Dear Valued Readers,

We are proud to present to you the latest edition of our magazine, entirely focused on the Union Budget 2023. As a publication that values data-driven analysis and rigorous research, we felt it was our duty to bring you a comprehensive examination of this critical event. This budget lays out a roadmap for the nation's future and outlines the priorities and policies that will shape the growth and development of India in the years to come.

We are grateful for the opportunity to provide you with in-depth analysis and insights into this important event, and we hope that our coverage will help you to understand the implications of the budget for various sectors and communities.

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We would like to thank you, our analytical readers, for your interest in our work and for your commitment to evidence-based analysis. We believe that the Union Budget 2023 will play a crucial role in shaping the future of India, and we are honoured to be your source for the latest and most accurate information on this important event.

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For and on behalf of M/s S. Jaykishan

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This publication contains information for general guidance only. Although the best of endeavor has been made to provide the provisions in a simpler and accurate form, there is no substitute to detailed research with regard to the specific situation of a particular individual or entity. S. Jaykishan or any of its members do not accept any responsibility for loss incurred by any person for acting or refraining to act as a result of any matter in this publication.

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55. Providing clarity on benefits and perquisites in cash.............................................. 58
56. Rationalisation of the provisions of Charitable Trusts and Institutions................... 59
57. Removal of certain funds from section 80G............................................................ 67
58. Set off and withholding of refunds in certain cases................................................. 67
    7. Others............................................................................................................................ 69
59. Omission of certain redundant provisions of the Act.............................................. 69
60. Decriminalisation of section 276A of the Act.......................................................... 69

4. INDIRECT TAX PROPOSALS..................................................................................... 70

1. ECONOMIC SURVEY

Introduction: The Economic Survey 2023 is a captivating tale of India's economic resurgence. The report throws light on the nation’s achievements, putting growth, wealth, and opportunity front and centre. From the return of inflation to the generation of new jobs, the survey showcases the many ways the Indian economy is thriving. Get ready to be inspired by the country’s relentless progress, as well as its innovative solutions to some of the world's most pressing challenges. Let us delve into the exciting world of the Economic Survey 2023 and witness the ways in which India is changing the game.

The survey highlights the current state of the Indian economy and its outlook for the future by putting emphasis on the following:

1. Reviving the Indian Economy: A Journey of Reforms and Recovery
   5. Strong Foundations: India's economy underwent wide-ranging reforms that strengthened its fundamentals and increased efficiency from 2014-2022.

1. 5. Development Through Partnership: The reforms were based on principles of creating public goods, adopting trust-based governance, working with the private sector, and improving agricultural productivity.

1. 5. Overcoming Challenges: The period of 2014-2022 saw balance sheet stress and global shocks that impacted credit growth, capital formation, and economic growth. With healthier balance sheets and a new credit cycle underway, the Indian economy is poised to grow at its potential in the coming years.

1. 5. Efficiency Gains and path to growth: The Indian economy is growing due to formalization, financial inclusion, and digital technology reforms. It has a better growth outlook than pre- pandemic years and is poised to reach its potential in the medium term.

2. Financial Feast: Celebrating Strong Revenue Growth
   5. Resilient Finances: The Union Government has displayed a strong financial performance, driven by recovery in economic activity, surge in tax revenues, and smart budget assumptions.

1. 5. Booming Tax Revenues: The Gross Tax Revenue recorded YoY growth of 15.5% from April to November 2022, with significant growth in direct taxes and GST collections. GST has stabilized as an essential source of revenue for the central and state governments, with gross collections increasing by 24.8% YoY from April to December 2022.

1. 5. Capital Expenditure Focus: The Union Government's emphasis on capital expenditure (Capex) continues, despite higher revenue expenditure requirements during the year. The Centre's Capex has steadily risen to 2.5% of GDP in FY22. The Centre has incentivized state governments to prioritize their spending on Capex with interest-free loans and increased borrowing limits.

1. 5. Growth-Driven Infrastructure: With a focus on infrastructure-intensive sectors such as roads and highways, railways, and housing and urban affairs, the increase in Capex has positive implications for medium-term growth.

1. 5. Sustainable Debt-to-GDP: The government's Capex-led growth strategy will keep the growth- interest rate differential positive, resulting in a sustainable debt to GDP ratio in the medium term.

3. Monetary Mastery & Financial Mediation: A Triumphant Year
   5. Monetary Tightening Initiated: The RBI started its monetary tightening cycle in April 2022. Repo rate has been raised by 225 bps. Surplus liquidity conditions have been moderated.

1. 5. Improved Lending by Financial Institutions: Cleaner balance sheets led to enhanced lending. Credit offtake by scheduled Commercial Banks (SCBs) has been growing in double digits since April 2022. Credit disbursed by Non-Banking Financial Companies (NBFCs) has also increased.

1. 5. Good Health of Financial Institutions: Gross Non-Performing Assets (GNPA) ratio of SCBs has fallen to 5.0, a seven-year low. Capital-to-Risk Weighted Assets Ratio (CRAR) remains healthy at 16.0.

1. 5. Efficient Debt Recovery: Recovery rate for SCBs through Insolvency and Bankruptcy (IBC) was highest in FY22 compared to other channels.

1. 5. Positive Investment Cycle: Growth in credit offtake is expected to sustain. Combined with a pick-up in private capex, a virtuous investment cycle is expected to emerge.

4. Balancing the Books: Navigating Inflation and the Cost of Living
   5. Inflationary Management: India successfully capped the increase in prices while other advanced economies struggled with high inflation. India's retail inflation rate peaked at 7.8% in April 2022, but it was still within the RBI's upper tolerance limit of 6%.

1. 5. Responsive Monetary Policy: The RBI's effective anchoring of inflationary expectations and responsive monetary policy played a crucial role in guiding the trajectory of inflation in the country.

1. 5. Stabilizing Inflation Expectations: One-year-ahead inflationary expectations by businesses and households have moderated, thanks to the government's timely intervention and the RBI's monetary policy.

1. 5. Revival in Housing Finance: The government's housing sector intervention and low home loan rates increased demand in the affordable segment, resulting in overall rise in Housing Price Indices, offering confidence to homeowners and financiers.

5. Social Sector Progress: India's Journey towards Empowerment and Development
   5. Expanding Social Spending: The government has increased its budgeted expenditure on the health sector, reaching 2.1% of GDP in the current fiscal year.

1. 5. Breaking Poverty Barriers: 41.5 crore people have lifted themselves out of poverty between 2005-06 and 2019-20, according to the UNDP's Multidimensional Poverty Index report.

1. 5. Pioneering Good Governance: The Aspirational Districts Programme and the eShram portal are shining examples of the government's efforts to improve governance, especially in remote and difficult areas.

1. 5. Financial Inclusion for All: The JAM trinity, combined with Direct Benefit Transfer, has revolutionized transparent and accountable governance by bringing the marginalized sections of society into the formal financial system.

1. 5. A Vital Role for Aadhaar: Aadhaar played a critical role in developing the Co-WIN platform for transparent administration of over 2 billion COVID vaccine doses.

1. 5. Labor Market Recovery: The labor market has recovered beyond pre-COVID levels, with unemployment rates falling from 5.8% to 4.2% between 2018-19 and 2020-21.

1. 5. Improving Education and Gender Equality: Gross Enrolment Ratios in schools and gender parity have improved, leading to a better future for all.

1. 5. Progress in Health: Infant, under five, and neonatal mortality rates have decreased and over 220 crore COVID vaccine doses have been given. The government has reduced out-of-pocket health expenditure from 64.2% in FY14 to 48.2% in FY19.

1. 5. Empowering the Health Sector: The Ayushman Bharat Scheme has verified over 22 crore beneficiaries and has operationalized over 1.54 lakh Health and Wellness Centres across the country.

6. Eco-Advancement: A Path to a Brighter Future
   5. Net Zero Pledge: India has committed to achieving a net zero emissions goal by 2070.

1. 5. Renewable Energy Expansion: India exceeded its target of 40% installed electric capacity from non-fossil fuels by 2030. The expected installed capacity from non-fossil fuels is over 500 GW by 2030.

1. 5. Emissions Reduction: India is aiming to reduce its emissions intensity of GDP by 45% by 2030, compared to 2005 levels.

1. 5. A Move towards Non-Fossil Fuels: By 2030, 50% of the cumulative electric power installed capacity is expected to come from non-fossil fuel-based energy sources.

1. 5. "LIFE" - Lifestyle for Environment: A mass movement has been launched to promote a sustainable lifestyle.

1. 5. Green Finance: A Sovereign Green Bond Framework was issued in November 2022, with two tranches of INR 4,000 crore Sovereign Green Bonds being auctioned by the RBI.

1. 5. National Green Hydrogen Mission: India aims to be energy independent by 2047 through the National Green Hydrogen Mission. A production capacity of at least 5 MMT of green hydrogen per annum is expected to be developed by 2030.

1. 5. Environmental Progress: The survey highlights the progress on eight missions under the NAP on CC to address climate concerns and promote sustainable development.

1. 5. Solar Power Expansion: Solar power capacity installed under the National Solar Mission stood at 61.6 GW as of October 2022, with India becoming a favoured destination for renewable energy investment, totalling USD 78.1 billion in 7 years.

1. 5. Toilets for All: Over 62.8 lakh individual household toilets and 6.2 lakh community and public toilets have been constructed under the National Mission on Sustainable Habitat.

7. Harvesting Progress: Elevating India's Agriculture and Food Management
   5. Agri-Boom: The agriculture and allied sector in India has been thriving due to various initiatives and measures taken by the government to improve crop and livestock productivity and ensure better returns for farmers. Private investment in agriculture saw a significant increase, reaching 9.3% in 2020-21.

1. 5. Farmer's First: The government has fixed the minimum support price (MSP) for all mandated crops and institutional credit to the agricultural sector has continued to grow, reaching 18.6 lakh crore in 2021-22. Rs 13,681 crores were sanctioned for post-harvest support and community farms under the Agriculture Infrastructure Fund.

1. 5. Food Security: The foodgrain production in India has been steadily increasing, standing at 315.7 million tonnes in 2021-22, with free foodgrains provided to 81.4 crore beneficiaries under the National Food Security Act for one year from January 2023.

1. 5. Transparent Trading: The National Agriculture Market (e-NAM) Scheme has implemented an online, competitive, transparent bidding system, connecting 1.74 crore farmers and 2.39 lakh traders.

1. 5. Organic Revolution: Organic farming is being promoted through Farmer Producer Organisations (FPO) under the Paramparagat Krishi Vikas Yojana (PKVY).

1. 5. Millet Movement: India is at the forefront of promoting millets through the International Year of Millets initiative.

8. Revitalizing the Industrial Sector: A Journey towards Robust Growth
   5. Strong Growth in Gross Value Added: The Industrial sector in India recorded a growth rate of 3.7% in Gross Value Added during the first half of FY22-23, higher than the average growth of 2.8% in the last decade.

1. 5. Boosting Factors: Robust Private Final Consumption Expenditure, export stimulus, increased investment demand and strengthened bank and corporate balance sheets have driven the growth of the industrial sector.

1. 5. Robust Supply Response: The industry has responded robustly to the demand stimulus, with PMI manufacturing in the expansion zone for 18 months and healthy growth in Index of Industrial Production.

1. 5. Credit for MSMEs and Large Industry: Credit to Micro, Small and Medium Enterprises (MSMEs) has grown by 30% and credit to large industry has shown double-digit growth since October 2022.

1. 5. Surging Electronics Exports: India's electronics exports have risen nearly threefold, from US

$4.4 billion in FY19 to US $11.6 Billion in FY22. India has become the second-largest mobile phone manufacturer globally, with the production of handsets rising from 6 crore units in FY15 to 29 crore units in FY21.

1. 5. Rise in Pharma FDI: Foreign Direct Investment (FDI) in the Pharma Industry has increased four times, from US $180 million in FY19 to US $699 million in FY22.

1. 5. PLI Schemes to Boost Global Supply Chains: PLI schemes aim to integrate India into global supply chains with a target capex of ?4 lakh crore. Resulted in FY22 investment of ?47,500 crore, leading to production/sales of ?3.85 lakh crore and employment generation of 3.0 lakh.

1. 5. Eased Regulations: Over 39,000 compliances have been reduced and more than 3500 provisions decriminalized as of January 2023, making it easier for businesses to operate.

9. Empowering the Service Industry: A Driving Force for Growth
   5. Soaring Growth: With a projected 9.1% growth in FY23, India's services sector is set for a strong comeback. PMI services index indicates a robust expansion in the sector since July 2022. Credit to the services sector has grown by 16% since July 2022.

1. 5. World Player: India is now one of the top ten services exporting countries, with a 4% share in the world's commercial services exports.

1. 5. Resilience Amidst Challenges: Despite the pandemic and geopolitical uncertainties, India's services exports remained strong due to increased demand for digital services and infrastructure modernization.

1. 5. Attractive Investment Destination: USD 7.1 billion in FDI equity inflows in in FY22.

1. 5. Real Estate Boom: The real estate sector is experiencing sustained growth, with a 50% increase in housing sales between 2021 and 2022

1. 5. Hospitality Revival: The hotel occupancy rate has improved from 30-32% in April 2021 to 68- 70% in November 2022. The tourism sector is showing signs of revival, with an increase in foreign tourist arrivals in India in FY23.

1. 5. Digital Transformation: The digital transformation of financial services is underway, with the e-commerce market projected to grow at 18% annually through 2025.

10. Excelling in the External Front: A Journey of Growth and Development
    5. Merchandise Exports: India's merchandise exports were US$ 332.8 billion during April- December 2022. India has diversified its markets by increasing exports to Brazil, South Africa, and Saudi Arabia.

1. 5. Remittances: India is the largest recipient of remittances receiving US$ 100 bn in 2022.

1. 5. Forex Reserves: India's Forex Reserves stood at US$ 563 bn as of December 2022, covering 9.3 months of imports.

1. 5. Debt Management: India's external debt is protected by its high level of foreign exchange reserves and low debt-to-GNI and short-term debt ratios.

11. Building a Robust Foundation: The Progress of Physical and Digital Infrastructure
    5. Government's Vision for Infrastructure Development: The Indian government aims to develop its infrastructure through public-private partnerships, with 56 projects approved under the VGF Scheme, costing ?57,870.1 crore, from 2014-15 to 2022-23. The government has also notified the IIPDF Scheme with an outlay of ?150 crore for FY 23-25.

1. 5. National Infrastructure Pipeline: There are 89,151 projects costing ?141.4 lakh crore under implementation, with 1009 projects worth ?5.5 lakh crore completed. The government has linked the NIP and Project Monitoring Group (PMG) portal to fast-track approvals and clearances.

1. 5. National Monetisation Pipeline: The estimated cumulative investment potential is ? 9.0 lakh crore, with ? 0.9 lakh crore monetisation achieved against the expected ?0.8 lakh crore in FY22. The target for FY23 is ?1.6 lakh crore.

1. 5. GatiShakti: PM GatiShakti Master Plan establishes comprehensive database for integrated planning, improving multimodal connectivity and logistics efficiency to streamline movement of people and goods.

1. 5. Electricity Sector and Renewables: The government has sanctioned 40 GW capacity for the development of 59 Solar Parks in 16 states. The electricity generated in FY22 was 17.2 lakh GWh compared to 15.9 lakh GWh in FY21. The installed power capacity increased from 460.7 GW to

482.2 GW on 31 March 2022.

1. 5. Making Indian Logistics Globally Competitive: The National Logistics Policy strives for a tech-enabled, efficient and sustainable logistics ecosystem in India. Highway construction budget

at ?2.4 lakh crore, major port capacity doubled in 8 years and new Inland Vessels Act promotes water transport.

1. 5. India's Digital Public Infrastructure: UPI usage on the rise, eyes global adoption. India drives digital transformation with 117.8 crore telephone subscribers and government schemes promoting privacy and data governance.

Conclusion: The Indian economy is thriving with government reforms and infrastructure investments driving growth. The industrial sector is growing due to consumer spending, investment, and exports, with further growth expected from reduced regulations and PLI. India boasts robust merchandise exports and is the largest recipient of remittances, supported by free trade agreements and ample Forex Reserves. Despite challenges, global agencies remain optimistic about India's growth prospects, driven by improved private investment and strengthened public sector banks.

2. HIGHLIGHTS FROM THE FM’s SPEECH

Union Budget 2023: Charting a path towards a bright future

The Union Budget 2023-24, presented by the Union Minister for Finance & Corporate Affairs, has a vision for “Amrit Kaal” - a blueprint for an empowered and inclusive economy. This year’s Budget has seven key priorities aimed at guiding the country’s progress towards inclusive development. These priorities complement each other and serve as the “Saptarishi” leading the country towards success. With the Indian economy estimated to grow at 7% - the highest among all major economies - and India being recognized as a ‘bright star’ in the 75th year of independence, the Union Budget 2023-24 aimed to present a vision for a prosperous and inclusive future, reaching all regions and citizens.

