Lalit Vanjani & Co.
Union Budget 2023

Uncluttering the cluttered

10 February 2023

Contents
Covering significant amendments on:
1

Personal tax

2

Corporate tax

3Startups

4

International taxation

5

Transfer pricing© Lalit Vanjani & Co.

Budget 2023 - Highlights

2

Tax policy

Consistency

Incentives for small
taxpayers• No change in corporate tax
structure• Tax rebate increased under
new regime for individual• Move towards exemption
free tax regime• Increased eligibility
threshold for presumptive
taxation• New mechanism for fasterdisposal of small appeals• Disincentive for delayed
payments to MSMEs© Lalit Vanjani & Co.

Plugging tax
leakages

Promotingentrepreneurship• Brining new TDS
provisions on winnings
from online gaming• Concessional rate of 15%
for new manufacturing
cooperatives• Rationalization of TDS
provisions on winnings
from crossword puzzels,
card games & any othergames, and horse racing• Continuing impetus tostartups/ IFSC

• Capping exemption on
insurance proceeds/
investment in new
residential property

Budget 2023 - Highlights

3Personal Tax© Lalit Vanjani & Co.

Budget 2023 - Highlights

4Personal tax
Optional simplified tax regime [Section 115BAC(1A)]

An individual/HUF taxpayer can opt for simplified
regime with lower tax rates. The new tax slab rates under
this simplified regime are as follows:
Income slabs (in INR)

Base Rate of Tax (%)

Up to 3,00,000

NIL

3,00,000 to 6,00,000

5

6,00,000 to 9,00,000

10

9,00,000 to 12,00,000

15

12,00,000 to 15,00,000

20

Above 15,00,000

30

Alternative Minimum Tax already does not apply to a
taxpayer who opts for new tax regime u/s 115BAC.

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In case an individual or HUF opts for the lower tax
regime, certain exemptions, deductions and set-off oflosses will not be available to be considered while
computing the taxable income (certain instances given
below):− Section 10 such as LTA, HRA, income of minor child, andcertain exemptions provided under section 10(14), etc.;− Interest on housing loan under section 24(b) on self-occupied
property and “house property loss”;− Chapter VIA deductions other than employers’ contribution
to NPS under section 80CCD(2) and deduction for
employment of new employees under section 80JJAA.
− Carry forward and set-off of loss arising from above
deductions and certain other eligible deductions against
business income [sections 32(1)(iia), 32AD, 33AB, 33ABA, 35,
35AD, 35CCC]
However, following deductions will be available.
− Standard deductions for family pension under section 57(iia)− Standard deduction under section 16− Contribution to Agniveer Corpus Fund

Budget 2023 - Highlights

5Personal tax
Simplified comparison of New Regime and Old Regime for AY 2024-25
E.g. - For taxable income of Rs. 20,50,000 (with standard deduction of Rs. 50,000)
In new regime u/s 115BAC
For AY 2024-25
Income slabs
Upto 3L
3L to 6L
6L to 9L
9L to 12L
12L to 15L
Above 15L
Total Basic Tax

Tax Rate
0
5%
10%
15%
20%
30%

Old regime
For AY 2024-25
Tax
15,00030,00045,00060,000
1,50,000
3,00,000

Income slabs
Upto 2.5L
2.5L to 5.0L
5L to 10L
Above 10L

Tax
12,500
1,00,000
3,00,000

Total Basic Tax

4,12,500

Old regime would be beneficial only if a person can claim deduction of more than Rs. 375,000 in a year under different provisions(HRA/Home Loan Interest/LTA/80C/ 80D/80G, etc.).
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Budget 2023 - Highlights

6Personal tax
New tax regime to be applicable at the option of assessee to be exercised in following manner:
Assessee with ‘business’ income

Assessee without ‘business’ income

Option to be exercised on or before due date of filing the
Return of Income

Option to be exercised along with the Return of Income

Option exercised to apply for all assessment years.

Option available for every assessment year. Effectively, thetaxpayer can opt in or opt out of the new tax regime every
year

Assessee can go back to the old regime once in life-time. Onceassessee withdraws from new tax regime, the option cannot be
exercised again, unless there is no business income.

