NEWSLETTER 1ST FEB 2023
BUDGET 23-24 HIGHLIGHTS AND ANALYSIS
AMENDMENTS IN DIRECT TAX
A. PERSONAL TAX
- The new tax regime to become the default tax regime unless the taxpayer opts otherwise.
- Tax Rates for Individuals and HUFs – No Change in Tax Rates as per Old Tax Regime
- Tax Rate for Individuals and HUFs or AOP [other than a cooperative society] or BOI, or an artificial juridical person–New Regime.
Existing Tax Rates
|SN||Total Income||Tax Rate|
|1||Up to 2,50,000||Nil|
|2||2,50,001 to 5,00,000||5%|
|3||5,00,001 to 7,50,000||10%|
|4||7,50,001 to 10,00,000||15%|
|5||10,00,001 to 12,50,000||20%|
|6||12,50,001 to 15,00,000||25%|
Revised Tax Rates
|SN||Total Income||Tax Rate|
|1||Up to 3,00,000||Nil|
|2||3,00,001 to 6,00,000||5%|
|3||6,00,001 to 9,00,000||10%|
|4||9,00,001 to 12,00,000||15%|
|5||12,00,001 to 15,00,000||20%|
|SN||Total Income||Tax Rate|
|1||Up to 50 Lakhs||Nil|
|2||50 Lakhs to 1 Crore||10%|
|3||1 Crore to 2 Crore||15%|
|4||2 Crore to 5 Crore||25%|
|5||Above 5 Crores||25%|
- Introduction of standard deduction of INR 50,000 from salary and INR 15,000 from family pension – New Regime
- Increase in rebate from tax enhanced to INR 25,000 from INR 12,500 where total income does not exceed INR 700,000 (enhanced from INR 500,000)
- Maturity proceeds (i.e. other than proceeds received upon death) from a life insurance policy (other than a Unit Linked Insurance Policy (ULIP)) issued on or after 01 April 2023 is taxable, if the aggregate annual premium (on all policies except ULIP) exceeds INR 500,000 in any of the tax years during the term of any of those life insurance policies. Such maturity proceeds net of non-tax deducted premium would be taxable as income from other sources in the year of receipt.
- Method of ascertaining perquisite value of rent free/ concessional accommodation to be prescribed
- Specific provisions to withhold tax at maximum marginal rate on provident fund withdrawal for Non Permanent Account Number (PAN) cases omitted.
- Leave encashment limit announced to increase from existing INR 3 Lakhs to INR 25 Lakhs
- Winnings from games including online gaming: – Net winnings from online gaming subject to withholding tax at 30% without any de-minimis threshold (as against a threshold of INR 10,000 earlier)
- New provision inserted to tax income from winnings from online games. Income tax to be aggregate of 30% on net winning and income tax which would have been chargeable on remaining income of taxpayer (after reducing new winnings above). This will be effective from 1 April 2024. TDS to be done on net winnings from any online games at rates in force effective from 1 July 2023.
- Where the benefit / consideration / winning is provided in kind in the context of section 194R, 194S or 194BA, a failure to pay the TDS or failure to ensure payment of said TDS, to attract penalty in the hands of payer (equivalent to TDS amount). Where the benefit / consideration / winning is provided in kind in the context of section 194R, 194S or 194BA, a failure to pay the TDS or failure to ensure payment of said TDS, to attract penalty in the hands of payer (equivalent to TDS amount).
B. CORPORATE TAX
- Last date of incorporation for claiming start-up incentives is extended by another year i.e., up to 31 March 2024
- Benefit of carry forward of business loss to eligible ‘start-ups’ will not be denied within 10 years (extended from seven years) from the year of incorporation subject to certain conditions.
Issue of shares to non-resident by Resident of India
- Investment from ‘non-resident’ investors is also covered under the ambit of ‘premium/ angel taxation’, and therefore, any fund raised in excess of the prescribed fair value is taxable in the hands of the Indian Company.
Profits and Gains of Business or Profession (PGBP) Additions and Deduction
- Payment to MSME beyond time limits specified in MSMED Act will be allowed as deduction only on actual payment. Deduction allowed on accrual basis only if payment is within due date of MSMED Act
- For the purposes of deductibility of preliminary expenses, requirement of service providers being approved by Central Board of Direct Taxes (CBDT) done away with for certain services. New filing requirements proposed to claim such preliminary expenses.
- Removal of exemption on TDS on payment of interest on listed debentures issued by a Company, to a resident, effective from 1 April 2023
- Penalty and prosecution for default in TDS on “in kind” payments for transfer of virtual digital assets and business benefit or perquisite or online game winnings made explicit with prospective effect (1 April 2023/1 July 2023)
- TCS rate increased to 20% (as against 5%) with effect from 01 July 2023 on remittances under Liberalised Remittance Schemes (including overseas tour packages) other than for medical and educational purposes.
