Income Tax Amendment in Finance bill 2023 easy summary – This article is summarized guide on amendments to Income Tax Act, 1961 as per latest Finance Bill 2023.
I Section 2 sub-section 24 “Income” definition has been broadened by including following income:-
By adding two separate subclauses the definition of Income has been broadened and following have become part of Income :
- Sum received by unit holder from business trust, which has not been taxed in hand of business trust. Exempt income as per section 10(23FC) & 10(23FCA) of business trust is excluded.
- sum received under life insurance policy, except those specifically excluded in section 10 .
II Section 9 sub-section 1 “Income deemed to accrue or arise in India” has been broadened by including following income:-
The following income shall be deemed to accrue or arise in India even in case of person who is not ordinarily resident in India (NOR) :
- From 1st April, 2023 if any money is transferred by a resident to NOR exceeding INR 50,000 same becomes taxable in Income from other sources.
- From 1st April, 2023 if any immovable property is transferred by a resident to NOR
- without consideration and DLC exceeds INR 50,000 same become taxable in Income from other sources or
- with consideration and DLC exceeds consideration by INR 50,000 or 10% of the consideration, whichever is higher same becomes taxable in Income from other sources.
III Section 10 clause 10D “Incomes not included in total income” has been
– narrowed by excluding following income from this section and thus making it taxable for assessee
- Sum received under life insurance policy will no longer will be exempt for those policies the amount of premium exceeds INR 5,00,000. In case of multiple policies, the combined premium exceeds INR 5,00,000. However, sum received in event of death is still exempt.
- Income of news agency set up in India solely for collection and distribution of news from FY 2023-24 & subsequent years
- any income of the North-Eastern Development Finance Corporation Limited becomes taxable for FY 2023-24 i.e. AY 2024-25 and subsequent years
- any income of the Credit Guarantee Fund Trust for Small Industries, being a trust created by the Government of India and the Small Industries Development Bank of India established under sub-section (1) of section 3 of the Small Industries Development Bank of India Act, 1989 (39 of 1989).
– broadened by including following income in this section and thus making it exempt for assessee
- any payment from the Agniveer Corpus Fund to a person enrolled under the Agnipath Scheme, or to his nominee.
- and income of body/authority notified by CG providing housing accommodation or planning, development or improvement of villages or regulating, developing any activity to benefit general public
– procedural update in exemption
Exemptions to the fund or trust or institution or university or other educational institution or hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), under the respective sub-clauses, shall be available if they make an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for grant of approval and get it approved.
Time limit to apply for exemption is
(i) Already registered fund or trust or institution or university or other educational institution or hospital or other medical institution within 3 months beginning from April 1, 2021.
(ii) Already registered fund or trust or institution or university or other educational institution or hospital or other medical institution at least 6 months prior to such expiry
(iii) Provisionally registered fund or trust or institution or university or other educational institution or hospital or other medical institution at least 6 months prior to such expiry.
(iv) in any other case, where activities of the fund or trust or institution or university or other educational institution or hospital or other medical institution have–
- (A) not commenced, at least one month prior to the commencement of the previous year which the said approval is sought
- (B) commenced and no income or part thereof of the said fund or trust or institution or university or other educational institution or hospital or other medical 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) 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.
IV Section 28 clause (iv) “Profits and gains of business or profession” has been substituted
After imposing TDS on benefits or perquisites arising out or business or profession under section 194R, the income from such benefits or perquisites will be taxable under the head Profits & Gains of business or profession.
For detailed article on TDS U/S 194 R refer >> https://www.taxledgeradvisor.com/deduction-of-tax-on-benefit-or-perquisite/
V Section 35D sub-section (2) clause (a) “Amortization of certain preliminary expenses” proviso updated
A prescribed form within prescribed time has to be filed by businesses to claim amortization of certain preliminary expenses U/S 35D.
List of expenditure are :
- Preparation of feasibility and project reports.
- Market survey & other survey for business
- Engineering services
VI Section 43B “Certain deductions to be only on actual payment” new clause (h) inserted
Biggest benefit given to MSME wherein, an expenditure to business will be allowed only on actual payment basis to MSME’s as per new clause inserted in section 43B. The payment to MSMEs has to be made on or before 31st March and in the case even if payment is made up to return filing date but after year end will not be allowed in that previous year and such expenditure will be allowed in the year in which payment is made.
VII Section 44AB “Audit of accounts of certain persons carrying on business or profession” proviso updated
Tax Audit requirements for business & professions have been harmonized and proviso is updated in tax audit section 44AB wherein a person is not required to carry tax audit if profits have been declared as per Section 44AD(1) (for business) or as per section 44ADA(1) (for profession).
VIII Section 44AD “Special provision for computing profits and gains of business on presumptive basis” proviso updated
Government in continuance of promoting non cash transactions have updated a limit from 2 crores to 3 crores. From FY 2023-24, if cash receipts & payments does not exceed 5% of total cash receipts & payments the assessee can opt for 44AD if turnover does not exceed 3 crores.
IX Section 44ADA “Audit of accounts of certain persons carrying on business or profession” proviso updated
Government in continuance of promoting non cash transactions have updated a limit from 50 lakhs to 75 lakhs. From FY 2023-24, if cash receipts does not exceed 5% of total receipts the assessee can opt for 44ADA if turnover does not exceed 75 lakhs.
X Section 45 “Capital gains” sub-sec (5) updated
The government in has clarified that consideration received in any mode whether in cash or cheque or draft will be added in full value of consideration in order to calculate capital gain.
XI Section 48 “Mode of Computation CG” proviso inserted
A very crucial amendment because of which assessee won’t be able to take double benefit of HL interest. After this amendment the HL deduction benefit if taken in clause 24(b) or in 80 C Chapter VIA deductions, then same will be excluded from Cost of Acquisition or cost of improvement while computing CG.
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This was first part of Income tax amendment in Finance bill 2023, second part will be coming soon.
The article references are : https://www.indiabudget.gov.in/doc/Finance_Bill.pdf
https://incometaxindia.gov.in/pages/default.aspx
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