Hirani & Co, Advocates and Tax Planners

Union Budget 2023 - Analysis of the relevant Income Tax Proposals

1. Increase in Turnover limits of presumptive taxation schemes for professionals (from 50 lakhs to 75 lakhs) and small businesses (from 2 Crores to 3 Crores) subject to conditions:

Section 44ADA For Professionals – This is a welcome change, particularly for professionals since the turnover limit for opting into the presumptive taxation scheme was 50 Lakhs of gross earnings since past many years. Under this scheme, professionals are not required to furnish books of accounts or get them audited at the time of filing returns if the net profit declared is at least 50% of the gross receipts. The limit for opting for this scheme is now increased from 50 lakhs to 75 lakhs of gross earnings in a financial year. However, this increased limit is available subject to the condition that the cash receipts earned should not be more than 5% of the gross earnings for the financial year. If the cash earnings are more than 5% of the gross earnings / receipts, then the original limit of 50 lakhs will apply. Also, if non-account payee cheques are received, such cheques will be considered as cash earnings.

Section 44AD For Small Businesses – Similar to the above, the turnover for opting into the presumptive taxation scheme for small businesses is increased from 2 Crores to 3 Crores of gross turnover of business, subject to the condition that the cash turnover earned should not be more than 5% of the gross turnover for the financial year. If the cash earnings are more than 5% of the gross turnover, then the original limit of 2 Crores will apply. Also, if non-account payee cheques are received, such cheques will be considered as cash earnings.

2. Tax Exemption till 3 lakhs and Reduced Slab Rates but only for New Taxation Regime:

Section 115BAC – The New Taxation Regime was introduced a couple of years back, wherein the concessional tax rates were given and Income tax slabs for taxation were lowered compared to the old regular scheme of taxation. This New Taxation Regime does not allow for Deductions for any investments made such as LIC, PPF, Education Expenses, Principal and Interest deductions for home loans, Tax Saving Funds, Mediclaim, etc. Thus, taxpayers can choose between Old Regime of Taxation with deductions or New Taxation Regime without deductions for each year before filing Return, depending on whichever is more beneficial in terms of tax payments.

No changes whatsoever are made to the Old Taxation Regime and the basic exemption limit remains 2.5 Lakhs. However, the basic exemption limit in the New Taxation Regime is increased from 2.5 Lakhs to 3 Lakhs.

Following are the reduced Slab Rates of Taxation if opting for the New Taxation Regime:

1. Upto Rs.3,00,000 Nil
2. From Rs.3,00,001 to Rs.6,00,000 5 per cent.
3. From Rs.6,00,001 to Rs.9,00,000 10 per cent.
4. From Rs.9,00,001 to Rs.12,00,000 15 per cent.
5. From Rs.12,00,001 to Rs.15,00,000 20 per cent.
6. Above Rs.15,00,000 30 per cent.

As compared to above, following are the Slab Rates of Taxation if continuing to opt for Old Taxation Regime:

1. Upto Rs.2,50,000 Nil
2. From Rs.2,50,001 to Rs.5,00,000 5 per cent.
3. From Rs.5,00,001 to Rs.10,00,000 20 per cent.
4. Above Rs.10,00,000 30 per cent.

In both tax regimes, the basic exemption limit remains 3 lakhs for Senior Citizens (60 years and above) and 5 Lakhs for Super Senior Citizens (80 years and above).

3. Tax Rebate increased from 5 Lakhs to 7 Lakhs income but for New Taxation Regime only:

At present, there is a tax rebate available for net income earned of 5 lakhs. Thus, there is no tax payable under both Old or New Taxation Regimes if net income is 5 Lakhs or less. This tax rebate is now extended to a total income of 7 Lakhs, provided the taxpayer opts for the New Taxation Regime only. The said Tax Rebate limit will continue to be 5 Lakhs for the Old Taxation Regime.

Going forward, the government intends to make the New Taxation Regime as the default Income Tax Regime.