The main priorities outlined in the Union Budget 2023 are:-

1. 5. Major Boost to Capital Investment: India's Capital Investment Outlay rises by 33% to INR 10 Lakh Crore.

1. 5. Bright Economic Outlook: Real GDP expected to grow at 7% in 2022-23 with Export Growth at 12.5%.

1. 5. Agriculture & Horticulture Acceleration: Atmanirbhar Clean Plant Program launches with INR 2,200 Crore outlay.

1. 5. Healthcare Expansion: 157 New Nursing Colleges Established and PM Awas Yojana enhanced by 66%.

1. 5. Transport Revolution: Record capital outlay of INR 2.40 Lakh crore for Railways.

1. 5. Waste Management & Sustainability: 500 New "Waste to Wealth" Plants under GOBARdhan Scheme.

1. 5. Skilled Workforce Development: Mantri Kaushal Vikas Yojana 4.0 and 10,000 Bio-Input Resource Centres.

1. 5. Tax Relief for Citizens: Personal Income Tax Reforms with New Slabs and Higher Exemption Limits.

1. 5. Export Promotion & Domestic Manufacturing: Indirect Tax proposals to encourage Exports and Green Energy.

1. 5. Simplified Customs Duty: Reduced Rates from 21 to 13.

1. 5. Support for Agri-Startups: Agriculture Accelerator Fund for Rural Areas.

1. 5. Cutting-Edge Research & Innovation: Pharmaceutical Mission and Comprehensive Training Overhaul for Teachers.

1. 5. Quality Education Access: National Digital Library for Children and Adolescents.

1. 5. Aspirational Districts & Blocks Program: Reaching Remote Areas with Improved Facilities.

1. 5. Protecting Vulnerable Tribes: Pradhan Mantri PVTG Development Mission will improve the lives of particularly vulnerable tribal groups, with basic facilities such as clean drinking water, improved access to education and healthcare, and sustainable livelihood opportunities.

1. 5. Affordable Housing: PM Awas Yojana Gets 66% Boost to over Rs 79,000 crore to provide affordable housing options.

1. 5. Digitized Museum of Inscriptions: Bharat Shared Repository of Inscriptions will be a digital museum of ancient inscriptions, with the first stage of digitization covering 100,000 inscriptions.

1. 5. Interest-Free Loans for States: 50-Year Loans for Infrastructure Development with Increased Outlay of INR 1.3 Lakh Crore.

1. 5. Urban Infrastructure Development: Establishing UIDF and AI Centers of Excellence.

1. 5. Data Governance & Innovation: National Data Governance Policy and Entity DigiLocker.

1. 5. Green Economy Focus: National Green Hydrogen Mission and Energy Efficient Solutions.

1. 5. Effective Capital Expenditure: INR 13.7 Lakh Crore to Drive Investment and Growth.

1. 5. Tax Exemptions for a Greener Future: Excise duty is exempt on blended compressed natural gas and GST-paid compressed bio-gas to promote clean energy.

1. 5. Capitalizing on Cutting-Edge Technologies: Customs duty has been extended for capital goods and machinery for lithium-ion cell batteries used in EVs and reduced for certain parts of mobile phones and TV panels to drive technological advancements.

1. 5. Encouraging Local Production: Basic customs duty has been reduced for key ingredients such as acid grade fluorspar, crude glycerin, and seeds used in Lab Grown Diamonds production to support local manufacturers.

1. 5. Closing the Tax Gap: Import duty on silver dore, bars, and articles has increased to align with gold and platinum, closing any tax loopholes.

1. 5. Streamlining the Taxation System: The common IT return form will be made next-generation, and the grievance redressal mechanism for direct taxes will be strengthened to ensure fair and efficient tax policies

1. 5. Targeting Tax Concessions: Investment deduction in residential houses is capped at ?10 crore and insurance policies with high value will also have limits, ensuring tax concessions are well-targeted.

1. 5. Empowering MSMEs: MSMEs will benefit from enhanced limits for presumptive taxation and deduction for payments when actually made, supporting their growth and success.

1. 5. Supporting the Cooperative Sector: The cooperative sector will benefit from lower tax rates for manufacturing activities, higher limits for deposits and loans, and higher TDS limits, enabling their growth and sustainability.

1. 5. Nurturing Start-ups: Start-ups will have the date for incorporation for income tax benefits extended to 31.03.2024 and carry forward of losses increased from 7 to 10 years, providing a supportive environment for their development.

1. 5. Amending for a Better Future: The CGST Act will be amended to raise the minimum threshold for prosecution, reduce the compounding amount, and decriminalize certain clauses, promoting a fairer and more efficient tax system.

1. 5. Revenue Forecast: The changes in taxes will result in a revenue foregone of ?38,000 crore and an additional revenue of ?3,000 crore, for a total of ?35,000 crore annually, fuelling growth and progress.

3. DIRECT TAX PROPOSALS

1. Rates of Income Tax

1. 1. Income Tax Rates - Option I

(No change in existing tax structure)

The existing tax structure can be summarized as below:

1. 1. 1. Individuals (Resident Individuals), HUF, AOP, BOP and AJP-
         • Other than Senior Citizen and Super Senior Citizen

• • • • Senior Citizen (60 years or more but below the age of 80 years)

• • • • Super Senior Citizen (80 years and above)

• • • • Surcharge:

• • • • Cess: “Health and Education Cess” is payable at the rate of four per cent on the amount of tax computed, inclusive of surcharge (wherever applicable), in all cases. No marginal relief shall be available in respect of such cess.

1. 1. 2. Co-operative Societies:

Surcharge: 12 per cent if the total income exceed Rs. 1 crore.

1. 1. 3. Firms: Tax rate 30%. Cess @ 4%, Surcharge @ 12% if Taxable Income exceeds Rs. 1 Crore.

1. 1. 4. Local Authorities: Tax @ 30%, Cess @ 4%, Surcharge @ 12% if Taxable Income exceeds Rs. 1 Crore.

1. 1. 5. Domestic Company:

1. where its total turnover or the gross receipt in the previous year 2020-21 does not exceed four hundred crore rupees; Tax: 25 per cent
2. other than that referred to in item(i); Tax: 30 per cent

0. 1. 6. Foreign Company:
1. Tax at the rate of 50 per cent on so much of the total income as consists of,-
   1. royalties received from Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern after the 31st day of March, 1961 but before the 1st day of April, 1976; or
   2. fees for rendering technical services received from Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern after the 29th day of February, 1964 but before the 1st day of April, 1976, and where such agreement has, in either case,been approved by the Central Government.

2. Tax at the rate of 40 per cent on the balance, if any, of the total income.

• • • • Marginal Relief on Surcharge:

• In case of Individuals/HUF/ AOP/ BOI/ AJP, the amount payable as Income Tax and Surcharge on Total Income exceeding Rs 50 Lacs/ Rs. 1 Crore/ Rs. 2 Crore/ Rs. 5 Crore as the case may be shall not exceed the tax payable on Total Income of Rs. 50 Lacs/ Rs. 1 Crore/ Rs. 2 Crore/ Rs. 5 Crore by more than the amount of Income that exceeds Rs. 50 Lacs/ Rs. 1 Crore/ Rs. 2 Crore/ Rs. 5 Crore.

• Similarly, in the case of certain companies, the amount payable as Income Tax and Surcharge on Total Income exceeding Rs 1 Crore (or Rs. 10 Crore) shall not exceed the tax payable on Total Income of exceeding Rs. 1 Crore (or Rs. 10 Crore) by more than the amount of Income that exceeds Rs. 1 Crore (or Rs. 10 Crore).
  2. Income Tax Rates - Option II

(Change in existing tax structure under new regime)

The tax structure can be summarized as below:

1. 1. Individuals (Resident Individuals), HUF, AOP, BOP and AJP -

• • • The rates provided below shall be applicable, as default, for determining the income-tax payable in respect of the total income for FY 2023-24 (AY 2024-25) from AY 2024-25 and onwards:

• • • Surcharge:

This option may be exercised for every previous year by an Individual and HUF having no business income, however, for other cases i.e. for person exercising this option and having business income, the option once exercised for a previous year shall be valid for that previous year and all subsequent years.

1. 2. The option can be withdrawn only once and thereafter, the individual of HUF will not be eligible to exercise the option of the concessional rate again, except in case where such individual of HUF ceases to have business income.

1. 3. The person availing concessional rate will not be allowed to claim any exemption or deduction for allowance or perquisites, by whatever name called, provided under any other law for the time being in force.

1. 4. The option is to be exercised along with the Return of Income to be furnished u/s 139(1) of the Act.

1. 5. The individual or HUF opting for taxation under section 115BAC of the Act shall not be entitled to any of the exemptions/ deductions except

• deduction under subsection (2) of section 80CCD (employer contribution on account of employee in notified pension scheme); and

• section 80JJAA (for new employment).

Domestic Company:

1. 6. Concessional Tax Rate – 22 per cent (Section 115BAA)

1. 7. For New Manufacturing domestic companies – 15 per cent (Section 115BAB)

1. 8. The tax rate prescribed U/s 115BAA is 22% which shall be further increased by a surcharge of 10% and health and education cess of 4%. Hence, the effective tax rate U/s 115BAA is 25.168%. However, such companies will not be required to pay minimum alternate tax (MAT) U/s 115JB of the Act

1. 9. Sections 115BAA and 115BAB were inserted via the Taxation Law (Amendment) Act, 2019. The scope of non-availment of deductions for the companies opting for the concessional rate has been widened to exclude all deduction under chapter VIA except deduction under section 80JJAA and Section 80M.

1. 10. Companies opting for concessional tax rate will get the benefit of section 80M in respect of dividend income received by it during the previous year and distributed by it. MAT provisions are not applicable on such companies.

1. 11. However, if the company continues to pay the tax under the regime, where provisions of Section 115JB are applicable, dividend income received by the company during the year will get added to the book profit for the calculation of MAT and reduction thereof would not available which would be detrimental to the Company.

Co-operative Society:

1. 12. On satisfaction of certain conditions, a co-operative society resident in India shall have the option to pay tax at 22 per cent for assessment year 2021-22 onwards as per the provisions of section 115BAD. Surcharge would be at 10% on such tax. Further, under proposed new section 115BAE of the Act, a new manufacturing co-operative society set up on or after 01.04.2023, which commences manufacturing or production on or before 31.03.2024 and does not avail of 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.

1. 3. Rates for deduction of income-tax at source during the financial year 2023-24

1. 1. The rates for deduction of income-tax at source during FY 2023-24 under the provisions of section 193, 194A, 194B, 194BB, 194D, 194LBA, 194LBB, 194LBC and 195 have been specified in Part II of the First Schedule to the Bill. The rates will remain the same as those specified in Part II of the First Schedule to the Finance Act, 2022, for the purposes of deduction of income- tax at source during FY 2022-23. Further, Part II shall now also apply to the proposed section 194BA for deduction of income-tax at source on income by way of winnings from online games at the rate of 30 % being the rate in force. For sections specifying the rate of deduction of tax at source, the tax shall continue to be deducted as per the provisions of these sections.

1. 2. The rates for deduction of income-tax at source from ?Salaries or under section 194P of the Act during the FY 2023-24 and also for computation of ?advance tax payable during the said year in the case of all categories of assessee have been specified in Part III of the First Schedule to the Bill. These rates are also applicable for charging income-tax during the FY 2023-24 on current incomes in cases where accelerated assessments have to be made, for instance, provisional assessment of shipping profits arising in India to non-residents, assessment of persons leaving India for good during the financial year, assessment of persons who are likely to transfer property to avoid tax, assessment of bodies formed for a short duration, etc. There is no change in the tax rates from last year except for those whose income is chargeable to tax under sub-section (1A) of section 115BAC of the Act

1. 4. Rebate under section 87A

1. 1. Under the provisions of section 87A of the Act, an assessee, being an individual resident in India, having total income not exceeding Rs 5 lakh, is provided a rebate of 100 per cent of the amount of income-tax payable i.e., an individual having income till Rs 5 lakh is not required to pay any income-tax.

1. 2. From assessment year 2024-25 onwards, an assessee, being an individual resident in India whose income is chargeable to tax under the proposed sub-section (1A) of section 115BAC, shall now be entitled to a rebate of 100 per cent of the amount of income-tax payable on a total income not exceeding Rs 7 lakh.

Illustration 1: Computation of income tax payable by an individual with annual income of Rs.7,00,000

Illustration 2: Computation of income tax payable by an individual with annual income of Rs.9,00,000

Illustration 3: Computation of income tax payable by an individual with annual income of Rs.15,00,000

Illustration 4: Computation of income tax payable by an individual with annual income of Rs.5,50,00,000

2. Socio Economic Welfare Measures

5. Promoting timely payments to Micro and Small Enterprises

1. 1. Section 43B of the Act provides that certain deductions can only be claimed when payment is made. Additionally, the section allows for deductions based on accrual if payment is made by the due date of submitting the tax return.

1. 2. To encourage timely payments to micro and small enterprises, the proposal is to include these payments under the provisions of Section 43B of the Act. A new clause (h) will be added to the section to state that deductions for payments made to micro or small enterprises beyond the time limit set by the Micro, Small and Medium Enterprises Development (MSMED) Act 2006 will only be allowed on actual payment. The proviso of Section 43B of the Act will not apply to these payments.

1. 3. Section 15 of the MSMED Act requires payments to micro and small enterprises to be made within the time agreed in writing (not exceeding 45 days) or within 15 days if no written agreement exists. The proposed amendment to Section 43B of the Act will only allow payment-based deductions and accrual-based deductions if payment is made within the time frame set by Section 15 of the MSMED Act.

1. 4. This amendment will take effect from 1st April, 2024 and will accordingly apply to the assessment year 2024-25 and subsequent assessment years.

Comments:

• • • The proposed amendment in MSME payments under Section 43B may have require taxpayers to maintain tedious details and documentation with respect to MSME vendors.
    • It is suggested that a centralised repository of entities registered under the MSME Act is made available on a public website by the Government for easier identification.
    • As per the language stated in finance bill “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 Act, 2006”. Accordingly, only those payments which are overdue as per MSMED Act shall be covered under the ambit of 43B.
    • Section 15 of MSMED Act covers only Micro and Small enterprises accordingly medium enterprises are not covered under the ambit of section 43B.
    • The proviso to section 43B would not be applicable to such payments hence even if the assessee have made payment after the end of financial year but before return filing date the same would be disallowed.
    • The classification of Micro, Small and Medium Enterprises is defined under the MSMED Act 2006. The Micro, Small and Medium Enterprises is based on the Investment in Plant, Machinery or Equipment values (excluding land and building) and Annual Turnover.

6. Agnipath Scheme – tax incentives proposed in tax laws

1. 1. The Ministry of Defence in India has launched the highly-anticipated Agnipath Scheme, 2022, offering the opportunity for individuals to enrol as Agniveers in the Indian Armed Forces. The scheme became active on 1st November, 2022, and to support its implementation, the competent authority decided to create a non-lapsable, dedicated Agniveer Corpus Fund within the interest- bearing section of the Public Account head. This fund, known as ‘Seva Nidhi,’ will be a consolidation of contributions from Agniveers and matching contributions from the government, along with any accumulated interest.

1. 2. Under the Agnipath Scheme, each Agniveer will be required to contribute 30% of their monthly pay to their individual Agniveer Corpus Fund account, with the government providing a matching contribution. The government will also be responsible for paying interest to the subscriber, as approved from time to time, on the contributions in their account. Upon completion of their four-year engagement, Agniveers will receive a one-time ‘Seva Nidhi’ package, which includes their contributions, interest, and the government's matching contributions.

0. 3. In a bid to promote the scheme, amendments are being proposed to the Indian tax code. This includes proposals to:
1. insert a new clause (12C) in Section 10 to exempt from tax any payments received by a person enrolled in the Scheme or by his nominee from the Agniveer Corpus Fund.
2. insert a new Section 80CCH to provide for a deduction for contributions made to the fund and also the government's contribution to his account.
3. insert a new sub-clause in clause (1) of Section 17 to provide that the contributions made by the Central Government to the fund on the account of an individual shall be considered as part of their salary. The corresponding deduction under Section 80CCH is being provided.
4. make amendment in the new tax regime under Section 115BAC, to provide that individuals enrolled in the Agnipath Scheme will also receive a deduction for the government's contribution to their 'Seva Nidhi.'
   4. These amendments will take effect on 1st April 2023, and will apply to the assessment year 2023-24 and subsequent years.

