VA_Presentation-on-Direct-tax-Provisions.pdf

Ppt

1. ANALYSIS OF
FINANCE BILL, 2023
1

2. DIRECT TAXATION
2

3. SEQUENCE OF TOPICS
3
S. No. Topics Slide Nos.
1 RATESOF INCOME-TAX 4-14
2 PERSONAL TAXATION 15-18
3 TAXATION OF INCOME OF NON- RESIDENTS/ NOT ORDINARILY RESIDENTS 19-27
4 TAXATION OF START-UPS 28-32
5 TAXATION OF NEW MANUFACTURING CO- OPERATIVE SOCIETY 33-38
6 ANGEL TAX 39-47
7 TAXATIONOF BUSINESS TRUST REIT 48-52
8 TAXATION OF CHARITABLE TRUSTS AND INSTITUTIONS 53-71
9 TAXATION OF BUSINESS PROFITS 72-104
10 CAPITAL GAINS 105-113
11 BUSINESS REORGANIZATION 114-118
12 TAXDEDUCTION/ COLLECTION AT SOURCE 119-155
13 APPEALSANDSEARCH&SEIZURE 156-173
14 COMPLIANCES & TAX ADMINISTRATION –ASSESSMENT, REASSESSMENT & REFUNDS 174-194
14 MISCELLANEOUS AMENDMENTS 195-219
15 TRANSFERPRICING 220-225

4. 4
RATES OF INCOME-TAX

5. 5
Rates of Income-tax
[Clause 2]
Re:Assessmentyear2023-24
Nochangeintaxrates(normalorspecial),surchargeoreducationcess,foranyassessee
Re:Assessmentyear2024-25
Individuals/HUF/AOP/BOI:Nochangeproposedintaxrate,surchargeoreducationcess
undertheoldregime-Changeinnewregimepersection115BAC
Otherassesseeincludingcompanies:Nochangeproposedintaxrate,surchargeoreducation
cess
Co-operativesocieties: Changesundertheproposedsection115BAE

6. 6
Section 115BAC -New Regime
[Clause 50] (w.e.f. 01.04.2024)
Section115BACwasintroducedvideFinanceAct,2020(w.e.f1.4.2021) toprovideanoption
toindividuals/HUFtopaytaxatconcessionalrates(asperslab)subjecttoconditionsinsub-
section(2)thereof.Sameslab-rateirrespectiveofage
Sub-section(2)providesfordenialforvariousdeductions/disallowancesincludingdeduction
underChapterVI-A[exceptu/s80CCD(2)and80JJA],HRA[s.10(13A)],LTC[s.10(5A)],
standarddeductionforsalaries[s.16],s.10AA,interestinrespectofself-occupiedorvacant
houseproperty[s.24(b)],etc
Itwasprovidedthatconcessionalregimeshallnotapplyunlessoptionisexercisedintheform
andmannerasprescribed
Theaforesaidnewregimeoftaxationofindividuals/HUFisproposedtoamendedasunder:

7. 7
Section 115BAC -New Regime
[Clause 50] (w.e.f. 01.04.2024)
Section115BACisproposedtobemadedefaulttaxregime
ApplicationisproposedtobeextendedtoAOP(otherthanco-operativesociety),BOI,andartificialjuridical
persons
Theslabratesu/s115BACareproposedtobeamendedw.e.f1.4.2024[newsub-section(1A)inserted]:
Old regime (Age<60 years) New Regime (115BAC) (AY 2023- 24) New Regime (115BAC) (AY 2024- 25)
Income (in Rs.) Rate Income (in Rs.) Rate Income (in Rs.) Rate
Upto2,50,000 Nil Upto2,50,000 NilUpto3,00,000 Nil
From 2,50,001 to 5,00,0005% From 2,50,001 to 5,00,000 5% From 3,00,001 to 6,00,000 5%
From 5,00,001 to 10,00,00020% From 5,00,001 to 7,50,000 10% From 6,00,001 to 9,00,000 10%
Above 10,00,000 30% From 7,50,001 to 10,00,000 15% From 9,00,001 to 12,00,00015%
Note:Alldeductions/exemptions
availableascomparedtonewregime
undersection115BACwhereinvarious
deductionsaredeniedaspersub-section
(2)thereof
From 10,00,001 to 12,50,000 20% From 12,00,001 to 15,00,00020%
From 12,50,001 to 15,00,000 25% Above15,00,001 30%
Above 15,00,000 30%
Note:Educationcess@4%shallapplyinallcases.Surchargeasprescribedalsoadditionallyapplicable.

8. 8
Section 115BAC -New Regime
[Clause 50] (w.e.f. 01.04.2024)
Newregimeapplicableunlessoptiontooptforoldtaxregimeexercised[sub-section(6)]in
prescribedformandmanner:
Particulars Conditions
Personhaving
businessincome
•Tooptonorbeforetheduedateundersection139(1)
•OptiontobeexercisedforAY2024-25andonwards
•Optiononceexercisedshallapplytosubsequentassessment
years
•Optiontooptbackfornewlowertaxregimeavailableonly
once
Person not
having any
businessincome
•Tooptonorbeforetheduedateundersection139(1)
•Optiontochoose/optforold/newregimeavailableevery
year

9. 9
Section 115BAC -New Regime
[Clause 50] (w.e.f. 01.04.2024)
TheexistingrateofsurchargeforindividualshavingincomeexceedingRs.5crorehasbeen
restrictedtomaximumof25%(asagainst37%stillapplicableunderoldregime)
Thus,highesteffectiveslabrateforindividualsfallinginthehighestslabofincomehas
beenreducedfrom42.744% to39%
Followingdeductionswhichwereearliernotallowedareproposedtobeallowedwhile
computingtaxableincomeundersection115BAC:
standarddeductionavailableunderclause(ia)ofsection16;
deductioninrespectofincomeinthenatureoffamilyplanningunderclause(iia)of
section57;and
educationforamountdepositedinAgniveerCorpusFundaspersection80CCH(2)

10. 10
Rebate under section 87A
[Clause 43] (w.e.f. 01.04.2024)
Undertheexistingprovisions,rebateofhundredpercentoftaxliabilityorRs.12,500
whicheverislower,isprovidedtoallindividualshavingincomenotexceedingRs.5lacs
ItisproposedtoincreasetheincomethresholdeligibleforrebatefromRs.5lacstoRs.7lacs
forindividualsnotoptingfortaxationinoldregime,i.e.,individualstaxedundernewregime
undersection115BAC. Thus,rebateisproposedtobeincreasedtomaximumofRs.25,000

11. 11
Section 115BAC –New Regime
Comments/Observations
Proposedamendmentsseemtohavebeenintroducedtoluretaxpayerstooptfortaxation
underthenewregime
ByincreasingthethresholdofincomeeffectivelynotchargeabletotaxtoRs.7lacs,
allowingstandarddeductionundersection16(ia)andloweringthehighestsurchargerate,an
attemptismadetobringtaxliabilityundernewregimeatparorlowerthanthetaxliability
calculatedunderoldregimeafterconsideringdeductionunderChapterVI-Aunderordinary
circumstances
Proposaltomakenewregimeasthedefaulttaxregimebuttresstheintenttopromote
simplifiedtaxationforindividualsandreducethedisputesarisingfromclaimof
deduction(s)

12. 12
New regime or old regime –which is beneficial?
Example1
Particulars Old Regime New regime
GrossTotal Income 7,00,000 7,00,000
Less: Deduction under Chapter
VI-A
-Section 80C 1,50,000
Total Income 5,50,000 7,00,000
Tax on above 22,500 25,000
Less: Rebate under section 87A (12,500) (25,000)
Tax Liability 10,000 0

13. 13
New regime or old regime –which is beneficial?
Example 2:Individual claims HRA of Rs.3,60,000
Particulars
(With HRA) (WithoutHRA)
Old regime New Regime Old Regime New regime
Income from salary 20,00,000 20,00,000 20,00,000 20,00,000
Less: HRA 3,60,000 -- -- --
Less: LTA 10,000 -- 10,000 --
Less: Standard deduction [sec 16(1a)] 50,000 50,000 50,000 50,000
Taxable salaryincome 15,80,000 19,50,000 19,40,000 19,50,000
Incomefrom savings bank interest 25,000 25,000 25,000 25,000
Taxable Income 16,05,000 19,75,000 19,65,000 19,75,000
Less: Deduction under Chapter VI-A
-Section 80C 1,50,000 -- 1,50,000 --
-Section 80D 50,000 -- 50,000 --
-Section 80TTB 10,000 -- 10,000 --
Gross Total Income 13,95,000 19,75,000 17,55,000 19,75,000
Tax on above (plus cess @ 4%) 2,40,240 3,04,200 3,52,560 3,04,200

14. 14
New regime or old regime –which is beneficial?
Example 3:Salary income is more than Rs.5 crores
Particulars
(With HRA) (WithoutHRA)
Old regime New Regime Old Regime New regime
Income from salary 10,00,00,000 10,00,00,000 10,00,00,000 10,00,00,000
Less: HRA 1,50,00,000 -- -- --
Less: Standard deduction [sec 16(1a)]50,000 50,000 50,000 50,000
Taxable salaryincome 8,49,50,000 9,99,50,000 9,99,50,000 9,99,50,000
Incomefrom savings bank interest 5,00,000 5,00,000 5,00,000 5,00,000
Taxable Income 8,54,50,000 10,04,50,000 10,04,50,000 10,04,50,000
Less: Deduction under Chapter VI-A
-Section 80C 1,50,000 -- 1,50,000 --
-Section 80D 50,000 -- 50,000 --
-Section 80TTB 10,000 -- 10,000 --
Gross Total Income 8,52,40,000 10,04,50,000 10,02,40,000 10,04,50,000
Tax on above (surcharge+cess) 3,61,67,835 3,87,85,500 4,25,79,435 3,87,85,500

15. 15
PERSONAL TAXATION

16. 16
Valuation of residential accommodation provided to employees
[Clause 10] (w.e.f. 01.04.2024)
Asperexistingprovisionsofsection17(2),perquisite,inter-alia,includesvalueofrent-free
accommodationorvalueofanyconcessioninrentprovidedtoemployeesbytheemployer
Whilevalueofrent-freeaccommodationiscomputedasperthemethodprescribedinRule3,
thevalueofanyconcessioninrentisprescribedunderExplanation1to4tosection17(2)
Tomakethemethodforcomputingthevalueofthetwocategoriesuniform,theexisting
method(s)ofcomputationasprovidedinRule3/Explanation1to4tosection17(2)(ii)are
proposedtobeamendedandanewcomputationmechanismistobeprescribedintheRules
Further,Explanation1toamendedsection17(2)(ii)isproposedtobeamendedtoprovide
thattheaccommodationisdeemedtobeprovidedatconcessionalrateifvalueof
accommodationcomputedasperprescribedrulesexceedstherentrecoverablefrom,or
payablebytheassesseeemployee

17. 17
Rationalization of exempt income under life insurance policy
[Clauses 3, 5 and 32] (w.e.f. 01.04.2024)
Undertheexistingprovisionsofsection10(10D),sumsreceivedunderalifeinsurancepolicy
inrespectofanyUnitLinkedInsurancePolicy(ULIP)issuedonorafter01.02.2021, where
theamountofpremium/aggregatepremiumpayableduringthetermofsuchpolicy(ies)
exceedsRs.2.5lakhsarenotliableforexemptioni.e.,aretaxable
WiththeintentdenyexemptionbenefittoHNIs,section10(10D)isproposedtobeamended
toprovidethatanysumreceivedinrespectofpolicy(ies)(otherthanULIP)issuedonorafter
01.04.2023, wheretheamountofpremium/aggregatepremiumpayableduringthetermof
oneormoreofsuchpolicy(ies)exceedsRs.5lakhshallnotbeexempt
Amount/sumreceivedondeathofapersoncontinuestobeexemptregardlessofthe
premiumpaid/payable

18. 18
Rationalization of exempt income under life insurance policy
[Clauses 3, 5 and 32] (w.e.f. 01.04.2024)
Correspondingly,anewclause(xiii)isproposedtobeintroducedtosection56(2)(x)for
taxationofsumreceivedinexcessoftheaggregatepremiumpaidduringthetermof
policy(ies)whicharenotcoveredundersection10(10D)
Deductionforpremiumpaidonsuchpolicy(ies)wouldbeallowedfromthesumreceived,if
notclaimedunderanyothersection

19. 19
TAXATION OF INCOME OF
NON-RESIDENTS/ NOT
ORDINARILY RESIDENTS

20. 20
Deemed accrual of gift made to Not Ordinarily Resident (RNOR)
[Clause 4] (w.e.f. 01.04.2024)
Section5,interalia,specifiesthatthe‘TotalIncome’ofaresidentshallincludethefollowing:
oIncomereceivedordeemedtobereceivedinIndia,byoronbehalfoftheresident
oIncomeaccruingorarisingordeemedtobeaccruingorarisingtotheresidentinIndia
oIncomethataccruesorarisestohimoutsideIndia
InthecaseofapersonnotordinarilyresidentinIndia(RNOR)incomewhichaccruesor
arisestohimoutsideIndiashallnotbesoincludedunlessitisderivedfromabusiness
controlledinoraprofessionsetupinIndia

21. 21
[Clause 4] (w.e.f. 01.04.2024)
Section9,interalia,specifiesthatfollowingincomesshallbedeemedtoaccrueorarisein
India:
oallincomeaccruingorarising,whetherdirectlyorindirectly,throughorfromanybusiness
connectioninIndia,or
othroughorfromanypropertyinIndia,or
othroughorfromanyassetorsourceofincomeinIndia,or
othroughthetransferofacapitalassetsituatedinIndia
Section56(2)(x),interalia,providesthatwhereapersonreceivesRs.50,000or
morewithoutconsideration,thensuchamountshallbetaxableasincomefromothersources
Deemed accrual of gift made to Not Ordinarily Resident (RNOR)

22. 22
[Clause 4] (w.e.f. 01.04.2024)
Section9(1)(viii)providesthatanysumofmoneyreferredtoinsection56(2)(x)receivedby
anon-residentwithoutconsiderationfromapersonresidentinIndia,onorafter05.07.2019,
shallbeincomedeemedtoaccrueorariseinIndia
MoneygiftedbyapersonresidentinIndiatoaRNORatpresentareexemptfromtaxinIndia
inthehandsoftheRNORrecipientconsideringthoseprovisionsassection5readwith
section9(1)(viii)areappliedonlytonon-residentrecipientofgiftandarenotapplicable
toRNOR
Deemed accrual of gift made to Not Ordinarily Resident (RNOR)

23. 23
[Clause 4] (w.e.f. 01.04.2024)
ToensurethatgiftsmadetoRNORaresubjecttotaxinIndiainthehandsofsuch
recipient,FinanceBill,2023hasnowproposedtosubstituteclausesection9(1)(viii)to
providethatincomearisingoutsideIndia,beinganysumofmoneypaidbyaresidentin
India:
oonorafterthe05.07.2019 toanon-resident;or
oonorafter01.04.2023 toapersonnotordinarilyresidentinIndia,withinthemeaning
ofclause(6)ofsection6;
shallbedeemedtoaccrueorariseinIndia
Deemed accrual of gift made to Not Ordinarily Resident (RNOR)

24. 24
[Clause 4] (w.e.f. 01.04.2024)
Theproposedamendmentappearstobewideandallpervasiveandmayincludeallkindsof
transfermadeinrespectof:
omoneyremittedbyapersonresidentinIndiatoaRNORinaccordancewiththe
LiberalizedRemittanceScheme
oAnysumofmoneygiftedbyanIndianresidentfromhisforeignbankaccountwhile
travellingabroadtoaRNORwouldbecaughtwithinthesweepoftheproposedamendment
IftheRNORqualifiesasataxresidentofanothercountrybyapplyingArticle4oftheTax
Treatythenwhether,giftmadebyresidentstopersonsoutsideIndiadoesnotpartake
characterof“income”fortaxationunderaTaxTreaty?
Deemed accrual of gift made to Not Ordinarily Resident (RNOR)

25. 25
[Clause 4] (w.e.f. 01.04.2024)
Whetherapplicabilityoftheproposedamendmenttosection9(1)inasituationwhereTreaty
kicksinorwouldfail?
Shouldtheterm“income”havingnotbeendefinedundertheTreaty,havethesamemeaning
asundersection2(24),inviewofArticle3(2)oftheTaxTreatywhichprovidesthatany
termnotdefinedthereinshallhavethemeaningwhichithasunderthelawsofthatState?
IntermsofArticle3(2)oftheTreaty,theterm“income”asdefinedundersection2(24)may
beconsideredforthepurposesoftheTreaty
Deemed accrual of gift made to Not Ordinarily Resident (RNOR)

26. 26
[Clause 4] (w.e.f. 01.04.2024)
Insuchacase,giftofmoneypaid,oranypropertysituateinIndiamadebyresidentsto
personsoutsideIndiawouldbeliabletotaxinaccordancewithArticles21/22oftheTreaty
dealingwithtaxabilityofotherincome/incomenotexpresslydealtinArticle6toArticle21
oftheTreaty
Certaintreatiesgrantexclusivetaxationrightstotheresidencecountryoftherecipientof
gift.Forinstance,Article22ofIndia-UAETaxTreatyprovidesthat:
“itemsofincomeofaresidentofaContractingState,whereverarising,whicharenotexpresslydealtwith
otherArticles(i.e.Article6toArticle21)oftheTaxTreaty,shall
betaxableonlyinthestateofresidence
oftheincomerecipient”
Deemed accrual of gift made to Not Ordinarily Resident (RNOR)

27. 27
[Clause 4] (w.e.f. 01.04.2024)
Accordingly,sincethereisnospecificArticleundertheIndia-UAETreatywhichdeals
withtaxabilityofgift,thereforeintermsofArticle22ofthesaidTreaty,incomearisingin
thehandsofadoneeresidentinUAEonaccountofsuchgiftshallbetaxableonlyinUAE
andnotinIndia
Accordingly,evenaftertheproposedamendmentinsection9,residentsofKorea,Kuwait,
SaudiArabia,UAEandPhilippineswouldnotbeliabletotaxinIndiainrespectof
giftsreceivedbythemfromapersonresidentinIndia
Deemed accrual of gift made to Not Ordinarily Resident (RNOR)

28. 28
TAXATION OF START-UPS

29. 29
Relief to Startups for Carry Forward and Set Off of Losses
[Clauses 35 and 41] (w.e.f. 01.04.2023)
Section79providesthatnolossincurredbyacompany,inwhichthepublicarenot
substantiallyinterested,priortothepreviousyearinwhichachangeinshareholdingofsuch
companytookplace,isallowedtobecarriedforwardandsetoffagainsttheincomeofthat
yearunless,onthelastdayofthepreviousyear,sharescarryingnotlessthan51%ofthe
votingpowerwerebeneficiallyheldbythesamepersonswhobeneficiallyheldnotlessthan
51%ofthevotingpowerasonthelastdayofthepreviousyear(s)inwhichthelosswas
sustained

30. 30
Relief to Startups for Carry Forward and Set Off of Losses
[Clauses 35 and 41] (w.e.f. 01.04.2023)
Intermsoftheprovisotosection79,incaseofaneligiblestartupasreferredtoinsection
80IAC,lossincurredinanyyear(priortothepreviousyear)isallowedtocarriedforwardand
setoffagainsttheincomeofthepreviousyearif-
oalltheshareholdershavingvotingpoweronthelastdayofthepreviousyearinwhich
losswasincurredcontinuetoholdsharesonthelastdayofthepreviousyearsinwhich
incomeistobesetoff,and
osuchlossisincurredduringtheperiodof7yearsfromtheyearofincorporation

