Ministry of Finance
1. ANTI-AVOIDANCE RELATED TO INTEREST PAID ON BORROWED CAPITAL
Budget 2023 proposes that cost of acquisition or improvement of house property shall not include the amount of interest on borrowed capital, which has been claimed earlier as deduction.
While interest paid on borrowed capital for acquiring or improving a property can, subject to certain conditions, be claimed as deduction from income, it can also be included in the cost of acquisition or improvement on transfer. It is now proposed that the cost of acquisition or improvement shall not include the amount of interest claimed earlier as deduction.
2. TCS FOR FOREIGN REMITTANCES
It is proposed to increase the rate of Tax Collection at Source (TCS) for certain foreign remittances under Liberalized Remittance Scheme (LRS) and for purchase of overseas tour programs from 5% to 20%.
For certain foreign remittances under Liberalised Remittance Scheme (LRS) and for purchase of overseas tour programs it is proposed to increase the rates of TCS from 5% to 20%
3. EXEMPTION OF PREMIUM FOR LIFE INSURANCE POLICIES
It is proposed that in case of life insurance policies issued on or after 1st April, 2023, tax exemption would be restricted to those policies (other than ULIP) having aggregate premium up to Rs.5 lakh.
- It is proposed to provide that where aggregate of premium for life insurance policies (other than ULIP) issued on or after 1st April, 2023 is above Rs 5 lakh, income from only those policies with aggregate premium up to Ps 5 lakh shall be exempt.
- This will not affect the tax exemption provided to the amount received on the death of person insured. It will also not affect insurance policies issued till 31st March 2023.
4. MEASURES RELATED TO DEBENTURES
It is proposed to withdraw exemption from TDS currently available on interest payment on listed debentures.Further,income from market linked debentures is proposed to be taxed as short-term capital gains
It is proposed to:
- Withdraw the exemption from TDS currently available on interest payment on listed debentures.
- The income from market linked debentures is proposed to be taxed as short-term capital gains at the applicable rates.
5. MEASURES RELATED TO CAPITAL GAINS
Currently, tax on capital gains can be avoided by investing proceeds of such gains in residential property. This is proposed to be capped at Rs. 10 crore.
6. MEASURES RELATED TO ONLINE GAMES
For Online Games it is proposed to:
- Provide for TDS and taxability on net winnings at the time of withdrawal or at the end of the financial year.
- TDS would be without the threshold of Rs. 10,000.
- For lottery, crossword puzzles games, etc. threshold limit Rs. 10,000 for TDS shall continue but shall apply to aggregate winnings during a financial year.
7. IMPROVING TAX ADMINISTRATION
With respect to rectification of orders by the Interim Board of Settlement, it is proposed to provide that where the time-limit for amending an order by it or for making an application to it expires on or after 01.02.2021 but before 01.02.2022, such time-limit shall stand extended to 30.09.2023.
8. IMPROVING COMPLIANCE
It is proposed to amend section 271C and section 2768 of the Act to provide for penalty and prosecution where default in TDS relates to transaction in kind.
9. IMPROVING TAX ADMINISTRATION
To expedite the disposal of certain appeals pending with Commissioner (Appeals), it is proposed to introduce a new authority in the rank of Joint Commissioner/ Additional Commissioner.
10. LEXTENDING THE SCOPE FOR DEDUCTION OF TAX AT SOURCE TO LOWER OR NIL RATE
- It is proposed to allow a taxpayer to obtain certificate of deduction of tax at source to lower or nil rate on sums on which tax is required to be deducted under section 194LBA of the Act by Business Trusts.
11. INCREASING THRESHOLD LIMITS FOR PRESUMPTIVE TAXATION SCHEMES
To ease compliance and to promote non-cash transactions, it is proposed
- To increase the threshold limits for presumptive scheme of taxation for eligible businesses from Ps 2 crore to Ps 3 crore and for specified professions from Rs 50 lakh to Ps 75 lakh.
- The increased limit will apply only in case the amount or aggregate of the amounts received during the year, in cash, does not exceed five per cent of the total gross receipts/turnover.
12. EASE IN CLAIMING DEDUCTION ON AMORTIZATION OF PRELIMINARY EXPENDITURE.
- At present for claiming amortization of certain preliminary expenses, the activity is to be carried out either by the assessee or by a concern approved by the Board.
- To ease the process of claiming amortization of these expenses it is proposed to remove the condition of activity in connection with these expenses to be carried out by a concern approved by the Board.
13. FACILITATING CERTAIN STRATEGIC DISINVESTMENTS
- It is proposed to allow carry forward of accumulated losses and unabsorbed depreciation allowance in the case of amalgamation of one or more banking company with any other banking institution or a company subsequent to a strategic disinvestment, if such amalgamation takes place within 5 years of strategic disinvestment.
- It is also proposed to enlarge the definition of ‘strategic disinvestment’.
14. EXEMPTION TO DEVELOPMENT AUTHORITIES ETC.
- It is proposed to provide exemption to any income arising to a body or authority or board or trust or commission, (not being a company) which has been established or constituted by or under a Central or State Act with the purposes of satisfying the need for housing or for planning, development or improvement of cities, towns and villages or for regulating any activity or matter, irrespective of whether it is carrying out commercial activity.
15. INCENTIVES TO INTERNATIONAL FINANCIAL SERVICES CENTER (IFSC)
- Relocation of funds to IFSC has certain tax exemptions if the relocation is before 31.03.2023. This date is proposed to be extended to 31.03.2025.
