Union Budget 2023: Know More On Direct & Indirect Taxes

New Delhi: The Union Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman presented the Union Budget 2023-24 in Parliament today. The highlights of the Budget are as follows:

DIRECT TAXES

• Direct Tax proposals aim to maintain continuity and stability of taxation, further simplify and rationalise various provisions to reduce the compliance burden, promote the entrepreneurial spirit and provide tax relief to citizens.
• Constant endeavour of the Income Tax Department to improve Tax Payers Services by making compliance easy and smooth.
• To further improve tax payer services, proposal to roll out a next-generation Common IT Return Form for tax payer convenience, along with plans to strengthen the grievance redressal mechanism.
• Rebate limit of Personal Income Tax to be increased to Rs. 7 lakh from the current Rs. 5 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to Rs. 7 lakh to not pay any tax.
• Tax structure in new personal income tax regime, introduced in 2020 with six income slabs, to change by reducing the number of slabs to five and increasing the tax exemption limit to Rs. 3 lakh. Change to provide major relief to all tax payers in the new regime.

New tax rates

• Proposal to extend the benefit of standard deduction of Rs. 50,000 to salaried individual, and deduction from family pension up to Rs. 15,000, in the new tax regime.
• Highest surcharge rate to reduce from 37 per cent to 25 per cent in the new tax regime. This to further result in reduction of the maximum personal income tax rate to 39 per cent.
• The limit for tax exemption on leave encashment on retirement of non-government salaried employees to increase to Rs. 25 lakh.
• The new income tax regime to be made the default tax regime. However, citizens will continue to have the option to avail the benefit of the old tax regime.
• Enhanced limits for micro enterprises and certain professionals for availing the benefit of presumptive taxation proposed. Increased limit to apply only in case the amount or aggregate of the amounts received during the year, in cash, does not exceed five per cent of the total gross receipts/turnover.
• Deduction for expenditure incurred on payments made to MSMEs to be allowed only when payment is actually made in order to support MSMEs in timely receipt of payments.
• New co-operatives that commence manufacturing activities till 31.3.2024 to get the benefit of a lower tax rate of 15 per cent, as presently available to new manufacturing companies.
• Opportunity provided to sugar co-operatives to claim payments made to sugarcane farmers for the period prior to assessment year 2016-17 as expenditure. This expected to provide them a relief of almost Rs. 10,000 crore.

• Provision of a higher limit of Rs. 2 lakh per member for cash deposits to and loans in cash by Primary Agricultural Co-operative Societies (PACS) and Primary Co-operative Agriculture and Rural Development Banks (PCARDBs).

• A higher limit of Rs. 3 crore for TDS on cash withdrawal to be provided to co-operative societies.

• Date of incorporation for income tax benefits to start-ups to be extended from 31.03.23 to 31.3.24.
• Proposal to provide the benefit of carry forward of losses on change of shareholding of start-ups from seven years of incorporation to ten years.

• Deduction from capital gains on investment in residential house under sections 54 and 54F to be capped at Rs. 10 crore for better targeting of tax concessions and exemptions.
• Proposal to limit income tax exemption from proceeds of insurance policies with very high value. Where aggregate of premium for life insurance policies (other than ULIP) issued on or after 1st April, 2023 is above Rs. 5 lakh, income from only those policies with aggregate premium up to Rs. 5 lakh shall be exempt.

