Direct Tax
This Budget, being the the first Budget in
Amrit Kaal, hopes to build on the foundation laid in the previous Budget, and
the blueprint drawn for India@100.
The economic agenda for achieving this vision
focuses on three things:
v facilitating ample opportunities for citizens,
especially the youth, to fulfil their aspirations;
v providing strong impetus to growth and job
creation;
v strengthening macro-economic stability.
The provisions of Finance Bill, 2023, relating todirect taxes seek
to amend the Income-tax Act, 1961 (“theIT Act”), tocontinue reforms in
direct tax system through tax reliefs, removing difficulties faced bytaxpayers
and rationalization of various provisions.
With a view to achieving the above, the various proposals for
amendments are organizedunder the following heads:—
(A) Rates of Income-tax;
(B) Socio economic welfare measures;
(C) Ease of compliance;
(D) Widening and deepening of tax base/Anti-Avoidance;
(E) Improving compliance and Tax administration;
(F) Rationalisation of Provisions; and
(G) Others.
Following amendments have been proposed under Income Tax Laws in
the Finance Bill, 2023:
1.
Changes
in Section 115BAC (New Tax Regime) with effect from AY 2024-25:
a.
New
subsection (1A) is proposed to be inserted in section 115BAC of the IT Actto
prescribe tax rates in respect of the total income of a person, being an
individual or Hindu undivided family or association of persons [other than a
cooperativesociety], or body of individuals. The new rates are as follows-
|
Sl. No. |
Total Income |
Rate of Tax |
|
1. |
Upto Rs.3,00,000 |
Nil |
|
2. |
From Rs.3,00,001 to Rs.6,00,000 |
5 per cent |
|
3. |
From Rs.6,00,001 to Rs.9,00,000 |
10 per cent |
|
4. |
From Rs.9,00,001 to Rs.12,00,000 |
15 per cent |
|
5. |
From Rs.12,00,001 to Rs.15,00,000 |
20 per cent |
|
6. |
Above Rs.15,00,000 |
30 per cent |
b.
Sub-section
(2) of Section 115BACof the IT Actis proposed to be amended to provide that following
deductionsare allowed under new tax regime viz.
i. Section 80CCH(2) [contribution by CG to the
account of an assessee in the Agniveer Corpus Fund],
ii. Section 16(i) [Standard Deduction upto Rs.
50000],
iii. Section 57(iia) [in the case of income in the
nature of family pension, a deduction of a sum equal to thirty-three and
one-third per cent of such income or fifteen thousand rupees, whichever is
less.]
c.
A
new proviso is inserted in sub section 3
of section 115BAC of the IT Act–“If there is a depreciation allowance in
respect of a block of assets which has not been given full effect prior to the
assessment year beginning on the 1st day of April, 2024, corresponding
adjustment shall be made to the written down value of such block of assets as
on the 1st day of April, 2023 in the manner as may be prescribed”.
d.
A
new sub section (6) is inserted in section 115BACof the IT Act–“Nothing
contained in sub- section (1A) shall apply to a person where an option is
exercised by such person, in the manner as may be prescribed, for any
assessment year, and such option is exercised,––
(i)
on or before the due date specified under subsection (1) of section 139 for
furnishing the return of income for such assessment year, in case of a
personhaving income from business or profession, and such option once exercised
shall apply to subsequent assessment years; or
(ii)
along with the return of income to be furnished under sub-section (1) of
section 139 for such assessment year, in case of a person not having income
referred to in clause (i):
Provided
that the option under clause (i), once exercised for any previous year can be
withdrawn only once for a previous year other than the year in which it was
exercised and thereafter, the person shall never be eligible to exercise the
option under this subsection, except where such person ceases to have any
income from business or profession in which case, option under clause (ii)
shall be available.”
Hence, a
person having income from business or profession who opted outfrom the new tax regime
shall be able to opt-in only once.
However, a person not having income from business or profession shall be able
to exercise the option every year.
Note:The rates given in sub-section (1A) of section
115BAC of the IT Act are the default rates. In other words,the income-tax
payable in respect of the total income of the person shall becomputed as per
new rates only unless the person exercises an option under sub-section (6) of
section 115BAC (Old Regime).
Further, the maximum surcharge rate will be reduced from
37 per cent to 25 per cent in the new tax regime.
2.
Increase
in Rebate under section 87A:
In Section 87A of the IT Act, aproviso shall be inserted with effect fromthe AY 2024-25to give effect that under new tax regime, now onwards an individual who is a resident in Indiawill be entitled to a rebate of 100% of the amount of income-tax payable on a total income not exceeding Rs 7 lakh.
