1. Income Tax Department brings reforms for Cooperatives!
Alternate Minimum Tax for cooperative societies reduced to 15% to bring them at par with companies.
Reduction of Alternate Minimum tax rate for cooperatives
Announcement
Currently, cooperative societies are required to pay Alternate Minimum Tax at the rate of eighteen and one half per cent. However, companies pay the same at the rate of fifteen per cent. To provide a level playing field between co-operative societies and companies, I,
propose to reduce this rate for the cooperative societies also to fifteen per cent.
Income Tax Department brings reforms for Cooperatives!
Surcharge for cooperative societies with total income exceeding ₹1 crore but not exceeding ₹10 crore reduced from 12% to 7%.
Progress so far
Finance Act, 2022 has reduced the rate at which the cooperative societies are required to pay Alternate Tax to 15% bringing them at par with companies.
2. Reduction of Surcharge on Cooperative Societies
Announcement
“I also propose to reduce the surcharge on co-operative societies from present 12 per cent to 7 per cent for those having total income of more than 1 crore and up to 10 crore.”
Income Tax Department cares!
Section 80DD amended to allow deduction where the payment of annuity & lumpsum amount to the differently-abled dependent is made during the lifetime of parents/guardians.
Progress so far
Finance Act, 2022 has reduced the surcharge from 12% to 7% in the case of co-operative societies having total income exceeding Rs 1 crore but not exceeding Rs 10 crore.
3. Tax relief to persons with disability
Announcement
There could be situations where differently abled dependants may need payment of annuity or lump sum amount even during the lifetime of their parents/guardians. I propose to thus allow the payment of annuity and lump sum amount to the differently abled dependent during the lifetime of parents/ guardians, i.e., on parents/ guardians attaining the age of sixty years.
Clarification on Surcharge/Cess Surcharge/Cess not allowed as deduction in computing taxable income. Relevant forms notified for taxpayer to apply for re-computation of income of previous year accordingly.
Progress so far
Section 80DD has been amended to provide that deduction will be allowed even in respect of a scheme where the payment of annuity and lump sum amount to the differently-abled dependent is made during the lifetime of parents/guardians, i.e., on parents/guardians attaining the age of sixty years.
4. Clarification in relation to ‘Health and Education cess’ as business expenditure
Announcement
“The income-tax is not an allowable expenditure for computation of business income. This includes tax as well as surcharges. The ‘Health and Education Cess’ is imposed as an additional surcharge on the taxpayer for funding specific government welfare programs. However, some courts have allowed ‘Health and education cess’ as business expenditure, which is against the legislative intent. To reiterate the legislative intent, I propose to clarify that any surcharge or cess on income and profits is not allowable as business expenditure.”
Progress so far
♦ Finance Act, 2022 has clarified that the term “tax” includes and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax. Hence, surcharge and cess are not allowable as deduction in calculating taxable income.
[Section 40 (a)(ii) of the Income-tax Act, 1961]
♦ Relevant forms have also been notified wherein the taxpayer can make an application requesting for re-computation of total income of the previous year without allowing the claim of surcharge or cess, which had been claimed and allowed earlier and payment of tax on the same.
[Section 155(18) of the Income-tax Act, 1961]
5. Boost to IFSC /Tax incentives to IFSC
Tax exemption provided to non-resident’s income from offshore derivative instruments, OTC derivatives issued, royalty/interest on lease of ship, portfolio management services in IFSC, subject to conditions.
Announcement
” Taking forward our efforts to further promote the IFSC, I hereby propose to provide that income of a non-resident from offshore derivative instruments, or over the counter derivatives issued by an offshore banking unit, income from royalty and interest on account of lease of ship and income received from portfolio management services in IFSC shall be exempt from tax, subject to specified conditions”.
Progress so far
Finance Act, 2022 has provided additional tax incentives for IFSC in terms of Section 10 (4E), 10(4F) & 10(4G) of the Income-tax Act, 1961, such as:
♦ Exemption to the income of a non-resident from offshore derivative instruments, or over-the-counter derivatives issued by an offshore banking unit, subject to specified conditions.
♦ Exemption to income from royalty and interest on account of lease of ship.
♦ Income received from portfolio management services in IFSC.