Comments:

• • • The introduction of the Agnipath Scheme, 2022, and the accompanying amendments, represent a major step forward for individuals seeking to join the Indian Armed Forces and for the development of the country.

• • • Since the Agniveers are engaged by the Ministry of Defence on a contractual basis, the retirement benefits in the form of provident and other funds were not available to them. The Scheme along with the proposed income tax incentives are a welcome step to by the Government to motivate young people to join the armed forces.
    • It may be noted that Agniveers opting for the new tax regime, will be entitled to deduction only for the governments matching contribution to the corpus. The deduction for the contribution made by the individual shall not be available under the new regime.

7. Relief to sugar co-operatives from past demand

1. 1. Sugar factories operating in co-operative sectors in certain states of India pay an amount above the Statutory Minimum Price (SMP) set by the central government to sugarcane growers. This amount, referred to as the Final Cane Price (FCP), is determined based on the factory's overall performance, taking into account all revenues and expenditures.

1. 2. The payment of FCP by co-operative sugar factories has led to tax litigation as they claim the excess payment as a business expense, which has been disallowed in assessments. This is because the excess price is seen as a profit appropriation and not an allowable deduction.

1. 3. To provide clarity and support the co-operative movement in the sugar sector, clause (xvii) was added to sub-section (1) of section 36 of the Act through the Finance Act 2015. The amendment, which came into effect on April 1, 2016, allowed co-operative societies engaged in sugar manufacturing to deduct the amount paid for sugarcane if it was equal to or less than the government-approved price when computing business income. Despite this, pending demands and litigation remained for assessment years prior to 2016-17.

1. 4. To resolve this issue and extend the benefits to all applicable years, it is proposed to amend section 155 of the Act with a new sub-section (19). The Assessing Officer will recompute the total income of a sugar mill co-operative based on an application from the assessee if any deduction for sugarcane expenses was claimed and disallowed in whole or in part. Based on such application, the AO 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.

1. 5. The provisions of section 154 shall apply and the four-year period specified in sub-section (7) of section 154 shall commence on April 1, 2022.

1. 6. This amendment will take effect from 1st April 2023.

Comments:

• • • As proposed by the Hon'ble Finance Minister opportunity to sugar cooperatives to claim payments made to sugarcane farmers for the period prior to assessment year 2016 17 as expenditure is expected to provide a relief of almost 10,000 crore.

8. Increasing threshold limit for co-operatives to withdraw cash without TDS

1. 1. As per the provisions of Section 194N of the Indian Tax Act, banking companies, co-operative societies engaged in banking operations, and post offices are mandated to deduct an amount equivalent to 2% of the sum being paid as income tax, at the time of making cash payments to any individual (known as the recipient). The requirement to deduct tax is applicable when the cash payments made exceed INR 1 crore in the financial year.

1. 2. For recipients who are non-filers of income tax returns, a higher TDS rate applies. In such cases, the payor is required to deduct 2% TDS on any sum exceeding INR 20 lakh but not exceeding INR 1 crore during the financial year. Additionally, a 5% TDS has to be deducted on any sum exceeding INR 1 crore during the financial year.

A non-filer, in this context, refers to a recipient who hasn't filed their income tax returns for the three assessment years relevant to the three previous financial years immediately preceding the current financial year in which the payment was received.

1. 3. To promote the co-operative sector, it has been proposed to amend Section 194N of the Indian Tax Act by inserting a new proviso. The new amendment provides that for recipient co-operative societies, the provisions of the TDS will be in effect as if the words "one crore rupees" were substituted with "three crore rupees."

1. 4. The proposed amendment will come into effect from 1st April 2023.

Comments:

• • • As proposed by the Hon'ble Finance Minister, the amendment is proposed to enable co operatives to withdraw cash up to Rs 3 crore in a year without being subjected to TDS on such withdrawal.

9. Increase in thresholds for penalties for cash loan/ transactions with primary co-operatives

1. 1. Section 269SS of the Indian Income Tax Act requires that no individual shall accept a loan or deposit of INR 20,000 or more otherwise than by an account payee cheque or account payee draft or online transfer through a bank account. Similarly, section 269T requires that no loan or deposit of INR 20,000 or more must be repaid otherwise than by an account payee cheque or account payee draft or online transfer through a bank account. Some exceptions have however been outlined in these provisions.

1. 2. A request has been received to bring parity to the limits on cash transactions with banking companies for Primary Agricultural Credit Societies (PACS) and Primary Co-Operative Agricultural and Rural Development Banks (PCARD) in regard to sections 269SS and 269T. These institutions, which provide credit facilities at the grass-roots level, are currently subject to penalties for accepting loans or deposits in cash exceeding INR 20,000 and for repaying loans or deposits in cash exceeding the same amount.

1. 3. To provide relief to low-income groups and facilitate business operations in rural areas, it is proposed that an amendment be made to section 269SS of the Act by raising the limit from INR

20,000 to INR 2 lakh for PACS and PCARD. The penalty would be imposed only if the amount of a loan or deposit is INR 2 lakh or more.

1. 4. Additionally, it is proposed to amend the provisions of section 269T of the Act and increase the limit from INR 20,000 to INR 2 lakh for PACS and PCARD. This would mean that payment must be made by an account payee cheque, bank draft, or online transfer through a bank account if the amount of the deposit or loan is more than INR 2 lakh. The penalty would be imposed if the amount of such loan or deposit exceeds INR 2 lakh.

1. 5. These amendments will take effect from 1st April 2023.

10. Relaxation for Startups

1. 1. Relief to start- ups in carrying forward and setting of losses

1. Section 79 of the Act limits the ability of companies, other than those in which the public is substantially interested , to carry forward and offset losses. If there is change in shareholding, carry forward and setting off of losses is not permitted and the loss can only be offset if at least 51% of the shareholding (as of the last date of the previous year) remains unchanged from the previous year in which the loss was incurred.

2. Eligible start-ups under Section 80-IAC of the Act are exempt from the requirement of holding at least 51% shareholding for loss set-off, as long as all shareholders of the company as on the last day of the year, in which the loss was incurred, continue to hold those shares on the last day of the previous year in which the loss is set off. Loss set-off is only allowed if incurred within 7 years of the date of incorporation of the company.

3. In order to align this period of seven years with the period of ten years contained in sub- section (2) of section 80-IAC of the Act, it is therefore proposed to amend the proviso to sub-section (1) of section 79 of the Act so that the carried forward loss of eligible start-ups shall be considered for set off under this proviso, if such loss has been incurred during the period of ten years beginning from the year in which such company was incorporated.

4. This amendment will take effect from the 1st day of April, 2023 and shall accordingly, apply in relation to the assessment year 2023-24 and subsequent assessment years.

1. 2. Tax Holdiay for Startups Extended till March 2024

1. The current provisions of section 80-IAC of the act allow eligible start-ups to deduct hundred percent of their profits from an eligible business for three consecutive assessment years out of ten, starting from the year of incorporation, at their discretion, provided conditions as laid down below are met,
   • the total turnover of its business does not exceed one hundred crore rupees,
   • it is holding a certificate of eligible business from the Inter-Ministerial Board of Certification, and
   • it is incorporated on or after 1st day of April, 2016 but before 1st day of April 2023.

12. Tax Incentives for the International Financial Services Centre

1. 1. In recent years, the Act has provided several tax concessions to units located in the International Financial Services Centre (IFSC) to establish it as a global hub for the financial services sector.

0. 2. To further incentivize operations in IFSC, the following amendments are proposed:
1. Clause (b) of Explanation to Clause (viiad) of Section 47 of the Act is proposed to be amended by extending the date for transfer of assets of the original fund, or of its wholly owned special purpose vehicle, to a resultant fund in case of relocation to March 31, 2025, from the current limitation of March 31, 2023.

2. Section 10(4E) of the Act exempts the income of non-residents on the transfer of Offshore Derivative Instruments (ODI) entered into with an IFSC Banking Unit (IBU). Under the ODI contract, the IBU makes investments in permissible Indian Securities, and the income earned by the IBU on these investments is taxed as capital gains, interest, or dividend under Section 115AD of the Act. The IBU then passes the income to the ODI holders.

Currently, the exemption only applies to the transfer of ODIs and not to the distribution of income to non-resident ODI holders, resulting in double taxation in India. To address this, it is proposed to amend Clause (4E) of Section 10 of the Act to also exempt any income distributed on offshore derivative instruments entered into with an offshore banking unit of an International Financial Services Centre, subject to prescribed conditions. The exemption will only apply to the amount charged to tax in the hands of the IFSC Banking Unit under Section 115AD.

3. The IFSCA (Fund Management) Regulations, 2022, which came into force on May 19, 2022, are to be incorporated into the provisions of the Act by amending the definitions of “Specified Fund,” “Resultant Fund,” and “Investment Fund” to include reference to the IFSCA (Fund Management) Regulations, 2022.
   3. The amendments referred to in Paragraph (i) and (iii) will take effect on 1st April 2023, and will apply to the assessment year 2023-24 and subsequent years. The amendment in Paragraph (ii) will take effect on 1st April 2024, and will apply to the assessment year 2024-25 and subsequent years.

13. Exemption to development authorities, etc.

1. 1. Clause 46 of Section 10 of the Act provides an exemption to specified income received by a body or authority, Board, Trust, Commission or class thereof, established or constituted by a Central, State or Provincial Act, or by the Central or State Government, with the aim of regulating or administering activities for public benefit, provided that such body is not engaged in any commercial activity and has been notified by the Central Government in the Official Gazette for the purposes of Clause 46.

1. 2. The Supreme Court of India, in the case of Assistant Commissioner of Income-tax (Exemptions) vs Ahmedabad Urban Development Authority, held that the term "commercial" in Clause (46) of Section 10 of the Act has the same meaning as "trade, commerce, business" in Clause (15) of Section 2 of the Act. Hence, the amounts charged by such notified body or authority must be considered to determine if it falls within the definition of "commercial activity."

The Supreme Court made a distinction in the case of statutory authorities established by the State or Central government for the purpose of providing public functions/services, stating that the amounts charged for such services are prima facie excluded from the definition of business or commercial receipts as they serve public purposes.

1. 3. In light of this decision, the Act is proposed to be amended to exclude the income of bodies or authorities, not being a company, from the scope of Clause (46) of Section 10 of the Act and insert a new Clause (46A) in Section 10 of the Act. Clause (46A) proposes to exempt income received by a body or authority, not being a company, established or constituted by a Central or State Act for purposes such as housing accommodation, city planning and development, regulation of activities for public benefit, or regulation of matters arising from its object of creation. The body must also be notified by the Central Government in the Official Gazette for the purposes of Clause (46A).

1. 4. Consequential amendments are also proposed in the Explanation to the nineteenth proviso of Clause (23C) of Section 10 of the Act and in Sub-section (7) of Section 11 of the Act. These amendments will take effect from 1st April 2024 and will apply to the assessment year 2024-25 and subsequent years.

14. Increase in the scope of Strategic Divestment

1. 1. Section 72A of the Act lays down provisions regarding the carry forward and utilization of accumulated losses and unabsorbed depreciation allowance in relation to amalgamation or demerger. Accumulated losses and unabsorbed depreciation of the amalgamating company shall be considered as the accumulated losses and unabsorbed depreciation of the amalgamated company for the prior year in which the amalgamation was affected. The section also establishes conditions to enable the carry forward and utilization of losses and unabsorbed depreciation in the case of strategic disinvestment.

1. 2. Strategic disinvestment is defined as sale of shareholding by the Central Government or any State Government in a public sector company which results in reduction of its shareholding below fifty-one per cent along with transfer of control to the buyer.

1. 3. It has proposed to amend the definition of 'strategic disinvestment' in section 72A of the Act such that strategic disinvestment shall mean sale of shareholding by the Central Government, the State Government or Public Sector Company in a public sector company or a company which results in

1. reduction of its shareholding below fifty-one per cent, and

2. transfer of control to the buyer.

However, the above first condition shall apply when shareholding was above fifty one percent before such sale of shareholding.

1. 4. It is also proposed to amend section 72AA of the Act to allow carry forward of accumulated losses and unabsorbed depreciation allowance in the case of amalgamation of one or more banking company with any other banking institution or a company subsequent to a strategic disinvestment, if such amalgamation takes place within 5 years of strategic disinvestment.

1. 5. This amendment will take effect from 1st April, 2023.

Comments:

• • • The proposed amendment is being made for the purpose of government’s decision to privatise IDBI Bank. In case of IDBI bank, Promoter shareholding includes Central Governm ent/State Government stake of 45.48% and LIC having a stake of 49.24%. As per existing provisions, Central and State Government share is less than 51% and thus fails to fall within the purview of definition of strategic disinvestment for the purpose of Section 72A.
    • With the proposed amendment, shares held by Central/ state government and Public sector company together is more than 51%. Thus, benefit of Section 72A would be triggered and accumulated losses & unabsorbed depreciation of IDBI can be carried forward and utilised in the event of Strategic disinvestment.

15. Concessional Tax Regime for Co-operative Societies -

1. 1. The Taxation Laws (Amendment) Act of 2019 introduced section 115BAB to the Act, which allows new domestic manufacturing companies established after October 1, 2019 and starting production by March 31, 2023 which has been extended to 31.03.2024.an option to pay taxes at a reduced rate of 15 percent as long as they do not claim any specific incentives or deductions.

1. 2. Representation were received for to provide for the concessional tax regime of 15% towards new manufacturing co-operative societies as well. Hence, Section 115BAE was introduced to make the levies at parity.

1. 3. The conditions mentioned therein are similar to the one contained u/s 115BAB for New Manufacturing Companies.

1. 4. The proposed amendment will come into effect from 1st April 2024.

3. Ease of Compliance

16. Changes in the condition to Claim Deduction u/s 35D

1. 1. Section 35D of the Income Tax Act provides for amortization of certain preliminary expenses like preparation of feasibility report, project report, etc incurred prior to the commencement of business or after commencement, in connection with extension of undertaking or setting up of a new unit.

1. 2. The section provides that the work relating to preparation of feasibility report or project report or market survey, etc. is required to be carried out by the assessee himself or by a concern approved by the Board.

1. 3. To ease the process of claiming amortization, it is proposed to amend Section 35D to remove the condition of activity to be carried out by a concern approved by the Board.

1. 4. Instead, the assessee will have to submit a statement providing details of their expenditures to the designated income tax authority, within the specified time frame and in the prescribed format.

1. 5. The proposed amendment will come into effect from 1st April 2024.

17. Change in Threshold for Presumptive Taxation Scheme

1. 1. The provisions of Section 44AD and 44ADA provides for presumptive income scheme for Small Businesses and small professional practices having turnover or Gross Receipts upto specified threshold Limits. Following table shows the details of existing and the proposed changes in the aforesaid sections.

1. 2. The proposed amendment will come into effect from 1st April 2024.

Comments:

• • • The condition of 5% Cash Receipts is applicable only when turnover exceeds Rs. 2 Cr but is upto Rs. 3 Crores under section 44AD. Similarly, in case of professionals covered under

Section 44ADA, the restriction is applicable when gross receipts is above Rs. 50 lakhs but upto 75 lakhs.

18. Extension of Scope of deduction of tax at Source to Lower or Nil Rate of Tax

1. 1. Section 197 of the Act relates to grant of a certificate of tax deduction at lower or nil rate. It provides for assessee to apply to the Assessing Officer for TDS at zero rate or lower rate on providing a justification.

1. 2. Section 194LBA specifies that business trust shall deduct and deposit tax at the rate of 5% on interest income of non-resident unit holders. Representations have been received that in some cases rate of deduction may be required to be reduced due to some exemption available to notified Sovereign Wealth Funds and Pension Funds. However, Section 197 of the Act does not provide for lower deduction under section 194LBA of the Act and hence the benefit of exemption is not available at the time of tax deduction.

1. 3. Therefore, section 197 is proposed to be amended to include Section 194LBA.

1. 4. The proposed amendment will come into effect from 1st April 2023.

4. Widening and Deepening of Tax Base/ Anti Avoidance

19. Under section 9 to gift to not-ordinarily resident

1. 1. Section 9 (1) of the Act is a deeming provision that determines the types of income that are considered as "accruing or arising in India" and therefore are taxable under Indian tax laws.

1. 2. The Finance Act of 2019 inserted, through the inclusion of clause (viiii) to sub-section (1) of section 9 that any sum of money in excess of 50,000 received by a non-resident without consideration from a resident of India shall be considered as income deemed to have arisen or accrued in India on or after 5th July, 2019 and hence shall be liable to tax in India.