3.
Tax
on income of certain new manufacturing co-operative societies:
A new section 115BAE is inserted to provide a
new manufacturing co-operative society set up on or after April 01, 2023, which
commences manufacturing or production on or before March 31, 2024 and does not
avail 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.
4.
Increasing
threshold limits for presumptive taxation schemes for eligible business:
In section 44AD of the IT Act, in the
Explanation, in clause (b), after sub-clause (ii), the following provisos shall
be inserted with effect from the AY 2024-25 namely :–
‘Provided that where the amount or aggregate
of the amounts received during the previous year, in cash, does not exceed five
per cent. of the total turnover or gross receipts of such previous year, this
sub-clause shall have effect as if for the words “two crore rupees”, the words
“three crore rupees” had been substituted:
Provided
further that for the purposes of the first proviso, the receipt of amount or
aggregate of amounts by a cheque drawn on a bank or by a bank draft, which is
not account payee, shall be deemed to be the receipt in cash.’.
Hence, it is proposed to provide thatunder
section 44AD of the IT Act, for eligible business, where the amount or
aggregate ofthe amounts received during the previous year, in cash, does not
exceed five per cent ofthe total turnover or gross receipts, a threshold limit
of three crore rupees will apply.
5.
Increasing
threshold limits for presumptive taxation schemes for specified professionals:
In section 44ADA of the IT Act, after
subsection (1), the following provisos shall be inserted with effect from the
AY 2024-25, namely:––
‘Provided
that in case of an assessee where the amount or aggregate of the amounts
received during the previous year, in cash, does not exceed five per cent. of
the total gross receipts of such previous year, this sub-section shall have
effect as if for the words “fifty lakh rupees”, the words “seventy-five lakh
rupees” had been substituted:
Provided
further that for the purposes of the first proviso, the receipt of amount or
aggregate of amounts by a cheque drawn on a bank or by a bank draft, which is
not account payee, shall be deemed to be the receipt in cash.’.
Hence, it is
proposed to provide that under section 44ADA of the IT Act, for professions
referred to in sub-section (1) ofsection 44AA of the IT Act, where the amount
or aggregate of the amounts receivedduring the previous year, in cash, does not
exceed five per cent of the total grossreceipts, a threshold limit of
seventy-five lakh rupees will apply.
6.
Decriminalisation
of section 276A of the IT Act:
In section 276A of the Income-tax Act, after the
proviso, the following proviso shall be inserted, namely:––
“Provided further that no proceeding shall be
initiated under this section on or after April 1, 2023.”
Section 276A of the IT Act, provided
prosecution of liquidator for non-compliance with Section 178, now, it is
proposed to amend section 276A wherein no fresh prosecution shall be launched
under this section on or after April 1, 2023.
7.
Tax
on winningsfrom onlinegames:
(a) A
new section 115BBJ is inserted with effect from the AY 2024-25 to provide for
taxability of Online Gaming as follows-
“Notwithstanding anything contained in any
other provisions of this Act, where the total income of an assessee includes
any income by way of winnings from any online game, the income-tax payable
shall be the aggregate of—
(i) the amount of income-tax calculated on net
winnings from such online games during the previous year, computed in the
manner as may be prescribed, at the rate of thirty per cent.; and
(ii)
the amount of income-tax with which the assessee would have been chargeable had
his total income been reduced by the net winnings referred to in clause (i).”
(b) New section 194BA is inserted with effect
from July 1, 2023, to provide for deduction of TDS as follows-
“(1) Notwithstanding anything contained in any
other provisions of this Act, any person responsible for paying to any person
any income by way of winnings from any online game during the financial year
shall deduct income-tax on the net winnings in his user account, computed in the
manner as may be prescribed, at the end of the financial year at the rates in
force:
Provided that in a case where there is a
withdrawal from user account during the financial year, the income-tax shall be
deducted at the time of such withdrawal on the net winnings comprised in such
withdrawal, as well as on the remaining amount of net winnings in the user
account, computed in the manner as may be prescribed, at the end of the
financial year.
(2) In a case where the net winnings are
wholly in kind or partly in cash, and partly in kind but the part in cash is
not sufficient to meet the liability of deduction of tax in respect of whole of
the net winnings, the person responsible for paying shall, before releasing the
winnings, ensure that tax has been paid in respect of the net winnings.”