- Further, any distributed income from the offshore derivative instruments entered with an offshore banking unit is also proposed to be exempted subject to certain conditions
16. GOLD TO ELECTRONIC GOLD RECEIPT
The conversion of physical gold to Electronic Gold Receipt sand vice versa is proposed not to be treated as a transfer and not to attract any capital gains.
17. AGNIPATH SCHEME, 2022
- The payment received from the Agniveer Corpus Fund by the Agniveers enrolled in Agnipath Scheme, 2022 is proposed to be exempt from taxes.
- Deduction from the computation of total income is proposed to be allowed to the Agniveer on the contribution made by him or the Central Government to his Seva Nidhi account.
18. PROMOTING TIMELY PAYMENTS TO MICRO AND SMALL ENTERPRISES
- In order to promote timely payments to micro and small enterprises, it is proposed to include payments made to such enterprises within the ambit of section 43B of the Income-tax Act, 1961.
- Thus, deduction for such payments would be allowed only when actually paid. It will be allowed on accrual basis only if the payment is within the time mandated under the Micro, Small and Medium Enterprises Development Act.
19. 15% CONCESSIONAL TAX TO PROMOTE NEW MANUFACTURING CO-OPERATIVE SOCIETY
- To promote the growth of manufacturing in I co-operative sector, a new co-operative society formed on or after 01.04.2023, which commences manufacturing or production by 31.03.2024 and do not avail of any specified incentive or deduction, it is proposed to allow an option to pay tax at a concessional rate of 15%
- This is similar to what is available to new manufacturing companies.
20. DILUTION OF PENAL PROVISIONS FOR CASH/LOAN TRANSACTIONS AGAINST PRIMARY CO-OPERATIVES
It is proposed to amend section 269SS and section 269T of the Income-tax Act, 1961 whereby no penal consequence would arise, if the amount of loan or deposit in cash is less than Ps. 2 Iakh.
21. INCREASING THRESHOLD LIMIT FOR CO-OPERATIVES TO WITHDRAW CASH WITHOUT TDS.
- It is proposed to enable co-operatives to withdraw cash up to Ps 3 crore in a year without being subjected to TDS on such withdrawal.
22. RELIEF TO SUGAR CO-OPERATIVES FROM PAST DEMAND
- It is proposed that for sugar co-operatives, for years prior to A.Y. 2016-17, if any deduction claimed for expenditure made on purchase of sugarcane has been disallowed, an application may be made to the Assessing Officer, who shall recompute the income of the relevant previous year after allowing such deduction up to the price fixed or approved by the Government for such previous year.
23. EXTENSION OF DATE OF INCORPORATION FOR ELIGIBLE START-UPS FOR EXEMPTION
- Certain start-ups are eligible for some tax benefit if they are incorporated before 1st April, 2023.
- The period of incorporation of such eligible start-ups is proposed to be extended by one year, i.e. before 1st April, 2024.
24. RELIEF TO START-UPS IN CARRYING FORWARD AND SETTING OFF LOSSES.
- The condition of continuity of at least 51% shareholding for setting off of carried forward losses is relaxed for eligible start-ups if all the shareholders of the company continue to hold those shares.
- At present this relaxation applies for losses incurred during the period of 7 years from incorporation of such start-up. It is proposed to increase this period to 10 years.
25. LEAVE ENCASHMENT EXEMPTION AMOUNT INCREASED
- Encashment of earned leave up to 10 months of average salary, at the time of retirement in case of an employee (other than an employee of the Central Government or State Government), is exempt under sub-clause (ii) of clause (10AA) of section 10 of the Income-tax Act, 1961 to the extent notified.
- The maximum amount which can be exempted is Ps 3 lakh at present. It is proposed to extend this limit to Ps. 25 lakh.
26. RATIONALIZATION OF SURCHARGE
- It is proposed that the surcharge rate of 37% will not apply for individuals, HUF, AOP (other than co-operative), BOI and AJP under the new regime.
- Highest surcharge shall be 25% for income above Ps 2 crore. This would reduce the ‘ maximum rate from about 42.7% to about 39%.
- No change in surcharge is proposed for those who opt to be under the old regime.
27. STANDARD DEDUCTION FOR NEW PERSONAL TAX REGIME
- Standard deduction of Ps 50,000 to salaried individual, and deduction from family pension up to Rs 15,000, is currently allowed only under the old regime.
- It is proposed to allow these two deductions under the new regime also.
28. REBATE UNDER NEW PERSONAL TAX REGIME
- Currently, resident individuals with total income up to Rs 5,00,000 do not pay any tax due to rebate under both old and new regime.
- It is proposed to increase the rebate for the resident individual under the new regime so that they do not pay tax if their total income is up to Rs 7,00,000
29. NEW REGIME WITH NEW SLABS AND TAX RATES AS UNDER:
| Total Income(Rs) | Rate % |
| Upto 3,00,000 | Nil |
| From 3,00,001 to 6,00,000 | 5 |
| From 6,00,001 to 9,00,000 | 10 |
| From 9,00,001 to 12,00,000 | 15 |
| From 12,00,001 to 15,00,000 | 20 |
| Above 15,00,000 | 30 |
NEW TAX REGIME IS NOW DEFAULT REGIME
- The new tax regime, which was introduced by the Finance Act, 2020, is now proposed to be the default regime for Individuals, HUF, AOP (other than co-operatives), BOI & AJP.
- However, any individual, HUF, AOP (other than co-operative), BOI or AJP not willing to be taxed under this new regime can opt to be taxed under the old regime.
The new tax regime, which was introduced by the Finance Act, 2020, is now proposed to be the default regime for Individuals, HUF, AOP (other than co-operatives), BOI & AJP.
Finance Act 2020 Default Regime ??? I felt it is Finance Act 2023 will be default regime