Key Amendments in India's Finance Bill 2023: A Focus on Taxation and Litigation

The Finance Bill 2023 is a bill that includes tax proposals for the fiscal year beginning on April 1, 2023. It was passed by the Lok Sabha, the lower house of the Indian Parliament, on March 24, 2023. The Lok Sabha has passed the Finance Bill 2023 with 64 official amendments. The bill includes several major amendments, some of which are:

1. Tax relief for taxpayers opting for a new tax regime who earn a marginally higher income than the no-tax ceiling of Rs 7 lakh.

2. Removal of long-term tax benefits for debt mutual funds to bring them at par with other interest-earning instruments.

3. Raising the tax rate on royalty and fees for technical services from 10% to 20%.

4. Taxation of gains from the transfer of units of specified mutual funds as short-term gains, and taxing them at slab rates.

5. Bringing credit card payments for foreign travel under the purview of the Liberalised Remittance Scheme (LRS) to ensure that such expenses do not escape TCS (Tax Collection at Source).

6. Setting up a committee under the finance secretary to look into the issue of pensions and evolve an approach which addresses the needs of employees while maintaining fiscal prudence to protect common citizens. The move comes against the backdrop of several non-BJP states deciding to revert to the DA-linked Old Pension Scheme (OPS), and some employee organizations in other states raising demand for the same.

7. The proposal to tax income other than interest, dividend, rent, and capital gains, by unitholders of REIT/lnVIT has been further amended in the latest round of changes in the Finance Bill.

8. Other Key changes- Extending tax benefits for sovereign wealth funds and pension funds investing in business trusts. They have also allowed for cost to be deducted against the return of capital component for unitholders of business trusts. Additionally, the establishment of a GST Tribunal has been approved, which will help streamline pending litigations. MUDRA loans for micro units/enterprises are now eligible for guarantee coverage under Credit Guarantee Fund for Micro Units. The angel tax has been deferred to April 1, 2024. Capital gains earned on redemption of market-linked debentures will be treated as short-term capital gains taxable at slab rates without any indexation benefit, and specified mutual funds investing at least 65% in equity shares of domestic companies are also included in this provision. The Securities Transaction Tax (STT) on options sale has been increased to Rs 2,100 on a turnover of Rs 1 crore.

These amendments were all approved by voice vote and will now go to the Rajya Sabha, the upper house of the Indian Parliament. They will become law once the President gives assent.

The author is a Chartered Accountant with 2 decades of experience into Accounting, Taxation, Auditing, Risk & Compliance, Credit Controls, Due diligence. Currently, the author is the founder and managing partner at RRL Global services.