Amendments in Finance Bill 2023

Amendments in Finance Bill 2023

Tags:      Gig Economy     Economy     WTO     WTO Public Stockholding     MSP     Economic Growth     Masala Bond     Environmental Performance Index     Forecast of Economic Growth     Functions of the Finance Commission

April 7, 2023

The Lok Sabha passed the Finance Bill 2023 recently by making 64 amendments.

Key Provisions of the Finance Bill 2023

• Capital Gains – Capital gains through debt funds, fund of funds, gold funds and international funds will be taxed at a person’s appropriate tax slab.

• Mutual Funds – Mutual funds with less than 35% Assets under Management (AUM) within domestic equity will be taxed as per short-term capital gains and will be deprived of indexation benefit.

• Securities Transaction Tax (STT) – There is an increase in STT taxes

• Infrastructure investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) – Only the amount accepted over initial investment will be taxed as earnings from other sources.

• GST Appellate Tribunal (GSTAT) – Recommends installation of a GSTAT with a principal bench and multiple state benches.

• Foreign Tours – There is a request for RBI to bring foreign tour remittance using credit cards into the scope of Liberalized Remittance Scheme (LRS).

• GIFT city – Foreign banking entities within GIFT city will receive 100% exemption on earnings for 10 years.

• Foreign (non-resident) companies – Tax on technical or royalty fee earned through non-resident organizations increased from 10% to 20%.

Implications of the amendments on debt mutual funds

• Separation in debt fund – As per the amendment, the separation in debt fund taxation for a retention period within 3 years or longer will not be applicable.

• Capital gain – Capital gain on debt funds redemption purchased on or after 1st April, 2023 to be taxed as per income tax slab rate.

• Investments in Debt fund – May help long-term financiers to postpone their responsibilities.

• Taxation perspective – With tax arbitrage among bonds, FDs (interest income) and debt funds (capital gains), all of them are at a similar level from the taxation perspective.

• Short-term Capital Gains – The holding period of listed bonds till a year to be taxed at an individual’s income tax slab rate.

• Long-term Capital Gains – To be levied at 10% without any indexation because it is the interest, rather than capital gain, that is the more important point of income.

• Accrual-based taxation – Helps avoid any inquiry possibility through the income tax department for data mismatch in reported data to the department and the tax on income.

Source - The HINDU Business Line