6. ITD for reduced litigation / Litigation management to avoid repetitive appeals by the Department
As per Section 158AB of the IT Act, 1961, filing of further appeal shall be deferred if an identical question of law is pending before the Supreme Court or jurisdictional High Court.
Announcement
“It has been observed that a lot of time and resources are consumed in filing of appeals which involve identical issues. Taking forward our policy of sound litigation management, I propose to provide that, if a question of law in the case of an assessee is identical to a question of law which is pending in appeal before the jurisdictional High Court or the Supreme Court in any case, the filing of further appeal in the case of this assesse by the department shall be deferred till such question of law is decided by the jurisdictional High Court or the Supreme Court. This will greatly help in during the repeated litigation between taxpayers and the department”.
Progress so far
♦ Finance Act, 2022 has inserted a new section 158AB in Income-tax Act, 1961 to provide that if a question of law in the case of a taxpayer is identical to a question of law pending in appeal before the Supreme Court/ jurisdictional High Court in any case, the filing of further appeal to the Appellate Tribunal or the jurisdictional High Court in the case of such taxpayer shall be deferred.
♦ The prescribed rule 16 of IT Rules, 1962 and form 8A in this regard have been notified vide Notification no. 83/2022 dated 12th July , 2022 . The collegium under the section has also been created vide order dated 28th September, 2022
7. ITD boost for business/Incentives for newly incorporated manufacturing entities under concessional tax regime
Newly incorporated manufacturing entities which commence manufacturing upto 31st March, 2024 eligible to claim concessional taxation of 15% as per Section 115BAB of the IT Act, 1961.
Announcement
In an effort to establish a globally competitive business environment for certain domestic companies, a concessional tax regime of 15 per cent tax was introduced by our government for newly incorporated domestic manufacturing companies. I propose to extend the last date for commencement of manufacturing or production under section 115BAB by one year i.e. from 31st March, 2023 to 31st March, 2024.
Progress so far
♦ Finance Act, 2022 has extended the last date for commencement of manufacturing under section 115BAB by one year to 31st March, 2024.
♦ Now the companies which commence manufacturing by 31st March 2024 can also opt for the concessional taxation of 15 % under Section 115BAB of the Income-tax Act, 1961.
8. Enhanced social security benefits/Parity between employees of State & Central Government
Deduction limit on employers’ contribution increased from 10% to 14% of salary in NPS Tier-I account for State Govt employees, providing parity with Central Govt employees.
Announcement
At present, the Central Government contributes 14 per cent of the salary of its employee to the National Pension System (NPS) Tier-1. This is allowed as a deduction in computing the income of the employee. However, such deduction is allowed only to the extent of 10 per cent of the salary in case of employees of the State government. To provide equal treatment to both Central and State government employees, I propose to increase the tax deduction limit from 10 per cent to 14 per cent on employer’s contribution to the NPS account of State Government employees as well. This would help in enhancing the social security benefits of the state government employees and bring them at par with central government employees.
Progress so far
Finance Act, 2022 has increased the deduction limit on employers’ contribution from 10% to 14% of salary in NPS Tier-I account for State Government employees, providing them equal treatment and parity with the Central Government employees.
9. Income Tax Department brings rationalization of surcharge/Rationalization of Surcharge
In case of AOPs consisting of only companies as its members, surcharge capped at 15%.
In the case of Individual/HUF/AOP, surcharge for all long-term capital gains capped at 15%.
Progress so far
Finance Act, 2022 has capped surcharge in case of AOPs consisting of only companies as its members to 15%.
In the case of Individual/HUF/A0P, Finance Act, 2022 has capped the surcharge at 15% for all long-term capital gains.
Announcement
“In the globalized business world, there are several works contracts whose terms and conditions mandatorily require formation of a consortium. The members in the consortium are generally companies. In such cases, the income of these AOPs has to suffer a graded surcharge upto 37 per cent, which is a lot more than the surcharge on the individual companies. Accordingly, I propose cap the Surcharge of these AOP’s at 15 per cent”.
