Part A- Direct Tax proposals

DIRECT TAX

  

Chapter Tax Rates:                                                             

1.      Individual/HUF Tax Rates

a)       For Individual assessees except senior citizens and HUF.

*Under old tax regime rebate u/s 87A will be available for those resident individuals whose income is less than 5,00,000 (i.e up to Rs.12,500)

*Under new tax regime rebate u/s 87A for the FY 2022-23 will be available for those resident individuals   whose income is less than 5,00,000 i.e up to Rs.12,500.

*Under new tax regime rebate u/s 87A for the FY 2023-24 will be available for those resident individuals  whose income is less than 7,00,000 i.e up to Rs.25,000.

b)       For Resident senior citizen assessees aged more than 60 years but less than 80 years.

*Under old tax regime rebate u/s 87A will be available for those whose income is less than 5,00,000 up to Rs.12,500

*Under new tax regime rebate u/s 87A for the FY 2022-23 will be available for those whose income is less than 5,00,000 i.e up to Rs.12,500.

*Under new tax regime rebate u/s 87A for the FY 2023-24 will be available for those whose income is less than 7,00,000 i.e up to Rs.25,000.

c)       For Resident senior citizen assessees aged 80 years or more.

*Under old tax regime rebate u/s 87A will be available for those whose income is less than 5,00,000 i.e up to Rs.12,500

*Resident Senior Citizens more than 75 or more years having only Pension and Interest Income are exempted from filing Income Tax Return

*Under new tax regime rebate u/s 87A for the FY 2022-23 will be available for those whose income is less than 5,00,000 up to Rs.12,500.

*Under new tax regime rebate u/s 87A for the FY 2023-24 will be available for those whose income is less than 7,00,000 up to Rs.25,000.

d)       Surcharge for Individuals

* Note: Health and Education Cess at 4% to be calculated on Tax and Surcharge

**   The Income mentioned above is excluding income by way of dividend or income under the provisions of section 111A and section 112A of the Income-tax Act, However the excluding income is subject to 15% Surcharge Rate.

2.      Co-operative Society Tax Rates

*Surcharge @ 7% is applicable if Total income of co operative society exceeds Rs. 1 Crore but does not exceed Rs.10 crores. Surcharge @ 12% is applicable if total income of cooperative society exceeds Rs.10Crores.

* *Health and Education Cess at 4% to be calculated on Tax and Surcharge

***New section 115BAE is introduced in the Finance act 2023 which will be applicable to the new manufacturing cooperative society setup on or after 01.04.2023 which commences manufacturing or production on or before 31.03.2024 and does not avail of any specified incentive or deductions, may opt to pay tax at a concessional rate of 15% for assessment year 2024-25 onwards. Surcharge would be at 10% on such tax.

3.      Firm/LLP and Local authority Tax Rates

Flat tax rate of 30% and surcharge @ 12% of income tax if total income exceeds Rs 1 Crore and Health and Education cess of 4% is applicable on tax and surcharge.

4.      Company Tax Rates

a)     Domestic Company

i)    Tax Rates

**   Surcharge @ 10% and Health and Education cess @4% is applicable on Special Rate 22%.

ii)  Surcharge Rates

* Health and Education Cess at 4% to be calculated on Tax and Surcharge

b)     Other than Domestic Company

i)    Tax Rates

ii)   Surcharge Rates

* Health and Education Cess at 4% to be calculated on Tax and Surcharge

Budget 2023 Major Amendments

            I.            CHANGES IMPACTING INDIVIDUAL TAXPAYERS:

New Tax Regime (Sec 115BAC):

·         New tax Regime has now made a default tax regime from FY 2023-24. It is proposed to widen the scope to cover AOP/BOI and Artificial Judicial persons.

·         Assessees with no business income have an option to opt for the old tax regime for every financial year.

·         Assessees with business income the option of shifting out of new tax regime shall be exercised only once and shall be valid for that financial year and all subsequent years. Once the option is exercised, such person shall be able to exercise the option of opting back to the new regime only once.

