02/02/2023
*Budget 2023 Few Important Proposed Amendments to Income Tax Act 1961*
*As per Finance Bill 2023 Amendment 1 – Rationalization of exempt income under life insurance policies – Section 10(10D)* –
1) It is proposed to tax income from insurance policies having premium or aggregate of premium above Rs 5,00,000 in a year.
2) Income to be exempt if received on the death of the insured person.
3) This income shall be taxable under the head ‘income from other sources’. Deduction shall be allowed for premium paid if such premium has not been claimed as deduction earlier.
4) The proposed provision shall apply for policies issued on or after 1st April, 2023. There will not be any change in taxation for polices issued before this date.
5) These amendments are applicable from the assessment year 2024-25.
*Amendment 2 – Deduction of expenses for payments to Micro and Small Enterprises – Section 43B* –
1) In order to promote timely payments to micro and small enterprises, it is proposed to include payments made to such enterprises within the ambit of section 43B of the Act.
2) Accordingly, section 43B of the Act to provide that any sum payable by the assessee to a micro or small enterprise beyond the time limit specified in section 15 of the Micro, Small and Medium Enterprises Development (MSMED) Act 2006 shall be allowed as deduction only on actual payment.
3) Clause under section 43B stating that payments made before due date of filing of ITR are allowed as deduction, is not applicable to the payments made to MSME.
4) These amendments are applicable from the assessment year 2024-25.
*Amendment 3 – Increasing threshold limits for presumptive taxation schemes – Section 44AD and Section 44ADA* –
1) Under section 44AD, if the amount or aggregate of the amounts received during the previous year, in cash, does not exceed five per cent of the total turnover or gross receipts, a threshold limit of three crore rupees will apply.
2) under section 44ADA, for professions if the amount or aggregate of the amounts received during the previous year, in cash, does not exceed five per cent of the total gross receipts, a threshold limit of seventy-five lakh rupees will apply.
3) Provision of section 44AB of the Act shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions above provisions. 4) These amendments are applicable from the assessment year 2024-25.
*Amendment 4 – Limiting to the exemption on investment in new residential property – Section 54 and Section 54F* –
1) It is proposed to impose a limit on the maximum deduction that can be claimed by the assessee under section 54 and 54F to rupees ten crore.
2) It has been provided that if the cost of the new asset purchased is more than rupees ten crore, the cost of such asset shall be deemed to be rupees ten crores.
3) For deposit in the Capital Gains Account Scheme, deduction is restricted to rupees 10 Crores.
*Amendment 5 – TDS on payment of accumulated balance due to an employee – Section 192A* –
1) Earlier the tax was to be deducted at maximum marginal rate as applicable ifperson was not having PAN.
2) Now the maximum TDS deduction will be 20% for not having PAN of employee.
*Amendment 6 – Facilitating TDS credit for income already disclosed in the return of income of past year – Section 155 (20) –*
1) Where income is included in the ITR filed by the assessee and tax is deducted in subsequent year according to the provisions.
2) Application can be filed by the assessee within 2 years from the end of financial year in which such tax was deducted at source with assessing officer.
3) Assessing officer will allow the tax credit and pass the necessary order with section 154.
4) It is required that the assessee has not claimed any tax credit in any other assessment year.
*Amendment 7 – New personal tax income slab rates – Section 115BAC* –
A) New Tax Regime – As per changes below tax rates are applicable according to income slabs –
Income Slab Tax Rate
From 0 to 3,00,000/- Nil
From 3,00,001/- to 6,00,000/- 5%
From 6,00,001/- to 9,00,000/- 10%
From 9,00,001/- to 12,00,000/- 15%
From 12,00,001/- to 15,00,000/- 20%
Above 15,00,000/- 30%
1) Standard deduction of Rs. 50,000/- is allowed in new tax regime.
2) Rebate allowed under section 87A is Rs. 25,000/- accordingly income till 7 Lakhs is free from tax payment.
3) New regime will now be a default regime, person will have to select the if he wants to continue with old regime.
4) Chapter VIA deductions are not allowed & interest on housing loan is not allowed condition is same as earlier.
5) Surcharge above 5 Crore is reduced to 25% from 37%.
B) Old Tax Regime – Tax rates will continue are as below (No Change in old regime) –
Income Slab Tax Rate
From 0 to 2,50,000/- Nil
From 2,50,001/- to 5,00,000/- 5%
From 5,00,001/- to 10,00,000/- 20%
Above 10,00,000/- 30%
1) Standard deduction of Rs. 50,000/- is allowed in Old tax regime.
2) Rebate allowed under section 87A is Rs. 12,500/- accordingly income till 5 Lakhs is free from tax payment.
3) Chapter VIA deductions (80C, 80D etc..) are allowed under old regime only.
4) New regime will now be a default regime, person will have to select the if he wants to continue with old regime. Housing loan interest deduction is allowed.
5) Surcharge above 5 Crore is kept as at 37%.
*Amendment 8 – Increasing threshold limit for co-operatives to withdraw cash without TDS – Section 194N* –
1) Any banking company or co-operative society while paying to any person in cash is liable to deduct the TDS at 2%.
2) The limit for this section is enhanced from 1 Crore to 3 Crores.
3) This amendment is applicable from 1st April 2023.
*Amendment 9 – Removal of exemption from TDS on payment of interest on listed debentures to a resident – Section 193*
1) The proviso to section 193 of the Act provides exemption from TDS in respect of payment of interest on certain securities.
2) Clause (ix) of the proviso to the aforesaid section provides that no tax is to be deducted in the case of any interest payable on any security issued by a company, where such security is in dematerialized form and is listed on a recognized stock exchange in India.
3) Accordingly, it is proposed in finance bill to withdraw this exemption.
