Changes in presumptive taxation schemes - Budget 2023

 

The amendments in relation to presumptive tax laws in Budget 2023 are a welcome change and have been largely appreciated by the taxpayer community.

 

Currently, businessmen with annual turnover less than Rupees 2 Crores and specified professionals with annual gross receipts less than Rupees 50 Lakhs are eligible to opt for presumptive taxation under sections 44AD and 44ADA.

The limits of sections 44AD and 44ADA have been revised upwards to Rupees 3 Crores and 75 Lakhs respectively.

 

Section	Nature of Income	Limit till FY 23	Limit for FY 24 and onwards
Section 44AD	Business	2 Crores	3 Crores
Section 44ADA	Profession	50 Lakhs	75 Lakhs

 

The enhanced limit is applicable only if the entire amount of cash received during the year does not exceed 5% of total gross receipts/turnover.

What's included in Budget 2023 for startups?

 1.     Extension of the date of incorporation for eligible start-ups

Section 80-IAC of the Income tax act, 1961 provides tax holidays for an eligible start-up engaged in an eligible business.

An eligible start-up can claim a deduction of 100% of its profits derived from eligible businesses for 3 consecutive assessment years out of 10 Assessment Years.

The 10 assessment years have to be reckoned from the year in which the start-up is incorporated.

To be eligible for a deduction under this section, a start-up must have been registered on or after January 4, 2016, but before March 31, 2023.

This limitation period has now been increased by an additional year, until 31-03-2024. So, all eligible start-ups registered on or before 31-03-2024 would also be eligible for benefits under this section.

 

2.     The extension of the time period for carry forward and set-off of losses to 10 years from 7 years at present

Under section 79, if all of the company’s shareholders continue to own shares, the requirement of continuity of at least 51% shareholding is not applicable for an eligible start-up for setting off the carried-forward losses.

The losses incurred by an eligible start-up can be carried forward and set off against the profit for a period of 7 years from the year in which the entity was incorporated.

The Budget 2023 has proposed to increase this period to 10 years from the year in which the entity got incorporated.

Impact of Budget 2023 on Gold and other precious metals

The customs duties on goods made of precious metals like gold, silver, and platinum were raised by the Budget 2023.

The customs duty rate has gone up from 20% to 25%.

Additionally, the rate of duty on imitation jewellery has also been increased in this budget. 

The revised customs duties are as below.

Capital gains on Gold:

It is proposed that the conversion of physical gold into an Electronic Gold Receipt and vice versa would not be considered as a transfer. Hence these transactions will not attract any Capital Gain tax.

This move is to encourage investments in digital gold.

Limit of Section 269SS and 269T enhanced - Budget 2023

 

Sections 269SS and 269T deal with limitations on taking out and repaying cash loans that are greater than Rs 20,000 per year. It also stipulates a fine in case a loan transaction in cash is done in excess of Rs. 20,000 per annum.

This limit is enhanced to Rs. 2 lakhs per annum in Budget 2023. This enhanced limit is applicable only to

Ø Primary agricultural credit society

Ø Primary co-operative agricultural

Ø Rural development bank

 

As a result, there won't be any penal consequences under section 269SS if a deposit is accepted by these entities from its members and the amount of the deposit is less than Rs. 2 lakhs per annum.

Additionally, if a loan is taken from these entities by its members and the amount of the deposit or loan is less than Rs. 2 lakhs per annum, there won't be any penal consequences under section 269SS.

  

Furthermore, there won't be any penal consequences under section 269T, if a deposit is repaid back in cash by these entities to its members and the amount of the deposit is less than Rs. 2 lakhs per annum,

Additionally, if a loan is repaid back in cash by these entities to its members and the amount of loan is less than Rs. 2  lakhs per annum, there won't be any penal consequences under section 269T.

Threshold limit for cash withdrawal increased for Co-operatives - Budget 2023

 

According to section 194N of the Act, TDS has to be deducted if the aggregate sum of cash withdrawn by a person in FY exceeds Rs. 1 Crores. (This limit is 20 lakhs in case no ITR has been filed for all three previous AYs).

TDS will be deducted at 2% of cash withdrawn in excess of the limit(Rs. 1 Crores / Rs. 20 Lakhs) as stated above.