·         The following deductions can be claimed under new tax regime from the FY 2023-24

v  Standard deduction to salaried taxpayer of Rs. 50,000

v  Deduction from income in the nature of family pension (1/3^rd of income or Rs. 15,000, whichever is less)

v  Amount paid or deposited in Agniveer Corpus Fund under newly proposed section 80CCH of the   Act.

  Presumptive Taxation:

·         It is proposed to amend section 44AD of the Act to increase the threshold limit of turnover / gross receipts in case of resident individuals, HUF, firm (other than LLP) carrying on eligible businesses from Rs. 2 Crores to Rs. 3 Crores provided that cash receipts during the respective FY does not exceed 5% of the total turnover / gross receipts

·         Section 44ADA of the Act is also proposed to be amended to increase the threshold limit of gross receipts in case of eligible professionals from Rs. 50 Lakhs to Rs. 75 Lakhs provided cash receipts during the respective FY does not exceed 5% of the total gross receipts -

·         It is proposed to amend section 17(2) in relation to valuation of residential accommodation for the purpose of calculation of perquisite and specify the method of computation through amendment in the Income-tax Rules, 1962.

·                     Clarification on Benefits & Perquisites in cash –

v It is proposed to amend clause (iv) of Section 28 of the Act to clarify that provisions of section 28 of the Act shall apply to benefit or perquisites in cash or in kind or partly in cash and partly in kind.

v Similar amendment has been made in section 194R of the Act to provide that the  withholding tax provision    shall be applicable to payment of benefit or perquisite whether in cash or in kind or partly in cash and partly in kind.

Capital Gains:

• Conversion of Gold to Electronic Gold Receipt and vice-a-versa, not regarded as transfer for the purpose of capital gains [Sec 47] – Applicable w.e.f 01st April 2023

v  Conversion of physical form of gold into Electronic Gold Receipt (‘EGR’) and vice-a-versa, not regarded as transfer for the purpose of computing capital gains under section 45 of the Act.

v 

v  The holding period for the purpose of capital gains would include the period for which gold / EGR was held by the person prior to its conversion into EGR / gold.

• The limit of claiming capital gain exemption on transfer of long-term capital asset has been restricted to Rs. 10 crores under section 54 and 54F of the Act respectively - Applicable w.e.f 01st April 2023

• The cost of acquisition and cost of improvement to be taken as Nil in case of intangible assets or any other sort of rights for which no consideration is paid for acquisition [Sec 55) - Applicable w.e.f 01st April 2023

• The capital gains on transfer or redemption or maturity of market linked debenture is deemed to be a capital gains arising from transfer of a short-term capital asset and taxable at applicable rates [Sec 50AA] - Applicable w.e.f 01st April 2023

• The full value of consideration for the purpose of computing capital gains shall be taken as the stamp duty value of share in the joint development agreement as increased by any consideration received in cash or by a cheque or draft or by any other mode [Sec 45(5A)]

• Rationalization of exempt income under life insurance policies [Sec10(10D)] - Applicable

v    Maturity proceeds of life insurance policy (other than ULIP) issued on or after 01-04-2023, net of premiums paid on such policy, shall be taxable as income from other sources in cases where the insurance premium paid on such policy exceeds Rs. 5,00,000 in a financial year.

v    The premium shall not be reduced from the maturity proceeds in case where the same is already claimed as deduction under other provisions of Act.

v    Maturity proceeds received on death of insured person is not taxable.

• Deduction for interest on borrowed capital for acquiring, renewing, or reconstructing a property (capital asset) from the full value of consideration to arrive at capital gains [Sec 48] - Applicable w.e.f 01st April 2023

• It is proposed to provide that the cost of acquisition or the cost of improvement for computing capital gains shall not include the amount of interest claimed under ‘income from house property’ or claimed as deduction under Chapter VIA of the Act.

