Residential status and new tax regime

An NRI, when returning to India, his or her residential status immediately changes to resident individual and he or she needs to change his or her status by informing the bank.  NRO NRE and FCNR accounts is decided as per FEMA (Foreign Exchange Management Act) provisions.

So far as Income Tax provisions are concerned, residential status is governed under section 6 of The Income Tax Act, 1961.

The budget 2020 introduced a new regime under section 115BAC giving Individuals and HUF tax payers an option to pay income tax at lower rates. Starting from FY 2023-24, the new income tax regime will be set as the default option. If you want to continue using the old regime, you must submit a form at the time of return filing.

Read the complete article:  Residential status and new tax regime

Important Budget Proposals related to MSME

Payment Based Deduction: Any payment made to MSME shall be allowed as expenditure only when payment is actually made. This move brings ‘payments to MSME’ under the purview of Section 43B.

At present, Micro enterprises with turnover up to ₹ 2 crore and certain professionals with turnover of up to ₹ 50 lakh can avail the benefit of presumptive taxation. Now the  limits are enhanced to ₹3 crore and ₹ 75 lakh respectively.

Budget 2023-2024 highlights- relief under new tax regime

     Union Budget 2023-2024 provides plethora of benefits under New Tax Regime as compared to the Old Tax Regime. 

Default regime

The new tax regime for Individual and HUF, introduced by the Finance Act 2020, is now proposed to be the default regime. New Tax regime would also become the default regime for AOP (other than co-operative), BOI and AJP.

   Any individual, HUF, AOP (other than co-operative), BOI or AJP not willing to be taxed under this new regime can opt to be taxed under the old regime. For those persons having income under the head “profit and gains of business or profession” and having opted for old regime can revoke that option only once and after that they will continue to be taxed under the new regime. For those not having income under the head “profit and gains of business or profession”, option for old regime may be exercised in each year. 

Tax slabs and tax rates

Substantial relief is proposed under the new regime with new slabs and tax rates as under:

Total Income (₹)		Rate (per cent)
Upto 3,00,000	:	Nil
From 3,00,001 to 6,00,000	:	5
From 6,00,001 to 9,00,000	:	10
From 9,00,001 to 12,00,000	:	15
From 12,00,001 to 15,00,000	:	20
Above 15,00,000	:	30

Rebate

Resident individual with total income up to ₹5,00,000 do not pay any tax due to rebate under both old and new regime. It is proposed to increase the rebate for the resident individual under the new regime so that they do not pay tax if their total income is up to ₹7,00,000.

Standard Deduction

Standard deduction of ₹50,000 to salaried individual, and deduction from family pension up to ₹15,000, is currently allowed only under the old regime. It is proposed to allow these two deductions under the new regime also.

Surcharge

Surcharge on income-tax under both old regime and new regime is 10 per cent if income is above ₹50 lakh and up to ₹1 crore, 15 per cent if income is above ₹1 crore and up to ₹2 crore, 25 per cent if income is above ₹2 crore and up to ₹5 crore, and 37 per cent if income is above ₹5 crore. It is proposed that the for those individuals, HUF, AOP (other than co-operative), BOI and AJP under the new regime, surcharge would be same except that the surcharge rate of 37 per cent will not apply. Highest surcharge shall be 25 per cent for income above ₹2 crore. This would reduce the maximum rate from about 42.7 per cent to about 39 per cent. No change in surcharge is proposed for those who opt to be under the old regime.

TDS @ 10% on the benefit or perquisite paid to a resident businessman or professional arising from its business or profession

The Finance Act, 2022 had inserted a new section 194R to the Income Tax Act, 1961 providing for deduction of tax at source (TDS) @ 10% on the benefit or perquisite paid to a resident businessman or professional arising from its business or profession. Section 194R is applicable from July 1, 2022.

Section 194R(1):- Any person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession, by such resident, shall before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or perquisite at the rate of ten percent of the value or aggregate of value of such benefit or perquisite. 

Provided that in case where the benefit or perquisite, as the case may be, is wholly in kind or partly in cash and partly in kind, but such part of cash is not sufficient to meet the liability of deduction of tax in respect of whole of such benefit or perquisite, the person responsible for providing such benefit or perquisite shall, before releasing the benefit or perquisite, ensure that tax required to be deducted has been paid in respect of the benefit or perquisite. 

Provided further that the provisions of this section shall not apply in case of resident where the aggregate value of the benefit or perquisite provided or likely to be provided to such resident during the financial year does not exceed twenty thousand rupees. 

Provided also that the provision of this section shall not apply to individual or HUF whose gross receipts or turnover does not exceed one crore rupees for business or fifty lakhs rupees for profession during the financial year immediately preceding the financial year in which such benefit or perquisite is provided by such person.

Whether sales discount, cash discount and rebates are covered under benefit or perquisite? – The answer is No, both the discounts and rebates are not covered under the benefit or perquisite, except the nature provided below:  

a) any incentive is given in form of car, TV, computers, etc. 

b) any person sponsors a trip for his/her recipient and relative upon achieving certain target. 

c) providing free ticket for an event.

