News Alert February 2022

Finance Bill 2022

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

Capital expenditure
increased by 34% in FY23

5G spectrum auctions in FY23 and PLI for 5G technology manufacturing ecosystem
Digital currency to be launched by the Reserve Bank of India
Infrastructure status for data centres
Strong pivot towards climate change and clean energy transition
PLI for manufacture of high efficiency modules increased by another INR 19,500 crores
Battery swapping policy and interoperability standards
Ease of Doing Business 2.0 & Ease of Living
Overhaul of SEZ and expert committee for scaling up PE/VC investments

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  • 15 percent concessional tax rate on foreign-sourced dividend income earned withdrawn w.e.f. April 1, 2022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

OUR OFFICES

Bengaluru-1
708/1, 6th ‘B’ Cross, 3rd Block Koramangala, Bangalore – 560 034, India

Bengaluru-2
IndiQube Southmile, Southend Road, Basavanagudi, Bangalore – 560 004, India

Chennai
The Executive Zone, Shakthi Towers, Phase 1, 2nd Floor, 766, Anna Salai, Chennai – 600002, Tamil Nadu – India

Mumbai
91 Springboard, Kagalwala House, KBK Complex, Mumbai – 400098
Maharashtra – India

Delhi
T236 AltF Coworking , Success Tower B, Golf Course Extension, Sector 65, Gurgaon – 122018, Haryana, India

New York
99 Washington Avenue, Ste 805a, Albany, New York, 12210, USA

Singapore
89 Short Street, #09-08A, Golden Wall Centre, Singapore 188216

Dubai
T211F 1G, RAKEZ Amenity Centre, Al Hamra Industrial Zone, RAK UAE

ABOUT 4i ADVISORY SERVICES

4i Advisory Services is a leading firm rendering Accounting, Assurance, Tax, Regulatory and Business Advisory Services with a collaborative vision of building one of the finest professional services firms.

With an experienced team of professionals, we provide well thought out strategies and solutions to complex problems based on our understanding of clients’ businesses and their objectives.

We recognize that today’s complex financial world requires simplicity and authenticity. From this we derive our commitment to deliver innovative solutions that are technically sound and actionable.

Our focused approach rests on a foundation of wisdom and a passion for excellence.

TRANSACTION TAX | INDIRECT TAX | ACCOUNTING & ASSURANCE
CORPORATE & INTERNATIONAL TAX | COMPLIANCE & OUTSOURCING