1. 3. The amendment is proposed to be introduced as a measure to prevent abuse on account of instances being noted of gifts made by residents of India to non-residents were being claimed as non-taxable in India by them. The Section is hence revised to include individuals who are Residents but not Ordinarily Resident and therefore would be liable to pay tax on gifts from Person Resident in India.

1. 4. The proposed amendment will come into effect from 1st April 2024.

Comments:

0. • • Section 6(1A) of the Act – introduced w.e.f from AY 202122 – provides for deemed residence. An individual, being an Indian citizen, not being a resident as per the conditions mentioned in subsection (1), shall be deemed to be an Indian resident, if
1. total income (excluding income from foreign sources) exceeds Rs. 15 lakhs during the relevant year; and
2. he is not liable to pay tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature.

Such residents will however, be treated as RNOR under the Act.

• • • The amendment in Section 9 will have farreaching implications for such assessees.

20. Removal of Exemption of News Agency u/s 10(22B)

1. 1. Clause (22B) of section 10 of the Act grants exemption to any income generated by a news agency established in India for the sole purpose of collecting and distributing news. The exemption is subject to the condition that the news agency applies its income or accumulates it solely for the collection and distribution of news and does not distribute its income to its members.

1. 2. In line with the government's policy of phasing out exemptions and deductions under the Act, the exemption granted to news agencies under clause (22B) of section 10 is proposed to be withdrawn.

1. 3. This amendment will take effect from 1st April 2024.

Comments :

• • • The Press Trust of India (PTI), a company owned by multiple newspapers, has been exempt from paying income tax since the 199495 assessment year due to its non-profit status. PTI does not distribute profits to shareholders, instead using all its income for news gathering.
    • The United News of India is also exempt from income tax as it follows a similar business model.

21. Tax avoidance through distribution by Business trust to its unit holders

1. 1. The Finance (No.2) Act, 2014 introduced a special taxation regime for Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (InVIT), also known as business trusts. These trusts invest in SPV through equity or debt and distribute sums in the form of interest, dividend, rental income and repayment of debt to their unit holders.

1. 2. The special taxation regime under Section 115UA of the Act provides a pass-through status for business trusts with regard to interest income and dividend income from a special purpose vehicle in case of both InVIT and REIT 10(23FC) and rental income in case of REIT 10(23FCA). This income is taxed in the hands of the unit holders unless exempt.

1. 3. However, it has been observed that some business trusts distribute sums to their unit holders classified as repayment of debt, which is not taxed in the hands of the business trust or unit holder, which is not in line with the intent of the special taxation regime. It may be noted that dual non-taxation of any distribution made by business trust is not the intent of the special taxation regime applicable to business trust.

0. 4. To address this, it is proposed to amend the Act by the way of :
1. Insertion of clause(xii) in sub section 2 of section 56 that provides for income chargeable

to income tax under the head “Income from other sources” shall include any sum that is

• • is not in the nature of rental income from REIT (23FC) or interest or dividends received by Business Trust from SPV (23FCA) of section 10 of the Act.
  • not chargeable to tax under subsection 2 of section 115UA of the Act.

2. Insertion of a proviso to the said clause to provide that where the sum received by a unit holder from a business trust is for redemption of units held by him, the sum received shall be reduced by the cost of acquisition of units to the extent the cost does not exceed sum received.
3. Insertion of sub-section (3A) in section 115UA of the Act to provide that the provision of sub - section (1), (2) and (3) of this section, shall not apply in respect of any sum, as referred to in clause (xii) of sub section (2) od section 56 of the Act, received by a unit holder from a business unit
4. Insertion of sub clause (xviic) in clause 24 of section 2 of the Act to provide that income shall include any sum referred to in clause (xii) of sub-section (2) of section 56 of the Act.

1. 5. These amendments will take effect from 01.04.2024 and will apply to the assessment year 2024-25 and subsequent years.

22. Removal of exemption from TDS on payment of interest (on listed debentures to a resident)

1. 1. Section 193 of the Act provides for TDS on payment of any income to a resident by way of interest on securities.

1. 2. The proviso of Section 193 in the Income Tax Act offers a TDS exemption for interest payments made on specified securities. Clause (ix) of the aforementioned proviso states that no TDS is required to be deducted for interest paid on securities held in dematerialized form and issued by a company and listed on a recognized stock exchange in India, as per the Securities Contracts (Regulation) Act, 1956 and its related regulations.

1. 3. There has been noted instances of Underreporting of Interest Income due to above proviso and hence the same is proposed to be omitted.

1. 4. This amendment will take effect from 1st April, 2023.

Comments:

• • • The above amendment will enable the Department to have a 360degree view on the income earned by an assessee. The Annual information Statement and the Tax Information Statement available to the assessee has been a big game changer for the Revenue with details of all income being captured based on TDS returns/ SFT returns / AIR filed by the specified person. This amendment is in line with the longterm objective of the Revenue to generate prefilled returns.

23. Preventing misuse of presumptive schemes under section 44BB and 44BBB

1. 1. Section 44BB of the Act provides for presumptive scheme in the case of a non-resident assessee who is engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of mineral oils. Under the schemes, a sum equal to ten per cent of the aggregate of the amounts specified in sub-section (2) of the said section is deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession".

1. 2. Section 44BBB of the Act provides for presumptive scheme in the case of a non- resident foreign company who is engaged in the business of civil construction or the business of erection of plant or machinery or testing or commissioning thereof, in connection with a turnkey power project approved by the Central Government. Under this scheme, a sum equal to ten per cent of the amount paid or payable (whether in or out of India) to the said assessee or to any person on his behalf on account of such services and facilities is deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession".

1. 3. Both provisions stipulate that an individual subjected to assessment may claim profits and gains that are lower than the specified amount, provided that they maintain the books of account and relevant documentation as mandated by sub-section (2) of Section 44AA of the Act, and that the individual's accounts are audited and the audit report is submitted as required by Section 44AB of the Act.

1. 4. It has been observed that taxpayers engage in opting in and out of the presumptive taxation scheme in order to avail the benefits of both presumptive income and non-presumptive income. In years where they incur losses, they claim the actual loss according to their records and carry it forward. On the other hand, in years with higher profits, they utilize the presumptive scheme to limit the profits to 10% and offset brought forward losses from previous years. Conceptually, if assessee is maintaining books of account and claiming losses as per such accounts, he should also disclose profits as per accounts There is no valid reasoning for offsetting losses determined based on their records with income calculated through the presumptive method.

1. 5. It is proposed to add a new subsection to sections 44BB and 44BBB of the act to ensure the prevention of any misuse. The new subsection will state that, regardless of the provisions in section 32(2) and section 72(1), in cases where an individual declares the profits and gains of their business for a given previous year under the provisions of presumptive taxation, no offset of unabsorbed depreciation and carried forward losses will be permitted for that previous year.

Comment-

• • • The NonResident Indian (NRI) has the advantage of utilizing a tax strategy that maximizes their financial benefit. By declaring losses during the year of incidence through audit procedures and electing for the presumptive scheme during years of higher profit margins, the NRI is able to reduce their overall tax liability.
    • To ensure consistency in financial reporting, it is imperative that the NRI accurately disclose their profits based on their maintained records and reporting of losses.
    • Furthermore, if the NRI elects for the Presumptive Taxation Scheme, the option for offsetting unabsorbed depreciation and carrying forward losses from the previous year will not be allowed.

24. TDS and taxability on net winnings from online games

1. 1. Section 194B of the Act provides that the person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle or card game and other game in an amount exceeding ten thousand rupees shall deduct income-tax thereon at the rates in force at the time of payment.

1. 2. Similar provisions also exist in section 194BB of the Act for deduction of tax at source for horse racing in any race course or for arranging for wagering or betting in any race course. Also, Section 115BB of the Act provides for the rate of tax applicable on above income.

1. 3. Deductors avoided tax deduction by splitting a winning into multiple transactions each below Rs 10,000/- under section 194B and 194BB of the Act.

1. 4. The scope of TDS under Section 194B with regards to winnings from lottery or crossword puzzle is proposed to be extended to encompass all forms of gambling or betting. Additionally, it is proposed that Section 194B shall be applicable in cases where the cumulative winnings in a financial year surpass INR 10,000, as opposed to winnings from a single transaction exceeding the same amount.

1. 5. Section 194BA is proposed to be added effective July 1, 2023, which requires the deduction of TDS on income received from the net winnings of online games in an individual's user account at the end of the fiscal year or from any withdrawals made during the year. The method of computing the net winnings shall be prescribed.

1. 6. Furthermore, a new Section 115BBJ is proposed to be added effective April 1, 2024, which mandates that the income received from net winnings of online games be taxed at a rate of 30%.

25. Increasing rate of TCS of certain remittances

1. 1. The Act's Section 206C mandates TCS for businesses trading in items like alcohol, liquor, forest produce, scrap, etc. Subsection (1G) of this section requires TCS on foreign remittances made through the Liberalized Remittance Scheme and on the sale of overseas tour packages.

1. 2. The amendment to Subsection (1G) of Section 206C of the Act is being proposed to increase TCS on certain foreign remittances and the sale of overseas tour packages.

1. 3. The current and proposed TCS rates are presented in the following table.

*In the above table, the current and proposed TCS rates are based on the total amount remitted by the buyer in a given financial year.

1. 4. This amendment will take effect from 1st July, 2023.

26. Limiting the roll over benefit claimed under section 54 and section 54F

1. 1. The provisions of Section 54 and Section 54F of the Income-tax Act, 1961 permit a deduction on capital gains derived from the transfer of long-term capital assets. The deduction is available if the assessee purchases a residential property in India within a year before or two years after the transfer or constructs a residential property within three years after the transfer. Under Section 54 of the Act, the deduction applies to the long-term capital gain from the transfer of a residential house if the capital gain is reinvested in a residential house. Under Section 54F of the Act, the deduction applies to the long-term capital gain from the transfer of any long-term capital asset, excluding a residential house, if the net consideration is reinvested in a residential house.

1. 2. Limitation on Deductions Under Section 54 and Section 54F

The primary objective of the provisions of Section 54 and Section 54F of the Act is to alleviate the shortage of housing and encourage house building activities. However, it has been observed that high net worth assessees are claiming substantial deductions by purchasing highly expensive residential properties, which defeats the purpose of these provisions.

To address this issue, it is proposed to impose a cap on the maximum deduction that can be claimed by an assessee under Section 54 and Section 54F at INR 10 Crores. The cost of the new asset purchased shall be deemed to be INR 10 Crores if it exceeds this amount, limiting the deductions under these sections to INR 10 Crores.

1. 3. Amendments to Capital Gains Account Scheme

Subsequently, provisions of Sub-Section (2) of Section 54 and Sub-Section (4) of Section 54F, which deal with deposits in the Capital Gains Account Scheme, are also proposed to be revised. A proviso is proposed to be inserted to provide that the provisions of Sub-Section (2) of Section 54 and Sub-Section (4) of Section 54F shall apply only to capital gains or net consideration, as the case may be, up to INR 10 Crores for the purpose of deposit in the Capital Gains Account Scheme.

1. 4. These amendments will become effective on 1st April 2024 and shall apply to the assessment year 2024-25 and subsequent assessment years.

Comments:

• • • It may be noted that Section 54 allows exemption from capital gains, based on a percentage of capital gains invested in the residential house, whereas Section 54F allows exemption based on a percentage of net consideration received on sale of a longterm capital asset.
    • The manner of computing the deduction results in a significantly higher exemption available under Section 54 in comparison to Section 54F. In scenarios where the capital gains under Section 54F is less than INR 10 crores but the net consideration is higher, the capital gains exemption for the purpose of Section 54F is computed based on the proportion of investment in a residential property (which is proposed to be capped at INR 10 crores) to the net consideration received upon the sale of a longterm capital asset

• • • This proposed amendment will lead to increase in taxable income of assessees, because of which the assessees’ tax liability on other income might increase (in addition to increase due to increase in income from capital gains) due to applicability of higher surcharge on income.
    • This proposal shall also lead to increase in execution of joint deeds such that multiple members from a family will be able to claim the deduction capped at INR 10 crores.

27. Special provision for taxation of capital gains in case of Market Linked Debentures

1. 1. It has been proposed to tax the capital gains arising from the transfer or redemption or maturity

of “Market Linked Debentures” as short-term capital gains at the applicable rates.

1. 2. The new section 50AA proposed in the Act to treat the full value of the consideration received or accruing as a result of the transfer or redemption or maturity of the above securities as reduced by the cost of acquisition of the debenture and the expenditure incurred 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.

1. 3. Market Linked Debentures has been defined as a security which has an underlying principal component in the form of a debt security and where the returns are linked to market returns on other underlying securities or indices and include any securities classified or regulated as a Market Linked Debenture by Securities and Exchange Board of India.

1. 4. This amendment will take effect from the 1st day of April, 2024 and shall accordingly, apply in relation to the assessment year 2024-25 and subsequent assessment years.

Comments:

• • • Market Linked Debentures are generally listed and hence is currently being taxed as long term capital gain at the rate of 10% without indexation. However, these securities are in the nature of derivatives which are normally taxed at applicable rates.
    • Market Linked Debentures (MLD) are the fixed income instruments, regulated by SEBI, whose returns are linked to either a particular security or market Index such as government security, gold index fund, or Nifty Index fund, etc. For example, debentures issued by Reliance Capital Limited with reference asset as “CNX NIFTY Index”.

28. Preventing permanent deferral of taxes through undervaluation of inventory

1. 1. Pursuant to the provisions of the Act, it is incumbent upon assessees to maintain accurate and complete books of account. The Central Government has issued the Income Computation and Disclosure Standards (ICDS) to aid in the calculation of income, with ICDS-II specifically addressing the valuation of inventory. Additionally, section 148 of the Companies Act 2013 mandates the maintenance and audit of cost records by a cost accountant in certain cases.

0. 2. In order to provide assurance to the Assessing Officer that inventory is valued in accordance with the relevant laws, it is proposed to amend section 142 of the Act, pertaining to Inquiry before assessment, to include the following provisions:
1. The Assessing Officer shall have the authority to direct the assessee to obtain a valuation of their inventory from a cost accountant nominated by the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner. The assessee must then provide the report of inventory valuation in the prescribed form, signed and verified by the cost accountant, containing the prescribed particulars and any additional information required by the Assessing Officer.
2. The expenses incurred for the inventory valuation (including the cost accountant’s remuneration) shall be determined by the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner in accordance with the prescribed guidelines and shall be paid for by the Central Government.
3. The assessee will be given an opportunity to be heard in regard to any material obtained from the inventory valuation, except in cases where assessment is made under section 144 of the Act.
4. The term “cost accountant” shall refer to an individual who holds a valid certificate of practice under the Cost and Works Accountants Act, 1959 and is defined in clause (b) of sub-section (1) of section 2 of the aforementioned act.
   3. Additionally, the following consequential amendments are proposed:

1. To amend section 153 of the Act to exclude the time period for inventory valuation through the cost accountant in the computation of time limitations.
2. To amend section 295 of the Act to include the power to make rules for the form of the report of inventory valuation and the particulars that the report must contain.
   4. These amendments to sections 142 and 153 of the Act shall become effective on 1st April 2023 and shall apply to the assessment year 2023-2024 and subsequent years. The amendment to section 295 of the Act shall become effective on April 1, 2023.

Comments:

• • • The proposed amendment will bring opportunity to cost accountants. Such cost accountants shall be responsible to verify the valuation of inventories and whether the same is computed in accordance with ICDS II.
    • Reference to Section 148 of the Companies Act in the memorandum implies that the verification shall be resorted to in scenarios where cost records are required to be maintained by the assessees and the computation of cost involves significant judgements and assumptions.

29. Rationalisation of exempt income under life insurance policies

1. 1. Pursuant to Clause (10D) of Section 10 of the Act, the sum received under a life insurance policy, including any bonuses, is exempt from income tax, subject to the condition that the premium payable in any of the years during the policy term does not exceed ten percent of the actual capital sum assured.

1. 2. The legislative intent behind this exemption is to subsidize the risk premium for an individual's life and provide benefit to small and genuine cases of life insurance coverage. However, it has been observed that some high-net worth individuals are exploiting the exemption by investing in policies with high premium contributions and claiming exemption on the sum received under such policies.

1. 3. To prevent this misuse, Clause (10D) of Section 10 of the Act was amended by the Finance Act, 2021, to provide that the sum received under a ULIP (excluding the sum received upon death), issued on or after February 1, 2021, will not be exempt if the premium payable for any of the previous years during the policy term exceeds INR 2,50,000. Additionally, if premium is payable for more than one ULIP, the exemption will only apply to policies where the aggregate premium does not exceed INR 2,50,000 for any of the previous years during the policy term.