Other Points

• It is proposed to raise the exemption limit for leave encashment received on retirement by non-government salaried employees to INR 25 lakh from the current INR 3 lakh. This change is mentioned in the Budget speech, but a separate notification is awaited.
• Finance bill 2023 proposed to remove the three name-based funds (Jawaharlal Nehru Memorial Fund, Indira Gandhi Memorial Trust, and Rajiv Gandhi foundation) listed under sec 80G. – Applicable w.e.f 01.04.2023

·         The deeming provision for accrual of income in respect of any sum of money received as gift exceeding Rs. 50,000 has been extended to Resident but not ordinarily resident (RNOR) by a resident in India. [Sec 9(1)(viii)]

·         Income from online winnings is proposed to be taxed @ 30% [Sec 115BBJ]

·           The taxability of consideration for issue of shares (as exceeding the fair market value) extended to apply to non-residents as well [Sec 56(2)(viib)] - Applicable w.e.f 01^st April 2023

Amendments in TDS and TCS Provisions:

• Section 194B and 194BB of the Act is proposed to be amended to provide tax withholding on payments at Rs. 10,000 per FY as against Rs. 10,000 per transaction earlier. - Applicable w.e.f      01 .04.2023

• TCS rate increased to 20% (as against 5%) with effect from 01 July 2023 on remittances through the Liberalized Remittance Schemes (including overseas tour packages, Oversees Direct Investment (ODI)) other than for medical and education purposes [Sec 206C]

• Exemption from deduction of TDS withdrawn in respect of interest income earned by a resident from listed securities which is in dematerialized form. – Applicable w.e.f 01st April 2023
• The Higher rate of TDS under section 206AB & 206CCA shall not apply to those persons who are not required to furnish the return of income and are notified by the government on this behalf.
• Second proviso to section 192A providing MMR is proposed to be removed. Accordingly, the general provisions of section 206AA shall apply where PAN of the EPF holder is not available.
• The limit under section 194N has been increased from Rs. 1 crore to Rs. 3 crores in case the recipient is a co-operative society.

          II.           

It is proposed to extend the last date of incorporation for claiming tax holiday by an eligible start up by one year to 31 March 2024       ( Sec 80-IAC)

• Relaxation has been provided to eligible start-up entities under section 79 of the Income Tax Act for carry forward of losses incurred during initial 7 years. The said period of 7 years has been extended to 10 years.

       III.            CHANGES IMPACTING COMPANIES & BUSINESSES:

• It is proposed that the tax benefits for SEZ units will be allowed only when return of income is furnished on or before the due date and the export proceeds are repatriated to India within 6 months from the end of FY or as regulated by RBI [Sec 10AA(4a)] - applicable w.e.f 01st April 2023 .

• To ensure valuation of inventory as per Income Tax Act and prevent permanent deferral of taxes through undervaluation, tax officer may ask direct taxpayer to get inventory valuation done by a cost accountant and furnish valuation report as prescribed. Such period for inventory valuation is excluded for computing time limitation.

        IV.            CHANGES IN INCOME TAX RETURN FILING & ASSESSMENT PROCEDURES.

• Joint Commissioner (Appeals) is introduced as the authority to reduce burden of appeals pending before CIT(A) and to handle certain class of cases involving small amount of disputed demand.

• Facilitating TDS credit for income already disclosed in ITR of past year –It is proposed to insert section 155(20) of the Act to allow rectification in case where income has been included in ITR of any assessment year and tax has been deducted by deductor in subsequent year. The assessee is required to file application in prescribed form within 2 years from the end of the financial year in which TDS has been deducted. Further, interest on refund under section 244A of the Act in such cases is proposed to be from date of application to the date when refund is granted. These amendments will take effect from 1st October 2023.

• Set-off and withholding of refund due –It is proposed to amend section 245 of the Act that where refund becomes due to a person, then the AO having regard to the fact that assessment or reassessment proceedings are pending in such case and grant of refund is likely to adversely affect the revenue, may withhold the refund till the date on which such assessment or reassessment is made.

• The time limit for completion of assessment proceedings from Assessment Year (AY) 2022–23 onwards is proposed to be increased to 12 months from the end of the AY.
• To make compliance easy and smooth, it is proposed to roll out a Common IT Return Form for taxpayer convenience.

