Some of the Amendments made by Finance Act, 2023 which is applicable for F.Y. 2022-23 (A.Y. 2023-24)

[GEETANJALI PANDEY]

This article will outline some of the important amendments made by Finance act, 2023 which is applicable for F.Y. 2022-23 (A.Y. 2023-24) which we need to take care of while filing ITR of A.Y. 2023-24.

DEDUCTION U/S 80CCH (AGNIPATH SCHEME)

Applicable for-

Individual who are enrolled in the Agnipath Scheme and subscribing to the Agniveer Corpus Fund.

Nature of Exemption-

Deduction u/s 80CCH shall be provided for –

1. Contribution made by Individual

2. Contribution made by Government

This deduction shall be provided from the computation of Total Income of Agniveer.

Note:

1. For those individual who have opted for New Taxation regime u/s 115BAC shall get a deduction of the government contribution to the Agnipath Scheme. (sub section (2) of Sec 80CCH)

2. Contribution made by the Central Government to the Agniveer Corpus Fund shall be considered as Salary of that individual.

3. Sec 10(12C) has been introduced to provide for exemption of any amount received by the Agniveer or his nominee from the Agniveer Corpus Fund ( Agniveer Corpus fund comprises of contribution of Agniveer + Interest AND Matching Contribution of Government + Interest)

INCREASING THRESHOLD U/S 194N FOR CO-OPERATIVE SOCIETY

Applicable for-

“Co-operative society” means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies.

What is Sec 194N

Sec 194N provides for deduction of taxes by the banking company or a co-operative society engaged in carrying on the business of banking or a post office, at the time of making payment to any person

                        Tax rate- 2%

                        Threshold-  Exceed Rs 1 Crore

However, the case of Non-filers who has not filed Income tax return for all the 3 assessment years , tax shall be deducted

                        @ 2% (for sum exceeding Rs. 20 lakhs to Rs. 1 Crore)

                        @ 5% (for sum exceeding Rs. 1 crore)

Threshold applicable for Co-operative Society

In the case of co-operative society, threshold increased to Rs. 3 crore.

RELAXATION U/S 269SS & 269ST FOR PACS & PCARD

Here, PACS is “ Primary Agricultural Credit Societies”

PCARD is “Primary Co-Operative Agricultural and Rural Development Bank”

What is Sec 269SS & 269T

Sec 269SS provides that no person shall take from any person any loan or deposit otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, if the amount of such loan or deposit is Rs. 20,000 or more.

Similarly, Sec 269T provides for that no loan or deposit shall be repaid otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, if the amount of such loan or deposit is Rs. 20,000 or more.

Further , provisions of both the sections will not apply where the payer is :

• Government
• Banking co, post office saving bank or co-operative Bank.
• Any corporation established by the Central, State or Provincial Act.
• Government company covered u/s 2(45) of Co. Act
• Such other institution, AOP, BOI to which Central Govt provides exemption by notification in Official gazette.

Relaxation provided to PACS & PCARD

Since the provision of both the sections provides exemption to Banking company and PACS / PCARD are also involved in granting loans and accepting deposit from the rural segment.

Hence to remove this disparity and to provide relief to the low income groups , limit u/s 269SS & 269T increased to Rs. 2 lakhs for PACS & PCARD.

269SS- This imply that the PACS & PCARD can accept loan or deposit from/by its members of Rs. 1,90,000, penalty would be leviable only if the amount of a loan or deposit is Rs. 2 lakh or more.

269T- where a deposit is paid by a PACS or a PCARD to its member or a loan is repaid to a PACS or a PCARD by its member, Penalty shall be imposable if the amount of such loan or deposit exceeds Rs. 2 lakh.

RELIEF TO ELIGIBLE START-UPS IN CARRYING FORWARD AND SETTING OFF LOSSES

Section 79

Section 79 of the Act deals with the provision of carrying forward and setting off losses. It prohibit setting of carried forward losses for the company, other than the companies in which the public are substantially interested if at least 51% shareholding of the company remains same with the company as on the last day of the previous year to which the loss belongs.

However, this restriction is not applicable to eligible start-ups, the loss incurred in any year prior to the previous year shall be allowed to be carried forward and set off against the income of the previous year if all the shareholders of such company who held shares carrying voting power on the last day of the year or years in which the loss was incurred, continue to hold those shares on the last day of such previous year and such loss has been incurred during the period of 7 years beginning from the year in which such company is incorporated. 

Deduction u/s 80-IAC

Sec 80-IAC provides that where the Gross Total income of the eligible start-ups includes any profit and gain from eligible business, 100% deduction shall be allowed of the profit and gain derived from such business for any 3 consecutive years out of 10 years beginning from the year in which such company is incorporated.

Relaxation provided

In order to align this period of 7 years contained in Sec 79 with the period of 10 years contained in Sec 80-IAC (2) of the Act, the time period for loss of eligible start-ups to be considered for relaxation is proposed to be increased from 7 years to 10 years from the date of incorporation.

It is therefore proposed to amend the proviso to sub-section (1) of section 79 of the Act so that the carried forward loss of eligible start-ups shall be considered for set off under this proviso, if such loss has been incurred during the period of 10 years beginning from the year in which such company was incorporated.

RELAXATION IN THE DEFINITION OF ELIGIBLE START-UPS REFERRED TO IN SEC 80-IAC

Sec 80-IAC provides that where the Gross Total income of the eligible start-ups includes any profit and gain from eligible business, 100% deduction shall be allowed of the profit and gain derived from such business for any 3 consecutive years out of 10 years beginning from the year in which such company is incorporated.