1. 4. After the amendment, while ULIPs with premium exceeding INR 2,50,000 are no longer eligible for exemption under Clause (10D) of Section 10 of the Act, other types of life insurance policies are still exempt, regardless of the amount of premium payable.

1. 5. To further curb misuse, it is proposed to tax income from insurance policies (other than ULIPs) with premium or aggregate premium above INR 5,00,000 in a year, except in cases where the income is received upon the death of the insured person. This income will be taxable under the head "income from other sources," with a deduction allowed for the premium paid, provided it has not been claimed as a deduction previously. This provision will apply to policies issued on or after April 1, 2023, and will not impact policies issued prior to this date.

1. 6. These amendments will take effect from 1st April, 2024 and will accordingly apply to the assessment year 2024-25 and subsequent assessment years.

Comments:

• • • The proposed amendment covers only insurance policies issued on or after April 1, 2023. Hence, it is expected that demand for life insurance policies will increase in the interim period so that assessee will be able to avail the exemption in respect of preexisting policies.

30. Alignment of provisions of section 45(5A) with the provisions of section 194-IC

1. 1. The existing provisions of the sub-section (5A) of section 45 of the Act, inter alia, provide that for computing the capital gains amount on the transaction as per the above-mentioned provisions of the Act, the full value of consideration shall be taken as the stamp duty value of one’s share, as increased by the consideration received in ‘cash’.

1. 2. It is proposed to amend the provisions of sub-section (5A) of section 45 so as to provide that the full value of consideration shall be taken as the stamp duty value of his share as increased by any consideration received in cash or by a cheque or draft or by any other mode.

1. 3. This is in accordance with the intention of law as is evident from the provisions of section 194- IC of the Act which, inter alia, provides that tax shall be deducted on any sum by way of

consideration (other than in kind), under the agreement referred to in sub-section (5A) of section 45, paid to the deductee in cash or by way of issue of a cheque or draft or any other mode.

1. 4. This amendment will take effect from the 1st day of April, 2024 and shall accordingly, apply in relation to the assessment year 2024-25 and subsequent assessment years.

Comments:

• • • The taxpayers were inferring that any amount of consideration which is received in a mode other than cash, i.e., cheque or electronic payment modes would not be included in the consideration for the purpose of computing capital gains chargeable to tax under sub section (5A) of section 45. Thus, the proposed amendment is clarificatory in nature.

31. Prevention of double deduction claimed on interest on borrowed capital for acquiring, renewing or reconstructing a property

1. 1. Pursuant to the provisions of the Act, the deduction for interest payable on borrowed capital for acquiring, renewing, or reconstructing a property is allowed under the heading "Income from House Property" as per Section 24 of the Act.. Section 48 of the Act outlines the computation of income chargeable under the heading "Capital Gains" by subtracting the cost of acquisition of the asset and the cost of any improvements made to the asset from the full value of the consideration received or received as a result of the transfer of the capital asset.

1. 2. It has been noted that some taxpayers are claiming a double deduction of interest paid on borrowed capital for acquiring, renewing, or reconstructing a property. Firstly, the deduction is claimed under the "Income from House Property" section 24, and in some cases, the deduction is also claimed under other provisions of Chapter VIA of the Act. Secondly, while computing the capital gains on the transfer of such property, the same interest forms a part of the cost of acquisition or cost of improvement under section 48 of the Act.

1. 3. To prevent this double deduction, it is proposed to insert a proviso after clause (ii) of section 48 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.

1. 4. This amendment is proposed to take effect from April 1, 2024 and will apply to the assessment year 2024-2025 and subsequent assessment years

Comments:

• • • The above proposed amendment is to overturn the ruling of Hon’ble ITAT in Asstt. CIT

v. C. Ramabrahmam wherein it supported the stand of the assessee that deduction towards interest paid can be claimed both under section 24(b) and section 48 of the Act.

32. Defining the cost of acquisition for certain assets for computing capital gains

1. 1. The term 'cost of acquisition' and 'cost of improvement' of certain assets like intangible assets or any sort of right for which no consideration has been paid for acquisition, it is proposed to amend

the provisions of section 55 so as to provide that the 'cost of improvement' or 'cost of acquisition' of a capital asset being any intangible asset or any other right ( other than those mentioned in the said sub-clause or clause, as the case may be) shall be 'Nil'.

1. 2. This amendment is will take effect from the 1st day of April, 2024 and shall accordingly, apply in relation to the assessment year 2024-25 and subsequent assessment years.

Comments:

• • • The cost of acquisition of such assets is not clearly defined as ‘nil’ in the present provision. This has led to many legal disputes and the courts have held that for taxability under capital gains there has to be a definite cost of acquisition or it should be deemed to be nil under the Act. Since there is no specific provision which states that the cost of such assets is nil, the chargeability of capital gains from transfer of such assets has not found favour with the Courts.

5. Improving Compliance and Tax Administration

33. Extension of time for disposing pending rectification applications by Interim Board for Settlement

1. 1. The Act was amended vide Finance Act, 2021 with retrospective effect from 01.02.2021, abolishing the Settlement Commission. Consequently, the Central Government was enabled to constitute one or more Interim Boards for Settlement (IBS), as an interim measure, for settlement of applications pending with Settlement Commission as on 31.01.2021.

1. 2. Where the time-limit for amending any order or filing of rectification application as per sub- section (6B) expires on or after 01.02.2021, then the period from 01.02.2021 till the constitution of IBS shall be excluded from computing the time-limit, and after such exclusion, if the time- limit available for amending the order or for making application is less than 60 days, such period shall be extended to 60 days. Therefore, as per the provisions of clause (iv) of sub-section (9) of section 245D, the period between 01.02.2021 till 10.08.2021 (when the order constituting IBS was issued) shall be excluded for computing the time-limit.

1. 3. Grievances were received from stakeholders re: the time available to the IBS under the Act to pass rectification or amendment orders. Accordingly, clause (iv) of sub-section (9) of Section 245D is proposed to be replaced with a new clause to extend the deadline for amending an order or making an application under sub-section (6B) to September 30, 2023 for those whose deadline falls between February 1, 2021 and February 1, 2022.

1. 4. This amendment will be retroactively effective from February 1, 2021.

34. Introduction of the authority of Joint Commissioner (Appeals)

1. 1. According to the current appeal process outlined in the Act, the Commissioner (Appeals) serves as the initial point of appeal for all who are dissatisfied with an order issued under the Act. The Commissioner (Appeals) has the authority to confirm, reduce, enhance or annul/ cancel an order of assessment or an order of penalty, after providing an opportunity of being heard to the assessee and the AO.

1. 2. A new authority for appeals is being proposed to address the issue of overburden faced by Commissioner (Appeals) due to high number of appeals. The proposed authority will be created at Joint Commissioner/Additional Commissioner level and will handle cases involving small disputed demands. The proposed authority will have similar powers, responsibilities, and accountability as the Commissioner (Appeals) for the disposal of appeals..

1. 3. The earlier section 246 was providing for the appeal functions of Deputy Commissioner (Appeals). That institution was discontinued in the year 2000. Accordingly, it is proposed to substitute section 246 of the Act to provide for appeals to be filed before Joint Commissioner (Appeals). Sub-section (1) of the proposed section seeks to provide that any assessee aggrieved by any of the following orders of an Assessing Officer (below the rank of Joint Commissioner) may appeal to the Joint Commissioner (Appeals) against—

1. an order being an intimation under sub-section (1) of section 143, where the assessee objects to the making of adjustments, or any order of assessment under sub-section (3) of section 143 or section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed;

2. an order of assessment, reassessment or recomputation under section 147;

3. an order being an intimation under sub-section (1) of section 200A;

4. an order under section 201;

5. an order being an intimation under sub-section (6A) of section 206C;

6. an order under sub-section (1) of section of section 206CB;

7. an order imposing a penalty under Chapter XXI; and

8. an order under section 154 or section 155 amending any of the orders mentioned in (i) to

(vii) above:

1. 4. These amendments will take effect from 1st day of April, 2023.

Comments

• • • The restoration of appeal provisions with the power of hearing given to the JCIT/Addl. CIT is a positive step at this time. The functioning of the first appellate process had come to a halt due to the pandemic and the introduction of the Faceless Appeal Scheme, leading to a slow pace of proceedings. The new proposed section is expected to improve the efficiency and productivity of this forum.
    • However, it is important to note that the JCIT/Addl. CIT should hear appeals objectively as an appellate authority, rather than as the former assessing officer, to avoid the forum becoming an extension of the assessment process, which is not desired by the assessee or intended by the legislature. This aligns with the principles of natural justice and should be applied according to the "fitness of things" principle.

35. Reducing the time provided for furnishing TP report

1. 1. Section 92D of the Act, inter-alia, provides that every person who has entered into an international transaction or a specified domestic transaction shall keep and maintain the information and documents as provided under rule 10D of the Income-tax Rules, 1962 (the Rules).

1. 2. In simpler terms, the Assessing Officer or the Commissioner (Appeals) has the power to request information or documents related to tax proceedings. The assessee is given 30 days to provide the information, but can request an additional 30 days if needed. However, it has been argued that in some cases the 30-day time frame may not be enough to provide the information, and a more reasonable amount of time is needed to complete the proceedings.

1. 3. In view of the above, the timeline under sub-section (3) of section 92D of the Act is proposed to be reduced to 10 days, which may be extended by a further period not exceeding thirty days.

1. 4. This amendment will take effect from 1^st day of April, 2023.

36. Rationalisation of Appeals to the Appellate Tribunal

1. 1. Pursuant to the Finance Act, 2021, section 263 of the Act was amended to permit the Principal Chief Commissioner and the Chief Commissioner to issue an order of revision under the said section. Nevertheless, the sub-section (1) of section 253 of the Act fails to include any reference to orders passed under section 263 of the Act, thereby preventing an aggrieved assessee from appealing any order issued under section 263 of the Act or rectified under section 154 of the Act by a Principal Chief Commissioner or Chief Commissioner to the Appellate Tribunal.

1. 2. Therefore, it is proposed to amend section 253 of the Act so that the appeal against an order passed under section 263 of the Act by the Principal Chief Commissioner or Chief Commissioner or an order passed under section 154 of the Act shall be brought before the Appellate Tribunal.

1. 3. Sub-section (4) of section 253 of the Act allows for the respondent in an appeal against an order of the Commissioner (Appeals) to file a memorandum of cross-objections before the Appellate Tribunal. However, this provision does not apply to appeals against orders by authorities other than the Commissioner (Appeals), such as the Principal Commissioner, Commissioner, Principal Director or Director, among others.

1. 4. This limitation leads to grievances and undermines fair and equitable judgment, hence it is proposed to amend sub-section (4) of section 253 to enable the filing of memorandum of cross- objections in all types of cases against which appeal can be made to the Appellate Tribunal. For instance, if the assessee files an appeal against an order passed by the Assessing Officer as a result of an order by the Dispute Resolution Panel, the Assessing Officer should be able to file a cross- objection to such appeal, which is not currently possible.

1. 5. These amendments will take effect from 1st day of April, 2023.

37. Assistance to authorised officer during search and seizure

1. 1. Section 132 of the Act governs the provisions and procedures of search and seizure operations. It outlines the powers of income-tax authorities, the steps to be followed, examination of documents, and preservation of evidence. During a search, the authorized officer can request assistance from police or government officers and consult with a valuation officer for property estimation within 60 days of the search. Due to the increasing use of technology and complex forms of assets, advanced techniques and experts, such as data forensics and digital specialists, are necessary for thorough analysis.

1. 2. Therefore, it is proposed to amend relevant provisions of the section to provide that during the course of search the authorised officer, may requisition the services of any other person or entity,

as approved by the Principal Chief Commissioner or the Chief Commissioner, the Principal Director General or the Director General, in accordance with the procedure prescribed by the Board in this regard, to assist him for the purposes of the search. Similarly, in during and post search enquiries, the authorised officer may make reference to any person or entity or any valuer registered by or under any law for the time being in force, who shall estimate the fair market value of the property in the manner prescribed and submit a report of the estimate to the authorised officer or the Assessing Officer within sixty days from the receipt of such reference.

1. 3. This amendment will take effect from the lst day of April, 2023.

Comments:

• • • Tax evasion evidence may appear in statements or documents seized during an action before March 31st, but the issuance of related notices may exceed the time limit due to the necessary procedures. This means that critical information about revenue loss cannot be acted upon because of the limited time for searches conducted and information obtained near the end of the financial year.
    • To address this, it has been suggested to add a provision to the section that if a search under section 132 is initiated or authorized after March 15th of any financial year, a 15day exclusion should be made for computing the notice issuance deadline under section 148 and the notice will be considered issued on March 31st of that financial year.

38. Provisions related to business reorganisation

1. 1. Section 170A of the Act, provisions for giving effect to the order of business reorganisation issued by tribunal or court or an Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016. The provision states that in the event of a business reorganization, the successor, who has filed a return of income u/s 139 of the Act, must submit a revised return within 6 months of the end of the month in which order was issued. This revised return must be in accordance with the terms of the order and is limited to it.

1. 2. The provisions for business reorganization and corporate restructuring exist under various laws, including the Companies Act 2013. However, some issues have arisen since the addition of section 170A to the Act. These include obligations of entities who have already filed returns and the obiligation of Assessing Officer for passing or modifying assessment or reassessment. To prevent potential disputes, it is proposed to amend the law for clarification.

1. 3. Accordingly, it is proposed to substitute section 170A, to provide that notwithstanding anything contained in section 139, in a case of business reorganisation, where prior to the date of order of the tribunal or the High Court or Adjudicating Authority as defined in clause (1) of section 5 of the Insolvency and Bankruptcy Code, 2016, any return of income has been furnished for any assessment year relevant to a previous year, by an entity to which such order applies, the successor shall furnish, within a period of six months from the end of the month in which the said order was issued, a modified return in the form and manner, as may be prescribed, in accordance with and limited to the said order. This would also enable modification of the returns filed by the predecessor wherever required.

1. 4. The provision for the procedure to be followed by the Assessing Officer after a modified return is furnished by a successor entity has been added. If the assessment or reassessment for the relevant year has been completed, the Assessing Officer will modify the total income based on the modified return. If the assessment or reassessment is pending, the Assessing Officer will assess or reassess the total income taking into account the modified return.

• 5. It is also proposed to define the following terms for the purposes of this section:
• “business reorganisation" means the reorganisation of business involving the amalgamation or

demerger or merger of business of one or more persons;

• "successor" means all resulting companies in a business reorganisation, whether or not the company was in existence prior to such business reorganisation.
  6. This amendment will take effect from the 1st day of April, 2023.

39. Rationalization of the provisions of the Prohibition of Benami Property Transactions Act, 1988 (the PBPT Act)

1. 1. Under the existing provisions of section 46 of the PBPT Act, any person, including the Initiating Officer (IO), aggrieved by the order of adjudicating authority, may prefer an appeal to the Appellate Tribunal within a period of 45 days from the date of the order. The order often takes time to reach the office of the Initiating Officer or the approving authority and, it is difficult to file an appeal within the prescribed time limit and leads to delay in such filing.

1. 2. Hence, it is proposed that the provisions of section 46 of the PBPT Act may be amended to allow the filing of appeal against the order of the Adjudicating authority within a period of 45 days from the date when such order is received in the office of the Initiating Officer or the aggrieved person as the case may be. Similar change is also proposed with reference to the order passed by an authority under section 54A of the PBPT Act.

Comment:

• • • Proposal to amend section 2(18) of PBPT Act to determine jurisdiction of High Court for nonresident parties in appeals against Adjudicating Authority's orders. The existing definition of High Court covers residents only and the proposed amendment adds a proviso for nonresidents, where the High Court jurisdiction will be based on the location of Initiating Officer's office.

40. Alignment of timeline provisions under section 153 of the Act

0. 1. Section 153 of the Act, provides the time limit for completion of assessment, reassessment or recomputation.
1. The time limit order of assessment u/s 143 shall be 9 months from the end of the A.Y. in which the income was first assessable.
2. In case of updated return u/s 139, an order of assessment/reassement may be made at any time before the expiry of 9 months from the end of the F.Y. in which the return was furnished

1. 2. Under section 143, a notice can be served on the assessee up to 3 months from end of the relevant assessment year.

1. 3. As the period of 6 months is short period of time for the taxpayers to explain themselves or provide evidence, the limit has been extended to 12 months from the end of the assessment year in which the income was first assessable.

1. 4. Section 153 was further amended to provide the provision of the said sub-section 3,5 and 6 shall also be applicable to order u/s 263 and 264, passed by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner, as the case may be.

