Policy Annoucements
The Union Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman presented the Union Budget 2022-23 in Parliament today. India’s economic growth in the current year is estimated to be 9.2 per cent, highest among all large economies. The Union Budget has made following key policy announcements.
Direct Tax – Compliance
Slab rates
- The income slabs and rate of taxation remain unchanged except for surcharge reduced to 7 in case of cooperative societies for income above INR 1 crore but below INR 10 crore
Updated Return subject to payment of additional tax liability
- Taxpayer can file an updated return of income whether a return was previously filed or not (Optional) – Condition of offering additional income
and payment of additional tax payable
– 25% if the updated return is filed within 12 months from the end of the
relevant AY
– 50% if the updated return is filed beyond 12 months from the end of
the relevant AY - Cases where updated return cannot be filed: Search/ Survey, completion of assessment/ re-assessment or re-computation/ revision of income
within the regular timelines, cases where communication under PMLA, Benami Property, prosecution and class of persons )notified by the
Board) - Updated return cannot be filed if assessment is pending
- New provisions with respect to updation of return also made applicable to entities which have undergone resolution process
Direct Tax – Taxability
Foreign sourced dividends
- 15 percent concessional tax rate on foreign-sourced dividend income earned withdrawn w.e.f. April 1, 2022
- Amendment to bring in parity on taxation of Indian-sourced dividends & foreign-sourced dividends
Payments not allowed as business expenditure w.e.f. April 1, 2022
- Expenses incurred in providing various benefits in violation of the provisions of IMC (Professional Conduct, Etiquette and Ethics) Regulations, 2002
- Expenses incurred for a purpose which is an offence under foreign law /compounding of an offence for violation of foreign law
Virtual Digital Asset
- Tax rate @ 30% on income from transfer of virtual digital assets
- No deduction or allowances to be allowed against income except cost of acquisition
- Losses can be set-off only against current year gains from transfer of virtual digital assets and allowed to be carry-forward
- Gift of virtual digital assets to be taxed in the hands of the recipient
- Section 194S: TDS to be applicable at the rate of 1 per cent on consideration payable to resident
No deduction for conversion of interest
- Conversion of interest payable into debenture or any other instrument by which liability to pay is deferred to a future date, shall not be deemed to have been actually paid
- Provisions take effect from April 1, 2022
TDS on benefit or perquisites
- Person responsible for providing benefit or perquisite to residents under head “income from business and profession” to deduct taxes at 10%
- Taxes to be paid before releasing the benefit
- Aggregate value of benefit or perquisite to exceed INR 20,000
- Not applicable to individuals or HUFs whose sales, gross receipts or turnover does not exceed INR 1 crore or INR 50 Lakh in case of business or profession, respectively in the preceding FY
Slump sale
Definition of Slump Sale to be amended by providing for inclusion of the word “transfer” as against “sales” to give effect to the intention of Slump Sale provisions as amended from April 1, 2021
Capping the surcharge
- Surcharge on long term capital gain on all assets reduced to 15% from 37%
Cess deduction
- The term tax includes surcharge or cess and therefore, any cess paid under the act shall not be allowed as a deduction
Window for filing modified return by successor entity
- Modified return can be filed (within six months from the end of the month in which the competent authority issues the order) by the successor in
case of business reorganization, for the period between the appointed date and date of the final order of the competent authority - This amendment will be effective from 1 April 2022
Angel tax relaxation
- Provisions of Section 56(2)(viib) not applicable to consideration for issue of shares received by venture capital undertaking from a specified fund
regulated by IFSC
COVID relaxation
- Any sum of money or property received by an individual from any person towards actual expenditure incurred on COVID 19 treatment of such individual or family members of such individual, not chargeable to tax
Bonus and Dividend stripping
- Provisions of bonus and dividend stripping now also applicable to units of InvITs / REITs/ AIFs
Start-ups
- Incorporation timeline extension to factor delays on account of pandemic and promote eligible start-ups
- Existing tax benefits for eligible start-ups has been extended by 1 year – date of incorporation to March 31, 2023 from the existing March 31, 2022
