The Union Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman tabled the Union Budget 2022-23 in Parliament yesterday.
The highlights of the Direct Tax Proposals made under the Finance Bill, 2022 are as follows:
1. Rates of Income Tax
- The rates of the Income-tax for A.Y. 23-24 are the same as that for A.Y. 22-23 except for the rate of surcharge on long-term capital gain (including LTCG covered under section 112) which is proposed to be capped at 15%.
- Also, surcharge in case of co-operative societies having income between 1 Crore to 10 Crore to be reduced from 12% to 7% (which are not opting for section 115BAD).
- Further, rate of Alternate Minimum Tax (AMT) to be reduced from 18.5% to 15% in case of co-operative societies, in parity with the rate of companies.
2. Extension of the last date for commencement of manufacturing or production
- The last date for commencement of manufacturing or production of an article or thing, under Section 115BAB has been proposed to be extended from 31-03-2023 to 31-03-2024 for an option of concessional rate of taxation @ 15%.
3. Extension of date of incorporation for eligible start up for exemption
- The tax incentive period under section 80-IAC is proposed to be extended by one year. Accordingly, eligible startups incorporated until 31st March, 2023 can claim tax benefits under section 80-IAC.
4. Filing of Updated Return
- A new sub-section (8A) under section 139 has been proposed to be inserted to provide an additional 24 months (2 years) to a taxpayer to furnish updated return, irrespective whether or not he has earlier filed the original, revised or belated return in respect of the relevant assessment year.
- However, the said updated return cannot be filed if it is a return of a loss or has the effect of decreasing the total tax liability or results in refund or increase in amount the refund.
- A new section 140B has been proposed to provide for the tax required to be paid for opting to file a return under the proposed provisions i.e. sub-section (8A) of section 139 of the Act.
- Also, an amount equal to
- 25% (if such return is furnished after expiry of the time available under sub-section (4) or sub-section (5) of section 139 and before completion of period of 12 months from the end of the A.Y.); or
- 50% (if such return is furnished after the expiry of 12 months from the end of the A.Y. but before completion of the period of 24 months from the end of the A.Y.)
as additional tax of aggregate of tax and interest payable on the additional income shown in the updated return would be required to be paid along with the updated return.
- In view of the proposed sub-section (8A) of section 139 and new section 140B, consequential amendments in section 144, section 153, section 234A and section 234B and 276CC have also been made.
5. No Appeal on pending identical question of law
- A new section 158AB is proposed to be inserted which provides that where any question of law arising in the case of an assessee for any A.Y.is identical with a question of law already raised in his case or in the case of any other assessee for an assessment year, which is pending before the jurisdictional High Court or the Supreme Court, then Commissioner or Principal Commissioner not to file any appeal until the decision on the question of law becomes final in the other case.
6. Clarification regarding treatment of cess and surcharge
- A new explanation under section 40(a)(ii) is proposed to be introduced retrospectively from 1st April, 2005 to clarify that the term “tax” includes and shall be deemed to have always included any surcharge or cess.
7. Clarification on expenditure which is an offence or which is prohibited by law
- Section 37 has been proposed to amended to provide that any benefit or perquisite to a person shall not be deductible for any purpose which is an offence under, or which is prohibited by, any law for the time being in force, in India or outside India.
8. Deduction on payment of interest only on actual payment
- Section 43B is proposed to be amended to provide that conversion of interest payable on loan or borrowing into debenture or any other instrument by which liability to pay is deferred to a future date, shall also not be deemed to have been actually paid
9. Tax Incentives to International Financial Services Centre (IFSC)
- It has been proposed to provide for an exemption on the income of non-residents from offshore derivatives, over-the-counter derivatives, royalty or interest on the lease of ship, etc. in IFSC.
- It is also proposed to insert a new clause (4G) to the said section so as to provide exemption to any income received by a non-resident from portfolio of securities or financial products or funds, managed or administered by any portfolio manager on behalf of such non-resident, in an account maintained with an Offshore Banking Unit, in any International Financial Services Centre as referred to in sub-section (1A) of Section 80LA, to the extent such income accrues or arises outside India and is not deemed to accrue or arise in India.
10. Deduction for NPS in case of State Government Employees
- The threshold limit for deduction in respect of employer’s contribution to NPS is proposed to be increased to 14% of salary in the case of State Government employees from present 10% under section 80CCD.
11. Condition of releasing of annuity to a differently-abled person
- The parent or guardian of the differently-abled can get a tax deduction on payment of the annuity or lump sum during the lifetime of parent or guardian, once the parent or guardian has attained 60 years or more.
12. Exemption of amount received for medical treatment and on account of death due to COVID-19
- The Finance Ministry had released a press statement dated: 25.06.2021 where it was announced that income-tax shall not be charged on the amount received by a taxpayer for medical treatment from employer or from any person for treatment of COVID-19 during FY 2019-20 and subsequent years.
- It was further announced that in order to provide relief to the family members of such taxpayer, income-tax exemption shall be provided to ex-gratia payment received by family members of a person from the employer of such person or from other person on the death of the person on account of COVID-19 during FY 2019-20 and subsequent years.
- Also, it was stated that the exemption shall be allowed without any limit for the amount received from the employer and the exemption shall be limited to Rs. 10 lakh in aggregate for the amount received from any other persons.
- To give effect to the aforementioned press release it is proposed to amend clause (2) of section 17.
13. TDS on sale of immovable property
- Section 194-IA is proposed to be amended to provide that in case of transfer of an immovable property (other than agricultural land), TDS shall be deducted at the rate of 1% on sum paid or credited to the resident or the stamp duty value of such property, whichever is higher.
- In case the consideration paid for the transfer of immovable property and the stamp duty value of such property are both less than fifty lakh rupees, then no tax is to be deducted under section 194-IA.
14. TDS on benefit or perquisite of a business or profession
- A new section 194R w.e.f. 1st July, 2022 is proposed to be inserted to provide that the person responsible for providing to a resident, any benefit or perquisite arising from carrying out of a business or exercising of a profession by such resident, shall, before providing such benefit or perquisite, ensure that tax has been deductedat the rate of 10% of the value or aggregate of value of such benefit or perquisite.
- However, no tax is to be deducted if the value or aggregate value of the benefit or perquisite paid or likely to be paid to a resident does not exceed Rs. 20,000 during the financial year.
Part 2 of this blog can be read here : https://taxninja.in/blog/decoding-direct-tax-proposals-in-the-finance-bill-2022-part-2