Relaxation has been provided to co-operatives with respect to the amount of cash that may be withdrawn with TDS being deducted.

This limit is enhanced to Rs. 3 Crores to Co-operatives. Now, Co-operatives may withdraw cash upto Rs. 3 Crores in a Financial Year without TDS being deducted.

A Big relief to MSMEs- Budget 2023

It is proposed to bring payments made to micro and small (MSME) businesses under the purview of section 43B of the Income Tax Act 1961.

The move is to encourage prompt payments to MSME businesses. 

As a result, expenditure can be claimed only when the payments are actually made to MSMEs. 

The expenditure can also be claimed on an accrual basis only if the payment is made within the time frame (Usually 45 days from the date of invoice) required by the Micro, Small and Medium Enterprises Development Act, 2006.

Changes in Personal Income Tax - Budget 2023

 It is now proposed that the New Tax Regime introduced in Finance Act 2020 will serve as the default tax regime. It is applicable to Individuals and HUFs. Additionally, this regime would take over as the default regime for AJP, BOI, and AOP (other than cooperative). Any Individual, HUF, AOP (other than a cooperative), BOI, or AJP may choose to be taxed under the old system if they do not want to be taxed under the new tax regime.

Tax rates under new tax regime

Total Income	Tax Rate
Upto Rs. 3 Lakhs	NIL
From 3 Lakhs to 6 Lakhs	5%
From 6 Lakhs to 9 Lakhs	10%
From 9 Lakhs to 12 Lakhs	15%
From 12 Lakhs to 15 Lakhs	20%
Above 15 Lakhs	30%

 

Tax rates under old tax regime

Total Income	Tax Rate
Upto Rs. 2.5 Lakhs	NIL
From 2.5 Lakhs to 5 Lakhs	5%
From 5 Lakhs to 10 Lakhs	20%
Above 10 Lakhs	30%

 

Enhancement of Rebate

Residents with total annual incomes up to Rs. 5,00,000 are now eligible for the tax rebate under section 87A under the old and new regimes. It is proposed to raise this rebate to Rs. 7,00,000 for assesses under the new tax regime.

Standard Deduction

Standard deductions of Rs. 50,000 for salaried individuals and family pensions of Rs. 15,000 are now only permitted under the Old Tax Regime. These two deductions would also be permitted under the new tax regime system.

Surcharge: The maximum surcharge rate is reduced to 25% from 37% for those who opt for new tax regime. No change in surcharge is proposed for those who opt to be under the old regime.

Leave Encashment: The exemption threshold increased from Rs. 3 Lakhs to Rs. 25 Lakhs.

KARNATAKA BUDGET 2020 HIGHLIGHTS

KARNATAKA BUDGET 2020 HIGHLIGHTS

1)   Diesel and Petrol costs more:

State tax (VAT) on Petrol is proposed increase from 32% to 35% and on Diesel it is proposed to increase from 21% to 24% thereby costing Diesel and Petrol more. Now, travelling seat may not be comfortable to those loving travelling a lot.

2)   Indian Made Liquor costs more:

Excise duty on Indian made liquor is proposed to increase by 6%. Therefore, liquor may not taste for the coming year.

3)   Reduction in Stamp Duty:

The rate of stamp duty on first time registration of new apartments/flats costing less than Rupees 20 Lakhs is reduced from 5% to 2%. This will surely bring smile on face of many people aspiring to buy new apartments/flats. Practically, no one will for buying apartments/flats in non-metropolitan cities and in Metropolitan cities getting an apartment/flat for Rupees less than 20 Lakhs is a nightmare.

4)   Cheers to Students

a)   Two Saturdays in every month will be observed as bagless days.

b)   Cash Prize of Rupees One Lakhs will be awarded to students belonging to Schedules Castes/ Scheduled Tribes who secures first rank at District level in SSLC Examination.

c)   Action to distribute a minimum of 25% of seats to the students of the same taluk in the residential schools run by Karnataka Residential Educational Institutions Society

✍

Sanjay R Shetty

Chartered Accountant

HAVE YOU READ THE BUDGET IN BETWEEN THE LINES?

