Earlier this week, the Union Budget 2023 was presented by Finance Minister in the Parliament, these Budget proposals will become law, once the Finance Bill, 2023 is passed by both Houses of the Indian Parliament and the Bill receives President’s assent. The key income tax proposals are as follows:
1. Corporate tax rates: No changes in the corporate tax rates;
2. Amendments relating to TDS/ TCS:
TDS on ‘benefit’ or ‘perquisite’ in respect of a business or profession: Section 194R to be applicable on any benefit or perquisite whether in cash or in kind or partly in cash or partly in kind;
Updated definition of ‘specified person’ (Section 206AB and Section 206CCA): Definition of ‘specified person’ to exclude a person who is not required to furnish the return of income and the same has been notified by the Indian Government;
Increase in TCS rate: With effect from July 1, 2023, TCS on sale of overseas tour package to be increased from 5% to 20% (without any threshold limit).
3. Anti-abuse provisions – extended to non-residents: Section 56(2)(viib) taxes the receipt in the hands of private company when shares are issued to ‘resident’ investors at a premium and the consideration exceeds FMV. Now, it has been proposed to expand the scope of section 56(2)(viib) by including non-resident investors as well;
4. Introduction of Joint Commissioner (Appeals) [“JC(A)”]: To reduce the burden and pendency of cases at CIT(A) level, a new authority in the form of Joint Commissioner (Appeals) proposed to be established to handle certain categories of cases involving small amount of disputed demand. Further, the selected existing appeals may also be transferred from CIT(A) to JC(A) for speedy disposal and vice-versa;
5. Rationalisation of compliances and assessment: Tax officer enabled to file cross-objections before the ITAT against the final assessment order passed post DRP directions (Section 253): Amongst other measures to rationalise filing of relevant appeals before the ITAT, it is proposed that the tax officer can file cross objections in all appeals before the ITAT. This will include orders passed by tax officers post DRP directions.
6. Payment to Micro and Small enterprises: Payment made to Micro and Small enterprises to be allowed as deduction under section 43B of the Income-tax Act, 1961 (“Act”) (i.e. on actual payment basis) provided the payment is made within prescribed timelines under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) (i.e., 15 days or maximum of 45 days as per agreement);
7. Relief for start-ups:
It is proposed that the eligible start-ups should be allowed to carry forward the loss under the relaxation for 10 years (earlier 7 years).
The time limit for incorporation of eligible start-ups is extended to before April 1, 2024 (earlier April 1, 2023).
8. Income tax refund process revamped: As per revamped provisions, the income tax authorities can adjust and also withhold refund till the completion of any pending proceedings after giving due intimation to the taxpayer with prior approval of prescribed authority;
9. Deduction of Expenses: As per the currently, specific expenses under section 35D are deductible only if the underlying activity is carried out by the taxpayer himself or by a concern which is approved by the CBDT. It is proposed to remove such requirement and instead, the taxpayer will be required to furnish a statement containing the particulars of expenditure for the mentioned activities, with the tax officer. The form, manner and period for submitting the above details is to be prescribed.
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