Other side of Coin – “Budget proposals (Direct Tax)”

Finance Bill 2023 proposed certain changes and proposed certain new provisions. Let’s have a look at impact of proposals which might remain unnoticed.

1. New tax regime

In addition to change in slab rate and rebate, new tax regime is amended to increase scope of regime to other persons. Accordingly, AOP (including Trust but not to co-operative society), BOI, AJP will be able to opt for New tax regime.

2. Uppper limit of 10 crore for Sec 54F

As per exisiting provisions of Sec 54F, if new property is sold within 3 years cost will be considered as NIL while calculating capital gain on transfer of new property.

As per budget proposal if more than 10 crores are invested in new property, exemption will be available only upto 10 crore. However, if we do literal interpretation of budget proposal, amount invested above 10 crore will neither available for Sec 54F nor for deduction as cost at the time of calculation of capital gain on new asset . Clarification is expected on the said amendment so as to avoid denial of both the benefits.

3. Importance of timely payment to MSME

As per proposed change in Sec 43B, if payment is not done to Micro/Small enterprises within 15 days/45 days, as applicable, said expenses will be disallowed.

Said changes will also impact payment made by Micro/Small enterprises to another Micro/Small enterprises registered under the act.

4. High premium term plan will not get tax benefits

In budget 2023, it is proposed to tax income from insurance policies (other than ULIP for which provisions already exists) having premium or aggregate of premium above Rs.5,00,000 in a year.

In case, any of prescribed relative makes payment of premium, policy holder will be required to pay tax on receipts of proceeds if above conditions are not fulfilled.

5. Capital Gain on Market linked debentures will always be short term

Consideration received on the transfer or redemption or maturity of the “Market Linked
Debentures” as reduced by the cost of acquisition of the debenture, will be capital gains arising from the transfer of a short term capital asset.

We understand that sale consideration will include interest received at the time redemption/maturity and interest will not be taxed separately. It is also understood that fixed rate debentures will not be covered by proposed amendment. Loss from other long/short term assets will be allowed to set off and exemption u/s 54F will be available if proceeds of debentures are invested in acquiring house property subject to fulfillment of specified conditions.