Major Changes Proposed in Income Tax Act through Finance Bill 2023
From Asstt Yr. 2024-25- No Income Tax on persons having income upto 7 lacs in new tax regime by allowing higher deduction of Tax u/s 87-A
From Asstt Yr. 2024-25- Standard deduction of 50,000/- from salary income and 15,000/- to pensioners and contribution to Agniveer fund in new tax regime also
Reduction in highest surcharge from 37% to 25% in New Tax Regime for the income above 2 crores.
Tax exemption limit for leave encashment on retirement increased to 25 lacs for non Govt employees.
In New Tax Regime the slab rates changed as under: - Applicable for all Individuals (including Senior Citizens), HUF, AOP or BOI. Now New Tax Regime will be default tax regime.
Total income (Rs.) Rate (per cent) u/s 115BAC
Upto 0-3 lakh Nil
From 3-6 lakh 5%
From 6-9 lakh 10%
From 9-12 lakh 15%
From 12-15 lakh 20%
Above 15 lakh 30%
Rebate u/s 87A 25,000/-, where total income less than 7 lacs, Cess 4%
No Change in Tax rates under Old Tax Regime.
Total income (Rs.) Senior Citizen Super Senior
Upto 0-2.50 lakh Nil Upto 3 Lacs Nil Upto 5 Lacs Nil
From 2.50-5 lakh 5% 3 to 5 lacs 5%
From 5-10 lakh 20% 5 TO 10 Lacs 20% 5 to 10 Lacs 20%
Above 10 lakh 30% Above 10 Lacs 30% Above 10 Lacs 30%
Tax Rebate u/s 87A Rs 12,500/- whose Income Less than 5 lacs, Cess 4%. Old Regime declaration will have to be filed before due date of filling original
No Change in Corporate Tax rates and tax rates of firms and LLP
VERY IMPORTANT Section 43B
It provides for certain deductions to be allowed only on actual payment. Further, the proviso of this section allows deduction on accrual basis if the amount is paid by due date of furnishing of the return of income.
FROM ASSTT YEAR 2024-25 (I.E. FROM FY 2003-04) To promote timely payments to micro and small enterprises, it is proposed to include payments made to such enterprises within the ambit of section 43B of the Act.
Accordingly, it is proposed to insert a new clause (h) in section 43B of the Act to provide that any sum payable by the assessee to a micro or small enterprise beyond the time limit specified in section 15 of the Micro, Small and Medium Enterprises Development (MSMED) Act 2006 shall be allowed as deduction only on actual payment. However, it is also proposed that the proviso to section 43B of the Act shall not apply to such payments.
Section 15 of the MSME Development Act mandates payments to micro and small enterprises within the time as per the written agreement, which cannot be more than 45 days. If there is no such written agreement, the section mandates that the payment shall be made within 15 days. Thus, the proposed amendment to section 43B of the Act will allow the payment as deduction only on payment basis. It can be allowed on accrual basis only if the payment is within the time mandated under section 15 of the MSMED Act.
Micro and Small enterprises shall have meaning as assigned to it in section 2 of the MSME Development Act 2006. The Enterprise to be Micro and Small Enterprise must be registered u/s MSME Development Act. Under this Act and enterprise would be as defined in the MSME development Act: -
a. “Micro Enterprise” if its Fixed Assets less than 1 crore and turnover less than 5 crore.
b. “Small Enterprise” if its Fixed Assets less than 10 crore and turnover less than 50 crore.
Conversion of Gold to Electronic Gold Receipt (EGR) and vice versa - It is Proposed that Conversion of Gold into EGR or EGR into gold will not amount to transfer and so there will be no Capital Gain on such conversions.
Presumptive Taxation u/s 44AD and 44ADA - At present presumptive scheme could have been opted for sales up to 2 crore (in case of Professional 50 Lacs) for non-maintenance of books of accounts id Income was not less than 8% (50% in case of professional). These limits are proposed to be increased to 3 crore and 75 lacs respectively if cash receipts were less than 5%.
Simplified common Return form - it is proposed that Government will bring in simplified common return form.
Relief to Start-ups - In case of startups, if there is change in shareholding, loss is allowed to be setoff, only if it has been incurred during the period of seven years beginning from the year in which such company is incorporated. To align this period of seven years with the period of ten years contained in section 80-IAC of the Act, the time period for loss is proposed to be increased from seven years to ten years from the date of incorporation. This amendment will take effect from Asstt Yr. 2023-24. It is proposed to amend the provisions of section 80-IAC of the Act so as to extend the period of incorporation of eligible start-ups before 1st day of April 2024 from 1st day of April 2023.
Ease in claiming deduction on amortization of preliminary expenditure - It is proposed to amend section 35D of the Act to remove the condition of activity in connection with such expenses to be carried out by a concern approved by the Board. Now, assessee shall be required to furnish a statement containing the particulars of this expenditure within prescribed period to the prescribed income-tax authority in the prescribed form and manner. This amendment will apply to the Assessment Year 2024-2025.
TDS and taxability of income from online gaming - Any Income earned by way of winning from online games, the tax will be levied at 30%. Which will be calculated on Net winning from such online games during the previous year, computed in the prescribed manners. There will be TDS also by online gaming portal on net income.
Investment in Residential Property for Capital Gain Deduction - It is proposed that the deduction from capital gain on investment in residential house u/s 54 and 54F shall be limited to 10 Crore.
Exemption of income under Life insurance Policies - For Life Insurance Policies issued on or after 1st April 2023 it is proposed that where premium or aggregate of premium is Rs 5 Lacs or more in a year then any sum received which exceeds the aggregate of the premium paid during the term of such life insurance policy shall be chargeable to tax under head "Income from other sources aspersection-56(2)(xiii) of the act. However, if the amount received on death of person, then it shall remain exempt.
Prevention of double deduction claimed on interest on borrowed capital for acquiring, renewing, or reconstructing a property - It is proposed to provide that the cost of acquisition or the cost of improvement shall not include the amount of interest claimed under section 24 or Chapter VIA. This amendment is proposed to take effect from Asstt Yr. 2024-25
TDS credit for income already disclosed in the return of income of past years - It is proposed to provide that where any income included in the ROI for any “Relevant Assessment year” and the TDS on such income is deducted in a subsequent financial year then the assessee can make application in the prescribed form to the Assessing Officer within two years from the end of the financial year in which such tax was deducted at source. Then Assessing officer on receipt of such application amend the order of assessment/intimation allowing credit of such TDS in “Relevant Assessment year”.
Rationalization of the provisions of Charitable Trust and Institutions -
It is proposed to levy exit tax where the trust is getting merged with a non-charitable or a charitable but with dissimilar object or does not transfer the asset to another charitable trust.
It is proposed to consider only 85% of the eligible donations made by a trust or institution to another trust or institution as application of such donation for charitable or religious purposes.
It is proposed that the application of donations out of corpus or repayment of loan or borrowing before 1 April 2021 should not be considered as an application for charitable or religious purposes.
It is proposed to introduce a time limit of five years for depositing back into the corpus or repayment of loan or borrowing.
It is proposed to allow direct final registrations or approval in case of newly formed trust or institution.
Increasing rate of TCS of certain foreign remittances - In order to increase TCS on certain foreign remittances and on sale of overseas tour packages, following amendment is proposed in sub-section (1G) of section 206C of the Act: These amendments will take effect from 1st July, 2023.
For a detailed discussion and professional advisory pertaining to the applicability and compliance of the said provision of law kindly contact:
CA. Ashok Seth
Partner - Income Tax & Audit
CA. Aswani Kumar
Partner - Income Tax & Audit