- Tax holiday period continues to remain 3 consecutive years out of 10 years as per the option of the taxpayer
Direct Tax – Others
Domestic manufacturing companies
- Last date for commencement of manufacturing or production for claim of concessional rate of 15% under Section 115BAB extended by 1 year to March 31, 2024
IFSC
- Income from transfer of ‘offshore derivative instruments’ or ‘over the counter instruments’ by non-resident to an offshore banking unit of an IFSC is proposed to be exempted
- Tax exemption to non-resident in IFSC extended to income on royalty and interest on account of lease of a ship, transfer of a ship and portfolio management fees
Section 14A disallowance
- Applicable even if exempt income has not accrued or arisen or received during the relevant previous year
Loan taxation
- The amount of loan or borrowing taxable in the hands of assessee if the lender of such loan or borrowing fails to offer explanation, nature and source of such amount provided as loan or borrowing to the assessee
Set-off of loss
- Set-off of brought forward loss or unabsorbed depreciation not allowed against undisclosed income found pursuant to search or survey under IT Ac
Appeal matters
- Revenue authorities can now defer filing an appeal before the High Court and Tribunal if an identical question of law is pending before the jurisdictional High Court or the Supreme Court including in case of another taxpayer
Charitable trust taxation
- Any sum received by trust or institution towards renovation or repair of temple, mosque, gurudwara, church or other place may, at its option, be
treated as corpus of such trust or institution eligible for tax benefit under section 11 of the IT Act subject to certain conditions
Assessment initiated during restructuring
- Proceedings initiated during the pendency of application will be deemed to be valid for the successor
- This will be effective from April 1, 2023
Indirect Tax
Realignment of Input Tax Credit (‘ITC’)
- Provisions introduced GSTR-2B
- Two-way communication process under GSTR-2A deleted
- Provisions introduced for claiming ITC based on auto-generated statement in GSTR-2B
Additional restrictions introduced for availing ITC
- Continued default in payment of tax by vendor (period to be specified)
- Difference between GSTR-1 and GSTR-3B of the vendor (limits to be prescribed)
- Availment of excess ITC by vendor (limit to be prescribed)
- Breach of prescribed limit of tax payment through Electronic Credit Ledger by the vendor
- Newly registered vendors (for specified period)
- Class of prescribed persons
Other ITC related amendments
- Extension of period for availing ITC to 30 November of subsequent year
- Retrospective reduction in interest rate to 18% for wrong Availment and utilization of ITC
Legislative changes
- Regulations now require sequential filing of returns of outward supplies (GSTR 1) and tax payment (GSTR 3B)
- GST registration liable to be cancelled if the returns have not been filed for continuous period (to be prescribed, earlier 6 months)
- Power to restrict maximum proportion of output tax liability which may be discharged through the electronic credit ledger enabled
- Late fee to apply on delayed filing of GST TCS returns
Relaxations
- Time limit extended to 30 November in case of issuance of credit notes and rectification of errors or omission in returns
- Transfer of amount available in electronic cash ledger under CGST or IGST of a ‘distinct person’ (GST registrations within the same PAN) allowed
Refund claims
- GST refunds – Reference date for filing refund for SEZ supplies linked to due date of monthly tax payment return
Supply
- Exclusion to fee for grant of alcoholic liquor licence as a ‘supply’ under GST made retrospective
Customs Duty
- The Advance Rulings shall remain valid for a period of 3 years or till there is a change in law or facts, whichever is earlier
- It is proposed to phase out the concessional customs duty rates in capital goods and project imports gradually and apply a moderate tariff of 7 5 per cent to make it conducive to the growth of domestic industry and ‘Make in India’
- A few exemptions are being introduced on inputs, like specialized castings, ball screw and linear motion guide, to encourage domestic manufacturing of capital goods
Central Excise
- As new BIS specification IS 17586 has been issued for Ethanol Blended Petrol
- Unblended fuel will attract an additional differential excise duty of INR 2 per litre from October 1 2022
Special Economic Zone Act
- It is announced that the Special Economic Zones Act will be replaced with a new legislation
- Alongside, reforms in Customs Administration of SEZs with be undertaken with a focus on higher facilitation and with only risk based checks
