not individual transactions above this threshold. A new section 115BBJ has been introduced to tax winnings from online games at the rate of 30 per cent. These amendments are effective from FY 2024 onwards.

Taxation of market-linked debentures

Market Linked Debentures are hybrid securities listed on exchanges that combine the features of plain vanilla debt securities and exchange-traded derivatives. Long-term capital gains arising on such debentures are currently taxed at 10% without any indexation benefit. Since these debentures have a derivative component, a new section 50AA has been introduced to specifically tax such market-linked debentures as Short term capital gains only. Therefore, any capital gains arising from such debentures would be deemed to be short-term capital gains, irrespective of the holding period, and would be taxed at normal slab rates as applicable in the case of short-term capital gains. This new rule with be effective from FY 2024 onwards.


  1. The Jawaharlal Nehru Memorial Fund, Indira Gandhi Memorial Trust, and Rajiv Gandhi Foundation have been excluded from the list of eligible funds for deductions under Section 80G.
  2. Under section 45(5A) proportionate share in stamp duty value of land or building under a Joint Development Agreement, as increased by any other consideration received in cash or otherwise, would be considered as full value consideration received, to calculate capital gains.
  3. Under the Prohibition of Benami Property Transactions Act, 1988, an appeal to the tribunal can now be filed within 45 days from the date of receipt of the order, instead of the date of order.