Highlights of Income Tax changes in Finance Bill, 2023

1. Personal Income-tax Rates :

New Income Tax Tax Regime as proposed to be amended by Union Budget 2023-24 Under sub-section (1A) of section-115BAC of Income Tax Act, 1961 from A.Y. 2024-25 / F.Y. 2023-24  onwards in case of Individual or HUF or association of persons (Other than a co-operative society) or Body of Individual (whether incorporated or not) or An Artificial Judicial Person.

2. Chart Explaining Difference between New regime from AY 21-22 to AY 23-24 and New regime from AY 24-25

3. Increasing the threshold limits for Presumptive taxation schemes : (w. e. f. A. Y. 2024-25)

Comments: Assessee is not required to get its books audited by a Chartered Accountant upto Turnover of Rs. 10 Crore If At Least 95% of receipts/payments are in Non-cash Mode(i.e. Cheque, draft, which is account payee)

4. 15% tax rate for New Manufacturing Co-operative Societies

Under proposed new section 115BAE of the Act, a new manufacturing co-operative society set up 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

5. TDS on payment of accumulated balance due to an Employee :

6. Capping of Exemption under section-54 and section-54F of the act : (w. e. f. A. Y. 2024-25)

7. Promoting timely payment to Micro and small Enterprises : (w. e. f. A. Y. 2024-25)

Comments: The Medium and large companies have not segregated the Micro and Small business as this is again a very big work as the norms for the classification has been changed more than once and they have no mechanism to classify themselves. They have to depend on the information given from the Micro and small units who are mostly unorganized and the information has to be authenticated through an independent source.

Now the Medium and Large Companies would internally take a stand that instead of going through all this process and suffer disallowance for a legitimate expenditure, they would as well do the jobs internally or give the jobs or buy material from a Medium/Large company. Hence this disallowance would not be in the best interest of the Micro and Small businesses. As enough safeguards are already available in the MSMED act, another legislation viz. Income tax act should not step in .

8. Life Insurance Policies : (w. e. f. A. Y. 2024-25)

9. Increasing the rate of TCS under section-206C (1G) on certain foreign remittances and on sale of overseas tour packages :

(w. e. f. 01/07/2023)

Comments: This change in rate will discourage foreign travel.

10. Relief to start-ups in carrying forward and setting off of losses

The Benefit to carry forward of losses extended from 7 years to 10 Years

11. Other Important Changes

11. 1 Taxation of capital Gain in case of Market Linked securities : (w. e. f. A. Y. 2024-25)

• New section-50AA has been inserted which proposed that: Notwithstanding anything contained in clause- (42A) of section 2 or section 48, where the capital asset is a Market Linked Debenture, the full value of consideration received or accruing as a result of the transfer or redemption or maturity of such debenture as reduced by––

(i) the cost of acquisition of the debenture; and

(ii) the expenditure incurred wholly and exclusively in Connection with such transfer or redemption or maturity,

11. 2 Tax treaty relief at the time of TDS under section-196A of the income tax act, 1961 : (w. e. f. 01/04/2023)

• It provides for TDS on payment of certain incomes to a Non-resident (Not being a company) or to a foreign company.
• The income is required to be in respect of units of a Mutual Fund specified under clause (23D) of section 10 of the Act or from the specified company referred to in the Explanation to clause (35) of section 10 of the Act.

11. 3 Extending deeming Provision under section-9 to Gift to Non-ordinary resident :

[w. e. f. A. Y. 2024-25]

• Sub-section- (1) of section-9 of the act is a deeming Provision providing the types of Income deemed to accrue or arise in India.
• Clause- (viiii) to sub-section- (1) of section-9 of the act provide that any sum of money exceeding Rs. 50, 000/-, received by Non-resident without consideration from a person resident in India on or after 05/07/2019 shall be income deemed to be accrue or arise in India. Sum of Money is referred to in sub-clause- (xviia) of section-24 of the act.
• Vide Finance Bill, 2023, The Government extended the scope of this section to Include Non-Ordinary resident within the Ambit of this section which are summarized below.

11. 4 TDS on payment of Interest on listed debenture to Non-resident : (w. e. f. 01/04/2023)

11. 5 TDS and taxability on Net winning from online games : (w. e. f. A. Y. 2024-25)

11. 6 Bringing Non-resident within the Ambit of Section-56 (2) (vii) (b) of the income tax act, 1961 :

(w. e. f. A. Y. 2024-25)

Section 56 (2) (viib) of the Act, inter alia, provides that where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable to income-tax under the head ‘Income from other sources’.

11. 7 Prevention of double deduction claimed on interest on borrowed capital for acquiring, renewing or reconstructing a Property :

(w. e. f. A. Y. 2024-25)

• Cost of acquisition or cost of improvement shall not include the amount of interest claimed under section-24 or chapter-VIA , as per amended proviso to clause- (ii) of section-48 of the income tax act, 1961.