BUDGET 2020 CAPSULE – 4

HAVE YOU READ THE BUDGET IN BETWEEN THE LINES?

1)   The ‘New Tax Regime’ has been introduced with the reduced rates of taxes. However, one need to forego certain deductions/exemptions to opt for the New Tax Regime. The motto of the new regime is to simplify the Income Tax Compliance of individual/HUF taxpayers but in fact, it has further created confusion among the taxpayers. The optional scheme forces one to Compute the Income Tax liabilities both in New Tax Regime and Old Tax Regime.   

2)   Dividend Distribution Taxes (DDT) has been abolished. Now, Companies are not required to pay DDT. However, the Dividend exempted u/s 10(34) in the hands of a receiver (i.e the investor) is taxed now. Earlier, Government could collect 20.56% (Including Cess and Surcharge) for every Rupee of Dividend declared. But now Government can collect up to 42.74% depending upon an assessee’s Total Income.

3)   The due date for filing the Income Tax Returns for certain classes of assesses who were required to file it before 30^th September has been extended to 31^st October, but at the same time due date for filing the Tax Audit Return is unchanged thereby forcing to file ITR also on or before 30^th September only.

4)   The tax audit limit has been increased to Rupees Five Crores from existing Rupees One Crores for certain classes of assessees having volume of transactions in banking modes not less than 95% of total transactions. But, at the same time madates Individual/HUF to Comply with TDS Provisions if Turnover exceeds Rupees One Crores irrespective of Tax audit is done or not.

5)   The Budget has given tax holiday to real estate companies but removed the deduction for repayment of Housing loan and interest thereof by individuals and HUFs. So, what’s the point in promoting the Companies when the ultimate customers are discouraged? Is not it like teaching a man fishing in an empty pond?

✍

Sanjay R Shetty

Chartered Accountant

WILL REAL ESTATE SECTOR GETS REJUVENATED BY THE BUDGET MEASURES?

BUDGET 2020 CAPSULE – 3

WILL REAL ESTATE SECTOR GETS REJUVENATED BY THE BUDGET MEASURES?

REAL ESTATE – The Real wealth creator for any economy. There is a famous saying, ““Real estate cannot be lost or stolen, nor can it be carried away, you can only get benefited. While an individual’s wealth is the reflection of the amount of investment made in Land, building etc. a country’s wealth treasure is the amount of investment made in its infrastructural facilities. The Government has rightly identified need for investment in infrastructural facilities and brought in a mammoth of measures and incentives to kickstart growth in the said sector.

SO, WHAT ARE THEY?

1)   INVESTMENT IN INFRASTRUCTUAL FACILITIES IN COUNTRY OF ABOUT 100 LAKHS CRORES OVER A PERIOD OF NEXT 5 YEARS. - 

The Government has already launched this ambitious project. In fact, the honourable Finance Minister has already unveiled the project on 31^st December, 2019.

So, how much is Rs. 100 Lakhs Crores? India’s Total budgeted expenditure in Budget 2020 stood to Rs. 30 Lakhs crores. So, almost 3 years budgeted expenditure should flow to this project only. Does it make sense? It’s impossible for the government to invest so much of the capital out of its own funds. So, comes the External Commercial Borrowing. Government will infuse the capital to this project through External Borrowing.

2)   Tax holiday for Companies engaged in creating infrastructural facilities under “affordable housing scheme”. So, such companies need not to pay any income taxes. Whatever the profit earned by them is completely tax free in the hands of Companies. This scheme has the capacity to bring foreign investments to India. It plays a key role for rejuvenating the sector.

3)   Extension of time limit u/s 80EEA: The Deduction of Interest paid on Housing loan borrowed was earlier limited to loans borrowed on or before 31/03/2020 and now the same has been extended to one more year i.e. till 31/03/2021 which will again bring many of the assessees into this category and helps in balancing the demand and supply chain effectively.

4)   Increasing the limit u/s 43CA/50C on sale of Land and or building

Taxability of proceeds from sale of land and building in India is with reference to the Stamp Duty value of the said Property. Earlier analogy was to tax the amount received on sale of property or the Stamp duty value for the said property, whichever is higher. But this analogy had been changed in recent past including the recent budget. The changed analogy has considerably brought down the tax of the assessee as explained below.