1. 5. Prior to the Finance Act,2021 an assessment or reassessment, relating to any A.Y., falling within the period of 6 assessment years as given in section 153A of the Act and for the relevant A.Y. pending on the date of initiation of the search, shall abate.

1. 6. According to Finance Act, 2021 search assessments to be carried out u/s 147. However, it does not provide for abatement or revival of any reassessment proceedings pending on the date of search or requisition.

1. 7. In the view of the above, a new sub section 3(A) may be inserted. If an assessment or reassessment is pending on the date of initiation of search or making of requisition, the period available for completion of assessment or reassessment shall be extended by 12 months in case of an assessee where such search is initiated or requisition is made.

1. 8. This amendment will take effect from the 1st day of April, 2023.

41. Modification of directions related to faceless schemes and e-proceedings

1. 1. The Central Government has undertaken a number of measures to make the processes under the Act, electronic, by eliminating person to person interface between the taxpayer and the Department to the extent technologically feasible, and provide for optimal utilisation of resources and a team-based assessment with dynamic jurisdiction.

1. 2. Consequent to these amendments introduced in the Act, various schemes have been notified and directions issued for implementation of e-proceedings and faceless schemes, as follows:

1. 3. While introducing these amendments in the relevant provisions, time limitations were also incorporated into the statute for issuing directions, with an intent to implement these reforms in a timely manner. These time limits in case of each provision are as below:

1. 4. Adjustments may be required to be made to the directions issued under these provisions, in order to overcome any issues arising in their implementation of these schemes and also to ensure that the schemes can operate according to the changing times. However, as per the present provisions, an express power to amend or modify the directions, upon expiry of the relevant time period is not available.

1. 5. Therefore, it is proposed to amend the relevant provisions to provide that where any direction has been issued for the purposes of giving effect to the scheme under that section before the expiry of limitation, i.e., 31st March, 2022 or 31st March, 2023, as the case may be, the Central Government may, amend such direction at any time by notification in the Official Gazette.

1. 6. These amendments will take effect from the lst day of April, 2022 for sections 135A, 250 and 274, and for sections 245MA and 245R, these amendments will take effect from the 1st day of April, 2023.

42. Provisions relating to reassessment proceedings

1. 1. The Finance Act, 2021 amended the procedure for assessment or reassessment of income in the Act with effect from the 1st April, 2021. The said amendment modified, inter alia, sections 147, section 148, section 149 and also introduced a new section 148A in the Act. In cases where search is initiated under section 132 of the Act or books of account, other documents or any assets are requisitioned under section 132A of the Act, assessment or reassessment is now made under section 147 of the Act for all the relevant years prior to the year in which the search was conducted or requisition was made after the Finance Act, 2021. Further, the provisions of re-assessment proceedings were rationalized by amendments made vide Finance Act, 2022

1. 2. Amendments have been proposed in the provisions relating to conduct of reassessment proceedings under the Act to further streamline them and facilitate their conduct and completion in a seamless manner. It has been proposed that the section 148 of the Act may be amended to provide that a return in response to a notice under section 148 of the Act shall be furnished within three months from the end of the month in which such notice is issued, or within such further time as may be allowed by the Assessing Officer on a request made in this behalf by the assessee. However, any return which is furnished beyond the period allowed in the section 148 to furnish such return of income shall not be deemed to be a return under section 139 of the Act. As a result, the consequential requirements viz. notice under sub- section (2) of section 143 etc. would not be mandatory for such returns.

1. 3. Further, section 149 of the Act provides the period of limitation for issuance of notice under section 148 of the Act for commencement of proceedings under section 147 of the Act. It is imperative to note here that in case of a search action under section 132 of the Act, requisition under section 132A of the Act and cases for which information emanates from the above proceedings are deemed to be information under section 149 of the Act and there is no requirement for proceedings under section 148A of the Act to be conducted prior to re-opening the cases in these cases.

1. 4. In cases where survey under section 133A of the Act is conducted, the Assessing Officer is deemed to have information for the purposes of section 148 of the Act but proceedings under section 148A of the Act need to be conducted prior to issuance of notice under section 148 of the Act. It has been seen that in the cases where the aforementioned search, requisition or survey proceedings are conducted after 15th March of a financial year, there is extremely little time to collate this information and issue a notice under section 148 or show cause notice under section 148A(b) of the Act. Moreover, the search is conducted by the Investigation Wing and the notice is required to be issued by the Assessing Officers.

1. 5. However, evidence of tax evasion may be reflected in the statements recorded or documents seized or impounded etc. during such action before 31st March, but issuance of notice related to such information or search may go beyond the time limitation provided due to the procedure involved. Therefore, important information related to revenue leakage cannot be proceeded on due to the paucity of time for searched conducted and information obtained as a consequence of these searches in the last few days of any financial year. Accordingly, it has been proposed to insert a proviso in the said section to provide that in cases where a search under section 132 is initiated or a search for which the last of the authorization is executed or requisition is made under section 132A, after the 15th March of any financial year a period of fifteen days shall be excluded for the purpose of computing the period of limitation for issuance of notice under section 148 and the notice so issued shall be deemed to have been issued on the 31st day of March of such financial year

1. 6. It is also proposed to insert another proviso in the section 149 of the Act to provide that in cases where the information deemed to be with the Assessing Officer emanates from a statement recorded or documents impounded under summons or survey, as the case may be, on or before the 31st day of March of a financial year, in consequence of, a search initiated or last of the authorization executed under section 132 or a requisition made under section 132A, after the 15th day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation for issuance of notice under section 148 and the show cause notice issued under clause (b) of section 148A in such case shall be deemed to have been issued on the 31st day of March of such financial year. It has also been provided that the impounding or the recording of the statement in consequence of the search or the search itself should be before the 31st March only. Only extension has been provided for the time consumed in the procedure for issuance of notice under section 148 or 148A, as the case may be.

1. 7. Section 151 of the Act contains provisions relating to the specified authority who can grant approval for the purposes of sections 148 and 148A of the Act. The said section provided that

the authority would be the Principal Chief Commissioner and where there is no Principal Chief Commissioner, the Chief Commissioner shall give approvals beyond a period of three years.

1. 8. It was seen that the clause (ii) of the said section was resulting in misinterpretation as well as confusion with regards to the specified authority for the cases where re-opening was being done after three years from the relevant assessment year. Therefore, to clarify the position of law in this regard, an amendment has been proposed to provide that the specified authority under clause (ii) of section 151 of the Act shall be Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.

1. 9. At the same time, to give further clarity with regards to the specified authority a proviso is proposed to be inserted in the section 151 to provide that while computing the period of three years for the purposes of determining the specified authority the period which has been excluded or extended as per the provisos in section 149 of the Act from the time limit for issuance of notice under section 148 of the Act shall be taken into account.

1. 10. These amendments will take effect from the 1st day of April, 2023.

43. Penalty for furnishing inaccurate statement of financial transaction or reportable account

1. 1. Section 285BA of the Act makes it mandatory for a person responsible for registering, or, maintaining books of account or other document containing a record of any specified financial transaction or any reportable account as may be prescribed, under any law for the time being in force, to furnish a statement in respect of such specified financial transaction or such reportable account to the prescribed income-tax authority.

1. 2. Section 271FAA, added through the Finance (No. 2) Act of 2014, includes penalties for providing an inaccurate statement of financial transactions or reportable accounts.

1. 3. Self-certifications by reportable persons and the account holders are mandated under the Rule 114H of the Income-tax Rules, 1962 for different purposes. This includes, inter alia, cases where new accounts are opened (to certify the country of tax residence), and cases of entities to certify whether they are Passive Non-Reporting Financial Entities. However, there is no penal provision for the submission of a false self-certification which in turn leads to furnishing of an incorrect statement under section 285BA.

1. 4. To address this, it is proposed to insert a new sub-section (2) in section 285BA that would impose a penalty of 5,000 rupees on reporting financial institutions for inaccuracies in statements due to false or inaccurate information from account holders, in addition to any other penalties levied by the income tax authority.

1. 5. The reporting financial institution may recover the penalty amount from the account holder. The reference to the income-tax authority designated to levy penalties in section 271FAA is also clarified to be the authority designated under sub-section (1) of section 285BA.

1. 6. These amendments will take effect from the 1st day of April, 2023.

44. Amendments in consequence to new provisions of TDS

1. 1. Section 271C of the Act has provisions for penalty for failure to deduct tax at source. Under this section, a person who has failed to deduct whole or part of tax as required under provisions of Chapter XVII-B (Tax Deduction at Source - TDS) or pay the whole or part of tax as Tax on distributed profits or tax on winnings from crossword, lottery, puzzles etc is liable to pay penalty of sum equal to the amount of tax he failed to deduct or pay. Section 276B of the Act makes provisions for prosecution for failure to pay tax to the credit of Central Government under Chapter XII-D (as required under section 115-O) or under XVII-B (deduction at source).

1. 2. Two new provisions – section 194R and section 194S were introduced in the Act vide Finance Act, 2022. In addition, section 194BA is proposed to be inserted in the Act vide the Bill to provide for TDS on net winnings from online games.

1. 3. Section 194S makes provisions for deduction of tax on payment on transfer of virtual digital asset (VDA) owing to their very nature, payments related to benefit or perquisite or VDA may also be wholly in kind or partly in cash and partly in kind. Accordingly, the first proviso to section 194R provides that in case the benefit or perquisite or VDA has a “in kind” component, then the person responsible shall ensure that required amount of tax has been paid, before releasing the benefit or perquisite.

1. 4. In the case of winnings from online games, sub-section (2) of the proposed section provides that where the net winnings are wholly in kind or partly in cash and partly in kind, the person responsible for paying the net winnings shall ensure that tax has been paid in respect of the net winnings, before releasing the winnings.

1. 5. Presently, the provisions for penalty and prosecution do not clearly mandate a penalty or prosecution for a person who does not pay or fails to ensure that tax has been paid in a situation where the benefit or perquisite is passed in kind. Therefore, it is proposed to amend section 271C inserting two new sub- clauses under clause (b) in sub-section (1) providing reference to the first proviso to section 194R and the first proviso to section 194S. Similar amendments are also proposed in section 276B. Drafting changes are also proposed in the section to align the language with the parent provisions.

1. 6. These amendments will take effect from the 1st day of April, 2023

1. 7. Further, in consequence to the proposal to insert section 194BA in the Act, it is proposed to insert a new sub-clause under section 271C and section 276B providing reference to sub- section

(2) of section 194BA.

1. 8. This amendment will take effect from the 1st day of July, 2023.

6. Rationalisation of Provisions

45. Amendment in thin capitalization norms - excluding non-banking financial companies (NBFC) from restriction on interest deductibility

1. 1. Section 94B of the Act provides restriction on deduction of interest expense in respect of any debt issued by a non-resident, being an associated enterprise of the borrower. It applies to an Indian company or a permanent establishment of a foreign company in India, who is a borrower.

1. 2. In case of any expenditure by way of interest or of similar nature exceeding ? 1 crore which is deductible in computing income chargeable under the head "Profits and gains of business or profession", the interest deductible shall be restricted to the extent of 30% of its EBITDA.

1. 3. Section 94B(3) excludes certain companies that are engaged in the business of Banking or Insurance from its scope.

0. 4. Amendment to sub-section (3) of section 94B of the Act to provide a carve out to certain class of NBFCs and to provide that nothing contained in sub-section (1) of section 94B of the Act shall apply to,-
1. an Indian company or a permanent establishment of a foreign company which is engaged in the business of banking or insurance; or
2. such class of non-banking financial companies as may be notified by the Central Government in the Official Gazette in this behalf;

1. 5. It is also proposed to provide that for the purposes of this section, “non-banking financial company” shall have the same meaning as assigned to it in clause (vii) of the Explanation to clause (viia) of sub-section (1) of section 36 of the Act.

1. 6. This amendment will take effect from 1st April, 2024 and will accordingly apply to assessment year 2024-25 and subsequent assessment years.

46. Tax treaty relief at the time of TDS u/s 196A of the Act

1. 1. Section 196A of the Act provides for TDS on payment of certain income to a non-resident (not being a company) or to a foreign company, at the rate of 20%.The income is required to be in respect of units of a Mutual Fund specified under clause (23D) of section 10 of the Act or from the specified company referred to in the Explanation to clause (35) of section 10 of the Act.
   2. Representations have been received requesting that the benefit of tax treaty may be considered at the time of TDS so that if the treaty provides a rate lower than 20%, TDS is made at that lower rate.

1. 3. It is proposed to add a provision to section 196A(1) of the Act to provide relief to non-resident taxpayers. This provision will ensure that the TDS is calculated at the rate which is lower of the rate of 20% and rates provided in agreement under section 90(1) or 90A(1) of the Act, if the payee has provided the tax residency certificate under section 90(4) or 90A(4) of the Act

1. 4. This amendment will take effect from 1st April, 2023.

47. TDS on payment of accumulated balance due to an employee

1. 1. Section 192A of the Act deals with TDS on payment of accumulated balance under the Employees' Provident Fund Scheme, 1952 to employees. Currently, section 192A requires TDS to be deducted at a rate of 10% of the taxable portion of the lump sum payment to the employee. TDS is not required if the total payment or the sum of all payments to the employee is less than fifty thousand rupees.

1. 2. The second proviso of section 192A of the Act requires the recipient of an amount on which tax is to be deducted to provide their PAN to the tax deductor. If the recipient fails to do so, the tax will be deducted at the highest marginal rate.

1. 3. It has been noted that many low-wage workers do not have a PAN and as a result, TDS is being taken out at the highest marginal rate under section 192A. To address this, it is proposed to remove the second proviso of section 192A so that in the event of not providing a PAN for payment of accumulated balance, tax will be deducted at a rate of 20% (as in other non-PAN cases) as outlined in section 206AA of the Act, instead of at the maximum marginal rate.

1. 4. This amendment will take effect from 1st April, 2023.

48. Facilitating TDS credit for income disclosed in return of income of past year

1. 1. TDS is often deducted by the deductor in the year the income is paid to the assessee, even though the assessee may have already disclosed the income using the accrual method in earlier years. This creates a TDS mismatch, as the corresponding income has already been taxed but TDS is only deducted much later. The assessee cannot claim TDS credit in the year the TDS is deducted because the income was not taxed in that year, and it may not be possible to revise the return for the year in which the income was included. This creates difficulties for the assessee in claiming TDS credit.

1. 2. In order to address TDS mismatch, a new sub-section (20) is proposed to be inserted in section 155 of the Act.

1. 3. Applies when an assessee has included income in their return for an assessment year and TDS is deducted in a subsequent financial year. Assessee can make an application in the prescribed form to the Assessing Officer within 2 years from the end of the financial year of TDS.

1. 4. The Assessing Officer will amend the assessment order or allow TDS credit in the relevant assessment year. Provisions of section 154 of the Act will apply, with the 4-year period calculated from the end of the financial year of TDS.

1. 5. TDS credit will not be allowed in any other assessment year.

1. 6. Amendment has also been proposed in section 244A of the Act to provide that the interest on refund arising out of above rectification shall be for the period from the date of the application to the date on which the refund is granted.

1. 7. These amendments will take effect from 1st October, 2023

49. Relief from special provision for higher rate of TDS/TCS (for non-filers of income-tax returns)

1. 1. Section 206AB of the Act provides for special provision for higher TDS for non-filers of income- tax returns and section 206CCA of the Act provides for special provision for higher TCS for non-filers of income-tax returns. A "specified person" is defined as someone who has not filed a return and has an aggregate of TDS/TCS of at least INR 50,000 in the previous year. Non- residents without a permanent establishment in India are excluded from being a "specified person".

1. 2. To provide relief, an amendment has been proposed amendment to definition of "specified person" to exclude those not required to file returns of income for the assessment year relevant to the said previous year and who is notified by the Central Government in the Official Gazette in this behalf.

1. 3. This amendment will take effect from April 1, 2023.

50. Clarification regarding advance tax while filing Updated Return

1. 1. The Finance Act, 2022 inserted sub-section (8A) in section 139 of the Act enabling the furnishing of an updated return by taxpayers up to 2 years from the end of the relevant A.Y. subject to fulfilment of certain conditions as well as payment of additional tax. Section 140B was inserted to determine the amount of additional tax u/s 234B on the tax on the updated return.

1. 2. The initial provisions of sub-section (4) implied that interest was payable only on the difference between assessed tax and advance tax.

1. 3. To clarify these provisions, an amendment has been proposed to sub-section (4) of Section 140B to compute interest under Section 234B on an amount equal to the assessed tax minus the advance tax that has been claimed in earlier returns, if any.