Claim of impermissible deductions exemption/set-off of losses Claim of impermissible deduction/exemption/set-off ofto make option invalid for that and subsequent assessment
losses to make option invalid only for that assessment year.
years© Lalit Vanjani & Co.

Budget 2023 - Highlights

7Personal tax
Increased rebate under Section 87A
Currently, 100% tax rebate is available if assessee is:− An individual, resident in India− Total income does not exceed Rs. 5 lac

The income threshold for rebate is proposed to be
increased to Rs. 7 Lakh if income is offered to tax under
new regime u/s 115BAC.
This amendment shall apply for AY 2024-25 and onwards.

Rebate u/s 87A shall be limited to the income of Rs. 5
Lakh if income is offered under old regime.

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Budget 2023 - Highlights

8Personal tax
Relaxation in Surcharge income exceeding Rs. 5 Cr
Old rates of surcharge in case of Individual, HUF, AOP
and BOI were as follows:

Surcharge above Rs. 5 Cr., in case of Individual, HUF,
AOP and BOI, proposed to be abolished if the income isoffered to tax in new regime. The new slabs of surcharge
would be:Sr. No.

Total Income

Surcharge

1

Above Rs. 50 Lakhs & up to Rs. 1 Cr.

10%

Sr. No.

Total Income

Surcharge

2

Above Rs. 1 Cr. and up to Rs. 2 Cr.

15%

1Above Rs. 50 Lakhs & up to Rs. 1 Cr.

10%

3Above Rs. 2 Cr. and up to Rs. 5 Cr.

25%

2

Above Rs. 1 Cr. and up to Rs. 2 Cr.

15%

4Above Rs. 5 Cr.

37%

3Above Rs. 2 Cr. and up to Rs. 5 Cr.

25%

The reduction in surcharge would be available only in new regime.
Highest effective tax rate will come down from 42.744% to 39.00%.
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Budget 2023 - Highlights

9Personal tax
Capping of insurance premium for claiming exemptionof income other than ULIP [Section 10(10D)]
Section 10(10D) provides tax exemption in respect of sum
received under an insurance policy subject to thefulfilment of conditions given therein.

Exemption is proposed to be restricted for life insurance
policies issued after 1 April 2023.
The exemption will not be available if the aggregate
premium payable in any previous year during the termof life insurance policy exceeds Rs. 5 Lakh.
Such income shall be taxed under “Income from othersources” w.e.f., AY 2024-25 and onwards.

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Budget 2023 - Highlights

10Personal tax
Increased in threshold limit for presumptive taxation
for businesses [Section 44AD]

Increased in threshold limit for presumptive taxation
for professionals [Section 44AD]

Currently, section 44AD provides that a sum equal to 6%
or 8% of turnover or gross receipts shall be deemed as
taxable income, if turnover or gross receipts do not exceed
Rs. 2 Cr.

Currently, section 44ADA provides that a sum equal to
50% of turnover or gross receipts shall be deemed as
taxable income, if turnover or gross receipts do not exceed
R. 50 Lakh.

The threshold for presumptive taxation u/s 44AD to beconsidered as Rs. 3 Cr., if the amounts or aggregate ofamounts received in cash do not exceed 5% of total
turnover or gross receipts.

The threshold for presumptive taxation u/s 44ADA to beconsidered as Rs. 75 Lakh, if the amounts or aggregate ofamounts received in cash do not exceed 5% of total
turnover or gross receipts.

This amendment will apply from AY 2024-25.

This amendment will apply from AY 2024-25.

Tax Audit u/s 44AB shall not apply in the above
conditions are met.

Tax Audit u/s 44AB shall not apply in the above
conditions are met.

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Budget 2023 - Highlights

11Personal tax
Withholding tax on payment of PF accumulated balance
due to an employee

Rationalization of valuation of residential
accommodation provided to employees• The second proviso to Section 192A is proposed to beomitted so that withholding tax on payment ofaccumulated balance in PF corpus in cases where thetaxpayer fails to furnish PAN is at par with Section
206AA i.e., taxed at 20% instead of maximum marginalrate.