• Reduced timeline to submit TP documentation - The time limit to furnish TP documentation and other information as required by transfer pricing officer (TPO) has been reduced from 30 days to 10 days [Sec 92D]

          V.            CHANGES IMPACTING CHARITABLE INSTITUTIONS

• Form No. 9A (85% not utilized due to amount not received to the trust eg; in accrual basis of accounting) / Form No. 10 (shorter of 85% may be accumulated upto 5 years in normal course of trust activities) are to be filed at least 2 months prior to the due date of filing return of income under section 139(1) of the IT Act [Sec 11(1)]
• Eligible donations made by a trust or institution to another trust shall be treated as application only to the extent of 85% of such donation.
• New trusts or institutions shall be allowed to make application for the provisional registration/approval only before the commencement of activities. [Sec 12A] – Applicable w.e.f 01st October 2023.
• Trust or institution which have already commenced their activities are required to apply for regular registration / approval, which is valid for a period of 5 years, instead of provisional registration/approval [Sec 12A]

• Application out of corpus or loans or borrowings before 1 April 2021 should not be allowed as application for charitable or religious purposes when such amount is deposited back or invested into corpus or when the loan or borrowing is repaid [Sec 11]
• If the trust or institution invests or deposits back the amount into corpus or repays the loan within 5 years of application from the corpus or loan, only then such investment/depositing back into corpus or repayment of loan will be allowed as application for charitable or religious purposes [Sec 11]
• Provisions of section 115TD of the IT Act relating to tax on accreted income shall be applicable to trust or institution if the same fails to make an application for re-registration / approval or for regular registration / approval.

• Distribution of Income by Business Trust to Unit Holders–In case of any income distributed by the business trust is not taxed either in the hands of the business trust or the unitholder, it is now proposed to tax such distributed income in the hands of the unit holder.

PART B of Union Budget 2022

GST AMENDMENTS

I.                    GST Proposals

CGST Act Amendments:

• Composition scheme benefits to be made available to the supplier of goods, supplying inter-state or supplying goods through an electronic commerce operator by way of amendments in section 10(2)(d) and 10(2A)(c).
• Amendment of Explanation to section17(3) to consider transaction at para 8(a) of schedule III i.e. Supply of warehoused goods before clearances for home consumption as an exempt supply for purpose of computation of reversals under rule 42 of CGST Rules.

• Time-limit to file monthly, quarterly, annual and other specified returns restricted to 3 years from the due- date of filing [Sec 37, 39, 44 & 52]
• Section 132(1) of the CGST Act is being amended so as to decriminalize offences specified in clause (g) (obstruct or prevents any officer in the discharge), clause (j) (tampers with or destroys any material evidence or documents) and clause (k) (fails to supply any information) of the said section.
• In the memorandum to the Finance Bill, it is proposed to raise the monetary threshold for initiating prosecution of offences under section132(1) from existing Rs.1 crore to Rs.2 crores for offences other than in cases of issuance of false invoices.
• Insertion of section122(1B) to levy penalty (higher of Rs.10,000 or the amount of tax involved) on e-commerce operators for certain non-compliances.
• Substitution of section 138(1)(c) to restrict the person who has committed an offence of issuance of invoices without any actual supply of goods or services to opt for compounding of offences.
• Slabs for compounding of offences are reduced to 25% & 100% from 50% & 150% [Sec 138(2)]

IGST Act Amendments:

• Amendment of section 2 (16) ‘non-taxable online recipient’ to include any unregistered person in receipt of OIDAR services irrespective of whether they are being used for the purposes of commerce, industry, business or profession and ‘unregistered person’ to include e commerce operators registered under the Act.
• Revision of definition of OIDAR by way of amendment to section 2(17) there by eliminating the condition of being ‘essentially automated and involving minimal human intervention’ to get classified under OIDAR.

• Omission of proviso to section 12(8) that specifies the Place of Supply of service to be the place of destination of goods where the goods are transported outside India, both the supplier and recipient being located in India.

Disclaimer:

This presentation intends to provide only an overall insight of the subjects covered herein. It should neither be regarded as comprehensive nor sufficient for making any decisions, nor should it be used in place of a Disclaimer Information professional advice. V.K. Dinesh & Senthilraja Chartered Accountants does not accept any responsibility for defeat /loss, if any arising from any action taken or not taken by anyone using this presentation.

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