1. 4. This amendment will take effect retrospectively from April 1, 2022

51. Bringing the non-resident investors within the ambit of section 56(2)(viib) to eliminate the possibility of tax avoidance

1. 1. Section 56(2)(viib) of the Act provides that if a company (other than a company in which the public are substantially interested) receives consideration for issuing shares that exceeds the face value of the shares, and the aggregate consideration exceeds the fair market value of the shares,

it will be charged to income tax under the "Income from other sources" head. The fair market value of unquoted equity shares is computed as per Rule 11UA of the Income Tax Rules.

1. 2. The provision was inserted in the Act via the Finance Act, 2012 to prevent the generation and circulation of unaccounted money through share premium received from resident investors in a closely held company in excess of its fair market value. However, the provision does not apply to consideration received from non-resident investors.

1. 3. To include consideration received from non-residents under the provisions of Clause (viib), it is proposed to remove the phrase "being a resident" from the clause. This amendment will make the provision applicable to any person regardless of residency status.

1. 4. It will be effective from April 1, 2024 for the assessment year 2024-25 and subsequent assessment years.

52. Rationalization of provisions related to the valuation of residential accommodation provided to employees

1. 1. The clause (2) of section 17 of the Act defines "perquisite" to include the value of rent-free accommodation or value of any concession in matters of rent provided to employees by the employer. The methodology for computing the value of rent-free accommodation is prescribed in Rule 3 of the Income-tax Rules, 1962, while the methodology for computing the value of any concession in rent is explained in the clause (2) of section 17.

1. 2. To rationalize the provisions and ensure uniformity in the methodology for computing the value of perquisites, amendments have been proposed in sub-clauses (i) and (ii) of clause (2) of section 17 of the Act. The power to prescribe the method of computation has been taken and the explanations have been amended to provide that accommodation is deemed to have been provided at a concessional rate if its value, as computed in the prescribed manner, exceeds the rent recoverable or payable by the employee. Explanations 2, 3 and 4 of sub-clause (ii) of clause

(2) of section 17 of the Act have been deleted to simplify the provisions.

1. 3. The amendments will take effect from 1st April 2024 and will apply to the assessment year 2024-25 and subsequent years.

53. Specifying time limit for bringing consideration against export proceeds into India

1. 1. The existing provisions of section 10AA of the Act provide a 15-year tax benefit to units established in a SEZ, which began to manufacture or produce articles or things or provide services on or after 01.04.2005. The deduction is available for units that started operations before 01.04.2020 and has been extended to 30.09.2020.

1. 2. Amendments to align the provisions of section 10AA with other similar deductions in the Act. The first amendment proposes to insert a proviso to sub-section (1) of section 10AA to provide

that no deduction shall be allowed to an assessee who does not file a return of income before the due date specified under sub-section (1) of section 139 of the Act.

1. 3. Secondly, it proposes to insert a new sub-section to provide that the deduction under section 10AA shall be available if the export proceeds from the sale of goods or services are received in or brought into India within a period of 6 months or, such further period as the Reserve Bank of India or any authorized authority may allow.

1. 4. In addition, the definition of the term "convertible foreign exchange" is proposed to be defined in clause (i) of Explanation 1 of section 10AA, and the expression "competent authority" means the Reserve Bank of India or any authorized authority under any law. The proposed amendments also include the insertion of section 10AA in sub-section (11A) of section 155 of the Act to allow the Assessing Officer to amend the assessment order later in case the export earning is realized after the permitted period.

1. 5. These amendments will be effective from 01.04.2024 and will apply to the assessment year 2024-25 and subsequent assessment years.

54. Non-Banking Financial Company (NBFC) categorization

1. 1. The provisions in section 43B and 43D of the Act currently use two outdated categories of NBFCs, namely Deposit taking Non-Banking Financial Companies and Systemically Important Non-Deposit taking Non-Banking Financial Companies. This classification is no longer followed by the Reserve Bank of India.

1. 2. In light of this, it is proposed to substitute the words “a deposit taking non-banking financial company or systemically important non-deposit taking non-banking financial company” with “such class of non-banking financial companies as may be notified by the Central Government in the Official Gazette in this behalf.”

1. 3. These amendments will take effect from 1st April, 2024 and will apply to the assessment year 2024-2025 and subsequent assessment years.

55. Providing clarity on benefits and perquisites in cash

1. 1. Section 28 of the Act provides for income that is chargeable to income-tax under the "Profits and Gains of Business or Profession" head. Clause (iv) of this section brings the value of any benefit or perquisite arising from business or profession, whether convertible into money or not, into the scope of chargeability. However, the Courts have interpreted that this clause only applies to benefits or perquisites in kind and not in cash.

1. 2. In order to align the provision with the intention of the legislature, it is proposed to amend clause

(iv) of section 28 of the Act to clarify that the provisions of this clause also apply to benefits or perquisites provided in cash, in kind, or partly in cash and partly in kind.

1. 3. This amendment will take effect from 1st April, 2024 and will apply to the assessment year 2024-2025 and subsequent assessment years.

1. 4. Section 194R of the Act inserted by the Finance Act 2022 provides for tax deduction on benefits or perquisites provided to a resident arising from business or profession. Subsection (1) provides for tax deduction at source at a rate of 10%, and the responsibility of tax deduction has been fixed on the person responsible for providing the benefit. The first proviso states that if the benefit is partly in cash, the person responsible must ensure the required tax has been paid. Sub- section (2) provides for issuance of guidelines by CBDT.

1. 5. To clarify, an explanation is proposed to be inserted into Section 194R to provide that provisions of subsection (1) apply to benefits in cash or in kind or partly in cash and partly in kind.

1. 6. This amendment will take effect from April 1st, 2023.

56. Rationalisation of the provisions of Charitable Trusts and Institutions

0. 1. Background
1. Income of any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub- clause (v) or sub- clause (vi) or sub-clause (via) of clause (23C) of section 10 of the Act or any trust or institution registered u/s 12AA or 12AB of the Act is exempt subject to the fulfilment of the conditions provided under various sections. The exemption to these trusts or institutions is available under two regimes-
   1. Regime for any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub- clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 of the Act (hereinafter referred to as trust or institution under first regime); and
   2. Regime for the trusts registered under section 12AA/12AB of the Act (hereinafter referred to as trust or institution under the second regime).

2. Section 12A of the Act, inter alia, provides for procedure to make application for the registration of the trust/institution to claim exemption U/s 11 and 12. A new Section 12AB was introduced with effect from the 1st April, 2021to provide for procedure for fresh registration.

1. 2. Depositing back of corpus and repayment of loans or borrowings

1. Under the existing provisions of the Act under both regimes-
   1. When any application out of corpus donation received by the trusts is invested or deposited back, into one or more of the forms or modes specified in sub-section (5) of section 11 of the Act maintained specifically for such corpus, from the income of the previous year, such amount is allowed as application in the previous year in which it is deposited back to corpus to the extent of such deposit or investment.

1. 2. Application from loans and borrowings is not considered as application for charitable or religious purposes for the purposes of third proviso of clause (23C) of section 10 of the Act and clauses (a) and (b) of section 11 of the Act. However, when loan or borrowing is repaid from the income of the previous year, such repayment is allowed as application in the previous year in which it is repaid to the extent of such repayment.

2. It was observed that applications from the corpus or loan or borrowings were claimed as applications prior to April 1, 2021 and treating such amounts as application again on depositing back in the corpus, or repayment of loan resulted in double deduction. Further, there was availability of an indefinite time frame for investment or deposit back to the corpus or repayment of loan borrowings.

3. Further, it was noted that conditions that are required to be satisfied in the case of application for charitable or religious purposes must also be satisfied while making the application from the corpus or loan or borrowing. These conditions are as follows:
   1. Such application should not be in the form of corpus donation to another trust;
   2. TDS, if applicable, should be deducted on such application;
   3. Application whereby payment or aggregate of payments made to a person in a day exceeds Rs 10,000 in other than specified modes (such as cash) is not allowed;
   4. Carry forward and set off of excess application is not allowed;
   5. Application is allowed in the year in which it is actually paid;
   6. Application should not directly or indirectly benefit any person referred to in sub-section
      1. of section 13 of the Act and the income of the trust or institution should not enure any benefit to such person;
   7. Application should be in India except with the approval of the Board in accordance with the provisions of clause (c) of sub-section (1) of section 11 of the Act.

4. In order to avoid the ambiguity arising out of exitising provisions of claiming application on depositing back to corpus or repayment of loan borrowings, It is proposed that
   1. any application out of corpus or loans or borrowings before 01.04.2021 should not be allowed as application for charitable or religious purposes.
   2. if the trust or institution invests or deposits back the amount into corpus or repays the loan within 5 years of application from the corpus or loan, then such investment/depositing back into corpus or repayment of loan would be allowed as application of income.
   3. where the application from corpus or loan did not satisfy the conditions as stated in paragraph 2.2, the repayment of loan or investment/depositing back in to corpus of such amount will not be treated as application.

5. These amendments will take effect from 1st April, 2023 and will accordingly apply to the assessment year 2023-24 and subsequent assessment years.

Comments:

• • • There were various charitable institutions that were availing double deduction relating to application of Income arising out of ambiguity in provisions introduced vide Finance Act, 2021. On one hand, they have claimed application from corpus donations or repayment of

loan/borrowing as application prior to 01.04.2021 and on the other hand, claiming such amount as application again at the time of depositing back in corpus or repayment of loan/borrowing resulted in claim of the same amount twice from income of charitable trusts/institutions. The proposed amendments intends to curb misuse of relevant provisions for claiming deduction twice.

• • • Essentially if loan has been taken prior to 01.04.21 and proceeds thereof have been utilized for revenue or capitalisation purposes, the said amount has been claimed as application of income once and subsequently, repayment of the said loan amount cannot be considered as application of income.
    • Trustees or members governing functioning of Trusts will also have to take into account tenure of new loans/credit facilities. Repayment within 5 years can only be considered as application of income. Therefore, longer moratorium period should ideally be avoided to avail tax benefits. Clarity would however, be needed as to whether the period of 5 years would be considered from date of sanction of loan or disbursement.

0. 3. Treatment of donation to other trusts:
1. The income of the trusts and institutions under both regimes is exempt subject to the fulfilment of certain conditions. Some of such conditions are as follows:
   1. at least 85% of income of the trust/institution should be applied during the year for the charitable or religious purposes.
   2. Trusts or institutions are allowed to either apply mandatory 85% of their income either themselves or by making donations to the trusts with similar objectives.
   3. If donated to other trusts or institutions, the donation should not be towards corpus to ensure that the donations are applied by the donee trust or institutions.
   4. Thus, every trust or institution under both the regimes is allowed to accumulate 15% of its income each year.
2. Certain trusts or institutions often try to defeat the intention of the legislature by forming multiple trusts and accumulating 15% at each layer. By this mechanism, the effective application towards the charitable/ religious activities is reduced significantly to a lesser percentage compared to the mandatory requirement of 85%.
3. It is proposed that only 85% of the eligible donations made by a trust or institution under the first or the second regime to another trust under the first or second regime shall be treated as application only.
4. These amendments will take effect from 1st April, 2024 and will accordingly apply in relation to the assessment year 2024-25 and subsequent assessment years.

Comments:

• • • For example if A Charitable Trust earns an income of Rs. 100 lacs in the current year and donates it to B Charitable Trust. What happens in this case is that for A Charitable Trust, Rs. 100 lacs donated to B Charitable Trust is treated as application of income and no tax is levied on A Charitable Trust. In turn, B Charitable Trust donates this amount of Rs. 100 lacs to C Charitable Trust whereby the said amount is again treated as application of income without the same being deployed to any actual charitable/religious applications.

• • • In order to prevent such wrong doings, the proposed amendment seeks to introduce that only 85% of such amount, i.e. 85 lacs will be considered as application of income by the donor trust. If the done trust resorts to any malpractice and again makes donation of Rs. 85 lacs, then 85% of 85 lacs will be treated as application at second stage. Thus, this measure should act as a detrerrent
    • This amendment will take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 202425 and subsequent years.

0. 4. Omission of redundant provisions related to roll back of exemption
1. There are roll back provisions for the trust or institutions under the second regime. Sub- section (2) of section 12A of the Act provides that where an application for registration u/s 12AB of the Act has been made, exemption shall be available with respect to the assessment year relevant to the financial year in which the application is made and subsequent assessment years.
2. Trusts and institutions under the second regime are required to apply for provisional registration before the commencement of their activities and therefore there is no need of provisions provided in second, third and fourth proviso to sub-section (2) of section 12A of the Act. Accordingly, it is proposed to omit the second, third and fourth proviso to sub-section

(2) of section 12A of the Act.

3. These amendments will take effect from 1st April, 2023.

0. 5. Combining provisional and regular registration in some cases
1. As per existing provisions relating to application for registration:
   1. New trusts or institutions under both regimes as well under section 80G regime need to apply for the provisional registration/approval at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration/approval is sought. Such provisional registration/ approval is valid for a period of 3 years.
   2. Provisionally registered trusts or institutions under both regimes and section 80G regime again need to apply for regular registration/approval at least six months prior to expiry of period of the provisional registration or within six months of the commencement of activities, whichever is earlier. Regular registration/approval is valid for a period of 5 years.
   3. The trusts and institutions under both regimes and section 80G regime need to apply at least six months prior to the expiry of regular registration/approval.
2. As per existing provisions, in order to get the exemption, trusts or institutions need to apply one month before the previous year for which exemption is sought. So, in that case the trust or institution formed or incorporated during the previous year are not able to get the exemption for that year in which they are formed or incorporated. Besides trusts or institutions, where activities have already commenced, are required to apply for two registrations (provisional and regular) simultaneously.
3. In order to remove the difficulties faced by freshly incorporated trusts or institutions, it has been proposed to allow for direct final registration/approval for the above mentioned cases vide the following amendments:

1. 1. Trusts and institutions under the both regimes shall be allowed to make application for the provisional approval only before the commencement of activities under relevant proposed provisions of the Act.
   2. Similarly trusts and institutions under section 80G regime shall be allowed to make application for the provisional approval only before the commencement of activities under proposed sub-clause (A) of clause (iv) of the first proviso to sub-section (5) of section 80G of the Act.
   3. Trusts and institutions under both regimes, which have already commenced their activities, shall make application for a regular approval under relevant proposed provisions of the Act.
   4. Trusts and institutions under section 80G regime, which have already commenced their activities, shall make application for a regular approval under the proposed sub-clause (B) of clause of the first proviso to sub- section (5) of section 80G of the Act.
   5. Such application shall be examined by the Principal Commissioner or Commissioner as per the procedure provided under clause (ii) of the second proviso to clause (23C) of section 10 of the Act for the trusts and institutions under the first regime, under clause

(b) of sub-section (1) of section 12AB of the Act for the trusts and institutions under the second regime and under clause (ii) of the second proviso to sub-section (5) of section 80G of the Act.

1. 6. Where the Principal Commissioner or Commissioner is satisfied about the objects and genuineness of the activities and compliance of other requirements provided in law, registration or approval in such cases shall be granted for 5 years.
   7. The Principal Commissioner or the Commissioner shall pass an order granting or rejecting such applications within 6 months calculated from the end of the month in which such application was received.

4. These amendments will take effect from 1st October, 2023.

1. 6. Specified violations under section 12AB and fifteenth proviso to clause (23C) of section 10

1. Under the existing provisions, new trusts must apply for provisional registration/approval, valid for 3 years or 6 months from start of operations and existing trusts must re- register/approve with form 10A under both regimes. Automated procedures are used to grant new trusts provisional permission, register them, and re-register and approve already- registered trusts. The trust or institution submits an application through an e-filing portal, and automatic registration is given without verification.
2. Since the procedure of registration/provisional registration is automated, registration is granted by CPC despite the fact that in certain cases Form 10A, were defective or not complete or contained incorrect information. Currently, the PCIT/CIT has the authority to revoke the registration of trusts as well as their provisional approval/registration in the event of a certain "specified violation".
3. It has been proposed to widen the scope/meaning of "specified violation" referred under section 10(23C) and section 12AB(4) to include a case where the application in Form 10A for Re-registration/approval is incomplete or contains false or incorrect information.

4. These amendments will come into effect from 1st April, 2023.

Comments:

- With the automation of the registration process, applications containing inaccuracies were inadvertently approved. To address this issue, the definition of "Specified Violations" has been revised to encompass instances of incomplete or erroneous information in the application, allowing the PCIT/CIT to revoke such approvals.