31. 31
Relief to Startups for Carry Forward and Set Off of Losses
[Clauses 35 and 41] (w.e.f. 01.04.2023)
Inordertoaligntheperiodof7yearswiththeperiodof10yearscontainedinsection
80IAC(2),whichprovidesanoptiontotheassesseetoclaimdeductionof100% oftheprofits
andgainsderivedfromsuchbusinessforany3consecutiveassessmentyearoutoftheblock
of10yearsbeginningfromtheyearinwhicheligiblestartupisincorporated,thetime
periodforrelaxationisproposedtobeextendedto10years
Sunsetclauseofsection80-IACoftheActhasbeenextendedbyone-yearuptoApril1,2024

32. 32
Relief to Startups for Carry Forward and Set Off of Losses
[Clauses 35 and 41] (w.e.f. 01.04.2023)
Comments/Observations
Startupsusuallyhavelonggestationperiodandtosupportthefinancialneedsofthebusiness
thebuddingentrepreneurhastodilutetheshareholdinginfavouroftheinvestor
TheGovernmenthastakenseriesofstepstopromotestartupsinthecountry
Theextensionofrelaxationperiodisawelcomemoveintendedtocatalyzestartupculture
andbuildastrongandinclusiveecosystemforinnovationandentrepreneurshipinIndia

33. 33
TAXATION OF NEW
MANUFACTURING CO -OPERATIVE
SOCIETY

34. 34
Section115BAE–Concessionalrate@15%topromotenew
manufacturingco-operativesocieties
[Clauses 45, 51 & 52] (w.e.f. 01.04.2024)
Benefitofconcessionaltaxrateregimeof15%(plusapplicablesurchargeandcess)availableto
companiesundersection115BABisnowproposedtobeextendedtonewlysetupco-operative
societiesengagedinthebusinessofmanufacturing
Suchco-operativesocietyhastobeset-upandregisteredonorafter1stApril,2023and
commencemanufacturingorproductionactivityonorbefore31stMarch,2024
Thebusinessmustnotbeformedbysplittingup,orthereconstructionofabusinessalreadyin
existenceandmustnotusemachineryorplantpreviouslyusedforanypurpose,subjectto
certainexceptions
Thesectionproposesanegativelisttoexcludeapplicabilityoncertainbusinesses

35. 35
Section115BAE–Concessionalrate@15%topromotenew
manufacturingCo-operativesocieties
[Clauses 45, 51 & 52 ] (w.e.f. 01.04.2024)
Incomehastobecomputedwithoutclaimingdeductions,set-offofcarriedforwardlossesor
depreciationfromearlierassessmentyear
Theassessingofficerisempoweredtodetermine/deemreasonableprofitsofsuchco-
operativesociety
Domestictransferpricingprovisionscontainedinsection92BAhavebeenproposedby
insertionofsub-section(vb)toSection92BA
Oncelowerrateoftaxisoptedunderthissection,theco-operativesocietyshallnotbeableto
subsequentlywithdrawtheoption

36. 36
Section115BAE–Concessionalrate@15%topromotenew
manufacturingCo-operativesocieties
[Clauses 45, 51 & 52 ] (w.e.f. 01.04.2024)
Surcharge in respect of income chargeable to tax under section 115BAE is prescribed @ 10%
Alternateminimumtaxprovisionsundersection115JCwouldnotapplytoco-operative
societyoptingfortaxationundersection115BAE

37. 37
Section115BAE–Concessionalrate@15%topromotenew
manufacturingCo-operativesocieties
S.L.No.Streamof Income Tax Rate*
1. Incomefrommanufacturingbusiness 15%
2. Incomefromshorttermcapitalgainsarisingfromtransferofnon-depreciableassets 22%
3. Incomeinexcessofreasonableprofitsasdeterminedbytheassessingofficer
(Incasetransactionbetweencloselyrelatedparties,theassessingofficerisentitledtodetermine
reasonableprofitsofaco-operativesocietywhichshallbetaxed@15%)
30%
4. Incomeofnewco-operativesocietywhich:i)hasneitherbeenderivedfromnorisincidentalto
manufacturingorproductionofanarticleorthing;andii)inrespectofwhichnospecificrateoftaxis
provided,shallbetaxableongrossbasis
22%
* The aforesaid tax rates are exclusiveof applicable surcharge and cess
[Clauses 45, 51 & 52 ] (w.e.f. 01.04.2024)
The tax rates for different streams of income earned by a domestic manufacturing co-operative society opting for
taxation under section 115BAE, shall be as follows:

38. 38
Section115BAE–Concessionalrate@15%topromotenew
manufacturingCo-operativesocieties
[Clauses 45, 51 & 52] (w.e.f. 01.04.2023)
Comments/ObservationsThisprovisionappearstobenefitthetaxpayersengagedinlowcapitalincentivemanufacturing/
productionbusinessinnon-urban areas.Probablesectorswhichwouldbebenefitedareqgro,
textile,handloom,dairyetc.
TheamendmentaimstopropelPM’svisionofpromotingacooperative-basedeconomic
developmentmodel,especiallyforsmallandmarginalfarmers,andothermarginalizedsections.
Theslewofproposedmeasureswouldalsoboostthegovernment’splantoestablishnew
multipurposecooperativesocieties,primaryfisheriessocietiesanddairycooperativesocietiesin
everypanchayatandmakethissectormoreempowered.

39. 39
ANGEL TAX

40. 40
Taxation of shares issued to non-resident (angel) investors
[Clause 32] (w.e.f. 01.04.2024)
Section56(2)(viib),interalia,providesthatwhere-
oacompany,notbeingacompanyinwhichthepublicaresubstantiallyinterested,receives,
inanypreviousyear;
ofromanypersonbeingaresident;
oanyconsiderationforissueofsharesthatexceedsthefacevalueofsuchshares;
otheaggregateconsiderationreceivedforsuchsharesasexceedsthefairmarketvalueofthe
sharesshallbechargeabletoincome-taxunderthehead‘Incomefromothersources'

41. 41
Taxation of shares issued to non-resident (angel) investors
[Clause 32] (w.e.f. 01.04.2024)
Section56(2)(viib)wasinsertedvideFinanceAct,2012topreventgenerationandcirculation
ofunaccountedmoneythroughsharepremiumreceivedfromresidentinvestorsinaclosely
heldcompany,inexcessofitsfairmarketvalue.
ThesaidsectionprovidesthatFMVshallbethegreaterofthefollowing:
oValuedeterminedbasisNAVorDCFmethoddeterminedbyamerchantbanker;
oAsmaybesubstantiatedbythecompanytothesatisfactionoftheincometaxauthorities

42. 42
[Clause 32] (w.e.f. 01.04.2024)
Section56(2)(viib)isnotapplicablewhereconsiderationforissueofsharesisreceivedby:
oVenturecapitalundertakingfromventurecapitalcompaniesorventurecapitalfunds
(“VCFs”).
oByacompanyfromCategoryIandCategoryIIAlternativeInvestmentFunds(“AIFs”)
[exemptionwasextendedbytheFinanceActof2019]
oCertainclassesofpersonsnotifiedbythegovernment.Forexample,theMinistryof
CommerceandIndustryvidNotificationno.G.S.R.127(E)dated19.02.2019readwith
notifiedcompaniesthatqualifythedefinitionof“start-up”wouldbeexemptfromsection
56(2)(viib)
Taxation of shares issued to non-resident (angel) investors

43. 43
[Clause 32] (w.e.f. 01.04.2024)
Atpresentthesaidsectionisnotapplicableforconsideration(shareapplicationmoney/
sharepremium)receivedfromnon-residentinvestors.
FinanceBill2023proposestoextendapplicabilityofsection56(2)(viib)tonon-resident
investorsaswell.
Inotherwords,thesaidsectionwillbeapplicableonreceiptofconsiderationforissueof
sharesfromanypersonirrespectiveofhisresidencystatus
Taxation of shares issued to non-resident (angel) investors

44. 44
[Clause 32] (w.e.f. 01.04.2024)
Comments/Observations
Ason01.02.2023, thereare89,759startupsregisteredbyDPIIT,whiletheactualnumberof
startupsmaybefarhigher
Variousunregisteredstart-upsandsmallerprivatecompanieswhichwanttoraisefundsfrom
non-residentPEsandVCswillbesubjectedtotherigorsofsection56(2)(viib)
ThePEfundsandVCsmaypreferfundingthestartupsthroughdebtinstrumentswhichwill
beburdensomeforalreadycashstarvedstartups
Taxation of shares issued to non-resident (angel) investors

45. 45
[Clause 32] (w.e.f. 01.04.2024)
Comments/Observations
IfCCPShasbeenissuedpriorto01.04.2023 andaretobeconvertedtoequityshares
after01.04.2025, thenwhethersuchtransactionwouldbesubjecttoprovisionsof
section56(2)(viib)?
PricingguidelinesundertheFEMArequirethatforeigninvestmentsmustbemadeat
oraboveFMV(asdeterminedbyamerchantbanker,usuallyfollowingtheDCFmethod).
oWhethertaxauthoritieswillbeginchallengingvaluationssubmittedbeforetheRBI
fromexchangecontrolperspective?
Taxation of shares issued to non-resident (angel) investors

46. 46
[Clause 32] (w.e.f. 01.04.2024)
Comments/Observations
Powersgrantedtothetaxauthoritiesundersection56(viib)torejectthevaluationmethod
ledtoprotractedlitigation
TheTribunalinvariousdecisionsheldthattaxauthoritiesarenotpermittedtochallenge
theapplicationoftheDCFmethodadoptedbytheassessee
oConsequenttotheproposedamendment,theaforesaidcontroversymayarisewithrespect
toforeigninvestmentintounlistedIndiancompanies
Section68providesthatwhereanysumisfoundcreditedinthe
booksofanassesseeandtheassesseedoesnotofferanexplanationaboutthenature
andsourcethereofthensuchsumischargeabletotaxasincomeoftheassessee
Taxation of shares issued to non-resident (angel) investors

47. 47
[Clause 32] (w.e.f. 01.04.2024)
Comments/Observations
Provisotosection68statesthatifassesseeisacompany(notbeingacompanyinwhichthe
publicaresubstantiallyinterested),andthesumsocreditedconsistsofsharecapitalorshare
premium,explanationofferedbysuchassesseeshallbedeemedtobenotsatisfactory,unless-
othesharesubscriberbeingaresidentoffersanexplanationaboutthenatureandsourceof
suchsum
Accordingly,non-residentshareholdersshallnotberequiredtoexplainsourceofsourceof
funds
Taxation of shares issued to non-resident (angel) investors

48. 48
TAXATION OF BUSINESS
TRUST REIT

49. 49
Plugging of Dual Non-Taxation of Distribution by Business Trusts
[Clauses 3, 32 & 58] (w.e.f. 01.04.2024)
Specialtaxregimeundersection115UAoftheITActwasintroducedbyFinance(No.2)
Act,2014quataxabilityofincomedistributedbyRealEstateInvestmentTrust(REIT)
andInfrastructureInvestmentTrust(InvIT)(knownas“BusinessTrusts”)tothe
unitholders
Apass-throughstatusisprovidedtoBusinessTrustsinrespectofinterestanddividend
incomereceivedbytheBusinessTrustsfromaspecialpurposevehicleincaseofboth
REITandInvITandrentalincomeincaseofREIT;suchincomeistaxableinthehands
oftheunitholdersunlessspecificallyexempted
TheincomedistributedbyBusinessTruststoitsunitholdersshallbedeemedtobeofthe
samenatureandinthesameproportioninthehandsoftheunitholders,asithadbeen
receivedbyoraccruedtotheBusinessTrusts

50. 50
Plugging of Dual Non-Taxation of Distribution by Business Trusts
[Clauses 3, 32 & 58] (w.e.f. 01.04.2024)
BusinessTrusts,apartfromdistributingsumsintheformofinterest,dividendandrental
income,havealsobeingpayingmoniesintheformof“repaymentofdebt”
Interest,dividendandrentalincomeshavebeenaccordedapass-throughstatusatthe
levelofBusinessTrustsandaretaxableinthehandsoftheunitholder
Distributionsshownasrepaymentofdebtdidnotsuffertaxationeitherinthehandsof
BusinessTrustsorinthehandsofunitholdersresultingindualnon-taxationofthesaid
sumdistributedbyBusinessTrusts
Inordertoplugtheaforesaidunintendedconsequence,itisproposedtoinsertclause
(xii)insection56(2)tobringtotaxsumreceived(notinthenatureofinterest,dividend
orrent)bytheunitholders(inexcessofcostincaseofredemption)fromBusinessTrusts,
whichdoesnotsuffertaxationinthehandsofBusinessTrusts.Corresponding
amendmentsareproposedinsections2(24)and115UA

51. 51
Plugging of Dual Non-Taxation of Distribution by Business Trusts
Comments/Observations
InvITRegulationsmandatesfordistributionofnotlessthan90%ofthenetdistributable
cashflowstotheunitholdersafterspecifiedintervals
Presently,distributionsweremadebyBusinessTrustintheformofeither“returnof
capital”or“repaymentofdebt”(notbeingofthenatureofdividend,interestorrent);
suchdistributions(inexcessofcostincaseofredemption)madeafterApril1,2023shall
besubjecttotaxinhandsofunitholdersas“Incomefromothersources”
Whethersurplusonredemptionofunitswould,goingforward,besubjecttotaxunder
thehead“Incomefromothersources”,insteadof“capitalgains”?
Oncetheentireamountofreturnoncapital/repaymentofloan(incaseofdistribution
andnotredemption)istaxedunderthehead“incomefromothersources”,then,whether
theimpairedvalueoftheunitwouldbeallowablelosstotheunitholder?Seeexample

52. 52
Plugging of Dual Non-Taxation of Distribution by Business Trusts
Particulars COA of
unit
(Given)
Distributionofrepayment
ofdebt/returnof
capital without
redemption
Distribution of repayment of debt/
return of capital with redemption
100 80 100 80 100 150
Present Position in the hands
of Unitholders (Taxability)
Nil Nil Nil Nil 50
COA 20 Nil CL
(20)
Nil CG (50)
ProposedPositioninthehands
ofUnitholders(Taxability)
80 100 Nil Nil 50
IFOS
COA 100 100 100 100 100
(without having any intrinsic value)
Practically, there is impairment in value of unit which would never be allowable as loss to the unitholder

53. 53
TAXATION OF CHARITABLE
TRUSTS AND INSTITUTIONS

54. 54
Charitable Trusts/ Institutions
Charitable Trust and Institutions can avail exemption under the following regimes:
oFund/trust/institutionreferredunderclauses(iv),(v),(vi)and(via)undersection
10(23C)[referredas1
st
regime]
oTrustsregisteredundersection12AA/12AB[referredas2
nd
regime]
Intermsofcompliancerequirements,application,investments,registrationregime,
etc.,thetworegimesarealreadyatparinviewofchanges/amendmentsmadeinpast
years
Inthe2023Budget,similarandsimultaneousamendmentsaremadeunderboththe
regimes

55. 55
Depositing back of corpus & Repayment of borrowings
[Clauses 5 & 7] (w.e.f. 01.04.2023)
Earlier,allexpenditureincurredbycharitabletrust,irrespectiveofsource,wasallowedas
applicationofincome
VideFinanceAct,2021(w.e.f.AY2022-23) itwasprovidedthat:
oApplicationmadebyutilizingcorpusfundsshallnotbetreatedasapplicationofincomeinthe
yearofapplication;thesameshallbetreatedasapplicationintheyearinwhichtheamountis
investedbackinthemodesprescribedundersection11(5)maintainedspecificallyforsuch
corpus
oApplicationmadebyutilizingborrowedfundsshallnotbetreatedasapplicationofincomein
theyearofapplication;thesameshallbetreatedasapplicationintheyearofrepaymentof
loan

56. 56
Depositing back of corpus & Repayment of borrowings
[Clauses 5 & 7] (w.e.f. 01.04.2023)
Further,theexistingprovisions,interalia,placefollowingfettersonallowingapplicationof
income(‘conditionsprecedent’):
oPromotionofinternationalwelfareoutsideIndiaisapprovedbyCBDT[section11(1)(c)];
oCorpusdonationtoothercharitabletrustisnotallowedasapplication[Explanation2]
oApplicationissubjecttoprovisionsofsection40(a)(ia )[30%disallowanceifTDSnot
deductedorpaid],andsection40A(3)/(3A)[disallowanceofcashexpenses>Rs.10,000ina
singledaytoasinceperson][Explanation3]
oDeficitofanyprecedingyearnotallowedasapplication[Explanation5]
oApplicationonlyonpaymentbasis[Explanationsectionbelow11(7)]
oAmountisnotappliedforbenefitofspecifiedpersons[section13(1)(c)]

57. 57
Depositing back of corpus & Repayment of borrowings
[Clauses 5 & 7] (w.e.f. 01.04.2023)
Itisnowproposedtoprovidethat:
oRecoupment/investmentbackincorpusorrepaymentofloanwouldbeallowedasapplicationonlyif
‘conditionsprecent’(supra)arecompliedwithattimeofincurrenceofexpenditure/applicationof
amount
oApplicationisallowedonlyifinvestingbackincorpusandrepaymentofloanismadewithin5years
fromtheyearinwhichapplicationwasmade
Itisalsoproposedthatinvestingbackincorpusorrepaymentofloanisnotallowedifapplication/
expenditurefromcorpusorloanwasmadeupto31.03.2021
Thesaidamendmentisaimedtoavoiddoubleapplicationinasmuchatrustcouldhaveclaimed
expenditureasapplicationinabsenceofrestrictionpriortoAY2022-23

58. 58
Depositing back of corpus & Repayment of borrowings
[Clauses 5 & 7] (w.e.f. 01.04.2023)
Comments/Observations
Deterrentforcharitabletruststohaveloansforperiodmorethan5years
Theamendmentsrelatingtonotallowingrepaymentofloans,takenpriorto31.03.2021,mayleadto
anomalyinasmuchitmayleadtodoublenon-deduction/non-applicationasexplainedhereunder:
oEvenpriortoassessmentyear2021-22,theITRformsallowedcapitalexpenditureincurredfromown
fundsonlyasapplicationofincome;capitalexpenditureincurredfromborrowedfundswereallowed
onlyonrepaymentofloans
oInsuchacase,wherecapitalexpenditureisincurredpriorto31.03.2021fromborrowedfundsandhas
notbeenclaimedasapplicationaspermandateinITRform,therepaymentofsameloangoing
forwardwouldalsonotbeallowedasapplicationasperamendedprovision- itwouldresultin
expenditurenotbeingallowedasapplicationevenonce
oCircularNo.100dated24.01.2.1973allowedrepaymentofloanasapplication

59. 59
Donations to other trusts
[Clauses 5 & 7] (w.e.f. 01.04.2024)
Presently,entirevoluntarycontributions/donationsbycharitabletrusttoothercharitable
trustoutofcurrentyear’sincomeisallowedasapplicationofincome
Asregardsrecipientcharitabletrust,exemptionisavailablesubjecttoutilizationof85%
ofincome/donation
TheMemorandumstatesthatinstanceshavecometothenoticethatcertaintrustsor
institutionsaretryingtodefeattheintentionofthelegislaturebyformingmultipletrusts
andaccumulating15%ateachlayer
Itis,thus,proposedthatvoluntarydonationstotheextentofonly85%shallbeallowed
asapplicationinthehandsofdonortrust

