Amendments between Finance Bill and Finance Act 2023

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• April 14, 2023

The Lok Sabha has passed the Finance Bill 2023 with over 60 amendments by making changes to the bill which was initially introduced in the Lok Sabha on February 01, 2023. These amendments include changes related to capital gains, TDS/TCS, Securities Transaction Tax (STT), GST Appellate Tribunal, etc.

Let’s have a look at the important amendments made in Lok Sabha to the Finance Bill 2023:

1. Establishment of GST Appellate Tribunals across the country
   In the absence of GST Appellate Tribunals, taxpayers have often been invoking writ jurisdiction to seek relief from High Courts.The Finance Bill has made it possible for setting up GST Appellate Tribunals across the country. Resulting, in establishment of a principal bench in New Delhi and several State benches. Former Supreme Court judge or a retired Chief Justice of a High Court will head the the Tribunal

2. Increase in TDS on royalties and technical services fee to Non Resident
   Indian subsidiaries remit significant sums as royalty or FTS to their overseas parent or affiliate entity for use of the global brand or under licensing agreement for technical knowhow. Even Indian companies make such payment to non-affiliate parties when they procure license right.The rate of withholding tax has increased from 10% to 20% on royalties and fee for technical services paid to non-residents. Due to increase in tax rate it s may increase the cost of import of technology in cases where Indian companies are grossing up withholding taxes and where any bilateral tax treaty benefits are not available.When such payment is made, tax is required to be withheld @20%.

3. Tax on debt mutual funds
   Income from debt mutual funds, Where upto 35% is invested equity shares of domestic companies will be taxable at applicable rate since income from equities in such funds do not constitute interest income.The capital gains arising from debt oriented mutual fund schemes will be treated as short-term capital gain, irrespective of the period of holding. Investors in such schemes will have to pay tax in line with their income slab beginning April 1.

4. Increase in Security Transaction Tax
   Proposed increase in STT will raise the revenues of the Government to a some extent. The main objective behind is to discourage the excessive trade in F&O segment where a number of retail traders lose their hard earn money due to excessive trade as per a recent SEBI study.STT on options is proposed to be increased to 0.0625% from 0.05% and on futures contracts to 0.0125% from 0.01%.

A. Let’s see some of the Key highlights of Budget 2023:

Standard deduction for Salary income is ₹50,000 which is allowed which is same in under the new tax regime as well as old tax regime. Under the new tax regime, ₹7.5 lakhs is tax-free income. Family pension, standard deduction on such pension is ₹15,000 or 1/3rd of pension, whichever is lower.

Highest surcharge is reduced to 25% from 37% under the new tax regime for people earning more than ₹5 crore. This reduction will brings down the tax rate from 42.74% to 39%. 

Revised Limit of Presumptive Taxation for Financial Year 2023-24: For Sec 44AD small businesses revised limit is ₹3 crores which was previously ₹2 crores. For Sec 44ADA professionals like doctors, lawyers, engineers, etc revised limit is ₹75 lakhs which was previously ₹50 lakhs. 

Start-ups: Business which has incorporated before 31.03.2024 can set-off and carry forward losses for 10 years from the date of incorporation which was previously 7 years in the previous year.

B. TDS Amendments:

Section 194BA: Withholding tax provisions is introduced on income from online gaming. The payer needs to deduct tax at the rate of 30% on the ‘net winnings’ in the user account at the end of the financial year or at the time of withdrawal by the user.

Section 196A: Benefit of tax treaty rate is now applicable to specified income earned by non-residents. For income earned from units of mutual funds by non-residents in India, tax is required to be deducted at the rate of 20%.

Section 192A: In case of premature withdrawal of EPF, if the employees is unable to furnish PAN. The accumulated balance of provident fund due to him will be deducted at the rate of 20% which was previously marginal rate, i.e. 34.608%.

Section 193: Tax to be deducted on interest on specified securities like interest payable on listed securities in dematerialized form which was previously excluded from the ambit of this Section.

Section 194B and 194BB: Clarification on threshold limit for winning income from lottery, crossword puzzle and horse racing. The existing threshold limit of INR 10,000 for tax deduction on such income. Currently, by splitting the winning income into multiple transactions below INR 10,000, the payers could circumvent the requirement to withhold tax. The proposed amendment seeks to curb the existing loophole of the sections.

Section 194N: Enhanced limit for co-operative society. In case of cash withdrawals by a co-operative society, the threshold is now INR 3 crores which was previously INR 1 crore, for deduction of taxes.

C. TCS Amendments:

Section 206C(1G): Increase in rate of TCS on specified remittances made outside India. Tax to be collected at an enhanced rate of 20% which was previously 5% in case of all the remittances under Liberalised Remittance Scheme (LRS) and overseas tour package.

Section 206AB & 206CCA: Exclusion of specified category from non-filers of tax return. There are certain persons who are not obliged to file tax return in India i.e. non-resident with no PAN and persons notified by the government. It is proposed to exclude such persons from the ambit of this Section and provide relief from higher TDS/TCS rate.

Written by – Kashish Sardana 

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