4. Tax Exemption for Re-investment in Residential House Property restricted to 10 Crores:

Sections 54 & 54F – Long Term Capital Gains Tax can be avoided if proceeds from Sale of Residential / Commercial Assets are re-invested in a Residential House Property subject to certain conditions. Until now, there was no restriction on the amount that could be re-invested in the new residential house for claiming tax benefit.

However, it is proposed that if the cost of the new residential property exceeds 10 Crores, the amount exceeding 10 Crores will not be considered for availing the re-investment benefits under Income Tax. In other words, the tax benefit for re-investing in a new residential house will be restricted to 10 Crores and the Balance Long Term Capital Gains from sale of old asset will be taxable.

5. Other important personal tax proposals:

- Instead of the various existing Income Tax Returns for different incomes earned, a Common Income Tax Return will role out for ease of Income Tax Return filings;
- 100 joint commissioners to be appointed to expedite small pending cases and appeals;
- Standard Deduction from Salary is increased from 50000/- to 52500/- for Salary Income above 5 Lakhs. Further, this deduction will also be available in the New Taxation Regime;
- Leave Encashment for State and Central Govt Employees at the time of retirement was totally tax exempt. However, only 3 lakhs (subject to conditions) for Non Govt Employees was exempt. This limit for tax exemption is now proposed to be raised to 25 Lakhs for Non – Govt Employees;
- Surcharge on the Tax payable amount for total income of 5 Crores and above is reduced from 37% to 25%, bringing it on par with Surcharge on total income between 2-5 Crores. Thus, highest effective tax rate reduced from 42.7% to 39%. This deduction in Surcharge is only available in the New Taxation Regime; and
- TDS on Employee Provident Fund (EPF) withdrawals where PAN Number is not available is reduced from 30% to 20%. If PAN Number is available, the TDS is deducted at 10% if withdrawal exceeds 50000/-. This TDS is deducted if Provident Fund money is withdrawn within 5 years of opening the EPF account and not otherwise.

Thanks & Regards,
Romil Hirani
Hirani & Co (Advocates & Tax Consultants)

Union Budget 2022 - Analysis of the relevant Income Tax Proposals for personal taxation:

1. Filing of Updated Income Tax returns within 2 years:
Section 139 (8A) - A new provision to file updated Income Tax return along with payment of relevant ‘Additional Income Tax’ (explained in next point) is proposed in order to rectify any irregularities or mistakes in the return filed. Such updated return can be filed within 2 years from the end of the relevant Assessment Year. However, such an updated return cannot be filed if there is an increase in refund or reduction in the tax liability that is already paid while filing the original return. Further, the updated return cannot be filed to claim loss under any head of income. The updated return can be filed even if the tax payer has missed filing the original return for the relevant Assessment Year. The tax payer is not eligible to file updated return if search, survey or any proceedings including scrutiny assessment for that relevant year is already initiated or completed by the Income tax department. Only one updated return can be filed.

2. Additional Income Tax for updated Tax Return:
Apart from the actual tax liability payable at the time of filing updated tax return along with the relevant surcharge, cess, interest and late fee, following additional tax is payable:
- 25% of the aggregate income tax and interest payable if the updated return is filed within 1 year from end of relevant assessment year; and
- 50% of the aggregate income tax and interest payable if the updated return is filed after 1 year but before 2 years from the end of relevant assessment year.

3. Taxation of Virtual Digital Assets (Crypto currencies and digital block chain assets including NFT):
Section 115BBH - Transfer (sale) of such virtual digital assets will be taxed at a fixed tax rate of 30%. No deductions apart from the actual cost of acquisition will be allowed from the same in order to calculate the gains / profits on the sale of such digital assets. Further, TDS @ 1% is proposed to be deducted on the sale of virtual digital assets. The losses made on sale of virtual digital assets cannot be set off against any other incomes and such loss cannot be carried forward to future years for set off. Gift of virtual digital assets will be taxable in the hands of the recipient.

4. Rationalisation of Surcharge on sale of Long Term Assets: Surcharge on the income from sale of certain long term assets such as on equity shares and equity oriented mutual funds which are liable to STT was capped at 15%. However, the surcharge on incomes from any other long terms assets including on sale of property was 25% of the tax amount on income between 2cr and 5 cr and 37% of the tax amount on income above 5 cr. It is proposed to remove the enhanced surcharge rates of 25% and 37% and cap the surcharge on sale of any long term assets at 15%.