Hence, deduction of tax at source on net
winnings in the user account at the end of the financial year is prescribed in
the Finance Bill,2023 at 30 per cent.
In case there is withdrawal from user account
during the financial year, the income-tax shall be deducted at the time of such
withdrawal on net winnings comprised in such withdrawal.
In addition, income-tax shall also be deducted
on the remaining amount of net winnings in the user account at the end of the
financial year.
Net winnings shall be computed in the
prescribed manner.
8.
Increasing
threshold limit for co-operativesocietesto withdraw cash without TDS:
In section 194N of the IT Act, after the
second proviso, the following proviso shall be inserted with effect from AY
2023-24, namely:––
“Provided also that where the recipient is a
co-operative society, the provisions of this section shall have effect, as if
for the words “one crore rupees”, the words “three crore rupees” had been
substituted.”
It is
proposed to amend section 194N of the IT Act by inserting a new proviso to
provide that, the co-operative society can withdraw cash without TDS upto the limit of 3
crore.
9.
Rationalisation
of exempt income under life insurance policies:
Amendment in
the section 10(10D) of the IT Act, for the sixth proviso, the following
provisos shall be substituted with effect from AY 2024-25, namely:––
“Provided also that nothing contained in this
clause shall apply with respect to any life insurance policy other than a unit
linked insurance policy, issued on or after the 1st day of April, 2023, if the
amount of premium payable for any of the previous years during the term of such
policy exceeds five lakh rupees:
Provided also that if the premium is payable
by a person for more than one life insurance policy other than unit linked
insurance policy, issued on or after the 1st day of April, 2023, the provisions
of this clause shall apply only with respect to those life insurance policies
other than unit linked insurance policies, where the aggregate amount of
premium does not exceed the amount referred to in the sixth proviso in any of
the previous years during the term of any of those policies:
Provided also that the provisions of the
fourth, fifth, sixth and seventh provisos shall not apply to any sum received
on the death of a person:”
That is, after the enactment of the amendment
in Section 10(10D), while ULIPs having premium payable exceeding Rs. 2,50,000/-
have been excluded from the purview of clause (10D) of section 10 of the IT Act,
all other kinds of life insurance policies are still eligible for exemption
irrespective of the amount of premium payable.
Hence,
i.
Inserted
a new proviso (sixth proviso) to clause (10D) of the section 10 of the IT Act
to provide that nothing contained in this clause shall apply with respect to
any life insurance policy (other than a unit linked insurance policy) issued on
or after the April 1, 2023, if the amount of premium payable for any of the
previous year during the term of such policy exceeds five lakh rupees.
ii.
Inserted
a new proviso (seventh proviso) to clause (10D) of section 10 of the IT Act to
provide that if the premium is payable by a person for more than one life
insurance policy (other than unit linked insurance policy), issued on or after
the April 1, 2023, the provisions of this clause shall apply only with respect
to those life insurance policies (other than unit linked insurance policies),
where the aggregate amount of premium does not exceed the amount referred to in
the sixth proviso in any of the previous years during the term of any of those
policies;
iii.
Amend
the existing sixth proviso (new proposed eighth proviso) to clause (10D) of
section 10 of the IT Act to provide that the provisions of the fourth, fifth,
sixth and seventh provisos shall not apply to any sum received on the death of
a person.
10.
Taxability
of life insurance policy under Income from Other Sources:
New Clause inserted in section 56(2) of the IT
Act, , with effect from AY 2024-25, namely: –
“(xiii) where any sum is received, including
the amount allocated by way of bonus, at any time during a previous year, under
a life insurance policy, other than the sum,––
(a) received under a unit linked insurance
policy;
(b) being the income referred to in clause
(iv), which is not to be excluded from the total income of the previous year in
accordance with the provisions of clause (10D) of section 10, the sum so
received as exceeds the aggregate of the premium paid, during the termof such
life insurance policy, and not claimed as deduction under any other provision
of this Act, computed in such manner as may be prescribed.”
The Finance Bill, 2023, has inserted clause (xiii) in sub-section (2)
of section 56 of the IT Act to provide where any sum is received (including the
amount allocated by way of bonus) at any time during a previous year, under a
life insurance policy, which is not exempt under clause (10D) of section 10 of the
IT Act, the sum so received as exceeds the aggregate of the premium paid during
the term of such life insurance policy shall be chargeable to income-tax under
the head “Income from other sources”. If the premium paid had been claimed as
deduction in any other provision of the IT Act such premium will not be reduced
from sum so received. Computation mechanism shall be prescribed. This would not
apply to ULIP or Keyman insurance policies whose taxation is governed by other
existing provisions of the IT Act.