• The valuation of residential accommodation provided
to employees is proposed to be made rationalized byprescribing a uniform methodology in the rules forcomputing the value of perquisite sunder Section 17(2)read with Rule 3.

• The above amendment is proposed w.e.f. 1 April 2023.

• It proposes to take the power of prescription of themethod for computation of value of perquisite in thefollowing cases w.e.f. 1 April 2024:‒ Rent-free accommodation provided to the employee by his
employer.
‒ Accommodation provided to the employee by his employer
at a concessional rate.

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Budget 2023 - Highlights

12Personal tax
Capital Gains on residential house [Section 54 and 54F]

Currently, exemption under section 54 and section 54F isavailable if investment is made in new residential house.

The calculations of investment as per net considerationu/s 54F would need to be considered carefully.

As of now there is no upper monetary limit for making
investment in new residential house for claiming thededuction under section 54 and section 54F.

Consequently, same limit will apply on amount to bedeposited in Capital Gains Account Scheme, if required.

• Section 54 (for sale of long-term capital asset being a
residential house property)

This amendment will take effect from AY 2024-25 andonwards• Section 54F (for sale of long-term capital asset otherthan residential house property)

It is proposed to restrict the quantum of exemption.
Maximum amount of investment in new residential
property will be considered at Rs. 10 Crores.

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Budget 2023 - Highlights

13Personal tax
Increased TCS on remittances under LRS [Section 206C(1G)]

TCS on certain foreign remittances and on sale of overseas tour packages is proposed to be increased. The comparison ofcurrent and proposed rates of TCS is as follows:
Sr. No.

1
2Type of remittance
Education loan obtained from any financial
institution as defined in section 80E
For the purpose of education, other than (1) orfor the purpose of medical treatment.

3

Overseas tour package

4

Any other remittance under LRS

Threshold limit (in INR)

Present rate

Proposed rate

7,00,000

0.5%

No change

7,00,000

5%

No change

Any amount

5%

20%

7,00,000

5%20%This amendment will take effect from 1 July 2023.

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Corporate Tax© Lalit Vanjani & Co.

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Corporate tax
Tax rates

Benefits and perquisites - Sections 28(iv) and 194R

There is no change in the tax slabs and tax rates fordomestic as well as foreign companies.

Section 28(iv) provides for taxability of value of any
benefit/perquisite, whether convertible into money or
not.

Optional tax regime under section 115BA, 115BAA and
115BAB to remain available.

Effective tax rates to range from 17.16% to 34.96% under
different options available to domestic companies.
Effective tax rate for foreign companies to be in the rangeof 41.60% to 43.68%.

Courts have upheld non applicability of section 28(iv) if
the benefit/perquisite are in cash [CIT v. Mahindra and
Mahindra (2018) 404 ITR 1 (SC)].
In order to align with the intention of legislature, it is
proposed to clarify that section 28(iv) also applies to cases
where benefit/perquisite provided is in cash or in kind or
partly in cash and partly in kind.
A similar amendment has been proposed in section 194R,
which deals with withholding tax in relation to thebenefits or perquisites arising from the business or
profession.
Amendment to be effective from 1 April 2023.

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Budget 2023 - Highlights

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Corporate tax
Prompting timely payments to MSMEs [Section 43B]

Certain expenditures are allowed as deduction on actual
payment basis u/s 43B.
The provision is proposed to cover any sum payable to
MSMEs beyond the time limits specified in section 15 of
MSMED Act, 2006.

Categorization of NBFCs to be rationalized [Section
43B]
To align the categorization of NBFCs as per the RBI
regulations, suitable amendments have been proposed
under sections 43B and 43D, whereby a notification shallbe issued by the CBDT for specific classes to be included
under these sections.

Expense payable to MSMEs would be allowed in the year
in which payment is made, if is not paid within thetimeline prescribed under MSMED Act [15/45 days].
This amendment will take effect 1st April 2024.

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Budget 2023 - Highlights

17Corporate tax
Cost of acquisition of Intangible Assets

The existing provisions of section 55, define the terms‘cost of any improvement’ and ‘cost of acquisition’.
In case of intangible assets or any sort of right for whichno consideration is paid for acquisition, the cost of
acquisition is not clearly defined as ‘nil’ under section 55.
This has led to disputes and the courts have ruled against
the tax department that in the absence of specificprovisions to determine the COA the capital gains cannot
be taxed as the computation mechanism fails.

