Hon’ble Finance Minister of India introduced Finance Budget 2023 yesterday, before the elected house of members in the parliament. The Budget is aimed at providing foundation for India@100. The proposed tax changes in the budget have been kept minimalistic and impetus is more on growth and inclusiveness of masses.
On the direct tax part, the proposals are aimed at maintaining continuity and stability of taxation along with further simplification and rationalisation of various provisions to reduce the compliance burden. Similarly on indirect taxes, it’s a mix of increase or decrease in customs duty rate with some legislative changes alongside.
With this background, we hope that you will find our synopsis of the Finance Budget proposal useful and insightful.
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This was the last full budget of the current Government before India goes in general election next year, therefore, it was an opportunity and at the same time an uphill task for the Government to continue focus on growth and stability considering the geopolitical uncertainties and economic slowdown among major
economies of the world.
This year’s budget termed as the first budget in “Amrit Kaal” reinstating India’s growth journey towards
100 years of independence. The major opportunities or the key drivers to help India achieve the “Amrit
Kaal” have been identified as ‘Saptarishi’
From tax perspective, the expectations were quite high on both direct tax and indirect tax front, however,
while the budget failed to meet the said expectations, but with focus on infrastructure and rationalizing tax provisions, it can be considered more than a neutral budget. The proposed tax changes in the budget have been kept minimalistic and impetus of focus is more in growth and inclusiveness of masses.
On the direct tax part, the proposals are aimed at maintaining continuity and stability of taxation along with further simplification and rationalization of various provisions to reduce the compliance burden.
Similarly on changes in indirect taxes was primarily focused on promoting exports, boosting domestic
manufacturing, enhancing the domestic value addition, and encouraging green energy. However, despite,
industry’s expectation, neither any update was provided on DESH scheme and GST Tribunals nor amnesty
scheme under GST or customs.
With India poised to be the fastest-growing major economy at 6.5-7.0 per cent in FY23, these optimistic
growth forecasts stem in part from the resilience of the Indian economy seen in the rebound of private
consumption seamlessly replacing the export stimuli as the leading driver of growth.
Index
Economic Survey
Economic Survey estimates 6.0 to 6.8% GDP growth in 2023-24
Capex growth driver of Indian economy in 2022-23
India sixth largest foreign exchange reserves holder in the world
Economic Survey 2022-23 highlights need to monitor current account deficit
Credit offtake increased in 2022-23
Other Key Highlights
Direct Tax
Tax Rates
No changes prescribed in tax rate and slab limit of individual and HUF in old tax regime. Updated slab rate under new tax regime.
| Total Income (₹) | Rates |
| Up to 3,00,000 | Nil |
| 3,00,001 to 6,00,000 | 5% |
| 6,00,001 to 9,00,000 | 10% |
| 9,00,001 to 12,00,000 | 15% |
| 12,00,001 to 15,00,000 | 20% |
| Above ₹15,00,000/- | 30% |
Further, tax relief under section 87A is revised from ₹5,00,000/- to ₹7,00,000/-
Highest rate of surcharge applicable on taxes under new tax regime has been capped at 25% from earlier rate of 37%.
The beneficial rate of tax in case company engaged in manufacturing activities has now been extended to newly incorporated manufacturing co-operative societies.
Thus, such Co-Operative societies eligible for lower rate of 15%.
No change in tax rates for other taxpayers
There are no changes proposed in the tax rate for Firm, Companies, LLP, AOP.
Provisions applicable to Non-Residents The taxability of consideration received over and above the fair market value of shares issued in the hands of closely held companies has been extended to shares issued to non-residents.
This amendment is ef ective from April 1, 2024 and will accordingly apply in relation to AY 2024- 25 onwards.
Section 56(2)(viib)
Relief from higher rates of TDS/TCS
The persons not liable to furnish the returns of income are to be excluded from the category of non-filer of returns and accordingly not to be subjected to higher rates of TDS/TCS.
This amendment is ef ective from April 1, 2023.
Section 206AB and 206CCA
No restriction on interest deductibility to NBFCs
For calculating thin capitalization disallowance which limit the interest deductibility on foreign debts to 30% of EBITDA, specific exclusion has been given to NBFCs engaged in the business of financing.
This amendment is ef ective from April 1, 2024 and will accordingly apply in relation to AY 2024- 25 onwards. Relevant notification will be issued in due course.