• Income of authorities, boards and commissions set up by statutes of the Union or State for the purpose of housing, development of cities, towns and villages, and regulating, or regulating and developing an activity or matter, proposed to be exempted from income tax.
• Minimum threshold of Rs. 10,000/- for TDS to be removed and taxability relating to online gaming to be clarified. Proposal to provide for TDS and taxability on net winnings at the time of withdrawal or at the end of the financial year.
• Conversion of gold into electronic gold receipt and vice versa not to be treated as capital gain.
• TDS rate to be reduced from 30 per cent to 20 per cent on taxable portion of EPF withdrawal in non-PAN cases.
• Income from Market Linked Debentures to be taxed.
• Deployment of about 100 Joint Commissioners for disposal of small appeals in order to reduce the pendency of appeals at Commissioner level.
• Increased selectivity in taking up appeal cases for scrutiny of returns already received this year.
• Period of tax benefits to funds relocating to IFSC, GIFT City extended till 31.03.2025.
• Certain acts of omission of liquidators under section 276A of the Income Tax Act to be decriminalized with effect from 1st April, 2023.
• Carry forward of losses on strategic disinvestment including that of IDBI Bank to be allowed.
• Agniveer Fund to be provided EEE status. The payment received from the Agniveer Corpus Fund by the Agniveers enrolled in Agnipath Scheme, 2022 proposed to be exempt from taxes. Deduction in the computation of total income is proposed to be allowed to the Agniveer on the contribution made by him or the Central Government to his Seva Nidhi account.

INDIRECT TAXES

• Number of basic customs duty rates on goods, other than textiles and agriculture, reduced to 13 from 21.
• Minor changes in the basic custom duties, cesses and surcharges on some items including toys, bicycles, automobiles and naphtha.

• Excise duty exempted on GST-paid compressed bio gas contained in blended compressed natural gas.
• Customs Duty on specified capital goods/machinery for manufacture of lithium-ion cell for use in battery of electrically operated vehicle (EVs) extended to 31.03.2024
• Customs duty exempted on vehicles, specified automobile parts/components, sub-systems and tyres when imported by notified testing agencies, for the purpose of testing and/ or certification, subject to conditions.

• Customs duty on camera lens and its inputs/parts for use in manufacture of camera module of cellular mobile phone reduced to zero and concessional duty on lithium-ion cells for batteries extended for another year.
• Basic customs duty reduced on parts of open cells of TV panels to 2.5 per cent.

• Basic customs duty on electric kitchen chimney increased to 15 per cent from 7.5 per cent.
• Basic customs duty on heat coil for manufacture of electric kitchen chimneys reduced to 15 per cent from 20 per cent.

• Denatured ethyl alcohol used in chemical industry exempted from basic customs duty.
• Basic customs duty reduced on acid grade fluorspar (containing by weight more than 97 per cent of calcium fluoride) to 2.5 per cent from 5 per cent.
• Basic customs duty on crude glycerin for use in manufacture of epicholorhydrin reduced to 2.5 per cent from 7.5 per cent.

• Duty reduced on key inputs for domestic manufacture of shrimp feed.

• Basic customs duty reduced on seeds used in the manufacture of lab grown diamonds.

• Duties on articles made from dore and bars of gold and platinum increased.
• Import duty on silver dore, bars and articles increased.

• Basic Customs Duty exemption on raw materials for manufacture of CRGO Steel, ferrous scrap and nickel cathode continued.
• Concessional BCD of 2.5 per cent on copper scrap is continued.

• Basic customs duty rate on compounded rubber increased to 25 per cent from 10 per cent or 30 per kg whichever is lower.

• National Calamity Contingent Duty (NCCD) on specified cigarettes revised upwards by about 16 per cent.

Legislative Changes in Customs Laws

• Customs Act, 1962 to be amended to specify a time limit of nine months from date of filing application for passing final order by Settlement Commission.
• Customs Tariff Act to be amended to clarify the intent and scope of provisions relating to Anti-Dumping Duty (ADD), Countervailing Duty (CVD), and Safeguard Measures.

• CGST Act to be amended

• to raise the minimum threshold of tax amount for launching prosecution under GST from one crore to two crore;
• to reduce the compounding amount from the present range of 50 to 150 per cent of tax amount to the range of 25 to 100 per cent;
• decriminalise certain offences;
• to restrict filing of returns/statements to a maximum period of three years from the due date of filing of the relevant return/statement; and
• to enable unregistered suppliers and composition taxpayers to make intra-state supply of goods through E-Commerce Operators (ECOs).

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