60. 60
Donations to other trusts
[Clauses 5 & 7] (w.e.f. 01.04.2024)
Comments/Observations
Theproposedamendmentresultsindenialofapplication(totheextentof15%)even
quagenuinedonationsmadetoothercharitabletrusts
Theaforesaidmayalso,incertaincases,resultinanomalyinasmuchasthoughsum/
moneyshallactuallyflowoutofcoffersofthegivertrust,butapplicationshallbe
allowedtotheextentof85%thereof
Itmayleadtoasituationwheretrustmaynothaveactualfundsforfutureapplication
E.g.TrustA,outofcurrentincomeofRs.100,donatesRs.100toTrustB,whichapplies
entireamountforcharitablepurpose.InhandsofTrustA,onlyRs.85shallbeallowedas
application,whereastheTrustshallnothaveactualresidualfundsofRs.15

61. 61
Roll back of registration/ exemption -only for 2
nd
regime
[Clause 8] (w.e.f. 01.04.2023)
Fortrustsfallingunder2
nd
regime,mainprovisionsofsection12A(2)providesthatwherean
applicationforregistrationismade,exemptionundersection11/12shallbeavailablefrom
assessmentyearimmediatelyfollowingthefinancialyearinwhichapplicationismade
Firstprovisoprovidesthat–(i)incaseofrenewalofalreadyregisteredtrustonintroductionof
section12AB,exemptionshallbeavailablefromAYforwhichearlierregistrationwasgranted;
and(ii)incaseofrenewal/finalizationofprovisionalregistration,fromyearfromwhichitwas
provisionallyregistered
Secondprovisoprovidesthatthatwhereregistrationhasbeengrantedundersection12AB,then
exemptionshallbeavailableforprecedingAYswhereinassessmentispending

62. 62
Roll back of registration/ exemption -only for 2
nd
regime
[Clause 8] (w.e.f. 01.04.2023)
Thirdprovisoprovidesthatnoactionundersection147shallbetakenbytheAOin
caseoftrustforanyAYprecedingtheaforesaidAYonlyfornon-registrationoftrustfor
saidAY
Fourthprovisoprovidesthatsecondandthirdprovisoshallnotapplywheretrustwas
refusedregistration,orregistrationgrantedwascancelledatanytime
Further,withintroductionofamendedregimeforregistrationvideTaxationandOther
Laws(RelaxationandAmendmentofCertainProvisions)Act,2020[‘TOLA’],anew
trustisrequiredtoapplyforprovisionalregistrationpriortocommencementofactivities
andthuscertainprovisionsrelatingtoroll-backofexemptionarestatedtobenotneeded
Thus,itisproposedtodelete/omitsecond,thirdandfourthprovisotosection12A(2)

63. 63
Roll back of registration/ exemption -only for 2
nd
regime
[Clause 8] (w.e.f. 01.04.2023)
Comments/Observations
Therollingbackofexemptionhadjudicialapproval,interalia,infollowingcases:
oSreeSreeRamkrishnaSamityvsDCIT:[2016] 156ITD646(KolTrib.)
oSNDPYogamvsADIT:[2016] 161ITD1(CochinTrib.)
oSt.Jude'sConventSchoolvsACIT:[2017] 164ITD594(AsrTrib.)
Theroll-backprovisionswouldhavestillbeenrelevantincertaincases.Forillustration,
wheretheapplicationofregistrationisdelayedforbonafidereasons;applicationisre-filed
onaccountoftechnical/venialdefault,etc.

64. 64
Rationalising the provisions of provisional & regular registration
[Clauses 5, 8, 9 & 40] (w.e.f. 01.10.2023)
TOLA introduced new registration regime as under:
ProvisionalRegistration-Newtrustneedstoapplyforprovisionalregistrationatleast1monthpriorto
thestartoffinancialyearforwhichexemptionissought.Provisionalregistrationvalidfor3years
RegularRegistration-Provisionallyapprovedtrustagainneedstoapplyfortheregularregistrationat
least6monthspriortoexpiryofprovisionalregistrationorwithin6monthsofthecommencementof
activities,whicheverisearlier.Suchapprovalisvalidforaperiodof5years;thetrustswillagainapply
forrenewalatleast6monthspriortoexpiryofregularregistration
Issues/ difficulties faced as per existing provisions:
Newtrustsformedduringthepreviousyearwerenotabletoclaimexemptionsincetheywererequiredto
apply1monthbeforethepreviousyear
Incaseoftrustwhereactivitieshavealreadycommencedarerequiredtoapplyfor2registrations
(provisional/regular)simultaneously

65. 65
Rationalisingtheprovisionsofprovisional&regularregistration
[Clauses 5, 8, 9 & 40] (w.e.f. 01.10.2023)
Toremovethedifficultiesfornewtrusts,followingamendmentsareproposed:
Wheretrusthasnotcommencedactivities:
oItshallapplyforProvisionalRegistration1monthbeforefinancialyearforwhich
exemptionissought;
oProvisionalRegistrationisgrantedautomaticallyfor3years
oInshort-nochangeforsuchtrust

66. 66
Rationalisingtheprovisionsofprovisional&regularregistration
[Clause 5, 8, 9 & 40] (w.e.f. 01.10.2023)
Wheretrusthascommencedactivities:
oItshallapplydirectlyforRegularRegistration;
oProcedureaslaiddownshallbefollowed-examinationofobjectsandactivities,
compliancetootherlawsetc.wouldbeexaminedbythePCIT;
oRegularregistrationisgrantedfor5years
Anotheramendmentisproposedinthedefinitionofspecifiedviolation,toprovidethat
registrationcanbecancelled/withdrawnwhereapplicationmadeforgrantofregistrationis
incompleteoritcontainsfalse/incorrectinformation(w.e.f01.04.2023)

67. 67
Section115TD(ExitTax)
[Clause 57] (w.e.f. 01.04.2023)
Section115TDleviestaxatMMRon‘accretedincome’asondateofconversion,interalia,
wherethecharitabletrustconvertsintoanyformnoteligibleforregistration(popularlyknown
asexittax)
Itisnowproposedtolevysuchexittaxontrustwhichfailstoapplyforrenewalof
provisional/regularregistrationwithinthetimeprescribedunderrelevantclauses
Dateofconversioninsuchcaseisproposedtokeptasthelastdateformakingapplicationfor
renewalofregistration

68. 68
Section115TD(ExitTax)
[Clause 57] (w.e.f. 01.04.2023)
Comments/Observations
Theprovisionsappeartobedraconian/harshandmayimpacteventhefollowingcases:
oWhethertrustregisteredunderoldregimeinadvertentlyforgetstoapplyforre-registrationundersection
12ABregimewithintimeallowedbutappliesbelatedlyforrenewalorfreshregistration
oSince,therearenoexpressprovisionforcondonationofdelayinapplyingforrenewalofregistration,evena
day’sdelay,thattoo,onaccountofgenuine/bonafidereason(s)mayalsobeadverselytaxed
oSincedateofconversioniskeptasthelastdateformakingapplicationforrenewalofregistration,thesame
wouldresultinasituationwhereaccreditedincomeistaxeddespiteregistrationbeingvalidforatleast6
moremonths
oTheamendmentisretrospectiveinasmuchasthesameismadeapplicableforAY2023-24(FY2022-23)

69. 69
TimelimitforfilingFormsandReturn
[Clauses 5,7 & 8] (w.e.f. 01.04.2023)
Thefollowingformsarerequiredtobefiledatleast2monthspriortotheduedatespecifiedunder
sub-section(1)ofsection139oftheAct:
oForm10: Inrelationtoaccumulationbeyond15%;
oForm9A: DefermentintermsofExplanationtosection11(1)[2
nd
regime]
Exemptionunder1
st
and2
nd
regimetobeavailableonlyifreturnofincomefurnishedwithinthetime
prescribedundersub-section(1)or(4)ofsection139[timefornewlyupdatedreturnnotallowed]
Comments/Observations
Trustwouldberequiredtofinalizeaccounts/auditandevencomputationofincomeatleast2
monthspriortofilingreturn

70. 70
Exemption to Development Authorities etc.
[Clause 5 & 7] (w.e.f. 01.04.2024)
Section10(46)providesexemptiontoanyspecifiedincomearisingtoabody/authority/board/trust/
commissionwhich:
oisestablishedbyCentral/State/ProvisionalActorbyCentral/StateGovt. (‘CG/SG’)withtheobjectof
regulating/administeringanyactivityforthebenefitofthegeneralpublic;
ois not engaged in any commercial activity;
ois notified by the CG in the official gazette for the purpose of this clause
Recently,inthecaseofACIT(E)vsAhmedabadUrbanDevelopmentAuthority:[2022] 449ITR
389(SC)theCourtheldthattheterm‘commercial’ asdefinedundersection10(46)(b)hasthesame
meaningas‘trade,commerce,business’undersection2(15)and,therefore,sumchargedbynotified
bodyetc.willrequiresimilarconsideration,i.e.,whetheramountschargedareoncost/nominalmark-
upbasisorsignificantlyhighertofallwithinthemischiefofcommercialactivity

71. 71
Exemption to Development Authorities etc.
Anewclause46Aisproposedtobeinsertedinsection10toexemptincomeofsuch
bodies/commissionestablishedbytheCG/SGwithfollowingpurposes:
oDealingwithandsatisfyingtheneedforhousingaccommodation;
oPlanning,developmentorimprovementofcities,townsandvillages;
oRegulating,orregulatinganddeveloping,anyactivityforthebenefitofthegeneral
public;or
oRegulatinganymatter,forthebenefitofthegeneralpublic,arisingoutoftheobject
forwhichithasbeencreated
TheorganizationwouldberequiredtobenotifiedbytheCGintheofficialgazette

72. 72
TAXATION OF BUSINESS
PROFITS

73. 73
Promoting Timely Payments to Micro and Small Enterprises
[Clause 13] (w.e.f. 01.04.2024)
Section43Bprovidesfordeductionofexpenditureintheyearofactualpayments,
irrespectiveofthefactthattheliabilitytopaythesamepertainstoanyotheryear
Intermsoftheprovisotothesaidsection,deductionisallowedonaccrualbasisifthe
specifiedsumispaidonorbeforetheduedateoffurnishingofthereturnofincome
Section15ofMicro,SmallandMediumEnterprisesDevelopmentAct,2006
(“MSMEDAct”)providesastatutorytimelineof15daysforpaymentofduesto
MSMEs,whichmaybeextendedcontractuallyforupto45days

74. 74
Promoting Timely Payments to Micro and Small Enterprises
[Clause 13] (w.e.f. 01.04.2024)
InordertopromotetimelypaymentstoMSMEs,section43Bisproposedtobeamended
toprovidethatsumpaid/payabletoMicroandSmallEnterprisesshallbeallowable
deductiononactualpaymentbasisifpaidbeyondthetimelimitspecifiedinsection15of
theMSMEDAct
DeductionofthepaymenttoMicroandSmallEnterpriseswouldnotbeallowedon
accrualbasis(unlesspaidwithinthetimelimitof15/45days,asthecasemaybe),
althoughpaidonorbeforetheduedateoffurnishingofthereturnofincome
Inotherwords,outstandingpaymenttoMicroandSmallEnterprisesattheyearend
wouldbeallowabledeductiononaccrualbasisprovidedthepaymentismadewithinthe
timemandatedundersection15ofMEMEDAct(i.e.,15/45days)

75. 75
Promoting Timely Payments to Micro and Small Enterprises
[Clause 13] (w.e.f. 01.04.2024)
Comments/Observations
WiththeaimofprovidingrelieftotheMicroandSmallEnterprises,theFinanceBillhas
proposedtoamendsection43BtoensuretimelypaymentsarereceivedbyMicroand
SmallEnterprises. Thisisexpectedtoendthedelayedpaymentproblemsbeingfacedby
manyMicroandSmallEnterprises
Theproposedamendmentwouldapplyquathepaymentsfallingdueonorafter1st
April,2024andnottounpaidamountscarriedforwardfrompreviousyears,ifany

76. 76
Facilitating Certain Strategic Disinvestment
[Clauses 33 & 34] (w.e.f. 01.04.2023)
Amendment in section 72A
Section72Adeemscarryforwardandset-offofaccumulatedlossandunabsorbed
depreciationoftheamalgamatingcompanyinthehandsoftheamalgamatedcompanyfor
thepreviousyearinwhichtheamalgamationwaseffected
Intermsofclause(d)ofsection72A, benefitofcarryforwardandset-offof
accumulatedlossandunabsorbeddepreciationoftheamalgamatingcompanyisprovided
onamalgamationoferstwhilepublicsectorcompanywithoneormorecompany(ies),if
amalgamationiscarriedoutwithin5yearsofstrategicdisinvestment
Theterm“strategicdisinvestment”isdefinedinclause(iii)ofExplanationtosection
72A(1)tomean“saleofshareholdingbytheCentralGovernmentoranyState
Governmentinapublicsectorcompanywhichresultsinreductionofitsshareholding
tobelow51%along- withtransferofcontroltothebuyer”

77. 77
Facilitating Certain Strategic Disinvestment
[Clauses 33 & 34] (w.e.f. 01.04.2023)
Amendment in section 72A
Inordertoprovideimpetustostrategicdisinvestments,itisproposedtoamendthe
definitionof“strategicdisinvestment”tofurtherprovidebywayofprovisothat:
otheconditionofreductionofGovernmentorpublicsectorcompany'sshareholding
below51%shallapplyonlyincasetheshareholdingisabove51%priortosaleof
shareholding,and
otransferofcontrolmaybecarriedoutbytheCentralGovernmentortheState
Governmentorthepublicsectorcompanyoranytwoofthemorallofthem

78. 78
Facilitating Certain Strategic Disinvestment
[Clauses 33 & 34] (w.e.f. 01.04.2023)
Amendment in section 72AA
Clause(i)ofsection72AA,interalia,permitscarryforwardofaccumulatedlossesand
unabsorbeddepreciationinthecaseofamalgamationofmoreormorebankingcompany
withanyotherbankinginstitutionunderaschemesanctionedbyCentralGovernment
underBankingRegulationAct,1949
Itisproposedtoaddsub-clause(b)toclause(i)forenablingcarryforwardof
accumulatedlossesandunabsorbeddepreciationinthecaseofamalgamationof–
“oneormorebankingcompanywithanyotherbankinginstitutionoracompany
subsequenttoastrategicdisinvestment,ifsuchamalgamationtakesplacewithin5
yearsofstrategicdisinvestment.”

79. 79
Amortization of preliminary expenses –ease in claiming deduction
[Clause 12] (w.e.f. 01.04.2024)
Section35Dprovidesforamortizationofcertainpreliminaryexpenses
Aspertheexistingprovisions,theworkinconnectionwiththepreparationoffeasibility
reportortheprojectreportortheconductingofmarketsurveyorofanyothersurveyor
theengineeringservicesisrequiredtobecarriedouteitherbytheassesseeorbya
concernapprovedbytheBoard
Inordertopromoteeaseofcompliance,theFinanceBillhasproposedtoremovethe
conditionofactivityinconnectionwiththeseexpensestobecarriedoutbyaconcern
approvedbytheBoard

80. 80
Amortizationofpreliminaryexpenses–easeinclaimingdeduction
[Clause 12] (w.e.f. 01.04.2024)
Aspertheproposedamendment,theassesseeshallberequiredtofurnishastatement
containingtheparticularsofthisexpenditurewithintheprescribedperiodtothe
prescribedincome-taxauthorityintheprescribedformandmanner
Governmentwouldlaydownrulesfortheabovepurpose

81. 81
Requirement of audit of accounts rationalized
[Clause 15] (w.e.f. 01.04.2024)
Presently,auditrequirementundersection44ABdoesnotapplytobusinesseswhohave
optedforpresumptivebasisoftaxationinaccordancewithsection44AD(1)
TheFinanceBill,2023hasproposedtosubstitutethefirstprovisotosection44ABto
providethattheauditrequirementshallnotapplytobusinessesaswellprofessionals
optingforpresumptivetaxationundersection44AD(1)orsection44ADA(1)

82. 82
Requirement of audit of accounts rationalized
[Clause 15] (w.e.f. 01.04.2024)
Comments/Observations
Sub-section(4)ofsection44ADAprovidesthattherequirementofauditappliesincases
whereprofitsandgainsfromprofessionarelowerthangainscomputedonpresumptive
basis
Presentlythereisnoexpressprovisionthatexemptstheauditrequirementfor
professionalswhohaveoptedforpresumptivetaxationundersection44ADA
Proposedamendmentinsection44ABclarifiesthattherequirementofauditisnot
requiredinsuchcases

83. 83
Increasing threshold limits for presumptive taxation schemes
[Clauses 16 &17] (w.e.f. 01.04.2024)
TheFinanceBillproposestoamendtheprovisionsofsections44ADand44ADAtoincrease
thethresholdlimitsforpresumptivetaxation,asunder:
*subjecttoaconditionthatcashreceiptsdoesnotexceed5%ofthetotalturnover/grossreceipts
Comments/Observations
Theproposedamendmentisawelcomechangewhichwouldincreasethecoverageofpresumptive
taxation,thus,resultinginmoretaxpayersoptingforthisscheme
Itwillfacilitateeaseofdoingbusinessandpromotecash-lesseconomy
Section Eligibility Existing thresholdProposed threshold*
44AD Business 2 crores 3 crores
44ADA Profession 50 lakhs 75 lakhs

84. 84
Preventing misuse of presumptive schemes under section 44BB and
section 44BBB
[Clauses 18 and 19] (w.e.f. 01.04.2024)
Section44BBprovidesforpresumptiveschemeinthecaseofanon-residentassesseewho
isengagedinthebusinessofprovidingservicesorfacilitiesinconnectionwith,or
supplyingplantandmachineryonhireused,ortobeused,intheprospectingfor,or
extractionorproductionof,mineraloils
Underthesaidsection,10%oftheaggregateoftheamountsspecifiedinthesectionare
deemedtobeprofitschargeableunderthehead"Profitsandgainsofbusinessor
profession"

85. 85
Preventing misuse of presumptive schemes under section 44BB and
section 44BBB
[Clauses18and19] (w.e.f.01.04.2024)
Similarly,section44BBB providesforpresumptiveschemeinthecaseofanon-resident
foreigncompanywhoisengagedinthebusiness
ofcivilconstructionorthebusinessof
erectionofplantormachineryortestingorcommissioningthereof,inconnectionwitha
turnkeypowerprojectapprovedbytheCentralGovernment
Underthesaidsection,10%oftheamountpaidorpayabletothesaidassesseeonaccount
ofsuchcivilconstruction,erection,testingorcommissioningisdeemedtobeprofits
chargeableunderthehead"Profitsandgainsofbusinessorprofession"

86. 86
Preventing misuse of presumptive schemes under section 44BB
and section 44BBB
[Clauses18and19] (w.e.f.01.04.2024)
Sections44BBand44BBBprovidesthatanassesseemayclaimlowerprofitsandgainsif
hemaintainsbooksofaccountsandgetsthesameauditedundersection44AB
Itisseenthattaxpayersoptinandoptoutofpresumptiveschemeinordertoavailbenefit
ofbothpresumptiveschemeincomeandnon-presumptiveincomei.e.
oinayearwhenthey
haveloss,theyclaimactuallossasperthebooksofaccountand
carryitforward;
oinayearwhentheyhavehigherprofits,theyusepresumptiveschemetorestrictthe
profitto10%andsetoffthebroughtforwardlossesfromearlieryears