Section 94B
Relief from blockage of funds from higher tax withholding in case of Income from units of Mutual Funds
Double Taxation Treaty benefits were not available while calculating rate of withholding tax in case of income arising from units of mutual funds. Such anomaly has now been resolved by providing such treaty benefits to calculate applicable rate of withholding tax.
This amendment is ef ective from April 1, 2023.
Section 196A
Rationalization of TDS rates from accumulated balance of EPF in case of non-furnishing of PAN
Tax withholding from payment of accumulated balance of EPF when no PAN is furnished by the
employee is limited to 20% instead of the earlier provisions which provide for withholding of tax at
maximum marginal rate.
This amendment is ef ective from April 1, 2023.
Section 192A
Establishing a mechanism for claiming TDS credit in respect of income already offered to tax in prior years
Time limit of two years, from the end of financial year where TDS is deducted, has been provided
for claiming TDS credit for which corresponding income has already been offered to tax. Such TDS
can be claimed by way of filing of application for rectification.
Interest on refund arising out such rectification shall be granted for the period from the date of the
application to the date of grant of refund.
This amendment is ef ective from October 1, 2023.
Section 155 and 244A
Set off and withholding of Refunds
The provisions of Set off and withholding of refunds have been merged together to avoid the
overlap of both the provisions.
The refund which has been withheld due to pending assessment or re-assessment shall not be
eligible for additional interest for the period starting from the date of withholding to the date of
such adjustment.
This amendment is ef ective from April 1, 2023.
Section 245
Allowance on actual payment basis to Micro and Small Enterprises
A new insertion has been proposed to be made wherein any sum payable to a Micro and Small Enterprise beyond the time limit as per the MSMED Act i.e., 45 days in case of a written agreement or 15 days in other scenarios will be allowed as a deduction only on actual payment basis.
Further, no deduction shall be allowed for that financial year even when the payment is made on or before due date of filing of return.
This amendment is ef ective from April 1, 2024 and will accordingly apply in relation to AY 2024- 25 onwards.
Section 43B
Tax Incentives to units in International Financial Services Centre (IFSC)
The relocation by the transfer of capital assets in an original fund to a resultant fund will not be
regarded as a transfer wherein such relocation is made on or before March 31, 2025 (earlier March
31, 2023) This amendment is ef ective from April 1, 2023 and will accordingly apply in relation to AY 2023-
24 onwards.
Section 47(viiad)
Income distributed on the offshore derivative instrument entered into with an offshore banking unit of an IFSC will be exempt in the hands of non-residents.
This amendment is ef ective from April 1, 2024 and will accordingly apply in relation to AY 2024-25 onwards.
Section 10(4E)
Taxation of capital gains in case of Market Linked Debentures
A new section has been proposed to be added, wherein the transfer, redemption and maturity of Market Linked Debentures will be taxed as shortterm capital gains irrespective of the period of holding.
Market Linked Debentures will include securities which have an underlying principle component in the form of debt securities and returns are linked to market returns or other underlying securities.
This amendment is ef ective from April 1, 2024 and will accordingly apply in relation to AY 2024- 25 onwards.
Section 50AA
Reduction in time period for furnishing of TP Study and other related documents
The time period for furnishing the information or document as required by the Assessing Officer during the TP Audit has been reduced from 30 days to 10 days.
This amendment is ef ective from April 1, 2023
Section 92D(3)
Penalty and prosecutions provisions applicable in case of Section 194R, 194S and 194BA
Penalty and prosecution provisions applicable in case of failure to deduct or pay TDS will be also applicable on the person responsible who fails to ensure that tax has been paid before releasing of benefit or perquisite (Section 194R), consideration (Section 194S) or net winnings (Section 194BA)
This amendment is ef ective from April 1, 2023 in case of Section 194R & 194S and is ef ective from July 1, 2023 in case of Section 194BA
Section 271C & Section 276B
Taxability on benefits or perquisites in cash
Benefits or perquisites will also include those received in cash and will be taxable under the head income from “Profit and Gains of business or profession”.
Similar inclusion has also been made under Section 194R for the purpose of applicability of withholding tax provisions.
Amendment of Section 194R is ef ective from April 1, 2023.
Section 28(iv) and 194R
Availability of Lower Deduction Certificate
