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Through this article we are going to dwell about key changes under Income tax Act 1961 (’Act’) based on Finance Act 2023. These changes are going to be useful for tax professionals while rendering advisory services. The changes have been capitulated under six segments where by my own ideas are expressed.

  • Slab rates
  • Business Income, Capital Gain & Income from other sources
  • Trust taxation
  • International taxation

A key point is that assessment procedure are not covered as faceless assessment being introduced sometimes assessment get over faster and  above all in this field certain issues remains litigative. It can be more appropriate to seek legal opinion. The objective of this write up is that return filing session(non tax audit) and tax audit is approaching for the period FY 24-25. This write up dwells largely upon Finance Act 2023(FY 2023-24 AY 2024-2025) which will be acting as key source while giving any professional opinion.

  • Slab Rates

For Individuals new scheme under 115bAC has been introduced. An Individual who has no business income  cannot be changing from old to new but however an individual who has no business income can be changing from old to new. The term individual also includes non resident. New scheme rate of tax are as follows.

Up to 3 lakhs Nil
3 to 6 lakhs 5%
6 to 9 lakhs 10%
9 to 12 lakhs 15%
12 to 15 lakhs 20%
Above 15 Lakhs 30%

It means that I as a professional would even give advice that a non resident who has no business income can opt for new scheme if it results in tax benefit. But an individual opting for new scheme cannot claim deduction allowance as laid in the act but now standard deduction under Section 16 is allowed. For an individual who takes new scheme rebate is now Rs 25000 or 100% of tax payable which is lower.

For cooperatives who are engaged in manufacturing sector rates of tax is 15% provided that they are engaged in manufacturing and exercise the option from the period from 1/4/23 to 31/3/24. For cooperatives other than manufacturing sector they can opt for new scheme where by tax rates is 22% and 10% surcharge but the following deduction are not allowed

VIA deduction except (80 JJA, 80 LA).

10 AA deduction.

Alternate minimum tax

And many other allowances deduction like additional depreciation.

For firms cooperatives company the rates remains unchanged.

Tax planning strategies

A peculiar question comes to my mind as to why 115BAC ,BAB for companies only sunset is only till March 31,2024. We will wait for notification or new budget where by some stands need to be taken by government and consideration need to be given for above companies.

  • Business Income capital Gain
  • Section 44 now undergone a change where by presumptive scheme for professionals now raised to 75 lakhs and for business it is 3 crores. It means that government now wants ease of doing business and tax benefit need to be derived.
  • Amortisation of preliminary expenses(35AD) can be done for a period of 5 years by submitting a form where by deduction can be claimed.
  • Prequisite in cash or kind get covered under Section 28 of the act. This leaves a landmark ruling overruined.
  • Market linked debentures get covered under short term capital gain tax.
  • There has been always changes under Section 54 exemption for capital gain. Investment in house property can be made only up to 10 crores (provided made in India). Note two house property can be made up to 2 crores once in a lifetime
  • 43b(h) of act has introduced changes as regards to payment made to MSME (micro small medium enterprises). The changes has been done to ease compliance for MSME that if payment made after time limit of act then such expenses shall be allowed in the year of payment.
  • Section 56 a residuary Section where by any other sum not payable being chargeable under other sources. Now the section includes gift received by a non resident and sum received from a real estate trust get covered.
  • Trust Taxation
  • Ever since covid NGO role have increased and there has been lot of changes with regard to trust taxation section 11,12. In fact to be precise I would like to advice that a separate Presentation need to made while doing trust advisory where by in a pictural form all scope need to be covered
  • Accounting perspective how to account subscription money receivables treatment.
  • Law perspective to study act which govern like trust act society act cooperative society and even check FCRA act.
  • Income tax perspective- Here after Allahabad urban society where by it was held that any amount received for cost plus a notional mark up the same would be taxable makes the judgment very weird. The government has introduced very tough rules where by it becomes very difficult to track the changes.
  • GST also happens to be area where certain educational services are exempt but some issues remain ambiquity.
  • The government has devised new form like 9A and in existing trust report Foreign contribution details are to be filed.

The areas relating to TDS TCS undergoes significant changes. Now based on Section 194A the maximum withdrawal rate in the case the employee failed to furnish PAN is 10%. Section 193 of the act is now amended that non resident can apply for lower deduction based on DTAA or 20%. In last year there have been new concepts introduced like crypto taxation , tax on perquisite and many more. The rates of TCS has not been articulated as rate keen on changing based on notifications

  • International taxation
  • Now a key amendment has been introduced that under Section 94B of the act the provision of thin capitalization would apply to NBFC. Here the term NBFC means any other class of NBFC.
  • 115A of the Act now amended that rates pertaining to Royalty fees for technical services is 20%. The government is very keen that sometimes where by for certain treaty DTAA rate is less then sometimes litigation may arise. In my view I feel that income tax cases are bound to rise as lot of companies do make royalty payment and may invoke DTAA then may lead to department taking cases. Hence advisory need to be provided carefully.
  • The above topic in brief been articulated is a general knowledge based topic not merely from budget. The concept of Pillar 1 and pillar 2 has evolved. Pillar 1 is able for entities have revenue exceeding Euro 20 billion and where by there is active market jurisdiction. Pillar 2 is a concept which is applicable for entities where by revenue exceed Euro 750 million in 2 out of 4 fiscal. It impose a minimum tax at rate of 15%. Pillar 2 has laid many concepts like under tax payment rule Globe rule subject to tax rule. I would like to advice that these concept for which advisory need to be given taking OCED(organization cooperation economic development) and other countries laws of respective jurisdiction need to be taken. Above all the entity need to be studied from a holistic perspective as well as cost finance factors need to be taken.

Conclusion: The Finance Act 2023 marks a pivotal shift in the taxation landscape, introducing key changes that demand attention from tax professionals and taxpayers alike. From the introduction of new slab rates to adjustments in business income, capital gains, and international taxation, these amendments signify the government’s approach towards simplifying tax compliance and fostering economic growth. As we approach the tax filing season, it’s imperative to grasp these changes comprehensively, ensuring that tax planning and advisory services are tailored to leverage the latest provisions effectively. This exploration not only aids in navigating the complexities of the Income Tax Act but also positions us to capitalize on potential tax benefits, underscoring the importance of staying abreast with the current tax laws and regulations.

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One Comment

  1. J.Radhakrishnan says:

    There is some confusion on this part of your statement
    “An Individual who has no business income cannot be changing from old to new but however an individual who has no business income can be changing from old to new”
    Please resolve

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April 2024