“Further, the long-term capital gains on listed equity shares, units etc. are liable to maximum surcharge of 15 per cent, while the other long term capital gains are subjected to a graded surcharge which goes up to 37 per cent. I propose to cap the surcharge on long term capital gains arising on transfer of any type of assets at 15 per cent. This step will give a boost to the start up community and along with my proposal on extending tax benefits to manufacturing companies and start ups re affirms our commitment to Atma Nirbhar Bharat”.
10. Income Tax Department boost/Incentives for Start-ups!
The period of incorporation of eligible start-ups extended by one year to 31st March, 2023 to make them eligible for tax incentives as per specified conditions.
Announcement
Start-ups have emerged as drivers of growth for our economy. Over the past few years, the country has seen a manifold increase in successful start-ups. Eligible start-ups established before 31.3.2022 had been provided a tax incentive for three consecutive years out of ten years from incorporation. In view of the Covid pandemic, I propose to extend the period of incorporation of the eligible start-up by one more year that is, up to 31.03.2023 for providing such tax incentive.
Progress so far
♦ Finance Act, 2022 has extended the period of incorporation of eligible start-ups under Section 80-IAC of the Income-tax Act, 1961 by one year to 31st March, 2023.
♦ An eligible start up incorporated before 1st April, 2023 shall be eligible for tax incentive for three consecutive years out of ten years from incorporation.
11. Deterrence against Tax Evasion!
Section 79A inserted in the IT Act, 1961 disallows any set off of loss or unabsorbed depreciation against undisclosed income detected in search or survey operations.
Announcement
“Presently, there is ambiguity regarding set off, of brought forward loss against undisclosed income detected in search operations. It has been observed that in many cases where undisclosed income or suppression of sales etc. is detected, payment of tax is avoided by setting off, of losses. In order to bring certainty and to increase deterrence among tax evaders, I propose to provide that no set off, of any loss shall be allowed against undisclosed income detected during search and survey operations”.
Progress so far
Finance Act, 2022 has inserted a new Section 79A in the Income-tax Act,1961, disallowing any set off of loss or unabsorbed depreciation against undisclosed income detected during search and seizure or survey, while computing the total income in the relevant year.
12. Widening of tax base / Rationalizing TDS Provisions
Section 194R introduced in the IT Act, 1961 providing for deduction of tax on benefits/perquisites exceeding Rs. 20,000/- during the FY to a resident carrying on business/profession.
Announcement
“It has been noticed that as a business promotion strategy, there is a tendency on businesses to pass on benefits to their agents. Such benefits are taxable in the hands of the agents. In order to track such transactions, I propose to provide for tax deduction by the person
giving benefits, if the aggregate value of such benefits exceeds Rs 20,000 during the financial year”.
Progress so far
Finance Act, 2022 has introduced Section 194R of the Income-tax Act, 1961 providing for deduction of tax on benefit/perquisite provided to a resident carrying on a business/profession if the value of such benefit or perquisite exceeds Rs. 20,000 during the financial year.
13. Boost for voluntary compliance/Introducing new ‘Updated Return’
Section 139(8A) introduced in IT Act, 1961 facilitates taxpayers to file ‘Updated Return’ on payment of additional tax. More than 5 lakh updated returns filed.
Announcement
“India is growing at an accelerated pace and people are undertaking multiple financial transactions. The Income Tax Department has established a robust framework of reporting of taxpayers’ transactions. In this context, some taxpayers may realize that they have committed omissions or mistakes in correctly estimating their income for tax payment. To provide an opportunity to correct such errors, I am proposing a new provision permitting taxpayers to file an Updated Return on payment of additional tax. This updated return can be filed within two years from the end of the relevant assessment year.”
Progress so far
♦ Section 139(8A) has been introduced in the Income-tax Act, 1961 permitting taxpayer to file an Updated Return to update his return anytime within two years from the end of the relevant assessment year.
♦ A taxpayer can file an updated return by voluntarily admitting omissions or mistakes and paying an additional tax as applicable. •A formal mechanism of first passively sharing information through AIS and then actively sharing through e-Verification scheme has been recently enabled.
♦ Non-intrusive mechanism to induce voluntary compliance through this approach has been devised to enable access to a taxpayer of information available with the Department and to nudge him to correct omissions/errors/oversights allowing updating of this return of income.
