Union Budget 2023
THE UNION BUDGET 2023
KORAH AND KORAH, CHARTERED ACCOUNTANTS
Do not Skip! – The Disclaimer
- This presentation summarizes the important proposals in a lucid manner based on the Finance Bill which was presented in the Parliament on the 1st of February 2023. These proposals are subject to further amendments before they are enacted.
- This presentation is not an offer, invitation, or solicitation of any kind. Utmost care has been taken while preparing this presentation, the views and opinion expressed are that of the writers.
- The readers are requested to kindly verify and check the facts before acting on them as this presentation is meant for general guidance and no responsibility for loss arising to any person acting or refraining from acting, as a result of any material contained in this presentation will be accepted by the Firm or its associates
- It is recommended that professional and expert guidance or advice is to be taken based on the specific facts and circumstances. This presentation does not substitute the need to refer to the original pronouncements.
- This compilation is meant only for the person to whom it is sent and any unauthorized reproduction of the whole or part of the compilation stated above without the writers’ prior permission is not allowed.
Vision for “Amrit Kaal” – to make India an empowered and an inclusive economy
- The vision for “Amrit Kaal” (meaning ‘the best time to begin new work’) is centered around the following 3 goals:
- In order to guide the country towards “Amrit Kaal”, the Budget has laid down 7 priorities:
Sector-wise breakup of the important Budget’23 Proposals
- Agriculture, Fisheries and Co-operatives
2.Education, Healthcare and Housing
3.Infrastructure and Logistics
4.Urban Infrastructure and Digitization
7.Ease of Doing Business
8.Financial Services Sector
The Most Significant! – Income Tax Proposals
- Generally, the proposals of The Finance Bill, 2023 will be applicable from 1st April 2023 i.e., for the Assessment Year (AY) 2024-25 onwards unless and otherwise stated. A detailed analysis of the direct tax proposals are as follows:
A.On Personal Income
- Change in tax slabs and tax rates under the New Regime
- Section 115BAC – income tax slabs have been enhanced under the new regime:
- The revised slabs have also been extended to association of persons (AOP), body of individuals (BOI) and artificial juridical persons.
- There has been no change in the limits under the Old Regime.
2.Change in tax rebate under the New Regime
- Section 87A – earlier, the tax rebate applicable for both old and new regimes was INR 12500 or tax payable – whichever lower.
- Now, specifically for the new regime the tax rebate has been increased to INR 25000. In other words, if you have total taxable income up to INR 7 lakhs, then under the new regime, you will not end up paying any income tax.
3.Standard Deduction now available for New Regime
- Section 16 (ia) – earlier, standard deduction was not available for the new scheme. INR 50000 was available as standard deduction under the old scheme.
- However, now, standard deduction of INR 50000 can be availed under the new tax regime also.
B.For Co-operative Societies
- Concessional rate of tax
- Section 115BAE – earlier, 22% concessional rate could be opted for by all co-operative societies. Now, new manufacturing co-operative societies can opt for the concessional rate of 15%
- However, this benefit will only become available if the new manufacturing co-operative societies are set-up on or before 31stMarch 2024.
- Also, once opted for the concessional rate, the same cannot be withdrawn.
2.TDS on Cash Withdrawals
- Section 194N – 2% TDS would be deducted by banks if cash withdrawals by the recipients during a year exceeds INR 1 Crore. However, if the recipient is a co-operative society, then the limit is enhanced now to INR 3 Crores.
3.Cash Loan & its Repayment
- Sections 269SS and 269T – penalty shall be imposed if any person accepts from another person, any loan/deposit in cash for INR 20000 or more. Similarly, penalty shall be imposed if any person relay any person, any loan/deposit in case for INR 20000 or more.
- These limits have now been enhanced to INR 2 Lakhs if such loans are taken/repaid by Primary Agricultural Credit Societies from/to its members
C.For Businesses & Professions
- Limits for Presumptive Scheme
- Sections 44AD & 44ADA – presumptive taxation scheme can be opted by small taxpayers (44AD – for businesses & 44ADA – for professions) with the benefit of paying lower tax plus doing away with the need to maintain books of accounts and undergo a tax audit.