- Tax Collected at Source (TCS) has been enhanced to 20% (from the existing 5%) on certain foreign remittances (except education & medical treatment), without any threshold limit
Concessional Tax Rates – New Co-operative societies
- Concessional tax regime introduced for new cooperative societies which commence manufacturing or production before 31 March 2024 and does not avail of any specified incentive or deductions, may opt to pay tax at a concessional rate of 15% (plus a surcharge of 10%) for the tax year 2023-2024 onwards.
Presumptive taxation U/s 44AD or 44ADA of the Act
- No set-off of brought forward business loss and/or unabsorbed depreciation to be allowed while computing the presumptive profits of non-residents engaged in the provision of services/facilities for exploration of mineral oils etc. A similar amendment is proposed for foreign companies engaged in the business of civil construction etc. in connection with certain turnkey power projects.
- Threshold limits for presumptive taxation scheme for eligible businesses and eligible professionals increased as under (subject to conditions): −
- For eligible businesses, the limit increased from INR 2 crore to INR 3 crore.
- For eligible professionals, the limit increased from INR 50 lakh to INR 75 lakh.
The taxation of non-monetary benefits
- Benefit or perquisite in cash or partly in cash and kind arising from business/profession is clarified to be business income.
- TDS at 10 percent is applicable on benefit or perquisite arising from business/ profession which is provided in cash or partly in cash and kind.
Taxation of income from business trusts
- Distribution (other than interest, dividend, rental income or capital gains), say, in the nature of ‘repayment of debt’, by business trust to unit holder to be taxed as ‘other income’ in hands of unit holders. Such distribution to be reduced by cost of acquisition where units are redeemed.
Capital Gains – Deductions, etc.
- Cost of acquisition of any intangible asset or any other right (not already included in the ITL) will be Nil effective from 1 April 2024
- Capital Gains arising from transfer/ redemption/ maturity of ‘Market linked Debenture’ (listed) taxable as short-term capital gains effective from 1 April 2024
- Capital gains rollover exemption on investment in new residential property in India is now capped to INR 10 crore with effect from 01 April 2024. New limit to apply to capital gains for rollover of capital gains from residential property and to net sale consideration for rollover of capital gains from any other capital asset.
- Conversion of gold to electronic gold receipt or vice versa is not liable to capital gains taxation.
- Interest payable on borrowed capital for acquiring/ reconstructing a property, which is allowed as deduction under the head ‘income from house property’ will not be included as cost of acquisition for computing capital gains on sale of such property. This amendment comes in effect from 1 April 2024
Setoff and Carry forward of losses
- Carry forward of accumulated losses and unabsorbed depreciation allowed on merger of erstwhile public sector companies subsequent to strategic disinvestment by the Government or public sector company where merger takes place within five years from prescribed date.
Transfer pricing – Reduced timeline to submit TP documentation and other information
- 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
Assessments / Appeals
- Clarificatory amendment issued on assessment/ reassessment of modified return filed by successor pursuant to an order of business reorganisation issued by tribunals or courts.
- To ensure valuation of inventory as per law 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.
- A Joint Commissioner / Additional Commissioner is proposed to be appointed for handling certain classes of appeals. Threshold limit for the disputed demand to be prescribed.
- Filing of memorandum of cross objections extended to all cases before the ITAT.
- Time limit for completing the regular assessment proceedings extended to 12 months (from 9 months) from the end of the AY (applicable from AY 2022-23).
- Central Government is empowered to amend any direction issued (prior to the limitation date prescribed under respective provision) under various faceless schemes and e-proceedings.
- Provisions relating to reassessment proceedings amended to provide time limit for filing a return in response to notice under section 148 of the Act within 3 months from the end of month in which notice is issued or the extended time allowed by the Assessing Officer. Returns filed beyond the above period shall not be treated as return under section 139. In certain search/survey cases a period of 15 days shall be excluded for the computation of time limit for issuance of notice under section 148 of the Act. Chief Commissioner / Director General can act as specified authorities (granting approval for 148/148A purpose) even in the presence of Principal Chief Commissioner or Principal Director General.
- For matters before the Interim Board for Settlement, time-limit extended to 30 September 2023 for amending an order or rectification applications.
- Time limit for completing the pending assessment and reassessment proceedings as on the date of search extended by 12 months.
- Tax officers authorised to seek assistance of domain experts and other professionals necessary to undertake the search and seizure.
- Effective from 1 October 2023, an assessee can make an application to claim TDS credit for income already disclosed in the return of income of past years in the prescribed form to the Assessing Officer within 2 years from the end of the financial year in which such tax was deducted at source. Further, the provisions of rectification shall also apply and the assessee also can make an application for rectification and the period of 4 years shall be reckoned from the end of the financial year in which such tax has been deducted. Interest on refund arising out of the above rectification shall be for the period from the date of the application to the date on which refund is granted.
- Effective from. 1 April 2023 “specified person” in section 206AB and 206CCA of the Act to exclude a specified category of person who is not required to furnish the return of income and who is notified by the Central Government in the Official Gazette in this behalf.
Goods & Service Tax
1. Composition taxpayers are now permitted to make intra-state supplies of goods through e-Commerce operators
- Section 10(2) and section 10 (2A) of the CGST Act, 2017 will be amended to allow composition taxpayers to make intra-state supplies of goods through e-Commerce operators.