♦ *Over 5.17 lakh updated returns filed.
14. Taxation of Virtual Digital Assets (VDA) introduced/Scheme for taxation of Virtual Digital Assets
→ Transfer of VDA to be taxed @30% % u/s 115BBH of IT Act, 1961
→ TDS @1 % also provided u/s 194S.
→ Gift of VDA to be taxed u/s 56 in the hands of recipient.
Announcement
“I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent.
- No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of virtual digital asset cannot be set off against any other income.
- Further, in order to capture the transaction details, I also propose to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1per cent of such consideration above a monetary threshold.
- Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient.”
Progress so far
♦ Finance Act, 2022 has introduced Section 115BBH in Income-tax Act, 1961, providing that the transfer of Virtual Digital Assets [VDA] shall be taxed at the rate of 30% without any deduction (other than cost of acquisition), allowance or set off of losses.
♦ It has also been provided that loss from transfer of VDA cannot be set off from any other income and cannot be carried forward to subsequent years.
♦ Tax Deduction at Source @1 % has been introduced on the transfer of VDA in terms of Section 194S of the Income-tax Act, 1961
♦ Gift of VDA has also been made subject to tax in the hands of recipient under Section 56 of the Income-tax Act, 1961.
15. Faceless Assessment for taxpayer’s ease!
Over 3.25 lakh peer-reviewed, team-based assessment orders passed in a faceless manner. Detailed SOP issued for ease of compliance. VC facility also mandated.
Announcement
“In order to impart greater efficiency, transparency and accountability to the assessment process, a new faceless assessment scheme has already been introduced.”
Expeditious disposal of cases without human interface. With team-based assessment, there’s greater transparency & efficiency & improvement in quality of assessments.
“In order to impart greater efficiency, transparency and accountability to the assessment process, a new faceless assessment scheme has already been introduced.”
Faceless Appeals entails no physical interface with the department & ease of compliance for taxpayers. Ensures greater efficiency, transparency & accountability.
“In order to take the reforms initiated by the Department to the next level and to eliminate human interface, I propose to amend the Income Tax Act so as to enable faceless appeal on the lines of Faceless Assessment”
Faceless Appeals enabled for taxpayers!
Over 1.41 lakh appeals already disposed of in a faceless manner. VC facility also provided to appellant. Dedicated Email ID for resolving taxpayer grievances.
” In order to take the reforms initiated by the department to the next level and to eliminate human interface, I propose to amend the Income Tax Act as to enable faceless appeal on the lines of Faceless Assessment.”
Progress so far
♦ As of 22nd December 2022, peer-reviewed assessment orders in 3,25,409 cases have been passed through team-based decision making.
♦ To improve compliance, outreach programs are being augmented to make the taxpayers aware of their rights and obligations under faceless assessment.
♦ Detailed Standard Operating Procedure (SOP) issued for ease of compliance by taxpayers.
♦ Video Conferencing (VC) facility mandated to be provided to taxpayers in assessment, wherever requested, in the interest of natural justice.
♦ Grievance Redressal Portal “Samadhan” constituted to resolve taxpayer grievances arising out of faceless assessments.
♦ A National Faceless Appeal Centre (NFAC) set up.
♦ 1,41,000 appeals have been disposed of by the NFAC upto 22nd December, 2022.
♦ To improve compliance, outreach programs are being augmented to make taxpayers aware of their rights and obligations under faceless appeals.
♦ Video Conferencing (VC) facility has been made mandatory at the request of appellant, in the interest of natural justice.
♦ Grievances related to appeals have been addressed by NFAC via dedicated email ID of “Samadhan” constituted to resolve taxpayer grievances.
BENEFITS
♦ No human interface
♦ Expeditious disposal of cases
♦ Ease of compliance for taxpayers Transparency and efficiency
♦ Functional specialization
♦ Team-based assessment
♦ Dynamic jurisdiction
♦ Improvement in quality of assessments
♦ No visits to Income Tax Office required
♦ No physical interface with the department required
♦ Reply to notice electronically
♦ Speedy completion of appeals
♦ Ease of compliance
♦ Greater efficiency, transparency, and accountability
Comprehensive compilation.
though i think you missed on 170A, ITR A.