5. Other important personal tax proposals:
- Brought forward losses cannot be set off against any undisclosed income which is realised during search and seizure operations by the Income tax department;
- No appeal cases from Income Tax department if any matter on identical question of law is pending before High Courts or Supreme Court;
- Health and Education Cess not allowed as business expenditure; and
- No changes in Income Tax slabs or rates.

Thanks & Regards,
Romil Hirani
Hirani & Co (Advocates & Tax Consultants)

📣 The much awaited Extension of Income Tax Returns for FY 20-21 (AY 21-22) is here:
- The due date for filing Income Tax Returns (non-audited) is extended from 30th Sep 2021 to 31st Dec 2021;
- The date for filing Tax Audit report is extended from 31st Oct 21 to 15th Jan 2022;
- The date of filing Income Tax Returns (audit cases) is extended from 30th Nov 2021 to 15th Feb 2022; and
- For those Returns filed beyond the above due dates (belated) or for revision of Returns filed for AY 21-22, the due date is extended from 31st Jan 2022 to 31st Mar 2022 . This means no Returns for AY 21-22 (FY 20-21) can be filed beyond 31st Mar 2022.

📣 It is to be noted that although the Income tax return filing dates are extended, interest U/s 234A is chargeable for every month from 31st July 2021 (original due date) in case the net tax liability is in excess of INR 1 Lakh

The circular issued in this regard is enclosed.

Wishing all a Happy Ganesh Chaturthi!
Thanks and Regards
Romil Hirani
Hirani & Co.

The new Income tax website is still facing issues due to which filing of Income Tax Returns for AY 21-22 (FY 20-21) is difficult at this time. We will update our clients once Return filing resumes and all updated Return Forms are made available online.

Hoping that the glitches faced for various online services on the Income Tax Web portal are resolved soon!

Thanks and Regards,
Romil Hirani
Hirani & Co.

https://www.caclubindia.com/news/memorandum-problems-being-faced-relation-new-income-tax-portal-20475.asp?utm_source=twitter&utm_medium=tweet&utm_campaign=AutoTweet_news

Memorandum on the problems being faced in relation to New Income Tax Portal - Income Tax The District Taxation Bar Association (Direct Taxes), Ludhiana has written a Memorandum to FM Nirmala Sitharaman wherein, they have highlighted 22 problems that are being faced by them and the taxpayers at large, on the New Income Tax Portal.

📣 Extension of Income Tax Returns for FY 20-21 (AY 21-22):

- The due date for filing Income Tax Returns (non-audited) is extended from 31st July 2021 to 30th Sep 2021;
- The date for filing Tax Audit report is extended from 30th Sep 21 to 31st Oct 21;
- The date of filing Income Tax Returns (audit cases) is extended from 31st Oct 21 to 30th Nov 21; and
- For those Returns filed beyond the above due dates (belated) or for revision of Returns filed for AY 21-22, the due date is extended from 31st Dec 21 to 31st Jan 22. This means no Returns for AY 21-22 (FY 20-21) can be filed beyond 31st Jan 22 (unless dates are further extended).

📣 The TDS Return due dates for Q4 of FY 20-21 (Jan 21-Mar21) have also been extended:
Non - Salary TDS: Due Date extended from 31st May 21 to 30th June 21; and
Salary TDS: Due date extended from 15th June 21 to 15th July 21
Thus, the above extensions may have an impact on the updation of TDS credits in Form 26AS for Q4 of FY 20-21 (AY 21-22)

📣 For those who missed filing Income Tax Returns (belated returns) or those who did not get a chance to revise Income Tax Returns for FY 19-20 (AY 20-21), can file such Returns on or before 31st May 21.

The circular issued in this regard:https://www.incometaxindia.gov.in/communications/circular/circular_9_2021.pdf

Thanks and Regards
Romil Hirani
Hirani & Co.

www.incometaxindia.gov.in