Union Finance Minister Nirmala Sitharaman speaks in the Lok Sabha throughout Budget Session of Parliament, in New Delhi on March 24, 2023.
| Photo Credit: PTI
The Finance Bill 2023 was been handed in Lok Sabha with no dialogue and the House was adjourned to satisfy once more on March 27.
Moving amendments to the Finance Bill, Nirmala Sitharaman stated, “It has been represented that payments for foreign tours through credit cards are not being captured under the Liberalised Remittance Scheme (LRS) & they escape tax collection at source. The Reserve Bank of India is being requested to look into this with a view to bring credit card payments for foreign tours within the ambit of LRS and tax collection at source thereon.”
Withholding tax on royalties and technical companies payment could improve value of know-how import
The withholding tax fee on royalties and payment for technical companies paid to non-residents has been raised from 10% to twenty%. “This may increase the cost of import of technology in cases where Indian companies are grossing up withholding taxes and any bilateral tax treaty benefits are not available,” stated Gouri Puri, associate at Shardul Amarchand Mangaldas & Co.
GST Appellate Tribunals to be arrange throughout nation
The Finance Bill has paved the means for establishing GST Appellate Tribunals throughout the nation, with a principal bench in New Delhi and a number of other State benches. The Tribunal might be headed by a former Supreme Court decide or a retired Chief Justice of a High Court.
Also learn: GST appellate tribunal could also be headed by a former Supreme Court decide
The measure could have the meant impact of curbing extreme F&O trades solely in flat or range-bound markets as when markets are unstable, merchants will hope to offset the greater tax by greater payoffs, Mr. Jasani defined. “In the past, such raising of taxes had a temporary minimal impact of F&O volumes. For more effective curbs on volumes, SEBI or stock exchanges may have to link the volumes and Open interest in the futures and options market with the disclosed income or wealth of the participants,” the HDFC Securities official stated.
Increase in STT to discourgae extreme commerce in F&O
“While the proposed increase in STT will shore up revenues of the Govt to a certain extent, the main idea behind this could be to discourage the excessive trade in F&O segment where a large number of retail traders end up losing money as per a recent SEBI study,” Deepak Jasani, head of retail analysis at HDFC Securities informed The Hindu. “An incidental effect of this could be shifting the F&O trades to SGX, Gift and other locations that do not attract such taxes for participants who have access to them,” he added.
Govt. tweaks Budget proposal to tax distribution from enterprise trusts as revenue from different sources
In a transfer that may assuage unit holders of REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts), the authorities has tweaked the Budget proposal to tax distribution from enterprise belief as revenue from different sources . “This is now proposed to be treated as return of capital by reducing the cost of acquisition of the units, as far as the issue price of the units. Any amount received in excess of the issue price would be taxable as income,” the Ministry defined.
Stakeholders concern on Angel Tax provisions to be addressed for startup investments
While there have been no adjustments made to the Budget’s Angel Tax provisions for investments in startups, the Finance Ministry has stated all considerations raised by stakeholders in implementation of this proposal can be addressed. “The draft rules related to valuation shall be shared with the stakeholders for their inputs in April itself, and exclusions, currently provided to domestic Venture Capital Funds etc, shall also be considered for similar overseas entities,” the Ministry assured.
This will affect all mutual funds that supply schemes with nomenclatures comparable to conservative hybrid funds, that make investments predominantly in debt however have an fairness publicity of as much as 35% of their portfolios.
“An arbitrage is being created right now where interest income from debt mutual fund (where not more than 35% invested in shares in domestic company) is not distributed and converted into long term capital gains of 20% (with indexation). In some case it comes to even less than 10% due to indexation. Thus many taxpayers are able to reduce their tax liability through this arbitrage,” the Finance Ministry defined
Tax on debt mutual funds
Income from debt mutual funds that make investments as much as 35% in fairness shares of home firms might be taxable at relevant fee since revenue from equities in such funds don’t represent curiosity revenue.
Also learn: Government scraps long-term tax profit for debt mutual funds investing lower than 35% property in fairness
Securities Transaction Tax raised on F&O contracts from April 1
The Government is elevating the Securities Transaction Tax (STT) on futures and choices contracts in the inventory market from April 1, 2023, and adjustments to this impact have been introduced into the Finance Bill cleared by the Lok Sabha at the moment. Options contracts will now appeal to 0.021% STT from 0.017% earlier and futures will appeal to a levy of 0.0125%, up from 0.01%