11.
Limiting
the roll over benefit claimed under section 54 and section 54F:
In Section 54(1) of the IT Act, second proviso
has been inserted with effect from AY 2024-25, namely:-
“Provided also that where the cost of new
asset exceeds ten crore rupees, the amount exceeding ten crore rupees shall not
be taken into account for the purposes of this sub-section.”
It is proposed to impose a limit on the
maximum deduction that can be claimed by the assessee under section 54 and 54F
to rupees ten crore. It has been provided that if the cost of the new asset
purchased is more than rupees ten crore, the cost of such asset shall be deemed
to be ten crores.
Further, it
is to be noted that similar amendment isproposed under section 54F of the IT
Act.
12.
Relief
to sugar co-operatives from past demand:
New sub-sections
(19) and (20) are inserted under Section 155 of the IT Act, to provide that in the case of a sugar mill
cooperative, where any deduction in respect of any expenditure incurred for the
purchase of sugarcane has been claimed by an assessee and such deduction has
been disallowed wholly or partly the Assessing Officer shall, on the basis of
an application made by such assessee in this regard, recompute the total income
of such assessee for such previous year. The Assessing Officer shall allow such
deduction to the extent such expenditure is incurred at a price which is equal
to or less than the price fixed or approved by the Government for that previous
year.
13.
Tax
holiday extended for startups for 1 more year:
In section 80-IAC of the Income-tax Act, in the Explanation, in
clause (ii), in sub-clause (a), for the figures “2023”, the figures “2024”
shall be substituted.
To promote the development of start-ups in India and to provide
them with a competitive platform, it is proposed to amend the provisions of
section 80-IAC of the IT Actso as to extend the period of incorporation of
eligible start-ups to April 1, 2024.
14.
Carry
forward of losses for eligible start-ups extended from seven year to ten years:
In section
79 of the Income-tax Act, in sub-section (1), in the proviso, for the word
“seven”, the word “ten” shall be substituted.
So, the
carried forward losses of eligible start-ups shall be considered for set off,if
such loss has been incurred during the period of ten years beginning from the
year in which such company was incorporated.
15.
Period
of tax benefits to funds relocating to IFSC, GIFT City extended till March 31, 2025:
In order to further incentivize operations
from IFSC, it is proposed to amend clause (b) of the Explanation to clause
(viiad) of section47 of the IT Actso as to extend the date for transfer of
assets of the original fund, or of itswholly owned special purpose vehicle, to
a resultant fund in case of relocation to March 31, 2025.
16.
TDS
rate to be reduced from 30 per cent to 20 per cent on taxable portion of EPF
withdrawal in non-PAN cases:
Since many
low-paid employees do not have PAN and thereby TDS is being deducted at the
maximum marginal rate in their cases under section 192A. Hence, it is proposed
to omit the second proviso to section 192A of the IT Act, so that in case of
failure to furnishing of PAN by the person relating to payment of accumulated
balance due to him, tax will be deducted at the rate of 20% as in other non-PAN
cases in accordance withsection 206AA of the IT Act, instead of at the maximum
marginal rate.
17.
Income
from Market Linked Debentures to be taxed:
It is proposed to insert a new section 50AA in
the IT Act to treat the full value of the consideration received or accruing as
a result of the transfer or redemption or maturity of the “Market Linked
Debentures” as reduced by the cost of acquisition of the debenture and the
expenditureincurred wholly or exclusively in connection with transfer or
redemption of such debenture, as capital gains arising from the transfer of a
short term capital asset.
Since,variety of hybrid securities that
combine features of plain vanilladebt securities and exchange traded
derivatives are being issued through private placements and listed on stock
exchanges. It is seen that such securities differ from plain vanilla
debtsecurities.
In order to tax the capital gains arising from
the transfer or redemption or maturity of these securities as short-term
capital gains at the applicable rates.
18.
Increase
in limit for exemption on leave encashment:
The limit of Rs. 3 lakh for tax exemption on
leave encashment on retirement of non-government salaried employees was last
fixed in the year 2002, when the highest basic pay in the government wasRs. 30,000/- per month. In line with the increase
in government salaries, It is proposed to increase this limit toRs. 25 lakh.
Hope the information will assist
you in your Professional endeavours. In case of any query/ information, please
do not hesitate to write back to us.
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