87. 87
Preventing misuse of presumptive schemes under section 44BB
and section 44BBB
[Clauses18and19] (w.e.f.01.04.2024)
ThememorandumtotheFinanceBill,2023statesthatthereisnojustificationforsetting-
offoflossescomputedasperbooksofaccountwithincomecomputedonpresumptive
basis
Toavoidsuchmisuse,FinanceBill,2023hasproposedtoinsertasub-section(4)andsub-
section(3)tosection44BBandsection44BBBrespectively;
“(4)Notwithstandinganythingcontainedinsub-section(2)ofsection32andsub-
section(1)ofsection72,whereanassesseedeclaresprofitsandgainsofbusinessfor
anypreviousyearinaccordancewiththe
provisionsofsubsection(1),nosetoffof
unabsorbeddepreciationandbroughtforwardlossshallbeallowedtotheassesseefor
suchpreviousyear"

88. 88
Inventory valuation by Department nominated Cost Accountant
[Clauses68,72&122] (w.e.f.01.04.2023)
Undertheexistingprovisionsofsection142(2A),theassessingofficermay,withtheprior
approvalofPCCIT/CCIT/PCIT/CIT,directtheassesseetogethisaccountsauditedby
anaccountant,andfurnishreportasperRules
Itisnowproposedtoamendsub-section(2A)ofsection142toadditionallyenablethe
assessingofficertodirecttheassesseetogetthe‘inventory’valuedbyacostaccountant,
asnominatedbythePCCIT/CCIT/PCIT/CIT
TheaforesaidamendmentisstatedtobeameasuretoensureadherencewiththeIncome
DisclosureStandards(ICDS)notifiedbytheGovernmentandtheprovisionsof
CompaniesAct,2013

89. 89
InventoryvaluationbyDepartmentnominatedCostAccountant
[Clauses68,72&122] (w.e.f.01.04.2023)
Thefollowingconsequentialamendmentsarealsoproposed: –
otoamendsection153,soastoexcludetheperiodforinventoryvaluationthrough
thecostaccountantforthepurposesofcomputationoftimelimitation.
otoamendsection295,soastoincludeintheaforesaidsection,thepowertomake
rulesfortheformofprescriptionofreportofinventoryvaluationandtheparticulars
whichsuchreportshallcontain
Theproposedamendmentswilltakeeffectfrom01.04.2023 andwillaccordinglyapply
toassessmentyear2023-2024andsubsequentassessmentyears

90. 90
InventoryvaluationbyDepartmentnominatedCostAccountant
[Clauses68,72&122] (w.e.f.01.04.2023)
Comments/Observations
Theproposedamendmentseekstoovercomethepermanentdeferraloftaxesthrough
under-valuationofinventory
Intermsoftheproposedamendment,theassessingofficerisnowempoweredtodirect
specialauditforthelimitedpurposeofvaluationofinventoryevenwithoutreferencefor
auditofaccounts
Thepre-requisiteconditionsofsection142(2A)viz.,natureandcomplexity,volume,
multiplicityoftransactionsetc.,quatheinventoryvaluationwillhavetobesatisfiedto
directcostauditofaccounts

91. 91
Section10AAeligibleifreturnfiledbeforetheduedate
[Clauses6&74] (w.e.f.01.04.2024)
Theexistingprovisionsofsection10AAdoesnotprovidefortheconditiontofilereturn
beforeduedateprovidedundersection139(1)forclaimingdeductionasisprovidedfor
similarexemptionprovisions[i.e.,section10A,10Betc.]
Clause(v)ofsection143(1)howeverprovidesthatdeductionundersection10AAshall
beeligibleonlyifthereturnisfiledbeforetheduedate
Itisnowproposedtoaligntheaforesaidprovisionsbyinsertingaprovisotosub-section
(1)ofsection10AAtoprovidethatnodeductionunderthesaidsectionshallbeallowed
toanassesseewhodoesnotfurnishareturnofincomeonorbeforetheduedate
specifiedundersub-section(1)ofsection139

92. 92
TimelimitstipulatedforSEZunitstobringforexinIndiafor
claiming10AAdeduction
[Clauses6&74] (w.e.f.01.04.2024)
Notime-limitisprescribedintheActfortimelyremittanceoftheexportproceedsfrom
saleofgoodsorprovisionofservicesbySEZUnitsforclaimingdeductionunderthe
saidsectionasisprovidedunderothersimilarexportrelateddeductions[i.e.,section
10A,10Betc.]
Anewsub-section(4A)isproposedtobeinsertedinsection10AAtoprovidethat
deductionunderthesaidsectionshallbeavailableforsuchunit,iftheproceedsfromsale
ofgoodsorprovisionofservicesisreceivedin,orbroughtintoIndiabytheassesseein
convertibleforeignexchange,within
aperiodofsixmonthsfromtheendoftheprevious
yearor,withinsuchfurtherperiodasthecompetentauthoritymayallowinthisbehalf

93. 93
TimelimitstipulatedforSEZunitstobringforexinIndiafor
claiming10AAdeduction
[Clauses6&74] (w.e.f.01.04.2024)
Theproposedamendmentfurtherprovidesthatexportproceedsfromsaleofgoods
orprovisionofservicesshallbedeemedtohavebeenreceivedinIndiawhere
suchproceedsarecreditedtoaseparateaccountmaintainedforthepurposeby
theassesseewithanybankoutsideIndiawiththeapprovaloftheReserveBankofIndia
Itisalsoproposedtomakeconsequentialamendmentinsub-section(11A)ofsection
155,toallowtheassessingofficertoamendtheassessmentorderlaterwheretheexport
earningisrealizedinIndiaafterthepermittedperiod

94. 94
Providing clarity on benefits and perquisites in cash
[Clause 11] (w.e.f. 01.04.2024)
Asperclause(iv)ofsection28,thevalueofanybenefitorperquisite,whether
convertibleintomoneyornot,arisingfrombusinessorexerciseofprofessionistaxable
underthehead‘profitsandgainsofbusinessorprofession’inthehandsoftherecipient
ofsuchbenefitorperquisite
TheHon’bleSupremeCourthadinthecaseofCITvsMafatlalGangabhai&Co
(P)Ltd:219ITR644(SC),renderedincontextofprovisionsofsections40(A)(v)and
section40A(5)(a)(ii),heldthatbyusingthewords‘whetherconvertibleintomoneyor
not’,thelegislativeintentwastocoveronlynon-monetarybenefits/perquisites

95. 95
Providing clarity on benefits and perquisites in cash
[Clause 11] (w.e.f. 01.04.2024)
TheCourtshave,inthefollowingdecisions,heldthatforattractingtheprovisionsof
section28(iv),thebenefits/perquisitesmustbenon-monetaryinnatureandthatthesaid
provisiondoesnotapplytobenefits/perquisitesreceivedincashormoney:
oCITvsMahindra&MahindraLtd:404ITR1(SC)
oCITvsJindalEquipmentsLeasing&ConsultancyServicesLtd:325ITR87(Del)
oCITvsToshaInternationalLtd:331ITR440(Del)
Basistheaforesaidlegalprecedents,monetarybenefitarisingpursuanttocapitalaccount
transactions,particularlywaiverofloanandinterestthereon(notclaimedasbusiness
deduction),areconsideredasnotliabletotaxundertheextantprovisions

96. 96
Providing clarity on benefits and perquisites in cash
[Clause 11] (w.e.f. 01.04.2024)
Memorandum,however,statesthattheintentionoftheLegislaturebehindintroduction
ofsection28(iv)wastoincludebenefitsorperquisites,bothincashandkind[Circular
No.20Ddated07.07.1964] .However,theCourtshaveinterpretedthatmonetarybenefit
isnotcoveredwithintheambitofsaidsection
Memorandumfurtherstatesthatinordertoaligntheprovisionswiththeintentionof
Legislature,itisnowclarifiedthatclause(iv)ofsection28alsoappliesifbenefitor
perquisiteprovidedisincashorpartlyincashandpartlyinkind

97. 97
Providing clarity on benefits and perquisites in cash
[Clause 11] (w.e.f. 01.04.2024)
Comments/Observations
Proposedamendment,seekingtodilutethelegalpositionsettledbytheSupreme
CourtinthecaseofMahindra&MahindraLtd(supra),shallhaveserious
consequences
Pertinently,intheproposedamendment,thereisnoexclusiontoCompanies
undergoingdebtrestructuring(likeOTSwithbanks/financialinstitutions),
reorganizationsandinsolvencyresolutionunderIBC
Accordingly,issuethatarisesiswhetherwaiverofloanunderonetimesettlement
schemewithbanks,financialinstitutionsandothercreditors,beingfundamentallya
capitalreceipt,wouldnowbecometaxableundersection28(iv)?

98. 98
Providing clarity on benefits and perquisites in cash
[Clause 11] (w.e.f. 01.04.2024)
Comments/Observations
TakeexampleoffollowingbalancesheetofaCorporateDebtor:
Liabilities Amount
(in Rs. crores)
Assets Amount
(in Rs. crores)
Share Capital 100 ….. …..
Loan 1,000
Interest payable 200
Total 1,300 Total 1,300

99. 99
Providing clarity on benefits and perquisites in cash
[Clause 11] (w.e.f. 01.04.2024)
Comments/Observations
VideQuestionNo.1ofCircularNo.18of2022dated13.09.2022, itwasprovidedthat
benefitarisingfromsettlement/waiverofloanbyspecifiedfinancialinstitutionswould
notbesubjectedtoprovisionsofsection194R.Itwas,however,clarifiedthatsuch
exemptionfromtaxwithholdingwouldnotimpactthetaxabilityofincomeinthehands
oftheborrower.Consideringtheproposedamendmentwherebycashbenefitswould
specificallygetincludedwithintheambitofsection28(iv),itappearsthattheamount
ofloanwaivedwouldgettaxedinthehandsoftheborrower

100. 100
Providing clarity on benefits and perquisites in cash
[Clause 11] (w.e.f. 01.04.2024)
Whetherproposedamendmentexpresslymadeapplicablefrom1stApril,2024, canbe
appliedtoearlierassessmentyears?
oAnenactmentistobeconstruedasprospective,unlessthecontraryappearsfrom
theexpresslanguageorbynecessaryimplication[N.GovindarajuvsITO:377
ITR243(Kar)]
oAmendmentoverrulingadecisionoftheSupremeCourtcannothaveretrospective
effect

101. 101
Providing clarity on benefits and perquisites in cash - Section 194R
[Clause 86] (w.e.f. 01.04.2023)
Section194RwasinsertedtoapplyTDSonbenefitsorperquisites, whether
convertibleintomoneyornot,arisingfromcarryingoutofabusinessorexercising
ofaprofession
Firstprovisoofsection194R expandedthescopeofthesectiontobenefitor
perquisite,whollyinkindorpartlyincashandpartlyinkind
MemorandumtoFinanceBill,2022categoricallystatedthatsection194Rprovides
fordeductionoftaxinrespectofincomefallingwithintheambitofsection28(iv)-
consideringthatprovisionsofsection28(iv)wereheldtobenotapplicabletomonetary
transactions,itwasinterpretedthatpuremonetarytransactionswouldbeoutsidethe
ambitofsection194Raswell

102. 102
Providing clarity on benefits and perquisites in cash - Section 194R
[Clause 86] (w.e.f. 01.04.2023)
Videquestion2ofCircularNo.12of2022, relyingonfirstprovisotosection
194R(1),CBDTclarifiedthattaxundersection194Risrequiredtobedeductedonall
benefitsorperquisites,whetherincashorinkind
TheaboveclarificationisnowproposedtoinsertedbywayofinsertinganExplanation
inthesection

103. 103
Providing clarity on benefits and perquisites in cash - Section 194R
[Clause86] (w.e.f.01.04.2023)
Comments/Observations
Proposedamendmentseekstowidenthedefinitionofbenefit/perquisitetoincludepure
monetarytransactionsundersection194R inlinewiththeamendmentmadeinsection
28(iv)
Section194Rwasinsertedw.e.f.,01.07.2022 andExplanation2hasbeenmade
applicablefrom01.04.2023 –WhethertheamendmentisapplicabletoAY2023-24?
Canthedeductorbeheldliabletodeducttaxatsourceduringtheperiodwhenthe
explanationwasnotonthestatute[EngineeringAnalysisCentreofExcellence(P)Ltd
vsCIT:432ITR471(SC)]

104. 104
Providing clarity on benefits and perquisites in cash section 194R
[Clause 86] (w.e.f. 01.04.2023)
Thelanguageofsection194R(1)isplain,unambiguousandparimateriatosection
28(iv),andwasinterpretedtoexcludemonetarybenefitsunderthatprovision. Thefirst
provisosoughttoexpandthescopeofthemainprovisionofsection194R(1)tomakeit
applicabletobenefitswhichwerepartlyincashandpartlyinkind
Whenprovisionsofsection194Rareclearandunambiguous-CanExplanationexpand
thescopeofmainprovision?[KatiraConstructionLtdvsUOI:352ITR513(Guj)]
andN.GovindarajuvsITO:377ITR243(Kar)]

105. 105
CAPITAL GAINS

106. 106
Converting Gold to Electronic Gold Receipt and vice versa
[Clauses 3,21,23] (w.e.f. 01.04.2024)
SEBI,initsmeetingheldonSeptember28,2021, approvedtheframeworkforGold
ExchangeandSEBI(VaultManagers)Regulations,2021
InordertopromotetheconceptofEGR,thefollowingamendmentareproposedinthe
FinanceBill:
oSection47isproposedtobeamendedtoprovidethatthatconversionofgoldinto
EGRorvice-versashallnotbetreatedas“transfer”forthepurposesofcapitalgains
oSection2(42A)toprovidethatonconversionoftheEGRintogoldandviceversa,the
periodofholdingwouldbereckonedfromthedateofacquisitionoftheoriginally
convertedasset
oSection49toprovidethatthecostofacquisitionofEGR/Gold(asthecasemaybe)
shallbedeemedtobethecostoftheconvertedasset

107. 107
Limiting roll over benefit under section 54/ 54F
[Clauses25&30] (w.e.f.01.04.2024)
Undertheexistingprovisions,deductionisallowed(withoutanycapping)ontheamountoflong-
termcapitalgainsre-investedinaresidentialhousepropertyasunder:
oSection54allowsdeductionongainsarisingfromtransferofresidentialhouseifsuchgainis
re-investedinaresidentialhouse;
oSection54Fallowsdeductionongainsarisingfromtransferofanylong-termcapitalasset
(exceptresidentialhouse),ifthenetconsiderationisre-investedinaresidentialhouse
Presentlythereisnorestrictionontheamountofexemptionthatcanbeclaimedfromlongterm
capitalgainsbyre-investinginaresidentialhouse
TheproposedamendmentnowputsacapofINR10crore(tencrores)ontheexemptionthatcanbe
claimedundersection54andsection54Fonreinvestmentmadeinresidentialhouse.The
amendmentalsoprovidesthatifthecostofthenewassetpurchasedismorethanINR10crore,the
costofsuchassetshallbedeemedtobeINR10croreonly

108. 108
Limiting roll over benefit under section 54/ 54F
[Clauses25&30] (w.e.f.01.04.2024)
Consequentialamendmentsarealsoproposedinsub-section(2)ofsection54andsub-
section(4)ofsection54Ftorestricttheamountofdepositthatcanbemadeinthe
CapitalGainsAccountSchemetoINR10crores
Theamendmenthasbeenproposedtodislodgehugeclaimofexemptionbeingmadeby
high-net-worthindividuals(HNIs)whoreinvestproceedsonsaleoftheirinvestmentsfor
purchasingexpensiveresidentialhouses,whichisstatedtobecontrarytotheintentfor
whichthesectionwasintroduced
Theamendmentproposedisprospectiveinnatureandwouldapplyinrelationto
assessmentyear2024-25andsubsequentassessmentyears

109. 109
Limiting roll over benefit under section 54/ 54F
[Clauses25&30] (w.e.f.01.04.2024)
Comments/Observations
Theamendmentonlyproposestorestrictthequantumofexemptionthatcanbeclaimed
undersection54/54FoftheActandwouldhavenoimpactontheactualcostof
acquisitionoftheasset
TheproposedmovetorestrictthequantumofexemptiontoINR10croreswillhavean
adverseimpactonluxuryhomesalesandalsoHNIswhoavaillargecapitalgains
exemptiononaccountofhighvaluetransactions
ThelimitofINR10croresseemstobeunrealisticconsideringtheexponentialrisein
realestatepricesintherecentpast
WhetheramountskeptinCapitalGainsAccountSchemeason31.03.2023 and
reinvestedinassessmentyear2024-25wouldbeimpactedbytheproposedamendment?