1. 7. Trusts or institutions not filing the application in certain cases

1. As per the existing provisions related to application for registration under clause (23C) of section 10 and clause (ac) of sub-section (1) of section 12A of the Act:
   1. All the existing trusts and institutions under the first and second regime were required to apply for re-registration/approval on or before 31.03.2021, with an extension till 25.11.2022 by the CBDT vide Circular No. 22 of 2022 dated 01.11.2022. Such re- registration/approval shall be valid for a period of 5 years.
   2. New Trusts and institutions must apply for provisional registration prior to the start of the relevant assessment year, at least a month in advance. This provisional registration lasts for 3 years.
   3. Provisionally registered trusts and institutions must re-apply for regular registration either before the provisional registration period ends (at least 6 months in advance) or within 6 months of starting their activities, whichever is earlier.
   4. Trusts and institutions must re-apply for registration/approval at least 6 months before the current registration/approval expires.
2. Non-compliance with registration requirements among trusts/institutions have come to notice including failure to apply for regular registration after provisional registration and re- registration/approval. There may be potential cases where re-registration will not be sought after the 5/3 year expiration, resulting in the following unintended consequences:
   1. Upon a trust or institution under the first or second regime transitioning into the exemption regime, they may exit upon paying tax at the maximum marginal rate on the accreted income, which is the difference between the assets' fair market value and liabilities.
   2. By not applying for re-registration/approval or registration/approval , the trust may evade its obligation to pay tax on accreted income by taking a simplified path to exit.

3. The trusts and institutions under both regimes may choose to terminate their operations and dissolve, merge with other non-charitable institutions. To prevent the abuse of exemption benefits and to address the legal loophole that allowed the conversion of such trusts/ institutions into non-charitable organizations, a new Chapter XII-EB was added to the Act to levy an exit tax on the conversion of such charitable organization into a non-charitable entity or merger with a non-charitable entity or a charitable entity with dissimilar objectives.
4. As per the provisions of the Chapter XII-EB, taxable accreted income (aggregate of the Fair Market Value (FMV) of total assets minus liabilities on the specified date) of a trust/institution occurs upon conversion to an unregistered entity under sections 12 AA or 12AB of the Act, merger with a non-similar entity not registered under sections 12AA or 12AB of the Act, or

failure to distribute assets to a registered charitable institution U/s 12AA or approved under section 10(23C) of the Act within 12 months of dissolution. The taxation of accreted income is at the maximum marginal rate, which is in addition to any income chargeable to tax in the hands of the entity.

5. The following amendments are proposed:
   1. It is proposed to amend the provisions of section 115TD of the Act by inserting clause

(iii) in sub-section (3) of the section, to provide that the provisions of Chapter XII-EB shall be applicable if any trust or institution under either regime fails to make an application in accordance with the applicable provisions of applicable regime, within the period specified in the said clauses or sub-clauses. Upon violation of these, it shall be deemed to have been converted into any form not eligible for registration or approval in the previous year in which such period expires.

5. 2. It is further proposed to amend section 115TD(5)(iii) of the Act to provide that principal officer or the trustee of the specified person, as the case may be, and the specified person shall also be liable to pay the tax on accreted income to the credit of the Central Government within 14 days from the end of the previous year in a case referred to in section 115TD(3)(iii) of the Act (as per the amendment in point 7.7 above);
   3. It is proposed to insert sub-clause (c) in clause (i) of the Explanation to section 115TD of the Act to define the term "date of conversion" to include the final date for submitting an application for registration under the relevant provisions of the first or the second regime, as applicable, in cases specified in section 115TD(3) of the statute.
6. These amendments will take effect from 1st April, 2023 and will accordingly apply to the assessment year 2023-24 and subsequent assessment years

Comments:

• The introduction of Chapter XII-EB, in the Finance Act, 2016 (further made applicable to the new regime via The Finance Act, 2022), was met with criticism due to various reasons, such as the cancellation of registration on technical grounds leading to substantial tax liabilities for legitimate trusts and the imposition of double taxation on assets generated from cancelled income. The Central Board of Direct Taxes acknowledged these criticisms, stating “the cancellation of registration without justifiable reasons, may cause additional hardship to an assessee institution due to attraction of tax liability on accreted income”. New amendments have been suggested to widen the applicability of Exit Tax in case of failure to make an application in accordance with the applicable provisions. However, the prior unresolved issues remain unsettled.
• Further some kind of appeal/redressal mechanism should also be provided wherein the trust/institution is provided with an opportunity of being heard and principles of natural justice are followed. The proposal seems to be quite stringent without consideration of facts and circumstances of the case.

0. 8. Alignment of the time limit for furnishing the form for accumulation of income and tax audit report
1. As per the existing provisions:
   1. The trusts and institutions under the first regime are required to get their accounts audited as per the provisions of section 10(23C) of the Act. The trusts and institutions under

second regime are required to get their accounts audited as per the provisions of section 12A(1)(b)(ii) of the Act. The audit report under both the regimes is required to be furnished at least one month before the due date for furnishing the return of income.

1. 2. A per the explanation to provisos of section 10(23C) and Section 11(2)(c) of the Act for the first and second regime respectively, if the trust or institution accumulates or sets apart its income, such trust or institution is required to furnish a statement in the prescribed form (Form 10) on or before the due date for furnishing the return of income for the previous year.
   3. Explanation 1 to Section 11(1) of the Act provides that where the trust/institution under the second regime deems certain income to be applied, such trust or institution is required to furnish a statement in the prescribed form (Form 9A) on or before the due date for furnishing the return of income for the previous year.
2. The due date for furnishing form 9A and form 10 is same as the due date of furnishing the return of income. The trusts are also required to furnish audit report in form 10B/10BB one month before the due date for furnishing return of income. The details of form 10/9A must be reported by the auditors in the audit report, which is to be filed one month before the deadline for submitting the ITR(and thus form 10/9A), hence causing difficulty in reporting.
3. In order to rationalize the provisions, it is proposed to provide for filing of Form No. 10A/9A at least two months prior to the due date for furnishing the return of income for the previous year.

Necessary amendments in this regard are proposed in relevant sub-sections and explanations of Section 10(23C) and Section 11 of the Act.

4. These amendments will take effect from 1st April, 2023 and will accordingly apply to the assessment year 2023-24 and subsequent assessment years.

Comments:

- There has been a paradigm shift in the taxation of charitable trusts/institutions in the last couple of years such as application of income based on actual payment basis, loan availment/repayment etc. Thus, both auditors and trustees would have to take care to get accounts audited in a timely manner. Relevant forms also need to be filed for accumulation/application of income.

0. 9. Denial of exemption where return of income is not furnished within time
1. As per the existing provisions, if the return of income is not furnished by a trust or institution under first regime and second regime within the time u/s 139 of the Act, exemption under sub-clause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 and section 11,12 of the Act shall not be available to such trust or institution.
2. The Finance Act, 2022 provides that taxpayers have an option to furnish updated return of income upto 2 years from the end of assessment year u/s 139.
3. This resulted in exemption under section 11, 12 of the Act and sub-clause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act will be available to the trusts where they furnish updated return of income. Accordingly, it is proposed to clarify that the exemption under section 11, 12 and sub-clause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act will be available only if the return of income has been furnished within the time allowed under sub-section (1) or sub- section (4) of section 139 of the Act.
4. These amendments will take effect from 1st April, 2023.

57. Removal of certain funds from section 80G

1. 1. Section 80G of the Act, inter alia, provides for the procedure for granting approval to certain institutions and funds receiving donation and the allowable deductions.

1. 2. Sub-section (2) of section 80G of the Act, inter alia, provides the list of these funds to which any sum paid by the assessee in the previous year as donations is allowed as a deduction to an extent of 50 per cent/100% of the amount so donated.

1. 3. It has been observed that there are only three funds based on names of the persons in the said section. In order to remove such funds, it is proposed to omit sub-clauses (ii), (iiic) and (iiid) of clause (a) of sub-section (2) of section 80G of the Act.

1. 4. This amendment will take effect from the 1st day of April, 2024 and shall accordingly, apply in relation to the assessment year 2024-25 and subsequent assessment years.

58. Set off and withholding of refunds in certain cases

1. 1. Section 241A of the Act governs the withholding of refunds in specific circumstances. According to this section, if a taxpayer is owed a refund u/s 143(1) and an assessment notice is issued to them u/s 143(2), the Assessing Officer (AO) may choose to withhold the refund until the assessment is made if they believe the refund will negatively impact revenue. The AO must document their reasoning and have the approval of the Principal Commissioner or Commissioner before proceeding with the withholding, which applies to assessments starting from 2017-18 fiscal year.

1. 2. Section 245 of the Act deals with set off of refunds against tax remaining payable. It provides that where refund is found to be due to any person under any provisions of the Act.

1. 3. There is an overlap between the two provisions. Therefore, it is proposed to integrate the two sections by substituting section 245, so as to provide that where under any of the provisions of this Act, a refund is due to any person.

1. 4. Integration of sections 245 would allow the Assessing Officer or Commissioner to set off a refund due to a person against any outstanding sum under the Act, after giving written notice to the person.

1. 5. Proposed to amend section 241A of the Act to make the provisions of that section inapplicable from 1st April, 2023.

1. 6. To account for the impact of the proposed amendments in section 245 would have an impact on cases section 244A(1A), it is suggested to add a proviso to sub-section (1A) of section 244A. The proviso would state that in cases where assessment or reassessment is pending, the additional interest outlined in the sub-section will not be payable to the

assessee for the period starting from the date that the refund was withheld by the Assessing Officer in accordance with sub-section (2) of section 245, until the assessment or reassessment is completed.

1. 7. However, the proposed amendment shall not impact the existing position with regard to all other types of interest, except additional interest under sub-section (1A) of section 244A, payable to the assessee as required under the Act.

1. 8. These amendments will take effect from the lst day of April, 2023.

7. Others

59. Omission of certain redundant provisions of the Act

1. 1. Section 88 of the Act relates to rebate on life insurance premia, contribution to provident fund, etc.

1. 2. Proposed to omit clauses (23BBF), (23EB), (26A), (41) and (49) of section 10 of the Act.

1. 3. This amendment will take effect from the 1st day of April, 2023.

60. Decriminalisation of section 276A of the Act

1. 1. Section 276A of the act imposes a penalty of up to 2 years in prison for a liquidator who fails to give notice, set aside the required amount, or disposes of company assets in violation of section 178.

1. 2. The government's policy is to decriminalize minor offenses to improve business ease. The provisions of the act have been evaluated, and it was found that section 276A penalizes a liquidator for non-compliance with section 178, and imposes personal liability for the same.

1. 3. With the implementation of the Insolvency and Bankruptcy Code, 2016, there is now a payment hierarchy for companies undergoing liquidation and section 178 no longer applies when the provisions of the IBC are in conflict. The liquidator is now supervised by the IBC.

1. 4. Given this, it is proposed to amend section 276A by adding a sunset clause effective March 31st, 2023, meaning that no new prosecutions under this section will be initiated after April 1st, 2023, but ongoing prosecutions will continue.

1. 5. This amendment will take effect on April 1st, 2023

4. INDIRECT TAX PROPOSALS

Goods and Service Tax Act

Amendments in the CGST ACT, 2017

1. As per clause (d) of sub-section 2 and clause (c) of sub-section 2A of section 10, registered person engaged in supplying goods through electronic commerce operators are not eligible for opting to pay tax under Composition Levy, the restriction, on which has now been removed.

2. If the person is exempted under sub-section (1) of section 23 of the Act, he is not required to obtain compulsory registration under sub-section (1) of the section 22 of the said Act. The same is put into effect retrospectively from 1st July,2017.

3. A new sub-section under section 122 to provide for penal provision applicable to Electronic Commerce Operator in case of Contravention of provisions on supplies of goods made by unregistered person or compositions taxpayers through them.

4. A new sub-section under section 37 is being inserted to provide for time limit upto three years (or such extended time period, on fulfilment of certain conditions) from the due date within which details of outward supplies for a tax period can be furnished by a Registered Person.

5. A new sub-section under section 39 is being inserted to provide for time limit upto three years (or such extended time period, on fulfilment of certain conditions) from the due date within which the return for a tax period can be furnished by a Registered Person.

6. A new sub-section under section 39 is being inserted to provide for time limit upto three years (or such extended time period, on fulfilment of certain conditions) from the due date within which the annual return for financial year can be furnished by a Registered Person.

7. A new sub-section under section 52 to provide a time limit upto three years (or such extended time period, on fulfilment of certain conditions) from the due date within which the statement for a month can be furnished by a electronic commerce operator.
8. Section 56 of the Act is being amended to provide for the manner of computation of period of delay of interest on delayed refunds.
9. Section 158A is being added to specify the manner in which the information shall be shared by registered individuals in their returns, applications for registration, statements of outward supplies and details uploaded for electronic invoicing or E-way bill purposes, through the common portal, the details of which shall be notified.

10. The Schedule III is being amended to make Para 7, 8(a), and 8(b) retrospectively applicable. The activities/transaction mentioned in the said paragraphs will now be considered as neither a supply of goods nor a supply of services with effect from 1st July,2017. It should be noted that if tax has already been paid for these transactions from July 1st, 2017 to January 31st, 2019, no refund will be granted.

11. Section 132(1) is being modified to eliminate criminal charges for the offenses specified in clauses

(g) (obstruction or prevention of an officer's duties), (j) (tampering with or destroying evidence or documents) and (k) (failure to provide information). Additionally, the monetary limit for prosecution under the Act has been raised from 100 lakh rupees to 200 lakh rupees, except in cases of issuance of invoices without supply of goods or services or both.

12. The explanation for section 17(3) is being revised to limit the availability of input tax credit for certain transaction listed in Schedule III, Para 8(a) i.e. the sale of warehoused goods prior to clearance for domestic consumption, by including their value in the value of exempt supplies. Accordingly, ITC for the same would not be available.

13. The provisions of section 17(5) has also been amended so as to provide that no input tax credit shall be available in respect of goods or services or both which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013.

14. The concept of provisional ITC was introduced during the implementation of GST, but it was later changed through the Finance Act 2022 and eliminated. To simplify this, the rules for provisional refunds, which previously allowed for 90% of eligible refunds, have been updated to exclude provisional ITC. As a result, 90% of self-assessed and claimed refunds can now be provisionally granted while the refund application is being processed, without considering provisional ITC.

15. The proviso of section 12(8) of the IGST Act is being removed to define the place of supply of services for transportation of goods to a registered person as the recipient's location and in all other cases as the location where the goods are handed over for transportation, regardless of the goods' destination, if both the service provider and recipient are located in India. Currently, as per the proviso to Section 12(8), if the transportation of goods is to a location outside of India, the place of supply is considered the destination of the goods.

Amendments in the IGST ACT, 2017

16. Section 2(16) of the IGST Act is being revised to change the definition of "non-taxable online recipient" by removing the requirement that the recipient of online information and database access or retrieval services (OIDAR) be for purposes other than commerce, industry, or any other business or profession. This amendment aims to make OIDAR services taxable provided by a person in a non-taxable territory to an unregistered recipient in a taxable territory.

Additionally, it aims to clarify that individuals registered only under clause (vi) of Section 24 of the CGST Act will be considered as unregistered for the purpose of the section. Also, section 2(17) is being revised to change the definition of "online information and database access or retrieval services" by removing the requirement that the supply be essentially automated with minimal human involvement.

Customs

17. Basic Customs Duty (BCD) is increased for the following:
    1. Articles of precious metals – from 20% to 25%
    2. Silver dore or silver (including silver plated with gold or platinum), unwrought or in semi- manufactured forms, or in powder form bars – from 6.1% or 7.5% to 10%.
    3. Compounded rubber – from 10% to 25% or INR30 per kg, whichever is lower.

18. The rate of BCD is reduced for the following goods, subject to compliance with the provisions of Import of Goods at Concessional Rate of Duty Rules (IGCR Rules):
    1. Denatured ethyl alcohol for use in manufacture of industrial chemicals – from 5% to Nil.
    2. Crude glycerin for use in manufacture of epichlorohydrin – from 7.5% to 2.5%.
    3. Seeds for use in manufacture of rough lab grown diamond (exemption for a period of two years) – reduced to Nil.
    4. Certain ingredients or inputs (such as fish meal or krill meal) for use in the manufacture of aquatic feed – from 15/ 30% to 5%/ 15%.
    5. Camera lens and input or sub parts for lens of camera module of mobile phone – from 2.5% to Nil.
    6. Parts for manufacture of open cells of TV panels – from 5% to 2.5%.

19. BCD is reduced to nil in respect of import of specified capital goods and machinery required for the manufacture of lithium-ion cells for batteries used in electric vehicles.

20. To rectify the inversion of duty structure and encourage the manufacturing of electric kitchen chimneys, the following changes are proposed in the rate of BCD:
    1. Increase in BCD on electric kitchen chimney – from 7.5% to 15%.
    2. Reduction in BCD on heat coils for use in the manufacture of electric kitchen chimney –

from 20% to 15% subject to compliance with IGCR