Therefore, it is proposed to amend section 55 to providethat the ‘cost of improvement’ or ‘cost of acquisition’ ofa capital asset being any intangible asset or any otherright shall be ‘Nil’.
This amendment shall be made effective from fiscal year2023-24.
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Corporate tax
New provision for TDS on online gaming [Section
194BA]Net winnings from online games to be subjected to TDS
under new section 194BA at the rates in force (currently
30 %) from 1 July 2023 as follows:- On withdrawal from user account during the FY (onthe net winnings comprised in such withdrawal)

Rationalization of TDS provisions for winnings fromlotteries, crosswords, horse races, etc. [Section 115BB,
194B and 194BB]
Threshold of INR 10,000 to apply on an aggregate basis(during an FY) and not on per transaction basis, for TDS
on winnings from lotteries, crossword & other games, andhorse races.

- On the net winnings in the user account/remaining in
the user account at the end of the FY.

TDS provisions of lottery, crossword puzzles, etc., havebeen amended to include winnings from “gambling or
betting of any form or nature whatsoever”.

Manner of computing net winnings in the user account tobe prescribed.

These amendments are proposed to be effective from 1
April 2023.

Where net winnings are wholly or partly in kind and,cash is insufficient to cover TDS liability, the payer should
ensure that the payee has paid tax before releasing thewinnings.

Winnings from online gaming would be excluded fromthe ambit of existing section 194B w.e.f. 1 July 2023.

Terms such as online gaming intermediary, user, user
account, etc., have been defined.
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Corporate tax
Other amendments related to TDS provisions

Exception provided in Clause (ix) of proviso to Section
193 omitted to bring interest payable on listed securities
by a company to a resident under its purview ofwithholding tax.

Proposed to amend section 271C and 276B to levy
penalty and carry out prosecution proceedings in a casewhere withholding tax is not paid to the Central
Government for payments covered under‒ section 194R (Benefit or perquisite in respect of business or
profession),‒ section 194S (Transfer of virtual digital asset), andThreshold limit for non-applicability of TDS under
Section 194N on cash withdrawal by co-operative society
has been increased from INR 1 Cr. to INR 3 Cr. However,the said threshold shall not be applicable on non-filers.
Widening the ambit of Section 197 (relating to issuance oflower or nil withholding certificate) to include
withholding tax under Section 194LBA by business trust.

© Lalit Vanjani & Co.

‒ the proposed new section 194BA (Net winnings from online
games).

The above amendments shall be effective from 1 April
2023 for Section 194R/ Section 194S and 1 July 2023 for
Section 194BA.
Higher rate of TDS and TCS under Section 206AB and
Section 206CCA are to be not applicable to persons who
are not required to furnish return of income for the
relevant year and the persons notified by the Govt.

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Corporate tax
Special provisions for taxation of Market Linked
Debentures (MLDs) [Section 50AA]_________________________________________________________

Income from transfer of Market Linked Debentures iscurrently taxed @ 10% as long-term capital gains without
indexation.

It is also proposed to defined “Market Linked Debenture”
as debt security where returns are linked to market andincludes SEBI regulated/classified Market Linked
Debentures.

New section 50AA is proposed to be introduced to tax
capital gains arising from transfer or redemption or
maturity of Market Linked Debentures. It is proposed totreat full value of consideration to be reduced by:This amendment shall be made effective from fiscal year2023-24.

‒ Cost of acquisition of the debenture; and‒ Expenditure incurred wholly and exclusively in connection
with such transfer or redemption or maturity.

as short-term capital gains taxed at normal applicabletax rates.

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Budget 2023 - Highlights

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Corporate tax
Mechanism to resolve withholding tax credit mismatch
where income is offered in earlier year(s) and TDS isdeducted in subsequent year(s) [Section 155(20)]Amendment proposed to Section 155(20) to enable the tax
authorities to pass orders revising assessment orders/
intimation providing credit for withholding tax where
income is offered in the relevant fiscal year, but the
subject withholding tax credit is deducted and remitted in
the subsequent fiscal year by the vendor.
To avail the above credit, the taxpayer needs to file anapplication in the prescribed form to the tax authorities
within two years from the end of the fiscal year inwhich tax is deducted at source.