110. 110
Taxation of capital gains in case of Market Linked Debentures
[Clause 24] (w.e.f. 01.04.2024)
Asperthememorandum,hybridsecuritieshavingfeaturesofdebtsecuritiesandexchange
tradedderivativesarebeingissued,listedandtradedonstockexchangeandarebeing
subjecttotaxaslong-termcapitalgains@10%withoutindexationundersection112.
Thesesecuritiesareprimarilyinthenatureofderivativeslinkedwithperformanceof
marketandgivevariableinterest
Inordertotaxincomearisingfrommarketlinkeddebenturesinthesamemanneras
derivativetrades(whicharesubjecttotax@30%),section50AAisproposedtobeinserted
totaxthetransfer,redemptionormaturityofMarketLinkedDebenturesasshort-term
capitalgains

111. 111
Taxation of capital gains in case of Market Linked Debentures
[Clause 24] (w.e.f. 01.04.2024)
MarketlinkedDebenturesisdefinedasasecuritybywhatevernamecalled,whichhasan
underlyingprincipalcomponentintheformofadebtsecurityandwherethereturnsare
linkedtomarketreturnsonotherunderlyingsecuritiesorindicesandincludeanysecurities
classifiedorregulatedasaMarketLinkedDebenturebySEBI

112. 112
Defining cost of acquisition in case of certain assets
[Clause31] (w.e.f.01.04.2024)
Undertheexistingprovisionsofsection55,thecostofacquisitionandimprovementin
respectofself-generated‘intangibleassets’or‘anyotherright’hasnotbeenspecifically
defined
Thecostofacquisitioninrespectofself-generatedintangibleassets/rightsforthe
purposeofcomputingcapitalgainshasbeensubjecttowidespreadlitigation,considering
thatthepresentprovisionsdonotclearlydefinesuchcostofacquisitionas‘Nil'
Intermsofthelegalpositionasitstandstoday,adefinitecostofacquisitionisrequired
fortaxabilityofcapitalgains,intheabsenceofwhichthecomputationmechanismwould
fail,leadingtonotaxabilityofcapitalgains[Refer:CITvsB.C.SrinivasaSetty:128
ITR294(SC)]

113. 113
Defining cost of acquisition in case of certain assets
[Clause31] (w.e.f.01.04.2024)
TheFinanceBill,2023nowproposestoamendprovisionsofsub-clause(1)ofclause(b)
ofsub-section(1)andclause(a)ofsub-section(2)ofsection55tospecificallydefinethe
term‘costofacquisition’and‘costofimprovement’inrespectofsuchself-generated
capitalassetbeing‘intangibleasset’or‘anyotherright’as“Nil”
Comments/Observations
‘Intangibleassets’and‘anyotherrights’,beingundefinedterms,couldbeconstruedvery
widelyandmanytransactionswhicharecurrentlynotsubjecttotax,norintendedtobe
taxedmaypotentiallybecovered
Leaseholdrights,reversionaryrights,mortgage,lifeinterest,intellectualpropertyrights,
andrightsintechnology,righttospecificperformanceoreasementrightsmaynowstand
coveredbytheproposedamendment

114. 114
BUSINESS REORGANIZATION

115. 115
Provisions related to business reorganization
[Clause 77] (w.e.f. 01.04.2023)
Section170AoftheActwasinsertedvideFinanceAct,2022togiveeffecttotheorderof
theTribunalorCourtinrespectofbusinessreorganizationhavingimpactontheincome
taxreturnfiledbythesuccessorintheprecedingyear(s)
Notwithstandingtheprovisionsofsection139whichprovidesfortheduedateforfiling
theincometaxreturn,thenewsectionpermitsfilingofthemodifiedreturnbythe
successorcompanyincaseofbusinessreorganizationuponreceiptoftheorderofHigh
CourtorTribunaloranadjudicatingauthority,withinaperiodofsixmonthsfromthe
dateofsuchorderinsuchformandmannerasmaybeprescribed

116. 116
Provisions related to business reorganization
[Clause 77] (w.e.f. 01.04.2023)
Rule12ADhasbeennotifiedprescribingtheformandmanneroffurnishingsuch
modifiedreturnbycompaniesbytheBoardvideNotificationNo.110/2022dated
19.09.2022
Presently,thereisnoprovisionontheproceduretobefollowedbytheassessingofficer
afterthemodifiedreturnisfurnishedbythesuccessorentity

117. 117
Provisions related to business reorganization
[Clause 77] (w.e.f. 01.04.2023)
Inordertoenablemodificationofthereturnofincomealreadyfiledbythepredecessor
beforereceiptoforderfromtheconcernedAuthority/Court/Tribunal,extantprovisionsof
section170Aareproposedtobesubstitutedtoprovidethatinrespectofanyreturnof
incomefurnishedforanyassessmentyearbythepredecessorpriortotheorder,the
successorshallfurnish,withinaperiodofsixmonthsfromtheendofthemonthinwhich
thesaidorderwasissued,amodifiedreturnintheformandmanner,asmaybe
prescribed,inaccordancewithandlimitedtothesaidorder

118. 118
Provisions related to business reorganization
[Clause 77] (w.e.f. 01.04.2023)
Itisproposedtofurtherprovidethattheassessingofficershallpassanorder
assessing/reassessing/modifyingthetotalincomeoftherelevantassessmentyearin
accordancewiththeorderofthebusinessreorganizationandtakingintoaccountthe
modifiedreturnsofurnished
Forthepurposesofsuchassessmentorreassessment,allotherprovisionsshallapplyand
thetaxshallbechargeableattherateapplicabletosuchassessmentyear

119. 119
TAX DEDUCTION/
COLLECTIONAT SOURCE

120. 120
Increase in threshold limit for co-operatives to withdraw cash
without TDS
[Clause 85] (w.e.f. 01.04.2023)
Undersection194N,anybankingcompanyoraco-operativesocietyengagedinthe
businessofbankingorapostofficeisrequiredtodeducttaxatsourceattherateof2%at
thetimeofpaymentinexcessofRs.1crore
Incaseofnon-filers,followingTDSratesareapplicable:
o2%onanysumexceedingRs.20lakhbutnotexceedingRs.1crore;
o5%onsumexceedingRs.1crore

121. 121
Increase in threshold limit for co-operatives to withdraw cash
without TDS
[Clause 85] (w.e.f. 01.04.2023)
Ithasnowbeenproposedtoincreasethethresholdlimitforrecipientsbeingco-
operativesocietiestoRs.3crorerupeesinsteadofexistinglimitofRs.1crorerupees
Forco-operativesocietieswhoarenon-filers,thedeductionshallbemadeattherateof
2%onsumsexceedingRs.20lakhbutnotexceedingRs.3croresand5%onsums
exceedingRs.3crores

122. 122
Increase in threshold limit for co-operatives to withdraw cash
without TDS
[Clause 85] (w.e.f. 01.04.2023)
Comments/ Observations
Thismovehasbeenproposedtopromoteco-operativesocietiesandisinlinewithother
amendmentsproposedundersection269SSand269T
Thesemeasureshavearrivedamidthegovernmentpromotingacooperative-based
economicdevelopmentmodel,especiallyforsmallandmarginalfarmers,andother
marginalizedsections

123. 123
Increase in threshold limit for co-operatives to withdraw cash
without TDS
[Clause 85] (w.e.f. 01.04.2023)
Comments/Observations
Co-operativesocietiesinIndiaaremainlyengagedinagriculture,dairies,sugarmills,
spinningmillsandcashisafundamentalmodeofoperationforthesecooperatives.The
enhancedthresholdforcashwithdrawalwouldprovideamuch-neededimpetustotheco-
operativesector

124. 124
Extending the scope for deduction of tax at source to lower or
nil rate
[Clause 88] (w.e.f. 01.04.2023)
Section194LBAwhich,inter-alia,providesthatabusinesstrustshalldeductand
deposittax@5%ondistributionofincometonon-residentunitholders,ispresently
notcoveredwithintheambitofsection197
Representationswerereceivedthatinsomecasesdeductionoftaxmaynotberequired
onaccountofcertainexemptions.However,sincecertificateforlowerdeductionunder
section194LBAcannotbeobtainedundersection197,benefitofexemptionisnot
availableatthetimeoftaxdeduction
Itisnowproposedtoamendsection197(1)tomakesection194LBA eligiblefor
obtainingcertificatefordeductionatlowerornilrate

125. 125
TDS exemption on payment of interest on listed debentures to a
resident withdrawn
[Clause 81] (w.e.f.01.04.2023)
Section193providesforTDSonpaymentofanyincometoaresidentbywayofintereston
securities
NoTDSisrequiredtobedeductedoninterestonsecuritiesissuedbyacompany,wheresuch
securityisindematerializedformandislistedonarecognizedstockexchangeinIndia[refer
clause(ix)ofprovisotosection193]
TheFinanceBillstatesthatthereisunderreportingofincome,onaccountofnon-deductionoftax
atsource. Accordingly,itisproposedtoomitclause(ix)towithdrawtheaboveTDSexemption
Comments/ObservationsThiswouldincreasetheadditionaltaxcompliancesforlistedcompaniesissuingsuchsecurities

126. 126
Online gaming –Taxability of income
[Clauses 53 & 54] (w.e.f. 01.04.2024)
Theexistingprovisionsofsection115BBprovidesfortaxationattherateof30%on
winningsfromlotteries,crosswordpuzzles,racesincludinghorseraces,cardgamesand
othergamesofanysortorgamblingorbettingofanyformornaturewhatsoever
Itisproposedtoamendsection115BBtoexcludeonlinegamingandinsertanew
section115BBJtospecificallyprovidefortaxationofwinningsfromonlinegamesatthe
samerateof30%.‘Onlinegame’hasbeendefinedtomeanagameofferedontheinternet
accessiblethroughcomputers,mobiles,etc.

127. 127
Online gaming –Taxability of income
[Clauses 53 & 54] (w.e.f. 01.04.2024)
Comments/Observations
TheFinanceBillcreatesadistinctionbetweentaxationofonlineandofflinegames
Analysisof‘gameofskill’vs‘gameofchance’-irrelevantforonlinegames?

128. 128
Offline gaming –Rationalization of TDS provisions
[Clauses 82 & 84] (w.e.f. 01.04.2023)
Sections194B and194BBcurrentlyprovidefordeductionoftaxattherateof30%on
paymentofanyamountexceedingRs.10,000
Presently,thereisnoclarityastohowthresholdlimitofRs.10,000istobecomputed
TheFinanceBill2023proposestoclarifythatthresholdlimitofRs.10,000istobe
computedonanaggregatebasisinafinancialyear

129. 129
Offline gaming –Rationalization of TDS provisions
[Clauses 82 & 84] (w.e.f. 01.04.2023)
Itisalsoproposedtoamendsection194B toprovidethattaxonwinningsfromonline
gamingwouldnotbedeductedunderthissectionw.e.f.1
st
July2023
Comments/Observations
Theamendmentsinsection194B and194BB istotaprevenueleakageonaccountof
splittingawinningintomultipletransactions,eachbelowRs.10,000

130. 130
Online gaming –TDS provisions
[Clause 83] (w.e.f. 01.07.2023)
Itisalsoproposedtoinsertanewsection194BAtodealwithdeductionoftaxatsourceon
winningsfromonlinegames
Underthenewprovisions,withholdingisproposedtotakeplaceon‘netwinnings’intheuser
account
Incasethereiswithdrawalfromuseraccountduringthefinancialyear,taxshallbededucted
atthetimeofsuchwithdrawalonnetwinnings.Inaddition,income-taxshallalsobededucted
ontheremainingamountofnetwinningsintheuseraccountattheendofthefinancialyear
Nominimumthresholdhasbeenprescribedunderthissection

131. 131
Online gaming –TDS provisions
[Clause 83] (w.e.f. 01.07.2023)
Incasewinningsarepartlyinkindandcashandthecashcomponentisshortofthetax
requiredtobededucted,personresponsibleforpayingTDSshallensurethattaxhasbeen
paidinrespectofsuchwinnings
Computationofnetwinningswillbeprescribedinduecourse
Asperstrictreadingofthesection,theproposedamendmentisapplicabletoallusers,
includingnon-residentusers.Evennon-residentonlinegamingintermediaryisresponsiblefor
deductingTDS
TDSistobedeductedasperratesinforce

132. 132
Online gaming –TDS provisions
[Clause 83] (w.e.f. 01.07.2023)
Comments/Observations
Nothresholdfordeductionoftaxwouldincreasecomplianceburden
Wouldnetwinningsmeanwinningsnetofentryfees/platformfeeornetoflosses
incurredinothergames?
Ifwinningsnetoflossesisnotconsidered,theamountintheuseraccountmayfallshort
ofthetaxrequiredtobededucted

133. 133
Online gaming –TDS provisions
[Clause 83] (w.e.f. 01.07.2023)
Comments/Observations
WinningspertainingtotheperiodApriltoJune2023otherwisenotliablefordeductionoftaxes,
wouldbecomeliablefordeductionoftaxatsourceonwithdrawalafter01July2023
UserswillnowneedtoprovidePANandotherdetailsacrossthegamingplatformstoclaimcredit
forwithholdingtax
Section194BA, beingnonobstanteclauseoverridesallotherprovisionsoftheAct-whether
treatybenefitwouldbeallowedtonon-residentusers?
Anissuewouldarisew.r.t.applicabilityofwithholdingtaxobligationonnon-residentonline
gamingintermediary,particularlywheregamerisanon-residentuser–tantamounttoextra
territorialoperationoflaw.Taxabilitymayalsoarisefornon-residentusersplayingonlinegames
onplatformofresidentonlinegamingintermediary

134. 134
Increasing rate of TCS of certain remittances
[Clause 90] (w.e.f. 01.07.2023)
Section206CprovidesforTCSonprofitsandgainsfromthebusinessoftradingin
alcohol,liquor,forestproduce,scrapetc.
Sub-section(1G)wasinsertedinsection206C videFinanceAct,2020toprovidefor
TCSonforeignremittancemadethroughtheLiberalizedRemittanceSchemeandon
saleofoverseastourpackage.TheobligationofthesaidTCSisontheAuthorized
DealerBank(ADBank)throughwhichtheremittancesaremade
ItisnowproposedtoincreasetheratesofTCSonoverseastravel,foreignremittances
made(otherthanforthepurposeofeducationormedicalexpenditure)from5%to20%
ontheamountsremittedduringthefinancialyearwithoutanythreshold

135. 135
Increasing rate of TCS of certain remittances
[Clause 90] (w.e.f. 01.07.2023)
ThecurrentandproposedTCSratesaretabulatedasunder:
S. No.Natureof foreign remittance Currentrate Proposed rate
(1) Forthepurposeofeducation,if
remittanceisaloanobtainedfromany
financialinstitutionasdefinedinsection
80E.
0.5% of the amount/aggregate of the
amounts remitted during the FY in
excess of Rs. 7 lakh.
No change
(2) Forthepurposeofeducation,otherthan
(1)orforthepurposeofmedical
treatment.
5% of the amount/aggregate of the
amounts in excess of Rs. 7 lakh.
No change
(3) Overseastourpackage 5% without any threshold limit.20%without any
threshold limit
(4) Anyothercase 5% of the amount/aggregate of the
amounts in excess of Rs. 7 lakh.
20%without any
threshold limit

136. 136
Increasing rate of TCS of certain remittances
[Clause 90] (w.e.f. 01.07.2023)
Comments/Observations
HigherTCSonoverseastravel,foreignremittancesmade(otherthanforthepurposeof
educationormedicalexpenditure)from5%to20%wouldresultinhighercashoutflow
atthetimeofremittance
Intendedtokeepacheckonhigherforeignremittancevis-à-vislowincomereportedin
theITR

137. 137
Clarification for consideration received through cheques in
case of Joint Development Agreements (JDA)
[Clause 20] (w.e.f. 01.04.2024)
UndertheexistingprovisionsoftheAct,incaseofanassessee, beinganindividualor
Hinduundividedfamily,whoentersintoaspecifiedregisteredagreementfor
developmentofaproject,thecapitalgainsshallbechargeabletoincome-taxinthe
previousyearinwhichthecertificateofcompletionforthewholeorpartofthe
projectisissuedbythecompetentauthority[refersection45(5A)]
IncaseofJDA,theconsiderationfortheland-ownermaybeinformoflumpsum
consideration,percentageofsalesrevenueorpercentageofthenewlyconstructedproject
dependinguponthetermsmutuallyagreeduponbytheparties

138. 138
Clarification for consideration received through cheques in
case of Joint Development Agreements (JDA)
[Clause 20] (w.e.f. 01.04.2024)
Forthepurposeofcomputationofcapitalgainsundersection48,thestampdutyvalueof
theshareoftheowner,beinglandorbuildingorboth,intheproject,onthedateofissue
ofcompletioncertificate,“asincreasedbytheconsiderationreceivedincash”,ifany,is
deemedtobethefullvalueoftheconsideration
Correspondingly,theexistingprovisionsofsection194-ICprovidesfordeductionoftax
atsourcebydevelopersuponpaymentofconsiderationincashorbyissueofacheque
ordraftorbyanyothermode(otherthaninkind)tolandownersattherateof10%

139. 139
Clarification for consideration received through cheques in
case of Joint Development Agreements (JDA)
[Clause 20] (w.e.f. 01.04.2024)
Ithasbeennowproposedtoamendsection45(5A)toalignwithsection194-ICofthe
Actandclarifythatpaymentsreceivedinamodeotherthancash,i.e.,chequeor
electronicpaymentmodeswouldbeincludedinthefullvalueconsiderationforthe
purposeofcomputingcapitalgainschargeabletotaxunderthissection
Comments/ObservationsThisisaclarificatoryamendmentandhasnosubstantiveconsequence
Interpretationofexpression‘receiptincash’insection45(5A)toexcludeamounts
receivedthroughbankingchannelswouldhave,infact,resultedinabsurdity

140. 140
Clarification for consideration received through cheques in
case of joint development agreements
[Clause 20] (w.e.f. 01.04.2024)
TheFinanceBillhas,however,notaddressedseveralopenissuesundersection45(5A),including,
interalia,thefollowing:
oProvisionsshouldalsobemadeapplicabletopersonsotherthanindividualandHUFs
oWhethertimelimitforclaimingbenefitofexemptionfromlong-termcapitalgainunder
section54and54Fistobereckonedfromdateoftransfer(whichisthedateofenteringinto
theJDA)orfromthedateofissuanceofcompletioncertificate?
oWhetherbenefitofindexationoncost/improvementwouldbeavailabletilltheyearinwhich
completioncertificatehasbeenreceivedoronlytilltheyearinwhichtheJDAhasbeen
enteredinto?

141. 141
Amendments in penalty and prosecution provisions
[Clause 113 and 119] (w.e.f. 01.04.2023/ 01.07.2023)
Penaltyandprosecutionprovisionscontainedinsections271Cand276B havebeen
amendedtoincludeTDSdefaultsundernewlyintroducedsections194Rand194S
(w.e.f.01.04.2023) andtheproposedsection194BA (w.e.f.01.07.2023) withinits
ambit

142. 142
Tax treaty relief at the time of TDS under section 196A of the Act
[Clause 87] (w.e.f. 01.04.2023)
Section196AprovidesforTDSonspecifiedincomes@20%.
Unlikesection195,section196A doesnotprovidefordeductionoftaxat‘ratesin
force’,whichincludestaxratesprovidedinDTAAs;therebyrequiringdeductionoftax
athigherrateof20%.
SupremeCourtinthecaseofPILCOMvsCIT:[2020] 425ITR312(SC)heldthat
payercannotapplyratesprescribedundertherelevantDTAAsforTDSonpaymentsto
non-residentswheretheActcontainsprovisionsprovidingforspecificTDSrateson
suchpayments.