The benefit or perquisite given as capital asset will be taxable in the hands of recipient as benefit or perquisite.

Profession Tax on Salary & Wages; effective from April 01, 2022

 Finance department of Gujarat vide notification no GHN-35-PFT-2022-S.3(2)(10)-TH dated 08th April 2022 revised profession tax slab for salary and wage earners. According to this notification there will no profession tax on salary & wages up to Rs. 12000/- per month. This notification will be effective from April 01, 2022.

 

Sr. No.	Class of Persons	Rate of Tax per Month
1	A)   Salary & wages earners of the state government, Central Government, Panchayats, Public Sector Undertakings of the State & Central Government and Grant-In-Aids institutions whose monthly salaries or wages are
	i)                    Up to Rs 12,000/-	Zero
	ii)                   More than 12,000/-	Rs. 200/-
	B)    Salary & wages earners other than those mentioned in sub-entry (A) above, whose institutions whose monthly salaries or wages are
	i)                    Up to Rs 12,000/-	Zero
	ii)                   More than 12,000/-	Rs. 200/-

 

Explanation I: Where any salary or wages are payable according to any period other than a month, the monthly salary or wages shall, for the purpose of this entry, be reckoned on the basis of the actual amount of salary or wages paid or payable for a month.

Explanation II: Where a person ceases to be a salary or wages earner before the end of any month, his liability to pay the tax for that month shall be proportionately reduced.

Source: Gujarat Professional Tax rates on Salary and Wages

Areas of Jurisdiction for Competent Authorities under Prohibition of Benami Act, 1988

The government empowered under section 7 of the Prohibition of Benami Property Transactions Act 1988 as amended by Finance Act, 2021, allocated the areas of jurisdiction among the Competent Authorities authorized under sub-section (1) of section 5 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 for the purpose of the said Act. 

Jurisdictions are as below:

S.  No.	Name of Competent   Authority		Jurisdiction
1.	Competent Authority Kolkata		ll the cases referred by Income Tax Authorities* exercising the powers and performing the functions under the Prohibition of Benami Property Transactions Act, 1988 having headquarters at Kolkata, Bhubaneshwar, Patna, Guwahati.
2.	Competent Authority Chennai		All the cases referred by Income Tax Authorities* exercising the powers and performing the functions under the Prohibition of Benami Property Transactions Act, 1988 having headquarters at Bengaluru, Chennai, Kochi, Hyderabad, Panaji.
3.	Competent Authority New Delhi		All the cases referred by Income Tax Authorities* exercising the powers and performing the functions under the Prohibition of Benami Property Transactions Act, 1988 having headquarters at Delhi, Bhopal, Raipur, Chandigarh, Ludhiana, Jaipur, Lucknow, Kanpur.
4.	Competent Authority   Mumbai		All the cases referred by Income Tax Authorities* exercising the powers and performing the functions under the Prohibition of Benami Property Transactions Act, 1988 having headquarters at Mumbai, Ahmedabad, Surat, Pune, Nagpur.

* The territorial area wise jurisdiction of the respective Income Tax Authorities in this regard will be same as provided for in CBDT Notification No 40/2017/F. No. 173/429/2016-ITA-I dated 18-05-2017 [S.O. 1621(E)] published in Part II, Section 3, Sub-section (ii) of the Gazette of India, Extraordinary.

The work performed by the Competent Authorities authorized under sub-section (1) of section 5 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (13 of 1976) in exercise of powers conferred under section 7 of the Prohibition of Benami Property Transactions Act 1988 will be in addition to the work already being performed by the Competent Authorities.

Source: Ministry of Finance (Department of Revenue) (Competent Authority Cell) 

 

TDS/TCS compliance for Section 206AB and 206CCA

Section 206AB and 206CCA inserted in the Income-tax Act,1961 (effective from 1st July 2021), imposed higher TDS/TCS rate on the "Specified Persons' defined as under,

For the purposes of this section ' specified person" means a person who has not filed the returns of income for both of the two assessment years relevant to the two previous years immediately prior to the previous year in which tax is required to be collected, for which the time limit of filing return of income under sub-section (1) of section 139 has expired; and the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in each of these two previous years. 

Provided that the specified person shall not include a non-resident who does not have a permanent establishment in India.

To facilitate Tax Deductors and Collectors in identification of Specified Persons as defined in sections 206AB and 206CCA, the Central Board of Direct Taxes ("CBDT") has directed the specified income-tax authority for furnishing information to the Tax Deductor / Tax Collector, having registered in the reporting portal of the Project Insight through valid TAN. This information is available through the functionality "Compliance Check for Section 206AB& 206CCA". 

This functionality "Compliance Check for Section 206AB& 206CCA" is made available through (https://report.insight.gov.in) of Income-tax Department.

Source: https://www.incometaxindia.gov.in/communications/notification/notification01_2021-compliance-check-functionality.pdf