Modified return in case of business reorganization

Section 170A of the IT Act provides for furnishing ofmodified return by the successor entity where the original
return was furnished by it. It is now proposed that thereturn furnished by an entity to which reorganization
order applies can be modified by the successor entity.
Further, it is also proposed to provide the procedure to befollowed by the Tax Officer after the modified return isfurnished by the successor entity.

Corresponding amendment to be made in section 244A to
grant interest from the date of filing rectification
application till the date of grant of refund.

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Budget 2023 - Highlights

22Corporate tax
Alignment of timeline provisions [Section 153]

Re-assessment proceedings [Section 148]

Time limit for completion of assessment relating to thefiscal year commencing on or after the 1 April 2021 is
proposed to be increased from 9 months to 12 months
from the end of the fiscal year in which the income was
first assessable.

Tax return in response to the notice initiating
reassessment proceedings shall be filed within 3 months
from the end of the month in which such notice isissued or further extended time as permitted by the tax
officer.

Similarly, time available for completion of assessment
proceedings in case of an updated return is also proposed
to be increased from 9 months to 12 months from the endof the fiscal year in which such return is furnished.

If the return is filed post the time allowed, it would be
deemed that no return has been filed at all
Effective from 1 April 2023

Time limits provided for completion of assessment etc.,
shall be applicable to revision order also.
These amendments shall be made effective from fiscal
year 2023-24.

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Corporate tax
Preventing permanent deferral of taxes throughundervaluation of inventory

Introduction of the authority of Joint Commissioner(Appeals)

To ensure that the inventory is valued in accordance withvarious provisions of law, it is proposed to amend section
142 of the IT Act relating to Inquiry before assessment toprovide for the following:

To expedite the disposal of appeals pending with firstappellate authority, it is proposed to introduce a new
authority in the rank of Joint Commissioner/ Additional
Commissioner [Joint Commissioner (Appeals)] to handle
certain class of cases involving small amount of disputed
demand.

‒ Valuation of inventory by a cost accountant nominated by theprescribed authorities.
‒ Expenses of and incidental to such inventory valuation(including remuneration of the cost accountant) shall be paidby the Central Government.
‒ Taxpayer will be given an opportunity of being heard (except
in case of best judgement assessment) in respect of any material
gathered based on such inventory valuation.

It is also proposed to provide for filing of appeal by the
taxpayer against certain specified orders passed by anauthority below the rank of Joint Commissioner(Appeals).
This amendment shall be made effective from fiscal year2023-24.

‒ Period for inventory valuation through the cost accountant tobe excluded for the purposes of computation of time limitation
for assessment and re-assessment.

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Corporate tax
Rationalization of appeals to the Tax tribunal

Amendment to Section 271FAA

Following amendments have been proposed:

The provisions of Section 271FAA of the Act provides forlevy of penalty of INR 50,000 for furnishing inaccurate
statement of financial transactions or reportable account.

‒ Appeal can be filed before the Tax Tribunal against penalty
orders passed by first appellate authority.
‒ Appeal against order passed by Principal Chief Commissioner
or Chief Commissioner can be filed before Tax Tribunal.
‒ Filing of memorandum of cross objections is enabled in allclasses of cases against which appeal can be made to the Tax
Tribunal.

This amendment to be effective from fiscal year 2023-24.
Decriminalization of Section 276A
It is proposed that liquidators would not be liable to beprosecuted on or after 1 April 2023.

It is proposed to amend the said provision by levying
additional penalty on reporting financial institution for
furnishing incorrect statement under section 285BA of the
IT Act.
The additional penalty of INR 5,000 shall be levied forevery inaccurate reportable account based on false selfcertification provided by the account holders.

The reporting financial institution may recover theamount so paid on behalf of the account holder or retain
out of any moneys that may be in its possession or may
come to it from every such reportable account holder.