Definition of Eligible Start-ups

Eligible start-up" means a company or a limited liability partnership engaged in eligible business which fulfills the following conditions, namely:—

(a) it is incorporated on or after the 1st day of April, 2016 but before the 1st day of April, 2023;

(b) the total turnover of its business does not exceed 22[one hundred] crore rupees in the previous year relevant to the assessment year for which deduction under sub-section (1) is claimed; and

(c) it holds a certificate of eligible business from the Inter-Ministerial Board of Certification as notified in the Official Gazette by the Central Government;

         Relaxation

In order to promote the development of start-ups business in India, sub-Clause (a) from the definition of Eligible start-ups has been extended to  1^st April 2024 this will be read as follows:

(a) it is incorporated on or after the 1^st Day of April, 2016 but before the 1^st day of April, 2024.

 

RELAXATION TO INTERNATIONAL FINANCIAL SERVICE CENTRE

What is International Financial service Centre

GIFT City is a multi-service Special Economic Zone (SEZ) with an International Financial Services Centre (IFSC) and a local financial centre. It is India’s first operational greenfield smart city and international financial services center, promoted by the Government of Gujarat as a greenfield project.

International Financial Service Centre (IFSC) is a multi-service SEZ in Gift city. IFSC is India’s first Offshore financial center. Currently, there are more than 125 licensed financial entities in IFSC. The key institutions permitted to set up an IFSC unit are the Banking sector, Insurance sector, and Capital Markets.

International (IFCs) or offshore Financial Centers are financial centres that serve consumers from countries other than their own (OFCs). All of these centres are ‘international’ in the sense that they deal with the cross-border flow of money and financial products and services.

Concession and benefits available to IFSC-

Some of them are as follows

• Concessional rate of tax in respect of capital gain arising from the transfer of specified securities.
• No tax on distribution of dividend to its shareholder.
• Reduced rate of MAT & AMt @ 9%.
• Transfer of specified securities by a non-resident on a recognised stock exchange located in any IFSC shall not be regarded as a transfer as per Sec 47(viiab)
• Clause (viiad) of Sec 47 provides that any transfer by a shareholder or unit holder or interest holder, in a relocation, of a capital asset being a share or unit or interest held by him in the original fund to the resultant fund shall not be considered as transfer , where relocation means transfer of assets of the original fund, or of its wholly owned special purpose vehicle, to a resultant fund on or before the 31st day of March, 2023.

Now, relocation has been extended to 31^st March 2025 i.e.

“relocation means transfer of assets of the original fund, or of its wholly owned special purpose vehicle, to a resultant fund on or before the 31st day of March, 2025”.

• IFSCA (Fund Management) Regulations, 2022 has come into force from May 19, 2022. To bring the reference of the said regulation in the provisions of the Act, it is proposed to amend the definition of “Specified Fund”, “Resultant Fund” and “Investment Fund” to include the reference of IFSCA (Fund Management) Regulations, 2022 in the Act.

EXTENDING THE SCOPE OF SEC 197 (LOWER DEDUCTION OF TAX) TO INCOME  RECEIVED FROM A BUSINESS TRUST REFERRED TO IN SEC 115UA OF THE INCOME TAX ACT

Sec 197 of the Income Tax Act provides an option to the person for make an application to the respective Assessing officer for lower deduction/ Non deduction of tax. Where the assessing officer is satisfied that the existing and estimated tax liability of a person justifies the deduction of tax at lower rate or no deduction of tax, then he may issue certificate u/s 197. Earlier Sec 197 covers only the following income reported under Sec 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBB, 194LBC, 194M, 194-O. Now it has been extended to income referred to in Sec 194LBA of the Act.

Existing Provision-

Where the income of non-resident person includes any income distributed by a business trust referred to in Sec 115UA of the Income Tax Act being interest, dividend, rental income etc referred to in Sec 10(23FC) or Sec 10(23FCA) of the Act , tax under Sec 194LBA required to be deduced @ 5% or 10% or at the rate in force.

Amended Provision-

Now the Non-resident person can make an application to the assessing officer u/s 197 for lower deduction of tax/ non-deduction of tax in respect of the aforesaid income reported u/s 194LBA of the Act.

REMOVAL OF EXEMPTION FROM TDS ON PAYMENT OF INTEREST ON LISTED DEBENTURE TO RESIDENT

Clause (ix) of the proviso to Sec 193 of the Act provides that no tax is to be deducted in the case of any interest payable on any security issued by a company, where such security is in dematerialized form and is listed on a recognized stock exchange in India.

Now this clause (ix) has been omitted and now Tax is required to be deducted for any interest payable on any security issued by a company, where such security is in dematerialized form and is listed on a recognized stock exchange in India.

AMENDMENT RELATED TO CHARITABLE TRUST/INSTITUTION

I have already discussed this amendment related to Charitable trust/Institution detailed in my previous Article titled “Impact of Finance act, 2023 on Charitable Trust & Institution”

RELIEF FROM PROVISION OF SEC 206AB & 206CCA (I.E. HIGHER DEDUCTION/COLLECTION OF TAXES)

I have already discussed this amendment related to Sec 206AB & 206CCA detailed in my previous Article titled “Impact of amendment by Finance act, 2023 on Non resident/Not-ordinarily resident”