Income Tax Slab Revamp

February 2, 2023

During the Union Budget presentation, Finance Minister Smt Nirmala Sitaraman announced that people earning up to Rs 7 lakhs need not pay taxes. Tax surcharges of the taxpayers in the highest tax bracket were reduced from 37% to 25%. The bottom line, the new income tax slab benefits taxpayers in the highest and lowest tax brackets.

Changes will be made to Income Tax Act

The older tax slabs supported the Multi Linked Debenture (MLD). It had 12 month maturity period. It was a popular investment because of its minimal tax gains. To avoid the new tax slabs from affecting this, a new section is added to the Income Tax Act. Section 50AA is to be added. Under this, the income from the Multi Linked Debentures will be treated as a short-term capital gain.

What is MLD?

They are debt instruments. Debentures are bonds or loans. The only difference is that it needs no collateral. Take a gold loan for instance. Here you place your jewels in the bank as collateral. The bank in return gives you money. You repay the money and get back your jewels. Also, you pay interest. In debentures, you get money. However, there are no such things as jewels or property placed as collateral. A debenture is backed by reputation or credit worth. Governments and private financial companies issue debentures to raise funds. Interests are applicable to debentures. In MLDs, the debentures are linked to multiple markets such as gold funds, government securities, the Nifty index, etc.

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