The earlier prosecutions initiated under section 276A will
however continue.
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Corporate tax
Set-off and withholding of refunds in certain cases[Section 241A and 245]
Provisions of section 241A relating to withholding ofrefund is proposed to be merged with section 245 relating
to set-off of refund against existing demand, to providethat where refund is due to a taxpayer, such refund shallbe set-off against existing demand, and if proceedings forassessment or reassessment are pending in such case, thebalance refund due will be withheld by the tax authorities
till the date of assessment or reassessment.
It is also proposed that additional interest under section
244A of the IT Act shall not be payable for the period
from the date of withholding of refund till the date ofcompletion of assessment.
Section 241A of the IT Act is proposed made inapplicablefrom fiscal year 2023-24.

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Corporate tax
Widening the scope of income to include certain
distributions by Business Trusts (REIT/InVIT) tounitholders
There was no clarity on taxability of distribution made bybusiness trust (REIT/InVIT) to unitholders other thaninterest, dividend and rental income.

Payment made towards repayment of debt with/without
redemption of units does not suffer taxation either in thehands of business trust or unitholders.

‒ Insertion of proviso to section 115UA to provide that payment
received towards repayment of debt in case of redemption is tobe reduced from cost of acquisition of the units to the extent
such cost does not exceed the sum received.
‒ Definition of income under section 2(24) is proposed to beamended to add clause (xviic) to cover distribution other thaninterest, dividend and rental income.

The amendment will be effective from FY 2023-24

The Finance Bill proposes to tax repayment of debt in thehands of unitholders by way of the following
amendments:‒ Section 56 proposed to be amended to tax any sum received
from the business trust other than interest, dividend and rental
income under the head “income from other sources”.

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Corporate tax
Cash Loan and deposits [Section 269SS]

Repayment of cash loan and deposits [Section 269T]

Presently, no person shall take loan and accept any
deposits other than by account payee cheque, accountpayee bank draft or any other online mode exceeding of
Rs. 20,000.

Under this section, repayment of loan or deposits shallnot be paid other than account payee cheque or any other
online mode exceeding of Rs. 20,000.

It is now proposed to increase the limit to Rs. 2 Lakh forthe following:- Primary Agriculture Credit Society (“PACS”)

In the continuation of section 269SS, loan repaid to PACS
or PCARD by its member or repaid of deposits by PACS
or PCARD to its member other than account payee
cheque, bank transfer or any other mode of online.
The limit would be increased to Rs. 2 Lakh from Rs.
20,000 for PACS and PCARD.

- Primary Co- operative Agriculture and Rural
Development Bank (“PCARD”)

This amendment will take effect from 1st April 2023.

where such deposit is accepted from its member.
This amendment will take effect from 1st April 2023.

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Startups© Lalit Vanjani & Co.

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Proposals for Startups
Extension of period of losses which can be carriedforward and set off [Section 79]____________________________________________________The general provisions of section 79 do not allow carryforward and set-off of tax losses of a closely heldcompany unless the shares carrying 51 of the voting
power on the last day of the year were beneficially heldby persons who beneficially held shares carrying 51 of thevoting power on the last day of the year in which losses
were incurredThis relaxation had been given for losses incurred during
the period of 7 years beginning from the year ofincorporation
The relaxation is now proposed to be extended for losses
incurred during the period of 10 years beginning from theyear of incorporation

This provision is relaxed for eligible start ups that areregistered under section 80 IAC. For such start-ups, aslong as all shareholders who held shares carrying voting
power on the last day of the year in which the loss wasincurred continue to hold those shares on the last day of
the relevant year

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Proposals for Startups
Extension of incorporation date for eligible start-ups toavail tax holiday [Section 80-IAC]
The date of incorporation for eligible start-ups to avail tax
holiday to be extended until 31 March 2024.

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International taxation© Lalit Vanjani & Co.

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International taxation
Preventing misuse of presumptive schemes under
section 44BB and section 44BBB

Providing DTAA relief for TDS on payment of specified
income to non-resident

Section 44BB and 44BBB provide for presumptive taxation
schemes in the case of non-resident taxpayers carryingout eligible businesses such as mineral oils exploration,
civil construction, turnkey power projects etc.

