ABSTRACT : The Budget – 2023 has come up with a plethora of changes proposed in the field of Direct Taxes. Proposed changes cover Income Tax & TDS both. Besides extending tax rebate up to Rs.7.00 lakhs under new regime, it effects the assesses who are taxed under the heads, Salary, Business & Profession, Capital Gains (both Long Term & Short Term) & Income from Other Sources. Provisions under TDS covers Online Games & EPF with drawls etc. Other proposed modification provide relief to Co-op. Societies on cash withdrawl. Foreign Remittances in some cases are likely to be covered under higher rate of TDS.
Union Budget 2023, presented in Parliament by Honorable Finance Minister Ms. Nirmala Sitharaman on 1st February, 2023, has proposed some changes in the Income Tax Act, 1961. These changes are likely to affect general public at large. An attempt has been made in this article to sum up all those proposals in simple terms, for easy understanding of citizens & professionals.
A. GENERAL PROVISIONS;
- TAX REBATE :
Tax rebate (u/s 87A) has been increased form Rs.5,00,000.00 to Rs.7,00,000.00. This is applicable only in new Tax Regime.
- BASIC TAX EXEMPTION LIMIT:
Basic Tax Exemption limit has been hiked from Rs.2,50,000.00 to Rs.3,00,000.00. This is however again, applicable only in new Tax Regime.
Upper limit of 37% has been reduced to 25%.. It is applicable when Income is beyond Rs.500,00,000.00 and is applicable only in new tax Regime.
Existing slabs are as under :
- Income between Rs.50.00 Lakhs – Rs.100.00 Lakhs 10%.
- Income between Rs.100.00 Lakhs – Rs.200.00 Lakhs 15%.
- Income between Rs.200.00 Lakhs – Rs.500.00 Lakhs 25%.
- Income between Rs.500.00 Lakhs & above 37%.
Last slab has been reduced from 37% to 25%.
4. OPTION TO ADOPT NEW OR OLD TAX REGIME :
Taxpayers not having any income under the head “Profits & Gains of Business or Profession” can opt for Old Regime. This option may be exercised by him/her in each year separately.
However, Taxpayers having Income under the head “Profits & Gains of Business or Profession” can opt for Old Regime, only once. After that, they will continue to be Taxed under New Regime. They cannot exercise this option every year.
- DEDUCTION OF DONATIONS is proposed to be restricted under section 80G, by OMITTING CERTAIN NAME-BASED FUNDS.
- REFUND OF INCOME TAX is proposed to be set off against existing demand, if any. If assessment or reassessment is pending, the refund due in such cases will be withheld by the Assessing Officer till the date of assessment or reassessment.
- SENIOR CITIZENS :
(a) SCSS (Senior Citizen Saving Scheme) is available in Post Office & Banks (both Public & Private Sector). Previously, maximum limit of deposit under this scheme was Rs.15.00 lakhs, which has now been raised to Rs.30,00 lakhs. It shall earn Interest @8.00% p.a
(b) POMIS (Post Office Monthly Income Scheme) is available in Post Offices only. Previously, maximum limit of deposit under this scheme was Rs.4,50,000.00, which has now been raised to Rs.9,00,000.00, for an individual account. In case of joint account, the limit has been raised from Rs.9,00,000.00 to Rs.15,00,000.00.It shall earn Interest @7.10% p.a., with effect from 01.01.2023.
- WOMEN :
MAHILA SAMMAN SAVING CERTIFICATES is available for WOMEN SENIOR CITIZENS who are over the age of 60 years. They can deposit up to Rs.2,00,000.00, which will yield 7.50 % p.a. Partial withdrawls are also allowed in this scheme.
B. INCOME – SALARIES :
- STANDARD DEDUCTION of Rs.50,000.00 for Salaries Employees & Pensioners (existing in old Regime u/s 16(i)(a), shall also be allowed in new Regime.
- LEAVE ENCASHMENT/SALARY : Present limit of Rs.3.00 lakhs (u/s 10AA(ii) for Non-Government Employees, has been revised to Rs.25.00 lakhs, subject to maximum of 10 month’s Salary
- FAMILY PENSION Exemption of Rs.15,000.00 already exists in the old tax regime. The same shall also be available in new Tax Regime..
C. INCOME – BUSINESS OR PROFESSION :
Following changes are proposed for assesses covered under this head of Income :
01. PRESUMPTIVE TAXATION SCHEMES – INCREASING THRESHOLD LIMITS :
In another proposal, threshold limits for presumptive taxation scheme for ELIGIBLE BUSINESSES has been increased from the existing limit (u/s 44AB & 44AD) of Rs.2.00 crores to Rs.3.00 crores. Similarly, for SPECIFIED PROFESSIONS (u/s 44ADA) it has been increased form Rs.50.00 lakh to Rs.75.00 lakhs.
