The Union Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman tabled the Union Budget 2022-23 in Parliament yesterday.
This blog is in continuation to Decoding Direct Tax proposals in the Finance Bill, 2022 - Part 1 which can be read here.
15. Taxation of virtual digital assets
- A new section 115BBH is proposed to be inserted for taxation of virtual digital assets w.e.f. A.Y. 2023-24.
- Virtual digital assets is proposed to cover cryptocurrencies, NFTs (Non fungible token), and any other digital asset notified by the Central Government in the Official Gazette.
- Income of transfer of any virtual digital asset will be taxed at the rate of 30%. However, no deduction in respect of any expenditure (other than cost of acquisition) or allowance or set off of any loss shall be allowed.
- Further, no set off of any loss arising from transfer of virtual digital asset shall be allowed against any income computed under any other provision of the Act and such loss shall not be allowed to be carried forward to subsequent assessment years.
- Further "property" under section 56(2)(x) shall include virtual assets and thus where virtual assets are received without consideration or inadequate consideration, the same shall be taxable in the hands of the recipient if it exceeds Rs. 50,000.
16. TDS on virtual digital assets
- A new section 194S is proposed to be inserted that provides for deduction of tax on payment for transfer of virtual digital asset to a resident at the rate of 1%.
- It is also proposed to provide that in case of a transaction where tax is deductible under section 194-O along with the proposed section 194S, then the tax shall be deducted under section 194S and not section 194-O.
17. Cash credits under section 68 of the Act
- Section 68 is proposed to be amended to provide that the nature and source of any sum, whether in form of loan or borrowing, or any other liability credited in the books of an assessee shall be treated as explained only if the source of funds is also explained in the hands of the creditor or entry provider.
- If there is no explanation about the nature and source of such credits or if the explanation is not satisfactory, the assessing officer may add such credits as income from other sources.
- However, this would not apply if the creditor is a well regulated entity, i.e., it is a Venture Capital Fund, Venture Capital Company registered with SEBI.
18. Set off of loss in search cases
- A New Section 79A is proposed to be inserted which seeks to provide that no set off of losses brought forward, or otherwise, or unabsorbed depreciation under sub-section (2) of Section 32 shall be allowed to an assessee while computing his total income in any previous year which includes undisclosed income which is found in the course of a search under Section 132 or a requisition under Section 132A or a survey under Section 133A.
19. Penalty under Section 272A
- Section 272A of the Act which provides for penalty for failure to answer questions, sign statements, furnish information, returns or statements, allow inspections etc. is proposed to be amended to provide an increase of penalty from existing Rs. 100 to Rs. 500 for every day during which the failure continues.
20. Rationalisation of the provision of Charitable Trust and Institutions
- Clause (b) of sub-section (1) of section 12A of the Act and tenth proviso to clause (23C) of section 10 of the Act is proposed to be amended to provide that if the total income of a trust or institution, without giving effect to the provisions of Sections 11 and 12 or Section 10(23C), exceeds the maximum amount which is not chargeable to tax, such trust or institution shall keep and maintain prescribed books of account and other documents, as may be prescribed.
- Sub-section (4) of section 12AB is proposed to be substituted to provide that the Principal Commissioner or Commissioner can cancel the trust registration if he has noticed one or more specified violations during any previous year or has received a reference from the AO or the case has been selected in accordance with the risk management strategy
- It is proposed to insert Explanation 3 to the third proviso to clause (23C) of section 10 of the Act to provide that for the purposes of determining the amount of application under this proviso, where eighty-five per cent of the income referred to in clause (a) of the third proviso, is not applied, wholly and exclusively to the objects for which the trust or institution, during the previous year but is accumulated or set apart, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income provided a statement has been furnished stating the purpose for which the income is being accumulated and the period for which the income is to be accumulated or set apart, which shall not exceed 5 years.
- A new section 115BBI is proposed to be inserted to tax the following income of the trust/institution at the rate of 30%:
- income accumulated or set apart in excess of 15% of the income where such accumulation is not allowed
- deemed income runder 11(3) or 11(1B) or Explanation 4 to third proviso to 10(23C)
- income which is not excluded from total income under clause (c) of section 11(1)
- Provisions of sections 115TD, 115TE and 115TF relating to taxation of Accreted Income are also proposed to be made applicable to trusts or institutions under Section 10(23C).
- Filing of return is proposed to be made compulsory under section 139(4C) for claiming exemption under section 10(23C).
21. Voluntary Contributions for the renovation and repair of temples, mosques, gurudwaras, churches etc notified under section 80G
- Explanation 3A under section 11(1) is proposed to be inserted to provide that where the property held under a trust or institution includes any temple, mosque, gurdwara, church or other place notified under clause (b) of sub-section (2) of section 80G, any sum received by such trust or institution as a voluntary contribution for the purpose of renovation or repair of such temple, mosque, gurdwara, church or other place, may, at its option, be treated by such trust or institution as forming part of the corpus of the trust or the institution
22. Reduction of Goodwill from block of assets to be considered as ‘transfer’
- It is proposed to clarify retrospectively from 1st April 2021 that for the purposes of section 50 of the Act, reduction of the amount of goodwill of a business or profession, from the block of asset in accordance section 43, shall be deemed to be transfer.
23. Amendment in the provisions of section 179 of the Act
- Section 179 of the Act contains provisions which enables Income tax authorities to recover tax due from a private company from its directors, under certain circumstances where such tax cannot be recovered from the company itself. The section makes each director of the private company jointly and severally liable for the payment of such tax with certain conditions.
- The liability of directors of a private company under this section is not conditional upon the company being in liquidation and the section makes no reference to liquidation.
- Therefore, to make the title of the section uniform with its provisions, it is proposed to amend the title of the section to “Liability of directors of private company”.
24. Provisions pertaining to bonus stripping and dividend stripping to be made applicable to securities and units
- Section 94 of the Act contains anti avoidance provisions to deal with transactions in securities and units of mutual fund which, inter-alia, include dividend stripping and bonus stripping.
- it is proposed to amend sub-section (8) of section 94, pertaining to the prevention of tax evasion through bonus stripping, so as to make the said provision applicable to securities as well.
- It is also proposed to amend the Explanation to the said section to modify the definition of unit, so as to include units of business trusts such as InvIT, REIT and AIF, within the definition of units.
