MAJOR DIRECT TAX PROPOSALS IN FINANCE BILL, 2022

 

 MAJOR DIRECT TAX PROPOSALS IN FINANCE BILL, 2022

 

➢   TAXATION OF VIRTUAL DIGITAL ASSETS :

 

Section- 115BBH - Income from transfer of Virtual digital Asset (effective from 1/07/2022)

Section-194S : Tax on payment for transfer of virtual  digital asset to a resident (effective from 1/07/2022)

➢  Shall be taxed at the rate of 30% (plus surcharge and cess)   ➢  Cost of acquisition shall be reduced while computing the income from transfer of virtual digital asset.   ➢   No any other expenditure or allowance or  set-off loss shall be allowed to the assessee under any provision of the income tax act, 1961.   ➢  Loss arising from the above transaction shall not be set-off against any income under other head or shall not be carried forward to the succeeding assessment year.   ➢  Gifting of virtual digital asset will also be taxed under section-56(2)(x) of the income tax act, 1961(w.e.f. A.Y.2023-24)

➢  Rate of TDS- 1%   ➢   Monetary Limit :   1)  In case of "specified Person"-Rs.50,000/- during F.Y.   2)  In case of Any other person- Rs.10,000/- during the F.Y.   ➢  If the tax has been deducted under section-194S then No tax shall be collected or deduced in respect of the said transaction under any other provisions of the Chapter-XVII of the act.   ➢  Section-206AB and Section-203A shall not be applicable to "specified Person"   ➢   "specified Person" means :   A)   Any Individual/HUF having business then Turnover < Rs.1 crore or Having Profession then gross receipt <Rs.50 Lakhs in immediately preceding financial year   B)  Any other individual having income other than Business Income.

 

➢   Filing of updated return under section-139(8A) of the income tax act, 1961:

 

 ANY PERSON, whether he has filed a return previously for the relevant assessment year or not.

 

 Time period: Within Twenty four months (2 Years) from the end of Assessment year.

 

Above section shall not be applicable if the updated return is a return of loss or has the effect of decreasing the total tax liability determined on the basis of return under section-139(4)/139(5) or results in refund or increases the refund due on the basis of earlier filed return.

 

Amount equal to 25% or 50%, (as the case maybe) as the additional tax and interest due on additional

 income furnished would be required to be paid subject to the other conditions mentioned in section-139(8A) and section-140B of the income tax act, 1961.

 

Return shall be accompanied by the proof of payment of tax as required under proposed section-140B.

 

➢  It is proposed to provide the explanation that Disallowance under section-14A of the income tax act, 1961 shall attract e ven though exempt income has not been accrued or arisen or received during the previous year in which expenditure has been incurred to earn the exempt income. (w.e.f 01/04/2022).

➢   Deduction under section-80CCD(2) of the income tax act, 1961 (w.e.f.2020-21)

 

Particulars	Any contribution made by central government or any other employer to MPS account (Deduction on Employer's contribution to NPS account)
	If contribution made by central government	If contribution made b State government  (Amendment in finance bill, 2022)	If contribution made by any other employer not being a CG or SG
Maximum deduction	14% of his salary	14% of his salary	10% of his salary

 

➢  It is also clarified in the finance bill, 2022 that ANY CESS OR SURCHARGE OR ANY OTHER TAX

 SHALL NOT BE allowed as business expenditure. (Retrospective w.e.f. A.Y.2005-06)

 

➢   Taxation of Bonus stripping/Dividend Stripping (w.e.f.A.Y.2023-24)

 

Applicability of Bonus stripping/Dividend Stripping (w.e.f A.Y.2023-24)	Section-94(7) - Dividend stripping	Section-94(8) - Bonus Stripping
	Applicable to Business units such as REIT, AIF, InvIT also	Applicable to Securities also (earlier it was applicable for shares only)

 

➢   Section-115BBI : Specified Income of Certain Institutions registered under

 section-10(23C)/11/12/12AA : (Income applied In violation to be taxed at special rate without deduction)

 

Section-115BBI : Specified Income of Certain Institutions (w.e.f. A.Y.2023-24)

Rate of tax :   •      At the rate of 30% on the aggregate of  specified income.   •     At the rate with which the assessee would have been chargeable if the total income of the assessee would have been reduced by the aggregate of specified income referred above. (ON REMAINING AMOUNT)   ➢  No deduction in respect of any expenditure or allowance or set-off of any loss shall be allowed to the assessee under any provisions of the act in computing the specified income.

"SPECIFIED INCOME MEANS" :   (i)  income accumulated or set apart in excess of fifteen percent of the income where such accumulation is not allowed under any specific provisions of the Act; or   (ii)     deemed income referred to in Explanation 4 to third proviso to clause (23C) of section 10 or sub-section (3) of section 11 or sub-section (1B) of section 11;or   Any income which is not exempt under clause (23C) of section 10 on account of violation of the provisions of clause (b) of third proviso of clause (23C) of section 10 or not to be excluded from total income under the provisions of clause (d) of sub-section (1) of section 13; or   Any income which is deemed to be income under the twenty first proviso to clause (23C) of section 10 or which is not excluded from total income under clause (c) of sub-section (1) of section 13; or   (v) Any income which is not excluded from total income under clause (c) of subsection (1) of section 11.