2. Reversal of ITC by the taxpayer on non-payment of amount towards the value of supply along with tax within 180 days from the date of invoice
- Where the recipient fails to pay to the supplier of goods or services towards the value of supply along with tax payable thereon within a period of 180 days from the date of issue of invoice by the supplier, an amount equal to ITC availed by the recipient shall be paid along with interest.
- However, the recipient shall be entitled to avail of the credit of ITC on payment made by him to the supplier of the amount towards the value of supply of goods or services or both.
3. ITC to be reversed on the supply of goods kept in customs bonded warehouse before clearance for home consumption
- As per section 17(3) read with rules 42 and 43, certain activities or transactions are to be treated as exempt supplies for ITC reversal. In this regard, supply of goods kept in the customs bonded warehouse before clearance for home consumption has now been included in exempt supply for the purpose of ITC reversal.
4. Input tax credit is unavailable on goods and services used for CSR activities
5. Compulsory registration is not required if the requirement for registration is exempted under section 23
- The following persons shall not be liable to registration:
- Any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act
- An agriculturist, to the extent of supply of produce out of cultivation of land.
6 Form GSTR 1/3B/9/9C cannot be filed after the expiry of the period of three years from the due date of furnishing the said return
- A registered person shall not be allowed to furnish to return for a tax period after the expiry of a period of three years from the due date of furnishing of the above-said returns.
7. Removal of provisional ITC concept from refund provisions
- Provisional refund provisions allowing 90% of claimable refunds have been modified to exclude the concept of provisional ITC. Therefore, 90% of self-assessed and claimed refunds would be allowed on a provisional basis pending the final disposal of the refund application without getting into the details of provisional ITC.
8. Manner to be prescribed for calculation of interest on delayed refunds
- Section 56 will be amended to provide a manner of computation of interest on delayed refunds.
9. E-commerce operators (ECO) will be penalized on the following cases
- Any unregistered person who was liable to be registered and not exempted was allowed to make the supply of goods or services through the website of such ECO
- A composition dealer not permitted to make inter-state supplies is allowed to make inter-supply through ECO
- Failed to furnish the supplies made by unregistered person in Form GSTR 8
10. The following offenses have been decriminalized and no prosecution can be initiated
- Obstruction or prevention of an officer in the discharge of his duties
- Tampering with or destroying any material evidence or documents
- Failure to supply information or supplying false information required under the law
11. The GST law allows for the compounding of certain offenses upon payment of the applicable amount and offers protection from further proceedings under the GST law
The following amendments have been made to such provisions:
- Irrespective of the amount, if a person deals with goods liable for confiscation or services in contravention of the provisions, he can apply for compounding.
- The limit of value earlier was Rs. 1 crore to apply for compounding of certain offenses has now been removed.
- Earlier, a person accused of committing an offense under any other law could not apply for compounding. This restriction has now been removed
- A person who is accused of issuing fake invoices without an actual supply of goods or services would not be allowed to apply for compounding.
12. Section 138(2) has been amended to revise the payment limit for compounding as below
|Minimum Limit||Higher of Rs. 10000 or 50% of tax involved||25% of the tax involved|
|Maximum Limit||Higher of Rs. 30000 or 150% of tax involved||100% of the tax involved|
13. Section 158A of CGST Act, 2017 regarding sharing of information by GST Portal with other systems
The Government is planning for sharing the following information with other systems after obtaining the consent of the relevant supplier/recipient:
- Application for registration
- GSTR-1, GSTR-3B and GSTR-9 / 9C
- Invoices uploaded on the GST portal for e-invoice
- E-waybill particulars
- Other prescribed details
14. High sea sales /Merchant trading transactions not to be treated as supply from July 2017
- In case of high sea sales, sales from customs bonded warehouses, and merchant trading are neither a supply of goods nor a supply of services under Schedule III of the CGST Act 2017 effective from 1st February 2019.
- Due to persisting debate with the GST Department for the earlier period i.e. 1st July 2017 to 31st January 2019, Schedule III is being amended to provide that this amendment would be applicable for the said period also.
15. Change in the definition of OIDAR and Non-taxable online recipient
- Non-Taxable online recipient: Where services are provided in the nature of ‘online information and database access or retrieval services’ (like internet ads, cloud services, online e-books/music/movie/software/ digital content/gaming, etc) and the services are received by a non-taxable online recipient for other than commerce, industry or business, the tax is liable to be paid by the supplier even if located outside India.
- OIDAR: After the amendment, the only condition is that the supplies are impossible to ensure in absence of IT. Without checking for automation or minimum human intervention, the supplies would be classified as OIDAR if they cannot be supplied without the assistance of information technology.
16. POS within India where supplier /recipient within India and destination outside India
- The place of supply of services by way of transportation of goods, including by mail or courier to:
- a registered person, shall be the location of such person.
- a person other than a registered person, shall be the location at which such goods are handed over for their transportation.
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