However, this shall be applicable in cases, where Cash Receipts are not more than 5% of Gross Turnover or Receipts.
02. Another change proposed is in respect of PRESUMPTIVE SCHEMES (u/s 44AB, 44AD & 44ADA etc.) FOR NON-RESIDENTS, is to DISALLOW CARRIED FORWARD AND SET OFF OF LOSS computed as per books of account with presumptive income.
03. OPTIONAL INVENTORY AUDIT BY COST ACCOUNTANTS (u/s 142(2)(A), has also been introduced by FM in this budget. This is a new concept in which, the AO has been given the powers to get Inventory Valuation by Cost Accountant, with the prior approval of Commissioner/Chief Commissioner.
This would be a deterrent to revenue loss, due to under valuation of Inventory.
D. CAPITAL GAINS :
01. LONG TERM CAPITAL GAINS :
01.1. Exemption available under u/s 54 & 54F (Investment in house property after selling a House Property), has been RESTRICTED to Rs.10.00 crores only. There was no such limit on this amount earlier.
01.2. Any Profit/Gain on Conversion of Gold into Electronic Gold Receipt & vice versa, will not be treated as capital gain.
01.3. While computing CAPITAL GAINS in case of joint development of property, it is proposed to include the amount received through cheque etc., as consideration.
01.4.Presently, Interest paid on borrowed capital is allowed as deduction (subject to certain conditions) under Income from House Property (u/s 24). This amount is also treated as Cost of acquisition, on its sale, thereby reducing Capital Gain to some extent.
It is proposed to disallow that part of Interest from the cost, which has already been claimed as deduction from Income (u/s 24) in earlier years, to work out cost of acquisition. This will result in higher amount of CAPITAL GAINS.
02. SHORT TERM CAPITAL GAINS :
02.1.The income from MARKET LINKED DEBENTURES is proposed to be taxed as SHORT TERM CAPITAL GAINS, at the applicable rates.
E. INCOME – OTHER SOURCES :
01. Any Income from INSURANCE POLICIES, with an Annual Premium of Rs.5,00,000.00 or more, taken after 01.04.2023 shall be taxable.
Any Income here means Net of Receipts from the Insurance Company & payments made against this policy. (Section 10(10D).
This will not affect the tax exemption provided to the amount received on the death of person insured. It will also not affect insurance policies issued prior to 31st March, 2023.
TDS PROVISIONS :
- CASH WITHDRAWALS BY CO-OPERATIVE SOCIETIES, upto a higher limit of Rs.3.00 crores, shall not attract TDS provisions. Beyond this limit, TDS shall be applicable @ 2% (u/s 194N).
Earlier this limit was Rs.1.00 crores & beyond that TDS @ 2% was applicable..
- TDS ON ON-LINE GAMES has been made applicable @ 30%, on payments made on winnings, This shall be deducted by the company making the payment to the winners, even if the amount of reward is Rs.10.00 only. Previously there was a limit of Rs.10,000.00 for such TDS deduction.
- TDS ON EPF WITHDRAWALS, has been reduced from 30% to 20% on Taxable portion of EPF withdrawn. However, this shall be applicable in NON PAN cases only.
- It is proposed to withdraw the exemption from TDS currently available on INTEREST PAYMENT ON LISTED DEBENTURES.
- FOREIGN REMITTANCE FOR OTHER PURPOSES (except Education & Medical treatment), is proposed to be covered under the TCS provisions at the rate of 20% (earlier 5%).
The rate of TCS for foreign remittances beyond Rs.7 lakhs, for EDUCATION &MEDICAL TREATMENT shall continue to be covered under TCS @ 5%. Similarly, the rate of TCS on foreign remittances for the purpose of education through loan from financial institutions, shall also continue to be 0.5 percent in excess of Rs.7 lakh.
- In another proposal, taxpayer has been allowed to obtain CERTIFICATE OF DEDUCTION OF TAX AT SOURCE TO LOWER OR NIL RATE, on sums on which tax is required to be deducted under section 194LBA of the Act by Business Trusts.
The procedure to obtain Certificate of Deduction of TDS, at Lower or Nil rate, may be notified in due course.
- Sometimes, tax for income of an earlier year is deducted later in the next year, while tax thereon has already been paid in the earlier year. Amendment is proposed to facilitate such taxpayers to claim credit of this TDS in the earlier year.
- TDS/TCS is charged on higher rate, if the recipient has not furnished his return of income of preceding previous year, but has aggregate of TDS and TCS of Rs. 50,000.00 or more. It has been proposed to exclude a person who is not required to furnish ITR for such previous year and who is notified by the Central Government in the Official Gazette in this behalf.
- Budget-2023 speech of Union Finance Minister.
- Income Tax Act – 1961.
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