Particulars	Case I	Case II	Case III	Case IV
Stamp duty Value	47	52	53	54
Actual Sale consideration	50	50	50	50
Taxable amount:
Taxable amount on or before 31-03-2018	50	52	53	54
Taxable amount on or before 01-04-2018	50	50	53	54
Taxable amount on or before 01-04-2020	50	50	50	50
Savings in the hands of an assessee as compared to the analogy existed on 31/03/2018.	0	2	3	4

       “He who owns more will always be respected more.” So, plenty of measures have been taken by the government in this respect and we are marching towards 5 Trillian Economy.

✍

Sanjay R Shetty

Chartered Accountant

WHY NRI’S NEED TO LOOK INTO THE BUDGET 2020 CAREFULLY?

Budget 2020 Capsule-2

 WHY NRI’S NEED TO LOOK INTO THE BUDGET 2020 CAREFULLY?

The Income of any assessee is taxed in India on the basis of “Residential Status” as enshrined under section 6 of the Income Tax Act, 1961. The Budget 2020, has brought in the tremendous changes in the said provision which particularly brings NRI’s income to Tax in India.

Why Residential Status plays a vital role in Taxation?

The taxation of Income depends upon the residential Status as mentioned below.

Ø  For “Ordinarily Resident” Income earned in India and also income earned outside India (Global Income) is Taxable.

Ø  For “Not Ordinarily Resident” Income Earned in India is only Taxable.

Ø  For “Non-residents” Income earned in India is only Taxable.

The Changes made in the Budget regarding the Residential Status in a nutshell –

Residential Status	Pre- Budget	Post Budget
Resident in India	If an individual stays in India in Previous Year for a period(s) of 182 days or more OR If an individual stays in India in Previous Year for a period(s) of 60 days or more and also stays for 365 Days or more within the four years preceding that Previous Year.	Following addition is made to the existing provision. An individual, being a citizen of India, is not liable to tax in any other country or territory by reason of his domicile or residence shall be deemed to be resident in India.
Resident in India - In case of an Indian Citizen/Person of Indian Origin who is residing outside India, comes on a visit to India in any previous year.	If an individual stays in India in Previous Year for a period(s) of 182 days or more OR If an individual stays in India in Previous Year for a period(s) of 182 days or more and also stays for 365 Days or more within the four years preceding that Previous Year.	If an individual stays in India in Previous Year for a period(s) of 182 days or more OR If an individual stays in India in Previous Year for a period(s) of 120 days or more and also stays for 365 Days or more within the four years preceding that Previous Year.
Non resident	If the above conditions are not satisfied an individual shall be treated as “Non-resident”.	If the above conditions are not satisfied an individual shall be treated as “Non-resident”.
Not Ordinarily Resident	an individual who has been a non-resident in India in 9 out of the 10 previous years preceding that year. OR has during the 7 previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and 729 days or less;	an individual who has been a non-resident in India in 7 out of the 10 previous years preceding that year
Ordinarily Resident	A Person who is Non resident in India for a lesser period as mentioned above for a “Non-Ordinarily Resident”	A Person who is Non-resident in India for a lesser period as mentioned above for a “Non-Ordinarily Resident”

IMPACT ASSESSMENT:

Ø  Person of India Origin/India Citizen who regularly stays outside India, comes to India on holiday or for whatever reasons and stays in India for a period more than 120 days (as against 180 days earlier) in India, his GLOBAL INCOME will also be taxable.

Ø  A person being an Indian Resident and earing income outside India and his income is not taxed in such countries on the basis of his residential status in such countries, he will be brought to tax in India as per his Residential Status in India.

Ø  To avoid taxing the “GLOBAL INCOME”, one must prove his Residential Status as “Not Ordinarily Resident”. Earlier, if an individual is non-resident for 9 out of 10 preceding previous years, he was declared as “Not ordinarily resident”. Now the same has been brought down to 7 out of 10 preceding Previous years.

✍

Sanjay R Shetty

Chartered Accountant

                                                                                                                                       Date : 04th February, 2020