143. 143
Tax treaty relief at the time of TDS under section 196A of the Act
[Clause 87] (w.e.f. 01.04.2023)
Itis,accordingly,proposedtoinsertaprovisoinsection196A(1)toprovidethatincase
ofapayeetowhomDTAAappliesandsuchpayeehasfurnishedthetaxresidency
certificatereferredtoinsection90(4)/section90A(4),then,taxshallbededucted@
20%orrateofincome-taxprovidedinDTAAforsuchincome,whicheverislower
Comments/Observations
Intermsoftheextantprovisions,non-residentsandforeigncompanysufferTDSat
higherrateof20%andthereafter,claimeligibilityoflowerratesundertherespective
DTAAsandrefundofadditionaltaxdeductedinIndiabyfilingreturnofincome

144. 144
Tax treaty relief at the time of TDS under section 196A of the Act
[Clause 87] (w.e.f. 01.04.2023)
RepatriationoftaxrefundinvolvesopeningabankaccountinIndiathatresultedin
unnecessarycomplianceforsuchnon-residents/foreigncompanies
Theaforesaidamendmentisawelcomemove,removingthehighertaxburdenimposed
onnon-residentsandforeigncompany,whichultimatelywouldhavebeenrefundable
tothem,therebyalsoleavingmoremoneyintheirhandstoinvestinIndia

145. 145
Tax treaty relief at the time of TDS under section 196A of the Act
[Clause87] (w.e.f.01.04.2023)
Section196Aprovidesthatanypersonresponsibleforpayingtoanon-residentany
incomeinrespectofunitsofaMutualFundspecifiedundersection10(23D)ora
companyreferredtoinsection2ofUnitTrustofIndiaAct,2002shalldeductincome-tax
@20%
Presently,benefitofthelowertaxrateintheTaxTreatyisnotavailableatthetimeof
deductionoftaxatsourceundertheaforesaidsection

146. 146
Tax treaty relief at the time of TDS under section 196A of the Act
[Clause87] (w.e.f.01.04.2023)
Inordertoprovidetherelieftothenon-residenttaxpayers,FinanceBill,2023proposesto
insertaprovisotosection196A(1)whichseekstoprovidethat:
otaxwouldbedeductedattheratewhichisloweroftherateof20%andtherate
providedundertherelevantTaxTreatyprovidedsuchpayeehasfurnishedthetax
residencycertificatereferredtoinsection90(4)

147. 147
Tax treaty relief at the time of TDS under section 196A of the Act
[Clause87] (w.e.f.01.04.2023)
TheSupremeCourtinthecaseofPILCOMvsCIT:[2020] 271Taxman200(SC),has
heldthat:
opayercannotapplyratesprescribedundertherelevanttaxtreatyforTDSonpayments
tonon-residentswheretheActcontainsprovisionsprovidingforspecificTDSrateson
suchpayments
oInthesaiddecision,itwasheldthatforpaymentscoveredbysection115BBA,tax
wasrequiredtobededucted@10%asprovidedinsection194Eandthebenefitoftax
treatycouldnotbeavailedatthestageofTDSsinceunlikesection195oftheAct,
section194EprovidesforTDSataflatrateof10%andnotasper‘ratesinforce’,
whichexpressionwouldincludeDTAArateswithinitsambit

148. 148
Tax treaty relief at the time of TDS under section 196A of the Act
[Clause 87] (w.e.f. 01.04.2023)
Consequenttotheaforesaidamendment,theratiodecidendioftheaforesaidcaseshallnot
applytodeductionoftaxatsourcetobemadeundersection196A

149. 149
TDS on payment of accumulated balance to an employee under
section 192A
[Clause 80] (w.e.f. 01.04.2023)
Section 192A provides for TDS on payment of accumulated balance due to an employee under the
Employee's Provident Fund Scheme, 1952 (‘EPFS’)
Rule8oftheFourthScheduleexemptsaccumulatedbalancewithdrawnbyanemployeeon
fulfilmentofcertainconditionsprescribedtherein
WhereRule8oftheFourthSchedulebecomesnotapplicable,thedeductorisstatutorilyrequiredto
deductTDS@10%,wheresuchpaymentortheaggregateamountofsuchpaymentexceeds
Rs.50,000
Thesecondprovisotosection192A requirestherecipienttofurnishhisPANtothedeductor,
failingwhichtaxshallbedeductedatthemaximummarginalrate,whichmayextendupto42.74%,
causinggraveprejudicetomanylow-paidemployeeswhodonothavePAN

150. 150
TDS on payment of accumulated balance to an employeeunder
section 192A
[Clause 80] (w.e.f. 01.04.2023)
Inordertoovercomethisproblem,itisnowproposedtoomitthesecondprovisotosection192A,
sothatwithholdingtaxincaseswherethetaxpayerfailstofurnishPANisatparwithsection
206AA,i.e.,taxedat20%insteadofmaximummarginalrate
Comments/Observations
Thisisawelcomeamendmentthatwouldrelievethelowpaidemployeesfromunwarrantedtax
burden

151. 151
TDS credit for incomes offered to tax in previous years
[Clauses 74 & 93] (w.e.f. 01.10.2023)
Theexistingprovisionsofsection155(14)provideforgrantofTDSandTCScredits,deniedearlieronthe
groundthatTDS/TCScertificateswerenotfiledwiththetaxreturn,uponfurnishingofsuchcertificatesby
assesseeswithin2yearsfromtheendoftheassessmentyearinwhichsuchincomeisassessable.Such
creditsweregrantedprovidedthecorrespondingincomewasreportedinthetaxreturnforthatassessment
year
Inmanycases,TDScreditmismatchesariseowingtotimingdifferencesorspreadoverofreceiptsinmore
thanoneyearordifferentaccountingmethodsfollowedbythedeductoranddeductee.Suchissuescouldnot
beresolvedthroughrecoursetosection155(14)astaxwasnecessarilynotdeductedinthesameyearin
whichincomewasofferedtotaxbytheassessee
Itmayalsonotbepossibletorevisethereturnofpastyearinwhichthecorrespondingincomewasincluded
sincetimetorevisethereturnofincomeforthatyearmayhavelapsed.Thisresultedindifficultytothe
taxpayersinclaimingcreditofTDS

152. 152
TDS credit for incomes offered to tax in previous years
[Clauses 74 & 93] (w.e.f. 01.10.2023)
Inordertoremovethisdifficulty,itisnowproposedtoinsertsub-section(20)tosection155toprovidethatincase
wheretheincomehasbeenincludedbytheassesseeinthetaxreturnforanyyear,howeverthetaxonsuchincome
hasbeendeductedatsourceinasubsequentfinancialyear,theassessingofficer,onapplicationbytheassessee
shallamendthepreviousorder/intimationandgrantsuchadditionalTDScredit
Theapplicationbytheassesseeisrequiredtobemadewithin2yearsfromtheendofthefinancialyearinwhichsuch
taxwasdeductedatsource
Thelimitationperiodof4yearshasbeenprescribedforpassingofanorderundersection155(20)shallbereckoned
fromtheendofthefinancialyearinwhichsuchtaxhasbeendeducted
Amendmenthasalsobeenproposedinsection244A toprovidethatinterestonrefundarisingasaresultoforder
passedundersection155(20)shallbegrantedfortheperiodstartingfromthedateofapplicationbytheassessee

153. 153
TDS credit for incomes offered to tax in previous years
[Clauses 74 & 93] (w.e.f. 01.10.2023)
Comments/Observations
Interestundersection244A iscompensatoryinnatureandtherefore,shouldhave,atleast,been
providedfromthedateofremittanceoftaxbythedeductorandnotfromthedateofapplication
bythededucteeforsuchcredit
Inaconversescenario,i.e.,wheredeductorfollowsmercantilebasisofaccountingandthe
deducteefollowscashbasisofaccounting,thetaxcreditscanbecarriedforwardandclaimedby
thededucteeinfutureyearscorrespondingtotheincomebeingofferedinaccordancewithsection
199readwithRule37BA.Theincometaxreturnformexpresslyprovidesforsuchcarryforward
ofTDScredit
TheapplicabilityoftheamendmenthasnotbeenextendedtoTCScredit

154. 154
Relief from special provision for higher rate of TDS/TCS for
non-filers of income-tax returns
[Clause 89 & 91] (w.e.f. 01.04.2023)
VideFinanceAct,2021, sections206AB and206CCA wereinsertedintheActas
specialprovisionsprovidingforhigherrateforTDS/TCS(i.e.,twicetherateunderthe
Actor5%,whicheverishigher)forthenon-filers('specifiedpersons')
Underexistingprovisionsofsections206AB and206CCA, “specifiedperson”is
definedtomeanapersonwhohasnotfurnishedthereturnofincomefortheassessment
yearrelevanttothepreviousyearimmediatelyprecedingthefinancialyearinwhich
taxisrequiredtobedeductedorcollected:
ofor which the time limit for furnishing the return of income under section 139(1) has
expired; and
othe aggregate TDS/TCS in his/her is Rs.50,000 or more

155. 155
Relief from special provision for higher rate of TDS/TCS for
non-filers of income-tax returns
[Clause 89 & 91] (w.e.f. 01.04.2023)
Presentlyintermsofprovisotosections206AB and206CCA onlyanon-residentis
excludedfromthedefinitionofspecifiedperson,ifsuchnon-residentdoesnothavea
permanentestablishmentinIndia
Itisnowproposedtoexpandtheexclusionstoalsoexcludeapersonwhoisnot
requiredtofurnishthereturnofincomeforthatassessmentyearandwhoisnotifiedby
theCentralGovernmentintheOfficialGazetteinthisbehalf
Comments/Observations
BigrelieftosmallassesseeswhoarenotliabletofurnishreturnfromhigherTDS/TCS
–reductionincomplianceburdenandhighercashflow

156. 156
APPEALS AND SEARCH &
SEIZURE

157. 157
Introduction of authority of Joint Commissioner (Appeals)
[Clauses3,60to62,64,65,73,75to79,98,99,100to104,107,109to112,115,117,120to
122] (w.e.f.01.04.2023)
TheFinanceBillproposestocreateanewauthority/forumforadjudicationofappeals,Joint
Commissioner(Appeals)inordertoreducethecurrentburdenonthefirstappellateauthority,
Commissioner(Appeals)andensurespeedyhearinganddisposalofappealsinvolvingsmall
amountofdisputeddemand.
ItisproposedtoallowtransferofappealspendingbeforeCommissioner(Appeals)tothenew
forumi.e.,JointCommissioner(Appeals)andvice-versa. Intheinstanceoftransferofappeal,
theassesseeshallbegivenanopportunityofbeing‘reheard’.
ItisproposedthattheJointCommissioner(Appeals)shallhaveallthepowers,responsibilities
andaccountabilitysimilartothatofCommissioner(Appeals)withrespecttotheprocedurefor
disposalofappeals.

158. 158
IntroductionofauthorityofJointCommissioner(Appeals)
[Clauses3,60to62,64,65,73,75to79,98,99,100to104,107,109to112,115,117,120
to122] (w.e.f.01.04.2023)
TheSalientfeatures/powersofthenewappellateforum,JointCommissioner(Appeals)isculled
outasunder:
oIncometaxauthoritiesatJointCommissioner/AdditionalCommissionerleveltoadjudicate
appealsinvolvingsmallamountofdisputeddemand.
oAppealintheproposedforumcanbefiledagainstanassessmentorder,reassessmentorder,
TDSassessmentorder,TDSprocessingorder,TCSassessmentorder,TCSprocessingorder,
penalty(s)orderandtheorderpassedforrectification.Hence,almostallthecategoryof
casesareproposedtobecovered.
oAppealcannotbefiledagainstanorderwhichispassedbyorwiththeapprovalofan
income-taxauthorityabovetherankofDeputyCommissioner.
oTheproposedforumiscontemplatedtobeconductedinafacelessmannerandforthis
purposeaseparateschemeisproposedtobeframed

159. 159
Introduction of authority of Joint Commissioner (Appeals)
[Clauses3,60to62,64,65,73,75to79,98,99,100to104,107,109to112,115,117,120
to122] (w.e.f.01.04.2023)
Comments/Observations
Effectively,onlyorderspassedby‘IncomeTaxOfficer’or‘Assistant/DeputyCommissionerof
IncomeTax’canbechallengedifnoapprovalaccordedbyhigherauthority
ProposedamendmentmaynotapplytoassessmentscompletedbyNFAC,sincetherank/levelof
income-taxauthorityintheAssessmentUnitisnotknown
Noprovisionforprovidingopportunityofhearingbefore‘transfer’ofcasefromCIT(A)tonew
forumandvice-versa
TheJointCommissioner(Appeals)toowillhavethepowerto'confirm','reduce','enhance'or
'annul'theassessmentascurrentlyavailablewithCommissioner(Appeals)
Thequantumof‘smalldisputeddemand’hasnotbeendefined

160. ProvisionsrelatingtoprocedureinappealsbeforetheFirstAppellate
authority-Section250
[Clause100] (w.r.e.f.01.04.2022)
Intermsoftheexistingprovisions,theschemeforappealsundertheAct,thefirstappellate
authorityforanassesseeaggrievedbyanyorderoftheAOisCIT(A).CIT(A)hasthepowers
toconfirm,reduce,enhanceorannul/cancelanorderofassessmentoranorderofpenalty,
afterprovidinganopportunityofbeingheardtotheassesseeandtheAO.
Proposed
amendments
Theamendmentsareproposedinsub-sections(1),(3)to(6)and(7)ofsection250to
introduceJointCommissioner(Appeals)for:
a.issuingnoticetotheappellantandtheAOforfixingadayandplaceofhearingofappeal
againsttheAOorder;
b.Grantingadjournment;
160

161. ProvisionsrelatingtoprocedureinappealsbeforetheFirstAppellate
authority-Section250
[Clause100] (w.r.e.f01.04.2022)
c.ConductingenquiriesanddirectingtheAOtomakefurtherenquiryandreportingthe
result;
d.Allowadditionalgroundsofappealnotspecifiedintheappealmemo;
e.Passingthespeakingorder;
f.CommunicatingtheordertotheassesseeandtoPCCITorCCITorPCITorCIT
Comments/Observations
Section246providedforanappealfunctionsofDy.CIT(A)[before01.06.2000] inrespect
ofthespecifiedorderspassedbytheAO.
161

162. ProvisionsrelatingtoprocedureinappealsbeforetheFirstAppellateauthority
-Section250
[Clause100] (w.r.e.f01.04.2022)
Withtheinsertionoftheprovisionsofsection246A w.e.f.1.10.1998therewasan
overlappingofpowersbetweenDy.CIT(A)andCIT(A)undersections246[appeal
functionsofDy.CIT(A)]and246A.Inordertoremovesuchanoverlapintheprovisionsof
section246and246A,thelegislatureprovidedforthesunsetperiodbeing01.06.2000.
Accordingly,after01.06.2000 allpendingappealsweretransferredtoCIT(A)
TheproposedamendmentisintendedtoclearabottleneckattheCIT(A)leveltohandle
certainclassofcasesinvolvingsmallamountofdisputeddemand
162

163. ProvisionsrelatingtoprocedureinappealsbeforetheFirstAppellateauthority
-Section250
[Clause100] (w.r.e.f01.04.2022)
TheJointCommissioner(Appeals)isproposedtoexerciseallthepowers,
responsibilitiesandaccountabilityofCIT(A)withrespecttotheprocedurefordisposal
ofappeals
PertinentlythevitalconditioninfilingtheappealbeforetheJCIT/Addl.CITisthatan
appealshallnotlieagainstanorderwhich"ispassedby"or"withtheapproval"ofan
income-taxauthorityabovetherankofDCIT
“
163

164. 164
Section 253 –Rationalization of appeals to the Tribunal
[Clause 102] (w.e.f. 01.04.2023)
Penaltymaybeleviedundersections271AAB, 271AAC and271AAD bytheassessing
officeraswellasbytheCommissioner(Appeals)
However,intheabsenceofreferencetosuchpenaltyorderspassedbytheCommissioner
(Appeals)insub-section(1)ofSection253,atpresenttheassesseecannotappealagainstsuch
orderspassedbytheCommissioner(Appeals)
Itisproposedtoamendsection253toprovidethatappealagainstpenaltyorderspassedby
Commissioner(Appeals)undersections271AAB, 271AAC and271AAD maybemadetothe
AppellateTribunal

165. 165
Section 253 –Rationalization of appeals to the Tribunal
[Clause 102] (w.e.f. 01.04.2023)
Anorderofrevisionundersection263canalsobepassedbyPrincipalChiefCommissioner
andChiefCommissioner
However,intheabsenceofreferencetosuchorderspassedbythePrincipal
ChiefCommissionerandChiefCommissionerinsub-section(1)ofSection253,appeal
cannotbefiledbyanaggrievedassesseeagainstsuchorders

166. 166
Section 253 –Rationalization of appeals to the Tribunal
[Clause 102] (w.e.f. 01.04.2023)
Itisproposedtoamendsection253toprovidethatappealagainstrevisionorderspassedby
PrincipalChiefCommissionerorChiefCommissionerundersection263maybemadetothe
AppellateTribunal
FilingcrossobjectionsbeforetheTribunal
Sub-section(4)ofsection253allowstherespondentinanappeal,againstanorderof
Commissioner(Appeals),tofileamemorandumofcross-objectionsagainstanypartofthe
orderoftheCommissioner(Appeals)beforetheAppellateTribunal

167. 167
Section 253 –Rationalization of appeals to the Tribunal
[Clause 102] (w.e.f. 01.04.2023)
However,appealcanbefiledbeforetheTribunalagainsttheordersofauthoritiesotherthan
theCommissioner(Appeals)suchastheorderpassedbytheDisputeResolutionPanel
Itisproposedtoamendsub-section(4)ofsection253toenablefilingofmemorandumof
cross-objections(“CO”)inallclassesofcasesinwhichappealcanbemadetotheAppellate
Tribunal
Accordingly,theassessingofficerwouldnowbeabletofilememorandumofcrossobjections
incaseswheretheassesseefilesanappealtoITATagainstthefinalorderpassedbythe
assessingofficerinconsequenceofdirectionsissuedbytheDisputeResolutionPanel(‘DRP’)

168. 168
[Clause102] (w.e.f.01.04.2023)
Inordertominimizelitigation,sub-section(2A)ofSection253,whichallowedthe
RevenuetofileanappealagainsttheorderoftheDRPwasomittedbyFinanceAct,2016
EventhoughtheorderofDRPisnotappealablebytheRevenueundersub-section(1)of
section253,theRevenuemaychallengethereliefallowedbytheDRPdeletinganyitemof
addition/disallowance,byfilingcrossobjectionsincaseswheretheassesseehasfiled
appealbeforetheTribunalonotherissues
Section 253 –Rationalization of appeals to the Tribunal

169. 169
Assistance to authorized officer during search and seizure
[Clause63] (w.r.e.f.01.04.2023)
Provisionsofsection132relatingtosearchandseizureinter-aliaempowersincome-tax
authority(ies )torequisitionservicesofotherofficers(policeofficersoranyother
officersofCentralGovt.)forassistance,examinationofbooksofaccountorother
documents,procedureforcustodyofevidence,valuationetc.Thesectionalsoprovides
thetimelinestobefollowedbytheincome-taxauthorityduringandpostsearch
proceedings
Therequisitionofservicesforsearchandseizureoperationiscurrentlyrestrictedonlyto
CentralGovernmentemployees

170. 170
Assistance to authorized officer during search and seizure
[Clause63] (w.r.e.f.01.04.2023)
TheFinanceBillnowproposestoamendsub-section(2)ofsection132toprovidethat
duringthecourseofsearchtheauthorizedofficermayrequisitiontheservicesofany
otherpersonorentity,asapprovedbythePrincipalChiefCommissionerortheChief
Commissioner,thePrincipalDirectorGeneralortheDirectorGeneral,inaccordance
withtheprocedureprescribedbytheBoard,toassisthimforthepurposesofthesearch.

171. 171
Assistance to authorized officer during search and seizure
[Clause63] (w.r.e.f.01.04.2023)
Itisalsoproposedtoamendsub-section(9D)ofsection132toempowertheauthorized
officertomakereferencetoanyotherpersonorentityforthepurposeofvaluationof
property/assets
Theamendmenthasbeenproposedinlightoftheincreaseduseoftechnologyand
digitizationineveryaspectincludingmanagementandmaintenanceofaccounts,
digitizationofdata,cloudstorage,assetsbeingheldindigitalformetc.,owingtowhich
theprocedureforsearch&seizurehasbecomecomplex,requiringtheuseofdigital/data
forensicprofessionals,valuers,archiveexperts,advancedtechnologiesfordecodingdata
etc.,forcompleteandproperanalysisofaccountsandvaluationofassetsheldin
encrypted/digitalforms

172. 172
Assistance to authorized officer during search and seizure
[Clause63] (w.r.e.f.01.04.2023)
Theamendmentproposedisretrospectiveinnatureandwouldapplyinrelationto
assessmentyear2023-24andsubsequentassessmentyears
Thetimelinesforcompletingassessmentorreassessmentinsearchcasesislinkedtothe
executionofthelastoftheauthorizationsduringsuchprocedure,inordertoestablishthe
dayofconclusionofsearchproceedings,andwhatconstitutesaslastauthorizationis
providedinsection153B
ConsequenttothechangesinFinanceAct,2021, theassessmentorreassessmentin
consequencetosearchisnowperformedundersection147andprovisionsofsections
153Aand153Barenolongerapplicable

173. 173
Assistance to authorized officer during search and seizure
[Clause63] (w.r.e.f.01.04.2023)
Astheprovisionsofsection153Barenolongerapplicable,itisproposedtoprovidethe
meaningofexecutionoflastauthorizationundersection132itselfasunder:
ointhecaseofsearch,ontheconclusionofsearchasrecordedinthelastpanchnama
drawninrelationtoanypersoninwhosecasethewarrantofauthorizationhasbeen
issued;or
ointhecaseofrequisitionundersection132A,ontheactualreceiptofthebooksof
accountorotherdocumentsorassetsbytheauthorizedofficer
Theamendmentproposedisretrospectiveinnatureandwouldapplyinrelationto
assessmentyear2022-23andsubsequentassessmentyears

174. 174
COMPLIANCES & TAX
ADMINISTRATION –
ASSESSMENT, REASSESSMENT &
REFUNDS

175. 175
Return/ Assessment/ Reassessment/ Revision
[Clause 72] (w.e.f. 01.04.2023)
Section153(1)hasbeenamendedtoincreasethetime-periodforcompletionofassessmentfor
AYs2022-23 andonwards
Theperiodhasbeenincreasedfrom9monthsto12monthsfromtheendoftherelevant
assessmentyear
Limitationhassimilarlybeenenhancedinsub-section(1A),whichprovidesforperiodof
limitationforcompletionofassessmentincaseofupdatedreturnofincomefiledundersection
139(8A),periodoflimitationincreasedfrom9monthsto12monthsfromtheendofthefinancial
yearinwhichupdatedreturnisfiled
TheintentbehindtheamendmentistoprovidemoretimetotheAssessingOfficerstocomplete
assessmentproceedings,asgrievanceshavebeenraisedbytaxpayersthatsufficienttimewasnot
providedduringassessmentproceedingstoprovidesubmissions/evidences; thiswillalsomake
theassessmentprocedurereasonable,inlineswiththeprinciplesofnaturaljustice

176. 176
Return/ Assessment/ Reassessment/ Revision
[Clause 72] (w.e.f. 01.04.2023)
Sub-section(3A)hasbeeninsertedinsection153toprovidethatwhereanassessmentor
re-assessmentispendingonthedateofinitiationofsearch,theninthefollowingcases,
theperiodofassessment/re-assessmentshallstandfurtherextendedby12months:
oIncaseofanassesseeonwhomsearchiscarriedout;
oIncaseofanassesseetowhomanymoney,bullion,jewellery,orothervaluablearticle
seizedorrequisitionedbelongs;
oIncaseofanassessee, towhomanybooksofaccountsordocumentsseizedorany
informationcontainedthereinbelongs;

177. 177
Return/ Assessment/ Reassessment/ Revision
[Clause 72] (w.e.f. 01.04.2023)
Thatundertheerstwhilesearchassessmentregime(section153A,etc.),anyassessment/
re-assessmentpendingonthedateofsearch,abated,andscrutinyproceedingswerelater
initiatedundersection153Aforconcludingassessments; however,thenewre-assessment
regime(section148,148A,etc.)introducedvideFinanceAct,2021, doesnotprovidefor
anyabatementorrevivalofanyassessment/reassessmentproceedingpendingonthedate
ofsearch/requisitionundersection132/132A
Accordingly,anextendedperiodof12monthsisprovidedtoassessingofficertoconduct
properscrutinybasedontheseizedmaterial/investigation

178. 178
Return/ Assessment/ Reassessment/ Revision
[Clause 72] (w.e.f. 01.04.2023)
Theamendedtime-limitsaretabulatedhereunder:
Particulars Old time-limit AmendedTime-limit
Section153(1)
(AY2022-23 onwards)
9monthsfromtheendoftherelevant
AY
12monthsfromtheendofthe
relevantAY
Section 153(3A)
[Searchcaseswhereregular
assessment/re-assessmentis
pendingonthedateof
search]
After01.04.2021, noseparatetime-
limitprovidedforsearchcaseswhere
assessmentwaspendingonthedate
ofsearch
[Noconceptofabatementof
assessment]
Aspertheproposedsub-section,
theexistingtime-limitsprovidedfor
assessment/re-assessmentshallbe
furtherextendedbyaperiodof
12monthsincaseofsearchcases.

179. 179
Return/ Assessment/ Reassessment/ Revision
[Clause 72] (w.e.f. 01.04.2023)
Section153hasbeenamendedtostreamlinesub-sections(3),(5)and(6)withtheamendments
broughtinsection263videFinanceAct,2021
FinanceAct,2021providedpowerstoPrincipalChiefCommissionerandChiefCommissionertopass
ordersundersection263
However,section153wasnotalignedtoprovideforperiodoflimitationwithrespecttoorderspassed
byPrincipalChiefCommissionerandChiefCommissionerundersection263
Accordingly,sub-sections(3),(5)and(6)ofsection153,whichdealswithlimitationforpassingof
consequentialorder,areproposedtobealignedwiththeprovisionsofsection263

180. 180
Return/ Assessment/ Reassessment/ Revision
[Clause 72] (w.e.f. 01.04.2023)
Explanation1tosection153hasbeenamendedtoexcludefromtheperiodoflimitation,thetimetaken
bythevaluertovalueinventoryofanassesseeaspertheamendedprovisionsofsection142(2A)
Further,thereferencetosub-section(1A)hasbeeninsertedinsub-sections(3),(5),and(6),andin
Explanation1,tostreamlinetheprovisionsandavoidanyconflict
Comments/Observations
Extensionofperiodoflimitationforcompletionofassessmentsundersection143/144isinviewofthe
factthatCourtshavebeensettingaside/quashingassessmentordersonthegroundsofviolationof
principlesofnaturaljustice/non-adherencetotheprocedureprovidedundersection144B.
Theassessment/re-assessmentcompletedbytakingintoaccountseizedmaterial/information,if
annulledinappealorbyCourts,whethertheassessment/re-assessmentpendingondateofsearchshall
standberevived?

181. 181
Return/ Assessment/ Reassessment/ Revision
[Clauses 66, 96, 97, 100 & 116] (Sections 134A, 250 and 270 w.e.f. 01.04.2022,
Sections 245MA and 245R w.e.f. 01.04.2023)
Faceless
SchemesandE-Proceedings:
Inlastfewyears,theCentralGovernmenthasintroducedvariousschemestoeliminateface-to-face
interactionbetweenAOsandthetaxpayers,suchas:
oSection135A–E-VerificationScheme2021
oSection245MA –E-DisputeResolutionScheme,2022
oSection245R–E-AdvanceRulingsScheme,2022
oSection250–FacelessAppealScheme,2021
oSection275–FacelessPenaltyScheme,2022
Underthesesections,CentralGovernmentwasonlyempoweredtoissueschemesandnopowerwasgranted
toCentralGovernmenttoamendormodifytheschemeissuedtherein

182. 182
Return/ Assessment/ Reassessment/ Revision
[Clauses 66, 96, 97, 100 & 116]
CentralGovernmentwasfindingitdifficulttomodifytheexistingschemesandremoveanyinconsistency/
redundancyinsuchfaceless/e-proceedingschemes
Now,sections135A,245MA,245R,250,and274,areproposedtobeamendedtoempowertheCentral
Governmenttoamendormodifyanyscheme/regulationissuedunderthesesectionsforimplementationof
faceless/e-proceedingregime
Comments/Observations
Thisamendmenthasbeenbroughtinlightoftheissueshighlightedbyindustry/taxpayersinthefaceless
appeal/penaltyschemesnotifiedbytheCentralGovernment
CentralGovernmentmayamend/modifytheseschemestoprovideforastipulatedtime-limittodispose-off
theappealsandsimplifythecumbersomeprocedurelaidouttherein

183. Provisions relating to reassessments
[Clauses69to71]
ThelegislaturevideFinanceAct,2021amendedtheprocedureforreassessmentofincome
escapingassessmentandmadeconsequentamendmentsinsections148,148A,149and151
TheFinanceAct,2021alsoprovidedthatincaseswheresearchhasbeeninitiatedunder
section132ormaterialhasbeenrequisitionedundersection132A onorafter01.04.2021,
assessment/reassessmentshallbemadeundersection147
Further,theaforesaidprovisionswerefurtherrationalisedbyvariousamendmentsbroughtin
bytheFinanceAct,2022
183

184. Provisions relating to reassessments
[Clauses69to71]
ProposedamendmentNo.1 (w.e.f.01.04.2023)
ITRinresponsetonoticeundersection148tobefurnishedwithin3monthsfromtheendof
themonthinwhichnoticeisissued;or
WithintheextendedtimeallowedbytheAOonarequestmadeinthisbehalfbytheassessee
ITRfurnishedaftertheperiodallowedshallnotbedeemedtobereturnundersection139.
Consequently,therequirementofissuanceofnoticeunder143(2) wouldnotbemandatory
184

185. Provisions relating to reassessments
[Clauses69to71]
Comments/Observations
Theamendmentisproposedtostreamlinethereassessmentproceedingsandfacilitateconclusion
thereof
TheproposedamendmentnowmandatesthattheITRinresponsetothenoticeundersection148be
filedwithinthespecifiedtime,failingwhichthereshallbenorequirementofissuanceofnotice
undersection143(2).
Itmaynownotbeavailabletoarguethatinabsenceofissuanceofjurisdictionalnoticeunder
section143(2),theentireproceedingsarenullity.[Refer:ACITvsHotelBlueMoon:321ITR362
(SC);CITvsLaxmanDasKhandelwal: 417ITR325(SC)]
185

186. Provisions relating to reassessments
[Clauses69to71]
ProposedamendmentNo.2 (w.e.f.01.04.2023)
Thirdprovisotosection149(1) isproposedtobeinsertedtoprovidethat,insearch/
requisitioncases[section132/132A]wheresearchisinitiatedorasearchforwhichlastof
authorizationsisexecutedorarequisitionismade,after15thMarchofanyFYandthe
periodforissueofnoticeundersection148expireson31stMarchofsuchFY,thena
periodof15daysshallbeexcludedforthepurposeofcomputingtheperiodoflimitation
andthenoticeissuedundersection148insuchcaseshallbedeemedtohavebeenissued
onthe31stMarchofsuchFY
186

187. Provisions relating to reassessments
[Clauses69to71]
Comments/Observations
Pertinently,noprocedureundersection148Aisrequiredtobefollowedinsection132and132Acases,
however,theproposedamendmentseekstorelaxthetimeavailablewiththeAOforissuingnoticeunder148
ProposedamendmentNo.3 (w.e.f.01.04.2023)
Fourthprovisotosection149(1)isproposedtoprovidethatwhere:
oInformationasreferredtoinexplanation1tosection148emanatesfromastatementrecorded;or
odocumentsimpoundedundersection131or133Aonorbeforethe31stMarchofafinancialyear,
inconsequenceof,asearchwhichisinitiatedorasearchforwhichlastoftheauthorizationsisexecutedora
requisitionismadeafterthe15thMarchofsuchFY,aperiodof15daysshallbeexcludedforthepurposeof
computingtheperiodoflimitationforissuanceofnoticeundersection148andnoticeundersection148A(b)
shallbedeemedtohavebeenissuedonthe31stMarchofsuchFY.Asaneffectofthisamendment,additional
timeisbeinggiventotheAOforissuanceofnoticeundersection148insuchspecificcases
187

188. Provisions relating to reassessments
[Clauses69to71]
Comments/Observations
TheproposedamendmentseekstorelaxthetimeavailablewiththeAOforcollatingtherequisite
information,conductingenquiriesandissuingnoticeundersection148A(b)
ProposedamendmentNo.4 (w.e.f.01.04.2023)
Sixthprovisotosection149(1)isproposedtoextendthelimitationperiodsoastoprovidea
minimumof7daystoAOforpassingorderundersection148A(d)
Comments/Observations
Theproposedamendmentseekstoclarifyandremoveanyambiguityintheexistingprovision
188

189. Provisions relating to reassessments
[Clauses69to71]
ProposedamendmentNo.5 (w.e.f.01.04.2023)
Clause(ii)ofsection151,whichprescribestheauthoritiesforgrantofsanctionforthepurposeof
sections148and148A,isproposedtobeamendedtoprovidethatthespecifiedauthorityforthe
purposeofsections148and148A shallbethePCCITorPrincipalDirectorGeneralorCCITor
DirectorGeneral,ifmorethan3yearshaveelapsedfromtheendoftherelevantassessmentyear
Comments/Observations
Theproposedamendmentseekstoclarifyandremovethescopeofanymisinterpretationofthe
existingprovision
189

190. Provisions relating to reassessments
[Clauses69to71]
ProposedamendmentNo.6 (w.e.f.01.04.2023)
Provisoinsection151isproposedtobeinsertedtoexcludetheperiod,whichisotherwise
excludedorextendedintermsoftheexisting3
rd
&4
th
provisosandproposed5
th
&6
th
provisostosection149,fromthetimelimitforissuanceofnoticeundersection148forcomputing
theperiodof3yearsforthepurposesofdeterminingtheapprovingspecifiedauthority
Comments/Observations
Theproposedamendmenthasbeeninsertedtorationalizetheprovisionsandbringtheminline
withtheprovisionsofsection149,andtoremoveanyambiguityregardingcomputationofthe
periodofthreeyearsforgrantingsanction
190

191. Set off and withholding of refund in certain cases
[Clauses92&94] (w.e.f.01.04.2023)
Section241Aprovidesforwithholdingofrefundincaseswherearefundbecomesdueto
anassesseeundersection143(1)andnoticeforassessmentisissuedundersection
143(2),theAOmay,afterrecordingthereasonsfordoingsoandwithpriorapprovalofthe
approvingauthorities,withholdsuchrefundtillthedateofsuchassessmentbeingmade,
ifheisoftheopinionthatthegrantofrefundislikelytoadverselyaffecttheRevenue
Section245providesforset-offofrefundsfoundtobeduetoanypersonunderany
provisionoftheActagainsttaxremainingpayableaftergivinghimanintimationinwriting
regardingtheproposedaction
191

192. 192
Set off and withholding of refund in certain cases
[Clause 92 & 94]
Proposedamendments (w.e.f. 01.04.2023)
Section241A isproposedtobeamendedtoprovideasunsetclauseonthesectionwitheffectfrom
31.03.2023.Thus,nowithholdingofrefundshallbemadeundersection241Aonorafter01.04.2023
Theprovisionsofsection245areproposedtobesubstitutedtoprovideasunder:
o245(1)set-offofrefundsfoundtobeduetoanypersonunderanyprovisionoftheActagainsttax
remainingpayableaftergivinghimanintimationinwritingregardingtheproposedaction;and
o245(2)withholdingofrefund[partafterset-offorfull]becomesduetoanassesseeand
assessment/reassessmentproceedingsarepending,theAOmay,afterrecordingthereasonsfor
doingsoandwithpriorapprovaloftheapprovingauthorities,withholdsuchrefundtillthedate
suchassessment/reassessmentismade

193. Set off and withholding of refund in certain cases
Comments/Observations (w.e.f.01.04.2023)
Videtheproposedamendmentinsection245(2),thelegislaturehasnowsubstitutedthefollowing:
193
Existing provisions of section 241AProposed Amendment by Finance Bill,
2023 to section 245(2)
Impact
Refundofanyamountbecomesduetothe
assesseeundersection143(1)
Apartofrefundisset-offunder245(1)or
wherenosuchamountisset-offand
refundbecomesduetoaperson
Priortotheproposedamendmentany
refundduetotheassesseeundersection
143(1)wastobewithheld;
However,postamendmentanyrefundis
amenabletobewithheld
Thatnoticehasbeenissuedundersection
143(2)inrespectofsuchreturn
That proceedings for
assessment/reassessmentarepending
Theamendmentisproposedtostreamline
theamendmentproposedinsection148
[requiringtheassesseetofileITRin
specifiedtime;failingwhichtheAOwillnot
berequiredtoissuenoticeundersection
143(2)]

194. Set off and withholding of refund in certain cases
Comments/Observations (w.e.f.01.04.2023)
ItisclarifiedinthememorandumexplainingtheprovisionsoftheFinanceBill,2023that
theamendmentsareproposedandintendedtointegratetheexistingprovisions
Theobjectistoeliminatetheoverlapbetweentheprovisionsofsections241A and245.
However,boththeprovisions,inouropinion,operateindependentlyandintheirrespective
fields
194

195. 195
MISCELLANEOUS
AMENDMENTS

196. 196
AgnipathScheme, 2022 (“Scheme”)
[Clause 5,10,39,50] (w.e.f. 01.04.2023)
TheMinistryofDefence('MoD')hasintroducedtheScheme,whichbecameeffectivefrom1st
November,2022,forenrolmentofAgniveersinIndianArmedForces
Inpursuancethereof,theCompetentAuthorityhascreatedanon-lapsablededicatedAgniveer
CorpusFund(comprisingofconsolidatedcontributionsofalltheAgniveersandmatching
contributionsoftheGovernmentalongwithinterestthereon)

197. 197
AgnipathScheme, 2022 (“Scheme”)
[Clauses 5,10,39,50] (w.e.f. 01.04.2023)
TheadministrationandmaintenanceoftheSchemewouldbecarriedoutundertheaegisofMoD
withthefollowingfeatures
-Agniveertocontribute30%inthedesignatedAgniveerCorpusFund,
-AnamountequaltothesaidcontributionwouldbecontributedbytheCentralGovernment,
-Oncompletionoffouryears,theAgniveerwillreceiveonetimeamountcomprisingoftheir
contributionalongwithCentralGovernment’scontributionandtheinterestthereon,whichis
termed“SevaNidhi”package

198. 198
AgnipathScheme, 2022 (“Scheme”)
[Clauses 5,10,39,50] (w.e.f. 01.04.2023)
TogranttaxreliefstoAgniveerundertheScheme,itisproposedtoinsert–
oanewsub-clause(viii)insection17(1)toprovidethatthecontributionmadebythe
CentralGovernmenttotheFundshallberegardedassalaryofAgniveers
oanewsection80CCH toprovidefordeductionofthewholeoftheamount
deposited/contributedbytheAgniveerandCentralGovernmenttotherespectiveaccount
intheAgniveerCorpusFundfromthetotalincomeoftheAgniveer
oanewclause(12C)insection10toprovidethatanypaymentreceivedbytheAgniveer
fromtheAgniveerCorpusFund,orhis/hernomineeshallbeexemptfromlevyoftax
Consequentialamendmentinsection115BACisalsoproposedwhichwouldprovideforthe
aforesaidrelieftoAgniveersunderthenewtaxregimeaswell
Theexpressions“Agnipathscheme”and“AgniveerCorpusFund”hasbeendefinedtherein

199. 199
Relief to Sugar Co-operatives from Past Demand
[Clause74] (w.e.f.01.04.2023)
Sugarcooperatives,inafewstates,payFinalCanePrice('FCP')tosugarcanegrowers.FCPis
paidoverandabovetheStatutoryMinimumPrice('SMP'),whichistheminimumpricesetunder
theSugarcaneControlOrder,1996
Inthepast,therehavebeendisputesaroundtheallowabilityofFCP,overandabove,theSMP
resultingintoprotractedlitigation,withtheRevenueallegingthatthesumabovetheSMP
representsappropriation/distributionofprofitsandthusisnotallowableasanexpense
Recently,theapexcourtinthecaseofCITvsTasgaonTalukaS.S.K.Ltd412ITR420heldthat
thedifferentialamountpersecannotbeconsideredtobeappropriationofprofitsandonlythat
partofprofit,whichisutilizedtodeterminethefinalFCPcanbesaidappropriationofsuch
profits.ThematterwasremittedtotheAOtoreworkthecomputationthereofbasisthedirection
issuedtherein

200. 200
Relief to Sugar Co-operatives from Past Demand
[Clause74] (w.e.f.01.04.2023)
Toputquietustotheabovecontroversyandon-goinglitigations,itisproposedtoinsertnew
sub-clause(19)insection155toenablemakingofanapplicationbytheassesseebeforethe
assessingofficer(quadisallowanceoftheexpenditure,whollyorpartly,forthepurchaseof
sugarcaneinthepastyears)forrecomputingthetotalincomeafterallowingdeductiontothe
extentsuchexpenditureisincurredatpriceequaltoorlessthanpricefixedbythe
Governmentfortherelevantyear
Inordertoprovideeffecttotheabove,theperiodoffouryears,asprovidedunderthe
provisionsofsection154isproposedtobereckonedfromtheendofpreviousyear
commencingon1
st
April,2022

201. 201
Tax Incentives to International Financial Service Centre (“IFSC”)
[Clause 5,21,59] (w.e.f. 01.04.2023)
IFSCatGIFTCityisconsideredanoffshorejurisdictionforforeignexchangepurposes,
businessessetupintheIFSCarestillsubjecttotheprovisionsoftheAct.Overthepastfew
yearsseveraltaxconcessionshavebeenprovidedundertheActtounitslocatedinIFSCsoas
tomakeitaglobalhuboffinancialservicessector
InordertofurtherincentivizeoperationsfromIFSC,itisproposedtoamendthefollowing
provisions:
-Duedateforavailingexemptionbyshareholdersonrelocationoforiginalfundtothe
IFSCFundextendedfrom31stMarch2023to31stMarch2025[clause(b)of
Explanationtoclause(viiad)ofsection47]
-Definitionsof“SpecifiedFund”,“ResultantFund”and“InvestmentFund”areproposed
tobeamendedtobringreferenceofIFSCA(FundManagement)Regulations,2022(made
effectivefromMay19,2022) withintheAct

202. 202
Tax Incentives to Offshore Derivative Instruments (“ODI”)
[Clause 5,21,59] (w.e.f. 01.04.2024)
Presently,section10(4E),exemptsfromtax,incomeaccruingorarisinginthehandsofa
non-residentsontransferof(i)non-deliverableforwardcontractsorODI,or(ii)overthe
counterderivativesenteredintowithanIFSCBankingunit('IBU')
AnyincomeearnedbyIBUontheinvestmentmadeinpermissibleIndiansecuritiesistaxed
aseithercapitalgains,dividends,orinterestundersection115AD
Thereafter,IBUdistributesthepost-taxincometoODIholdersandreceiptofthesameis
taxableinthehandsofthenon-residentODIholders
Inviewoftheabove,anydistributionsmadebyIBUtoODIholdersgetstaxedtwice
Inordertoaddresstheaboveissueofdoubletaxation,itisproposedtoamend10(4E) to
exemptfromlevyoftaxreceiptofanyincomebynon-residentODIholderondistribution
madebyIBU(onwhichtaxundersection115ADhasalreadybeenpaid)

203. 203
Double deduction claimed on interest on borrowed capital
[Clause22] (w.e.f.01.04.2024)
UndertheexistingprovisionsoftheAct,theamountofanyinterestpayableonborrowed
capitalforacquiring,renewingorreconstructingapropertyisallowedasdeduction
underthehead“Incomefromhouseproperty”undersection24
Independently,forthepurposeofcomputationof‘capitalgains’ontransferofsuch
property,section48,inter-alia,providesthatthegainsshallbecomputedafterdeducting
thecostofacquisitionoftheassetandthecostofanyimprovementtheretofromthefull
valueofconsiderationreceivedoraccruingasaresultofthetransferofthecapitalasset
Apartfromtheabove,deductionisalsoallowedunderChapterVI-Ai.e.,intermsof
section80EEand80EEAoninterestpayableinrespectofborrowingsmadeforpurchase
orconstructionofresidentialhousepropertysubjecttothethresholdspecifiedtherein

204. 204
Double deduction claimed on interest on borrowed capital
Intheabsenceofanyspecificrestrictivecovenantinsection48,theassesseeswereclaiming
doubledeductionofinterestpaid/payableonborrowedcapitalforacquiring,renewingor
reconstructingapropertyattwostagesviz.,:
oWhenpropertyisinpossession-Deductionclaimedundersection24(b)orChapter
VIA.
oOntransferofproperty-Deductionclaimedaspartofcostofacquisitionorcostof
improvementundersection48.
Inordertopreventsuchdoubleclaimofdeduction,itisnowproposedtoinsertaproviso
afterclause(ii)ofsection48toprovidethatthecostofacquisitionorthecostof
improvementoftheassetshallnotincludethedeductionsclaimedontheamountofinterest
undersection24(b)orChapterVIA

205. 205
Double deduction claimed on interest on borrowed capital
Comments/Observations
TheproposedamendmentseekstooverrulethedecisionofTribunalinthecaseofACITvsC.
Ramabrahmam:27taxmann.com104,whereintheassessee’sclaimfordeductiononinterest
paidonhousingloanwasupheldbothundersection24(b)aswellasundersection48onthe
groundthatdeductionunderthetwosectionsarealtogethercoveredbydifferentheadsofincome
andneitherofthemexcludestheoperationoftheother
Theexistingprovisionsofsection80EEandsection80EEAalreadyprovideforexclusionof
amountclaimedunderanyotherprovision
Theamendmentproposedisexpresslystatedtobeprospectiveinnatureandhence,maynot
impactclaimsalreadymade
Theproposedamendmentisrestrictedonlytotheclaimofinterestonhousepropertyandnotthe
‘principal’amountclaimedasdeductionundersection80C(2 )(xviii)

206. 206
Doubledeductionclaimedoninterestonborrowedcapital
Comments/Observations
Benefitdeniedonlytotheextentofactualdeductionclaimedundersection24(b)/
Chapter-VIA
Particulars Pre-amendment Post-amendment
Sale Consideration (A) INR 50,00,000 INR 50,00,000
Cost of Acquisition (B)
[Including intereston loan of
INR 5,00,000]
INR 30,00,000 INR 30,00,000
Actual deduction claimed
under section 24(b) of the
Act
INR 2,00,000 INR 2,00,000
Capital Gains [A –B] INR 20,00,000 INR 22,00,000

207. 207
PendingrectificationapplicationsbeforeInterimBoardfor
Settlement
[Clause95] (w.r.e.f.01.02.2021)
TheCentralGovernmentwasempoweredtoconstituteoneormoreInterimBoardsforSettlement
(IBS),asaninterimmeasure,forsettlementofapplicationspendingwithSettlementCommissionason
31.01.2021
Theexistingprovisionsprovideforexclusionofperiodfrom01.02.2021till10.08.2021(i.e.,till
constitutionofIBS)forthepurposeofcomputationoflimitationforamending/rectifyingtheorderof
SettlementCommissionincaseswheresuchapplicationforamendment/rectificationwaspendingason
01.02.2021
Inordertodisposethependencyandavoidanyfurtherlitigation,itisproposedtoamendclause(iv)of
sub-section(9)ofsection245Dtobesubstitutedwithanewclausetoprovidethatwherethetime-limit
foramendinganorderorformakinganapplicationundersub-section(6B)expiresonorafter
01.02.2021butbefore01.02.2022,suchtime-limitshallstandextendedto30.09.2023
Theamendmentproposedisretrospectiveinnatureandwouldapplyw.e.f.01.02.2021

208. 208
AmendmentstoProhibitionofBenamiPropertyTransactionsAct,
1988(‘PBPTAct’)
[Clause 152(a)] (w.e.f. 01.04.2023)
UnderClause(18)ofsection2,ascurrentlyexisting,the“SITUS
OFHIGHCOURT”,
forthepurposeofappealundersection49ofthePBPTAct,isdeterminedas:
oTheHighCourtwithinwhosejurisdictiontheaggrievedparty[viz.,thebenamidar,
beneficialowner,oranyotherpersonwhoseekstopreferanappeal]ordinarilyresidesor
carriesonbusinessorpersonallyworksforgain;and
oWheretheGovernmentistheaggrievedparty,theHighCourtwithinwhosejurisdiction
theRespondentoranyofthem[viz.,thebenamidar,beneficialowner,oranyother
personagainstwhomappealispreferred]ordinarilyresidesorcarriesonbusinessor
personallyworksforgain.

209. 209
AmendmentstoPBPTAct[contd.]
[Clause 152(a)] (w.e.f. 01.04.2023)
Possibly,theexistingschemefordeterminationof“SitusofHighCourt”leadtodifficulties
incaseswherethepreciselocation/jurisdictionoftheconcernedparties[i.e.,theplace
wherethebenamidar,beneficialowner,oranyotherperson(filingtheappealoragainst
whomappealissoughttobefiled),ordinarilyresidesorcarriesonbusinessorpersonally
worksforgain]wasnotwithinthejurisdictionofanyHighCourt.Fore.g.,incaseofa
non-resident
Toobviatesuchdifficulty,bothfortheGovernmentandotheraggrievedparties,the
amendmentnowprovidesthatinsuchcases,appealshallliebeforetheHighCourtwithin
whosejurisdictiontheofficeoftheInitiatingOfficerislocated

210. 210
AmendmentstoPBPTAct[contd.]
[Clause 152(a)] (w.e.f. 01.04.2023)
Importantly,theamendmentisinthenatureofa“residuary”clause,fordeterminationof
“SitusoftheHighCourt”onlyinthefollowingcases:
oWheretheaggrievedpartyfilingtheappeal[viz.,thebenamidar,beneficialowner,or
anyotherpersondoesnotordinarilyresideorcarriesonbusinessorpersonallyworks
forgainwithinthejurisdictionofanyHighCourt;OR
oWheretheappealisfiledbytheGovernment,noneoftheRespondentsordinarily
resideorcarryonbusinessorpersonallyworkforgainwithinthejurisdictionofany
HighCourt
Inallothercases,the“SitusoftheHighCourt”shallcontinuetobegovernedby
sub-clauses(i)and(ii)ofclause(18)ofsection2,ascurrentlyinforce

211. 211
AmendmentstoPBPTAct[contd.]
[Clause 152(a)] (w.e.f. 01.04.2023)
Theamendment,however,doesnotfullyaddresstheissueofmultiplicityof“Situsof
HighCourts”–wheremorethan1aggrievedparty,suchasthe‘benamidar’and‘beneficial
owner’ordinarilyresideorcarryonbusinessorpersonallyworkforgain,atdifferentplaces
–appealsmaybefiledbyeachofthembeforedifferentHighCourts
Existenceofmorethan1appellateforum,i.e.,theHighCourt,cannotbetheintentofthe
law[refer:AmbicaIndustries(2007) 6SCC769],particularsince,certaintyofjurisdiction
inanamedforumisanessentialattributeofaneffectivejudicialremedy[refer:ABCPapers
447ITR1(SC)]
Theaforesaidis,thus,stillanopenissuewhichmayleadtodifficulty

212. 212
AmendmentstoPBPTAct[contd.]
[Clause 152(b)] (w.e.f. 01.04.2023)
Undersub-sections(1)and(1A)ofsection46,astheycurrentlystand,thelimitationfor
filingappealbeforetheAppellateTribunal,istobereckonedfromthe“dateofthe
impugnedorder”passedbytheconcernedauthority
Bywayoftheproposedamendment,suchlimitationisstatedtobecomputedfromthe“date
onwhichsuchorderisreceivedby”theappellant,i.e.,theaggrievedpersonortheInitiating
Officerseekingtofileanappeal
TheproposedamendmentisakintoSection12oftheLimitationAct,1963whichprovides
forexclusionofthe“thetimerequisiteforobtainingacopy”oftheimpugnedorder,
judgment,etc.,forthepurposesofcomputingthelimitationforfilinganappeal

213. 213
Computation of interest in updated return
[Clause 67] (w.r.e.f. 01.04.2022)
TheFinanceAct,2022insertedsub-section(8A)insection139enablingthefurnishingofan
updatedreturnbytaxpayersforupto2yearsfromtheendoftherelevantassessmentyear
subjecttofulfilmentofcertainconditionsaswellaspaymentofadditionaltax
Forthedeterminationoftheamountofadditionaltaxonsuchupdatedreturnsection140B
wasinsertedintheAct

214. 214
Computation of interest in updated return
[Clause 67] (w.r.e.f. 01.04.2022)
Undertheexistingprovisionsofsection140B,forthepurposeofcomputationofinterest
undersection234B,itwasprovidedthatinterestshallbecomputedonanamountequaltothe
assessedtaxor,iftheassesseehasmadeanyadvancetaxpayment,ontheamountbywhich
theadvancetaxpaidfallsshortoftheassessedtax
‘Assessedtax’hasbeenfurtherdefinedastaxonthetotalincomeasdeclaredintheupdated
returnandinter-aliareducedbyamountofreliefortaxreferredtoinsub-section(1)of
section140A,thecreditforwhichhasbeenclaimedintheearlierreturn

215. 215
Computation of interest in updated return
[Clause 67] (w.r.e.f. 01.04.2022)
Theaboveprovisionsresultedindoubledeductionforadvancetaxespaidbytheassessee
forthepurposeofcomputationofinterestundersection234B
Itisnowproposedtoamendtheprovisionsofsection140B(4) suchthatforthepurposeof
computinginterestunder234B,theamountofadvancetaxisreducedonlyonce.Thisis
explainedwiththehelpofbelowillustration:

216. 216
Computation of interest in updated return
[Clause 67] (w.r.e.f. 01.04.2022)
Comments/Observations
Thisamendmentintendstoremovethedefectincomputationofinterestundersection234Batthetimeof
filingofupdatedreturn

217. Decriminalization of section 276A
[Clause118] (w.e.f01.04.2023)
Theliquidatorwho:
i.failstogivenoticeinaccordancewithsection178(1);or
ii.failstosetasidetheamountasrequiredby178(3)orpartswithanyoftheassetsofthecompany
orthepropertiesincontraventionoftheprovisionsofthesaidsection
ispunishablewithrigorousimprisonmentuptotwoyears
Proposedamendment
Section276Aisproposedtobeamendedtoprovideasunsetclausetothissectionwitheffectfrom
31.03.2023.Thus,nofreshprosecutionshallbeinitiatedundersection276Aonorafter01.04.2023
Comments/Observations
Theamendmentisintendedtodecriminalizeminoroffences,asasteptowardsimprovingeaseof
doingbusiness
217

218. Decriminalization of section 276A
[Clause118] (w.e.f01.04.2023)
ItisclarifiedinthememorandumexplainingtheprovisionsoftheFinanceBill,2023thatthe
alreadyinitiatedprosecutionswillcontinue
ThememorandumexplainingtheprovisionsoftheFinanceBill,2023furtherclarifiesthe
intentforprovidingthesunsetasunder:
Section178imposespersonalliabilityonliquidatorforthenon-complianceoftheprovisionsof
sub-sections(1)and(3)totheextentoftaxduetothecompany;
IBC,2016providesthewaterfallmechanismforpaymentofduesforcompaniesunder
liquidation;
218

219. Decriminalization of section 276A
[Clause118] (w.e.f01.04.2023)
Section178(6)providesthatthesectionshallnothaveeffectwhenprovisionsoftheIBC
areincontradiction;
Moreover,theliquidatorisnowworkingundertheoversightofthisspecificlaw[IBC]
Pertinently,itwillbeappreciatedthattherewasnosubstantivelitigationaroundthesaid
provision
219

220. 220
TRANSFER PRICING

221. 221
Section 92BA –Amendment in definition of specified domestic
transaction
[Clause45] (w.e.f.01.04.2024)
Section115BAEisproposedtobeinsertedtoprovideforbeneficialtaxrateof15%for
newmanufacturingco-operativesocieties
Acorrespondingamendmentisproposedtobemadeinsection92BAtoincludea
transactionbetweenamanufacturingco-operativesocietycoveredundersection115BAE
andapersonhavingcloseconnectionwithsuchsociety,intheambitofspecifieddomestic
transaction

222. 222
Thin Capitalization Rules –amending section 94B to exempt NBFCs
[Clause 47] (w.e.f. 01.04.2024)
Section94B,insertedvideFinanceAct,2017, isbasedontherecommendationsofActionPlan4ofthe
OECDBEPSProject. Thegenesisofthincapitalizationruleslieinthedistinctionbetweentaxtreatment
ofdebtandequity
Section94Bseekstodisallowexcessinterestpayments(definedasinterestpaymentsinexcessof30%of
EBITDAoftheborrowerinthepreviousyearorinterestpaymentstoAEsforthatpreviousyear)madeto
non-residentAEbyaborrower,beingadomesticcompanyorpermanentestablishment('PE')ofaforeign
company
Sub-section(3)ofsection94Bcreatedacarveoutforcompaniesengagedinthebusinessofbankingor
insurance

223. 223
Thin Capitalization Rules –amending section 94B to exempt NBFCs
[Clause 47] (w.e.f. 01.04.2024)
ItisproposedtoextendtheaforesaidcarveouttoNBFCs,whichareengagedinthebusinessof
financingsincetheyareundertakingsimilarfunctionsandarenowsubjecttosimilarregulations
andcompliances.TheexclusionisproposedforsuchclassofNBFCsasmaybenotifiedbythe
CentralGovernmentandwhichqualifyasNBFCsasdefinedinclause(f)tosection45Iofthe
RBIAct,1934
Comments/Observations
InterestexpenseisusuallythemajorcostforanNBFC;inthattheirprincipalsourceofincomeis
thearbitragebetweenfundsborrowedandthefundslent
Undertheextantprovisionsofsection94B,therewasgreatertaxoutflowincasetheNBFCwas
fundedbyanon-residentAEandinterestexpenseexceededthethresholdlimit,whereasbanks
andinsurancecompaniesengagedinsimilarbusinesswerenotaffectedassuch;thedichotomy
standsaddressedwiththeproposedamendment

224. 224
Section 92D -Reducing time for furnishing TP report
[Clause 46] (w.e.f. 01.04.2023)
Section 92D provides that every person who has entered into an international transaction
or a specified domestic transaction shall keep and maintain the information and
documents as provided under Rule 10D of the Rules
Sub-section(3)ofsection92DprovidesthattheAssessingOfficerortheCommissioner
(Appeals)mayduringthecourseofanyproceedingsundertheActrequiresuchpersonto
furnishthedocumentationwithinaperiodofthirtydaysfromthedateofreceiptofa
noticeissuedinthisregard
Onanapplicationmadebytheassesseethetimeperiodofthirtydaysmaybeextendedby
anadditionalperiodofthirtydays

225. 225
Section 92D -Reducing the time for furnishing TP report
IthasbeenrepresentedbytheRevenuethatinseveralinstancesduetolimitedtime
availableforTPproceedingsitmaynotbepracticallypossibletoprovideminimumthirty
daysforproducingtheTPdocumentationwhichinanycaseisinpossessionofthe
assessee
Itisproposedtoamendsub-section(3)ofsection92Dtoprovidethattheassessing
officerortheCommissioner(Appeals)mayrequiretheassesseetofurnishtransferpricing
documentationprescribedunderRule10DoftheRuleswithinaperiodoftendaysfrom
thedateofreceiptofanotice
Onanapplicationmadebytheassesseethetime-periodoftendaysmaybeextendedby
anadditionalperiodofthirtydays