The tax on income earned by non-resident from units ofspecified mutual funds or specified company, shall be
deducted at lower ofSuch taxpayers opt in and opt out of presumptive
schemes to avail benefit of both presumptive scheme
income and non-presumptive income.
To avoid such misuse, it is proposed that non-resident
taxpayers shall not be eligible to claim brought forwardbusiness loss and unabsorbed depreciation in case they
adopt a presumptive taxation scheme under sections 44BB
and 44BBB.

© Lalit Vanjani & Co.

‒ 20%, or‒ the rate provided in the relevant double tax avoidance
agreement,

subject to payee furnishing tax residency certificate.

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International taxation
Rationalization of thin capitalization provisions[Section 94B]
Section 94B restricts the deduction of interest exceeding
30% of EBIDTA, subject to other specified thresholds, incase of an Indian company (or a PE of a foreign company
in India) if the interest is payable in respect of debt issued
by a non-resident Associated Enterprise (AE).
Sub-section (3) of this section excludes certain companies
that are engaged in the business of banking or insurance
from its scope.
NBFCs to be brought at par with Banking/Insurance
institutions for non-applicability of thin capitalization
provisions under section 94B (i.e., restriction on claim ofinterest expense payable to non-resident associatedenterprise).
This amendment will take effect from 1 April 2024.

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International taxation
Bringing the non-resident investors within the ambit ofsection 56(2)(viib) to eliminate the possibility of tax
avoidance
Any amount received from a resident by a company inwhich public are not substantially interested towards
issue of shares, the amount in excess of fair value ofshares shall be taxable in the hands of the investee
company.
It is proposed that this provision shall apply to theamount invested by non-residents as well.
The amendment will be effective from 1 April 2023

© Lalit Vanjani & Co.

Extending deeming provisions [Section 9]
Currently, a sum or money received by non-resident isdeemed to be income arise or accrue in India and taxed inIndia in the hands of non-resident (NR), if the aggregate ofgifts:− exceeds Rs. 50,000− is received from a person who is resident in India

Individuals who are not-ordinarily resident (NOR) in
India also proposed to be included in the scope of persons
receiving gifts exceeding Rs. 50,000 from Indian residents.

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Transfer Pricing© Lalit Vanjani & Co.

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Transfer Pricing
Reduction in time limit for furnishing the Transfer
Pricing documentation
It is proposed to reduce time limit for filing the“information and documentation” as prescribed in Rule
10D of the Income-tax Rules, 1962 (Transfer Pricing
documentation) from 30 days to 10 days from the date ofreceipt of notice from the AO or CIT(A).
This time limit can be further extended by 30 days at thediscretion of the AO or CIT(A) on filing of application by
the taxpayer. The time limit for extension is also
proposed to be reduced to 10 days.
This amendment is proposed to be effective from 1 April
2023.

© Lalit Vanjani & Co.

Widened scope of domestic transfer pricing

It is proposed to widen the scope of domestic transfer
pricing prescribed u/s 92BA to include transactions withnew manufacturing cooperative society availing a
concessional tax rate of 15% as referred to in Section
115BAE.
Issue of shares to non-resident
As discussed in previous slides, receipts from issue ofshares by a company from a non-resident shall be taxable,
to the extent such receipts exceed the fair market value.
With this proposed amendment, the taxpayers may nolonger be able to take shelter of t he
Hon’ble Bombay High Court decision (Vodafone & Shell)to take a position that issue of shares does not give rise toincome and therefore no requirement to determine arms
length consideration

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Contact us
Lalit Vanjani & Co. (LVC) is a firm of Chartered Accountants in India. Established inyear 1993, LVC has been serving clients for 30 years and is a multi-disciplinary firm withextensive experience in Audit & Assurance, Tax & Regulatory, Financial Process
Outsourcing and Secretarial Services.
This publication contains information in summary form and is therefore intended forgeneral guidance only. It is not intended to be a substitute for detailed research or the
exercise of professional judgment. Neither LVC nor any of its Partners/employees canaccept any responsibility for loss occasioned to any person acting or refraining fromaction as a result of any material in this publication. On any specific matter, reference
should be made to the appropriate advisor.
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Budget 2023 - Highlights

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