Union Budget Direct and Indirect Tax Proposals

Finance Minister presented her Union Budget 2023 in Parliament for the 5th time in her tenure. Projecting the economic growth to 5 USD trillion economy, the proposed benefits in the Budget got several direct and indirect tax changes highlighting benefits for both the lower income group and the middle class.

Here is a list of proposed changes in the Direct and Indirect Tax structure & compliance for the FY 2023-24.

DIRECT TAX

  1. Proposal for a Common IT Return Form :

Finance Minister announced the rollout of a ‘’ common IT return filling form ‘’ for taxpayers for their convenience in tax filing and to bring ease to the redressal mechanism.

  1. No Tax Payable for Income Upto Rs 7 lakh :

No tax shall be payable for income up to Rs 7 lakh as compared to the 5 lakh limit in the current tax regime. The said benefit will be provided if opted for the new tax regime.

  1. Changes in Tax Slab in New Tax Regime :

Changes in tax structure as proposed in 2020 from 6 tax slabs to 5, the minimum exemption to the tax slab raised to Rs 3 lakh. The tax structure for the FY 2023-24 in the new regime will be :

Total Income (Rs) Rate (percent)
Up to 3,00,000 Nil
From 3,00,001 to 6,00,000 5
From 6,00,001 to 9,00,000 10
From 9,00,001 to 12,00,000 15
From 12,00,001 to 15,00,000 20
Above 15,00,000 30

 

  1. Standard Deduction Benefit extended to New regime :

The standard deduction from the income of a salaried employee of Rs 50000, and the deduction on the family pension limit of Rs 15000 will be available in the new tax regime.

  1. Reduction in Surcharge Rate :

Proposed to reduce the applicable surcharge rate on tax payable from 37% to 25% in the new tax regime.

  1. Lower Tax Rate and benefits for Cooperatives :
  1. Extension on Leave Encashment Limit :

The limit for tax exemption on leave encashment benefits was raised from Rs 3 lakh to Rs 25 lakh in the case of non-government salaried employees.

  1. Change in State of New Tax Regime :

The new tax regime will be considered the default tax regime. While the taxpayer is provided an option to choose the old tax regime.

  1. The enhanced limit for Taxation of MSMEs / Startups and Professionals :

For the applicability of provisions of 44AD and 44ADA, the benefit of taxation shall be provided to taxpayers with a threshold limit of 75 lakhs and 3 crores for assessees than the earlier limit of 50 lakhs and 2 crores.

For MSMEs, payments were considered to be on an accrual basis which is now proposed for payments as per Section 43B.

  1. Proposed Cap on Capital Gains Benefit :

For capital gains benefits on the residential property, a limit for tax benefit was proposed to up to Rs 10 crore under Section 54 and Section 54F.

  1. Reduction in Minimum period for Compliances :

The Finance Minister provided for a reduction in the minimum period for the production of documents and information as required by the Transfer pricing officer from 30 to 10 days.

The period for filing of appeal in the Benami Act stipulated 45 days from the received of the order of Initiating officer.

  1. Limit on Insurance Benefit : 

Exemption for tax benefits on insurance policies with high value will be provided up to Rs 5 lakh only (Not applicable on ULIP Policies).

  1. Taxability of Online Gaming and Proceeds :

To charge TDS at the rate of 30% on the net winning amount from online gaming proceeds with Section 194BA and Section 115BBJ.

  1. Income Tax benefits for Startups : 

The date of incorporation was extended from 31.3.23 to 31.3.24 for the issue of tax benefits to startups.

  1. Removal of TDS Threshold : 

The minimum threshold limit of Rs 10000 as TDS will be removed.

  1. Capital Gain on Digital Gold :

The provisions for capital gain on the conversion of gold to digital gold or vice versa will be removed.

  1. TDS on EPF Withdrawl : 

For withdrawals from EPF, the proposed tax rates would be 20% than 30% in non-PAN cases.

  1. Taxation on Market-Linked Debentures : 

It is proposed to treat the transfer of redemption or a majority of the Market linked debentures as taxable through the insertion of a new section 50AA.

  1. Decriminalization under Section 276A :

Certain acts of omission of liquidators under Section 276A shall be decriminalized under the Income Tax Act, 1961. For the act, 100 Joint Commissioners shall be deployed for small appeals to reduce latency in appeals.

  1. Permissibility of Carry forward of Losses :

Extension in the period to startups provides for Carry forward of losses provided from 7 to 10 years.

  1. Taxability of Benefits from Agniveer Fund :

Payments made from the Agniveer Fund to those who enrolled in the Agniveer Scheme, 2022 shall be exempted from tax.

INDIRECT TAX:

  1. Reduction and Exemption of Custom and Excise Duty :

Basic custom duty rates were reduced from 21 to 13 on major goods except for textiles and agriculture. Duty on specific capital goods including those used in the production of lithium batteries, vehicle spare parts, components, and tires, are exempted.

Custom duty on Cameras, lenses, and their input was reduced to zero, open cell tv panels to 2.5 percent, electric kitchen chimney increased to 15%, heat coil for kitchen goods reduced to 15%, and several chemicals to 2.5%.

  1. Revision of National Calamity Contingent Duty :

Revision of rates of specified cigarettes raised by about 16%.

  1. Changes in Legislative laws :

Change in compliance duration and filing applications shall be notified and intent of Anti Dumping Duty, Countervailing Duty, and Safeguard measures shall be amended.

  1. Changes in CGST Act :

Raised minimum threshold for launching prosecution under GST from 1 crore to 2 crores, reduced compounding amount from range of 50-150 percent of the tax to 25 to 100 percent.

Restriction for filing of returns to a maximum duration of 3 years shall be proposed and a proposal to enable unregistered suppliers and composition taxpayers to make intra-state supplies through E-Commerce Operators shall be undertaken.

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