- The turnover limits for the above is fixed at INR 2 Crores for businesses and INR 50 Lakhs for professions.
- Now, these limits have been enhanced to INR 3 Crores and INR 75 Lakhs respectively
- The rider here is that these limits shall only be applicable if the total of cash receipts in a year for the business/profession should not exceed 5% of total turnover/professional receipts.
- In other words, if the total of cash receipts exceed 5%, then the old limits of presumptive scheme shall become applicable.
2.Payments to Micro & Small Enterprises
- Section 43B – certain payments listed under this Section shall be allowed as a deduction for tax computation only when the same is paid before the return filing due-date.
- However, in the case of payments pending for more than 45 days to Micro (turnover up to INR 1 Crore) and Small enterprises (turnover up to INR 10 Crores), then the same shall not be allowed for deduction even if paid before the return filing due-date.
D.For Charitable Organizations
- If one charitable organization donates to another charitable organization, then only 85% of such donations shall be considered as application of income for the donor charitable organization.
- Application out of corpus or loan shall be allowed as application for charitable or religious purposes only if the same is put back into the corpus or the loan is repaid within 5 years from the application.
- Form 9A (Form for application) and Form 10A (Form for registration) now needs to be filed within 2 months before the date of filing the tax return.
- Tax exemptions can be claimed by charitable and religious trusts only if the return of income is filed before the due-date
E.Other Significant Changes
1. Online Gaming
- Section 115BBJ – winnings from online gaming to be now taxed at flat 30% without any deductions.
- Also, tax to be deducted on such winnings at prescribed rates with effect from 1st July 2023.
2. SEZ Unit Exemption
- Section 10AA – additional conditions have been proposed in order to claim 100% business profit exemption for SEZ Units –
A) exemption can only be claimed if the return of income has been filed and;
B)the foreign realizations should come into India within 6 monthsfrom the end of the relevant year.
- Section 80-IAC – tax holiday for registered start-ups have now been increased by a year i.e. startups incorporated before 31st March 2024 can now claim 100% deduction from business profits.
- Earlier, it was up to 31st March 2023
- Section 56(2) (viib) – hereafter, even if a non-resident is issued shares by a private limited company wherein the issue price is more than fairmarket value, then the excess shall be taxed.
4. Overseas Tour
- Section 206C – earlier 5% was the tax to be collected by the receiver in the case of:
A) overseas tour packages without any limits
B) educational and health purposes if the amount paid/payable exceeded INR 7 Lakhs in a year.
- However, now, the rate has been increased to 20% in both the above cases.
5. Life Insurance
- Section 10(10D) – it is now proposed to tax the income from insurance policies having premium or the aggregate premium exceeding INR 5 Lakhs in a year. Such income is proposed to be exempt if received on the death of the insured person.
- While computing the taxable income, the premiums paid shall be allowed as a deduction if not claimed earlier.
6. Cap on Capital Gain Exemption on purchase of new residential
- Sections 54 & 54F – the existing provisions provide for exemption from long-term capital gains in the case of sale of a residential house (Section 54) and sale of a capital asset (Section 54F) and when the gains/proceeds are invested in another residential house property.
- Now, the maximum exemption of capital gains in both the above cases have been capped at INR 10 Crores.
- In other words, any amount in excess of INR 10 Crores would be
subject to Capital Gains tax.
Expensive or Cheap? – Indirect Tax Proposals
- Composition tax payers (small tax payers under GST) are permitted to make intra-state supplies of goods through e-commerce operators.
- ITC in respect of goods and services purchased for CSR activities have been blocked and cannot be availed now.
- Penalty now imposed for E-commerce operators in the case of any non-compliance of any provisions under the GST Law.
- Effective from 2nd February 2023, a National Calamity Contingent Duty has been increased on specified cigarettes, making it more expensive.
- Here are the changes in Basic Customs Duty (BCD) for certain items/industries: