DIRECT TAX
PROPOSALS – UNION
BUDGET 2023
© CA VAIBHAV GOEL
© CA VAIBHAV GOEL 1
Personal Tax Rates
For the new tax regime, it is proposed to increase the
income limit for tax rebate under section 87A from INR
5,00,000 to INR 7,00,000.
As a result, resident individuals having an annual
income of INR 7,00,000 or less in a financial year, are not
required to pay tax if not opted out of new tax regime
(as per section 115BAC(1A) of the Act).
Revised Tax Slabs for AY 2023-24
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Personal Tax Rates
To make the new tax regime a more lucrative option, the
benefit of standard deduction of INR 50,000 on salary
income has been extended.
For taxpayer earning pension income, the deduction of
one-third of such pension subject to maximum limit of
INR 15,000, has also been extended under the new tax
regime.
Sec 80CCH – Contribution to Agniveer Corpus Fund
Interest on Borrowed Capital for purchase or
construction of HP – if let out; (deemed let out?) (Sec
115BAC(2)(i) vs (iv); Sec 115BAC(2)(ii)(b) vs 71(3A)?)
New Scheme applicable to all individuals, HUF, AOP
(except Co-operative Society), BOI or AJP – [164 vs
115BAC?]
Option to opt out of new scheme – only once if PGBP
income; exception – if such person ceases to have PGBP
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income, option available before due date of ROI;
Personal Taxation – Interest under HP
Section 115BAC(2)(i) –
without any exemption or deduction under the provisions
of clause (5) or clause (13A) or prescribed under clause
(14) (other than those as may be prescribed for this
purpose) or clause (17) or clause (32), of section 10 or
section 10AA or clause (ii) or clause (iii) of section 16 or
clause (b) of section 24 [in respect of the property
referred to in sub-section (2) of section 23] or clause
(iia) of sub-section (1) of section 32 or section 32AD or
section 33AB or section 33ABA or sub-clause (ii) or sub-
clause (iia) or subclause (iii) of sub-section (1) or sub-
section (2AA) of section 35 or section 35AD or section
35CCC or under any of the provisions of Chapter VI-A
other than the provisions of sub-section (2) of section
80CCD or sub-section (2) of section 80CCH or section
80JJAA;
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Personal Taxation – Interest under HP
Section 115BAC(2)(ii) –
without set off of any loss,—
(a) ….
(b) under the head "Income from house property" with any
other head of income
Section 115BAC(2)(iv) –
without any exemption or deduction for allowances or
perquisite, by whatever name called, provided under
any other law for the time being in force. (Judges Act,
Land Acquisition Act etc?) – Notwithstanding …. this Act
Section 115BAC(3) –
The loss and depreciation referred to in clause (ii) of sub-
section (2) shall be deemed to have been given full
effect to and no further deduction for such loss or
depreciation shall be allowed for any subsequent year:
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Personal Taxation – Interest under HP
Section 48(ii) -
Provided that the cost of acquisition of the asset or the
cost of improvement thereto shall not include the
deductions claimed on the amount of interest under
clause (b) of section 24 or under the provisions of Chapter
VIA;
Cases Overruled - CIT v Sri Hariram Hotels (P) Ltd (2010)
325 ITR 136 (Hon’ble Karnataka High Court)
[ Whether Interest paid on house property for self-
occupation would be allowed as deduction u/s 48, if
assessee opts for new scheme? ]
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Personal Taxation – Leave Salary
Under the existing law, exemption of leave encashment
received on retirement of an employee (other than a
government employee) was capped up to a maximum of
INR 3,00,000. The Finance Minister proposed to amend
this limit to INR 25,00,000, allowing a much higher
exemption limit for leave encashment. The relevant
notification may be issued in due course after the Finance
Bill is passed.
Kamal Kumar Kalia v UOI (2020) 268 Taxman 398
(Delhi High Court)
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Personal Taxation – Insurance Policies
income from insurance policies (other than ULIP for which
provisions already exists) having premium or aggregate of
premium above Rs 5,00,000 in a year - Not exempt u/s
10(10D) for policies issued after 01.04.2023;
the sum so received as exceeds the aggregate of the
premium paid during the term of such life insurance
policy shall be chargeable to income-tax under the head
“Income from other sources”; (Section 56(2)(xiii) rws
2(24)(xviid))
If any amount of premium already claimed as deduction
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under any provision of Income Tax?
MSME
Section 43B(h) of the Income Tax Act, 1961 –
“(h) 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 Act, 2006,”;
Time Limit – 15 days or 45 days or agreed period or upto
due date of filing of ROI u/s 139(1)? Sum includes – GST?
‘Payable’ within but actually ‘paid’ beyond? Purposive
Interpretation to be followed - M/s Palam Gas Service vs
Commissioner of Income Tax [TS-170-SC-2017]
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Relief to Sugar Co-operatives from past
demand
- Section 155(19) -
- in the case of a sugar mill cooperative, where any
deduction in respect of any expenditure incurred for the
purchase of sugarcane has been claimed by an assessee
and such deduction has been disallowed wholly or partly
the Assessing Officer shall, on the basis of an application
made by such assessee in this regard, recompute the total
income of such assessee for such previous year. The
Assessing Officer shall allow such deduction to the extent
such expenditure is incurred at a price which is equal to
or less than the price fixed or approved by the Government
for that previous year. Also, the period of four years
specified in sub-section (7) of section 154 shall be
reckoned from the end of previous year commencing on
the 1st day of April, 2022.
-
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Presumptive Taxation
- Section 44AB
Existing Provisions New Provisions
Provided that this section Provided that this section
shall not apply to the shall not apply to a person,
person, who declares profits who declares profits and
and gains for the previous gains for the previous year
year in accordance with the in accordance with the
provisions of sub-section (1) provisions of sub-section (1)
of section 44AD and his of section 44AD or sub-
total sales, turnover or gross section (1) of section 44ADA
receipts, as the case may be,
in business does not exceed
two crore rupees in such
previous year
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Presumptive Taxation
under section 44AD of the Act, for eligible business,
where 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.
under section 44ADA of the Act, for professions
referred to in sub-section (1) of section 44AA of the Act,
where 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
12 seventy-five lakh rupees will apply.
Presumptive Taxation
Issues – Whether it is mandatory (if not willing to get the
accounts audited u/s 44AB(e)/(d)) to disclose profit in
terms of section 44AD and 44ADA even if profit
(exceeding maximum amount not chargeable to tax) is
less than prescribed minimum % and turnover is also
less than Rs 1 crores and Rs 50 lakhs respectively? and
benefit of presumptive taxation has not been availed in
any of the preceding years?
[UOI v A Sanyasi Rao (1996) 219 ITR 330 (SC)]
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Capital Gains
Section 45(5A) – Joint Land Development – Cash
includes cheque or draft or any other mode
Conversion of gold into EGR or vice-versa- not treated
as transfer;
Section 50AA – Market Linked Debentures – Short term
capital gains
Section 54/54F – Cost of new asset for this section
cannot exceed Rs 10 crores
Section 55 – Cost of all intangible assets/rights – NIL, if
self acquired
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Other Sources
Taxation of Online games – at 30% manner of
computation of income to be prescribed (Section
115BBJ); TDS @30% u/s 194BA on net winnings
without any threshold
Share Premium by NR – also covered u/s 56(2)(viib)
Gift exceeding Rs 50k received by RNOR taxable in India
Amendment to section 28(iv) – [Section 194R]
“(iv) the value of any benefit or perquisite arising from
business or the exercise of a profession, whether––
(a) convertible into money or not; or
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(b) in cash or in kind or partly in cash and partly in kind;
Taxation of Charitable Trust
Hon’ble Supreme Court- Ahmedabad Urban
Development Authority (SC) – commercial activity by
Statutory Boards/Trust/Commission (with only
nominal mark up) - Now exempted u/s 10(46A)
Donations to other trust – only 85% of the eligible
donation allowed as application
Form 9A/10 – to be filed by 31st August (earlier upto 31st
October)
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Taxation of Charitable Trust
Expln 4 to section 11(1)
Provided further that provisions of the first proviso shall
apply only if there was no violation of the conditions
specified––
(a) in clause (c) of this sub-section;
(b) in Explanations 2, 3 and 5 of this sub-section;
(c) in the Explanation to this section; and
(d) in clause (c) of sub-section (1) of section 13,
at the time the application was made from the corpus:
Provided also that the amount invested or deposited back
shall not be treated as application for charitable or
religious purposes under the first proviso unless such
investment or deposit is made within a period of five years
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from the end of the previous year in which such
application was made from the corpus:
Taxation of Charitable Trust
Expln 4 to section 11(1)
Provided also that nothing contained in the first proviso shall
apply where application from the corpus is made on or before
the 31st day of March, 2021
Similar provision for repayment out of loans and borrowing;
Disturbing Issue – making it mandatory to repay the loan
and/or borrowing within 5 years – does not match with the
intention;
Section 12A(1)(ba)
Return of Income to be filed within the time allowed u/s 139(1)
or 139(4)
Provisos to section 12A(2) – omitted as now registration is required
before commencement of activities, no roll back required; (wef
01.04.2013)
Effect of omission on existing proceedings.
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Taxation of Charitable Trust
“Section 12A(1)(ac)(vi) in any other case, where activities of
the trust or institution have ––
(A) not commenced, at least one month prior to the
commencement of the previous year relevant to the
assessment year from which the said registration is
sought;
(B) commenced and no income or part thereof of the
said trust or institution has been excluded from the
total income on account of applicability of sub-clause (iv)
or sub-clause (v) or sub-clause (vi) or sub-clause (via) of
clause (23C) of section 10, or section 11 or section 12,
for any previous year ending on or before the date of
such application, at any time after the commencement
of such activities,”
[For existing trusts who missed the deadline of 22.11.2022?]
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Taxation of Charitable Trust
Section 12AB
Item B clause (vi) to section 12A(1)(ac) – final registration;
Item A – provisional registration;
Section 12AB
Specified violation - “(g) the application referred to in clause (ac)
of subsection (1) of section 12A is not complete or it contains false or
incorrect information.”.
Section 115TD(3)(iii) - it fails to make an application in
accordance with the provisions of clause (i) or clause (ii) or
clause (iii) of the first proviso to clause (23C) of section 10 or
sub-clause (i) or sub-clause (ii) or sub-clause (iii) of clause
(ac) of sub-section (1) of section 12A, within the period
specified in the said clauses or sub-clauses, as the case
may be, which expires in the said previous year.”;
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Assessment
Inventory Valuation by CMA
Section 148 –
New time limit to furnish ROI - a period of three months
from the end of the month in which such notice is issued, or
such further period as may be allowed by the Assessing
Officer on the basis of an application made in this regard by
the assessee
Provided also that any return of income, required to be
furnished by an assessee under this section and furnished
beyond the period allowed shall not be deemed to be a
return under section 139;
Effect on issuance of notice u/s 143(2) for belated returns
filed in response to notice u/s 148.
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Assessment
Section 149 – Excluding 15 days time limit prescribed for
issuance of notice u/s 148 for search cases or information
emanates from a statement recorded or documents
impounded under section 131 or section 133A after 15th
March and notice deemed to be issued on 31st March.
If time period to pass order u/s 148A(d), after exclusion of
time, was 7 days, 7 days were not available to the AO. Now
with the word, “do not exceed 7 days” – further 7 days
available.
Section 151 - “Provided that the period of three years for
the purposes of clause (i) shall be computed after taking into
account the period of limitation as excluded by the third or
fourth or fifth provisos or extended by the sixth proviso to
sub-section (1) of section 149.”.
[JM Financial & Investment Conslutancy Services (P) Ltd v
22 ACIT (WPC 1050 of 2022 dated 04.04.2022) (Bombay)]
Assessment
Section 149 – Excluding 15 days time limit prescribed for
issuance of notice u/s 148 for search cases or information
emanates from a statement recorded or documents
impounded under section 131 or section 133A after 15th
March and notice deemed to be issued on 31st March.
If time period to pass order u/s 148A(d), after exclusion of
time, was 7 days, 7 days were not available to the AO. Now
with the word, “do not exceed 7 days” – further 7 days
available.
Section 151 - “Provided that the period of three years for
the purposes of clause (i) shall be computed after taking into
account the period of limitation as excluded by the third or
fourth or fifth provisos or extended by the sixth proviso to
sub-section (1) of section 149.”.
[JM Financial & Investment Consultancy Services (P) Ltd v
23 ACIT (WPC 1050 of 2022 dated 04.04.2022) (Bombay)]
Increase in Time Limits
Assessment u/s 143(3) rws 144B - 12 months from AY
2022-23 and subsequent AYs
12 months for updated return as well
Extension of 12 month for assessment or
reassessment pending as on the date of search – no
concept of abatement
Section 155(20) – Time limit of 2 years from the end of the
FY in which such TDS has been deducted
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Appeals
(a) an order being an intimation under sub-section (1) of section 143,
where the assessee objects to the making of adjustments, or any order of
assessment under sub-section (3) of section 143 or section 144, where
the assessee objects to the amount of income assessed, or to the amount
of tax determined, or to the amount of loss computed, or to the status
under which he is assessed;
(b) an order of assessment, reassessment or recomputation under section
147;
(c) an order being an intimation under subsection (1) of section 200A;
(d) an order under section 201;
(e) an order being an intimation under sub-section (6A) of section 206C;
(f) an order under sub-section (1) of section 206CB;
(g) an order imposing a penalty under Chapter XXI; and
(h) an order under section 154 or section 155 amending any of the orders
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mentioned in clauses (a) to (g):
