Lok Sabha passes finance bill 2023 amid din. Here are the highlights

The Lok Sabha on March 24 passed the Finance Bill 2023 with amendments even as the Opposition continued to press for a Joint Parliamentary Committee (JPC) investigation against the Adani group.

The Finance Bill, which contains proposals related to taxation and government spending, was passed with several amendments. Besides, 20 more sections were added to the Bill.

While the House was taking up the Bill, several opposition members were in the well raising slogans and holding placards demanding a JPC probe into the allegations against the power-to-port conglomerate after a US-based short-seller accused the group companies of stock manipulation, a charge denied by the Adani group. As sloganeering continued, the proceedings were adjourned till March 27.

Key amendments in the Finance Bill 2023-24

Securities transaction tax hiked 

As per an amendment, the securities transaction tax (STT) on the sale of options has been hiked to Rs 2,100 on a turnover of Rs 1 crore against an earlier levy of Rs 1,700, an increase of 23.5 percent.

On the sale of futures contracts, STT has been hiked to Rs 12,500 on Rs 1 crore of turnover against Rs 10,000 earlier, indicating a 25 percent hike.

Debt mutual funds may lose long-term capital gains taxation benefit

Finance Bill 2023 has proposed that investments in mutual fund where not more than 35 percent is invested in equity shares of Indian companies ie debt funds will now be deemed to be short-term capital gains.

That is, capital gains from debt funds, international funds and gold funds, irrespective of their holding period, will be taxed at an individual’s relevant tax slab.

No relief for startups on angel tax provision

Startups have failed to get any significant respite from the proposed change in the angel tax regime, which might hamper foreign funding for young companies.

Govt has shared a background note on key amendments in Finance Bill 2023-24. Full text:

1) Angel tax deferred to 1st April 2024: No, in the original proposal as well it was to come into effect from 1st April 2024, ie For Assessment year 2024-25 (FY 2023- 24). There is no change in it. However, all concerns raised by stakeholders in implementation of this proposal would be addressed. The draft rules related to valuation shall be shared with the stakeholders for their inputs in the next month itself, viz April. Exclusions, as already provided to domestic Venture Capital Funds etc, shall also be considered for similar overseas entities.

2) Taxation on debt mutual fund: It is proposed to tax the income from debt mutual fund at applicable rate since it is of the nature of interest income. An arbitrage is being created right now where interest income from debt mutual fund (where not more than 35% invested in share 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. This is sought to be addressed.

3) Changes in REIT/InvIT: Finance Bill proposed to tax distribution from business trust which as income from other sources at applicable rate. This is now proposed to be treated as return of capital ie reduction from cost of acquisition, till the cost at which the unit was issued. However, any amount in excess of the issue price would be taxable as income. Thus, the change would benefit the unitholders vis a vis the earlier proposal.

4) Any change to 7L limit: No there is no change. Only marginal relief is proposed to be provided. Currently if a taxpayer has income of 7 L s/he pays no tax but if s/he has income of 7,00,100 s/he pays tax of 25,010. Thus additional income of Rs 100 leads to tax of Rs 25,010. Hence, marginal relief is proposed to that the tax that what one pays should not be more than the income that exceeds 7L (Rs 100 in this case). 5. LRS 20% TCS (applicability to IFSC): At present there is TCS on LRS if it is remitted out of India. Hence, when money is remitted by resident to Gift City there is no TCS. To bring parity in treatment it is proposed that TCS shall apply to all LRS even if within India.