 

➢  It is proposed to insert n ew section-79A of the income tax act, 1961 that Notwithstanding anything contained in the act, where any undisclosed income detect during the search initiated under

section-132/132A/survey under section-133A than No loss (whether brought forward or otherwise) would be allowed to be set-off against such income. (w.e.f.01/04/2022).

 

➢     TDS PROVSIONS :

 

PARTCULARS	OLD PROVSIONS	NEW PROVSIONS
Section-194R- TDS ON Benefit or Perquisite of business or profession (newly Introduced (w.e.f.01/07/2022)	NOT APPLICABLE	➢   Rate of tax- 10% of the value or aggregate of such benefit or perquisite.   ➢   Payer : Any person providing Benefit or perquisite or in case of company, the company itself or its principal officer.   ➢   Payee- Resident   ➢   Monetary Limit : if the value of benefit or perquisite is or likely to be provided does not exceed Rs.20,000/- during the F.Y.   ➢   Section Not applicable to any Individual/HUF having business then Turnover is < Rs.1 crore or Having Profession then gross receipt <Rs.50 Lakhs in immediately preceding financial year.
Section-194S : Tax on payment for transfer of virtual digital asset to a resident (Newly Introduced) (w.e.f.01/07/2022)	NOT APPLIABLE	➢   Rate of tax- 1% of the consideration for transfer of virtual digital asset   ➢   Payer : Any person responsible for paying by way of consideration for transfer of virtual digital asset   ➢   Payee- Resident   ➢   Monetary Limit : Rs.50,000/- for specified person & Rs,10,000/- for Any other person.   ➢  Definition of " Specified  person" is prescribed under the said section.
Section-194-IA  (w.e.f. 01/04/2022)	TDS to be deducted AT THE RATE OF 1% on consideration paid toward purchase of immovable property if the consideration exceeds Rs.50,00,000/-	TDS to be deducted AT THE RATE OF 1% on the amount HIGHER OF   (i) Consideration paid toward purchase of immovable property
		(ii) Stamp duty value of such

property   IF THE ANY OF THE ABOVE EXCEED Rs.50,00,000/-

 

➢  Alternate Minimum Tax(AMT) for co-operative society has been Reduced to 15%(plus applicable cess and surcharge) [w.e.f.A.Y.2023-24]

 

➢   It is proposed to amend section-37 of the income tax act, 1961 that (w.e.f.01/04/2022)

 

 Any expenditure incurred by assessee :

 

(i)  for any purpose which is an offence under, or which is prohibited by, any law for the time being in force, in

 India or outside India; or

 

(ii)  To provide any benefit or perquisite, in whatever form, to a person, whether or not carrying on a business or exercising a profession, and acceptance of such benefit or perquisite by such person is in violation of any law or rule or regulation or guidelines, as the case may be, for the time being in force, governing the conduct of such person; or(For example :GIFT, TRAVEL FACILITY, HOSPITALITY, CASH OR ANY OTHER MONERATY GRANT given by pharmaceutical or any other assessee to Medical professional or their associations.).

 

(iii) To compound an offence under any law for the time being in force, in India or outside India.

 

	P articulars	O LD PROVSIONS	N EW PROVSIONS
	S ection-272A(2):	R s.100 for every day during which the failure continues	R s.500 for every day during which the failure continues (w.e.f.01/04/2022)
	Penalty for failure to answer questions, sign statements, furnish information, returns or statements
	S ection-271AAE	NOT APPLICABLE	O ccurrence:
	Penalty for passing on unreasonable benefits to trustee or specified persons (Newly I ntroduced) (w.e.f.A.Y.2023-24)		On passing any unreasonable benefits to trustee or specified person under section-13(3) of the act by Trust or institution registered under section-10(23C) or 11/12A/12AB of the act.
			P enalty amount :
			•     a sum equal to the aggregate  amount of income applied, directly or indirectly, by such person,
			(IF VIOLATION COMMITTED FIRST TIME DURING ANY PREVIPOUS YEAR)
			•     a sum equal to two hundred  percent of the aggregate amount of income of such person applied,

		directly or indirectly, by such
		person
		(WHERE VIOLATION IS
		NOTICED AGAIN IN ANY
		SUBSEQUENT PREVIOUS
		YEAR)

 

➢   SURCHARGE :

 

Particulars	Rate of surcharge
where the total income includes  any  income by  way of  dividend  or  income  chargeable  under  section  111A, 112 and section 112A of the Act(for Individual/HUF/Body of Individual/Artificial judicial persons	Rate  of  surcharge  on  the  amount  of  income-tax deducted in respect of that part of income shall not  exceed fifteen per cent.
In case of an association of persons consisting of only companies as its members,	The rate of surcharge on the amount of Income-tax shall not exceed fifteen per cent.

 

➢   Socio- economic Welfare measures :

 

Particulars	Amendment
Last date for commencement of manufacturing or production, under section-115BAB of the income tax act, 1961	Date of commencement of manufacturing or production of an article or thing, Extended to 31/03/2024
Extension of date of incorporation for eligible start up for exemption under section-80-IAC of the income tax act, 1961	Period of incorporation Extended to 31/03/2023