Finance Bill, 2022 has proposed various changes in Corporate taxation related to company assessees. The amendments in the Income-tax Act, 1961 (‘Act’) related to taxation of companies are discussed in this article.
No Change in Corporate tax rates and MAT rate
Tax Rate on Companies for the AY 2023-24 are is given below-
Table-7
Table-8
Optional Corporate income-tax rates for Assessment Year 2021-22 [introduced by the Taxation Laws (Amendment) Act, 2019]
Table-C
Table-D
Filing of Updated Return
Section 139 of the Act is related to the provisions for filing Income Tax returns by the taxpayers. Section 139(4) of the Act facilitates the filing of a belated return after the expiry of the due date. Section 139(5) of the Act provides the taxpayer with an opportunity to revise the return filed under sub-section (1) or sub-section (4) of section 139 in case of any omission or wrong statement, after the due date.
As per the amended provisions of section 139 as introduced by the Finance Act, 2021, no belated or revised return can be filed after the 31st Day of December of the Assessment Year.
In case any assessee has committed omissions or any mistakes in correctly estimating their income, a new provision section 139(8A) is introduced permitting taxpayers to file an “Updated Return” on payment of additional tax. This updated return can be filed within two years from the end of the relevant assessment year.
However, one needs to pay an additional tax to file an ‘updated return’ over and above the normal tax that the assessee has to pay on his total income.
It is proposed that additional tax equal to 25% of the unpaid tax on additional income is payable if the updated return is filed within 1 year. This will go up to 50% if the updated return is filed after 1 year.
More other provisions are also made with respect to updated returns which will be discussed in detail in another article on this topic.
Last date for commencement of manufacturing or production under Section 115BAB extended
It is proposed to extend the last date for commencement of manufacturing or production under Section 115BAB by one more year i.e. from March 31, 2023 to March 31, 2024.
Cap the surcharge on long-term capital gains
The long-term capital gains (LTCG) on listed equity shares, units etc. are liable to a maximum surcharge of 15 per cent, while the other long term capital gains are subjected to a graded surcharge which goes up to 37 per cent. It is proposed to cap the surcharge on long term capital gains arising on the transfer of any type of assets and chargeable to tax under section 112 at 15 per cent.
Tax on virtual digital assets (VDA) or Cryptocurrency
It is proposed that any income from transfer of any virtual digital asset (which includes cryptocurrency) shall be taxed at a flat rate of 30%.
No deduction in respect of any expenditure or allowance shall be allowed while computing such income except the cost of acquisition.
Further, loss from transfer of virtual digital asset cannot be set off against any other income. This is proposed in new section 115BBH.
Hence, in a financial year if you have profit, pay tax @ 30%. In case of loss, no carry forward is allowed.
TDS on payment for transfer of virtual digital assets (VDA): Effective from 1st July 2022, it is proposed to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1% of such consideration above a monetary threshold which is given below:
This is proposed in Section 194S.
VDA to be taxed as Gift: It is also proposed to amend section 56(2)(x) to provide for the taxation of the gift of virtual digital asset in the hands of the recipient.
Surcharge or Cess not allowable as business expenditure
It is proposed that any surcharge or cess on income and profits is not allowable as business expenditure. For this purpose, the term “tax” is redefined to include any surcharge or cess, by whatever name called, on such tax. This amendment will take effect retrospectively from 1st April, 2005 and will accordingly apply in relation to the assessment year 2005-06 and subsequent assessment years.
Conversion of Interest not to be allowed under section 43B
It is proposed to amend section 43B provide that conversion of interest payable into debenture or any other instrument by which liability to pay is deferred to a future date shall not be deemed to have been actually paid.
Disallowance under section 14A in absence of any exempt income during an assessment year
It is proposed to insert an Explanation to section 14A of the Act to clarify that provisions of section 14A shall apply in a case where exempt income has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred during the said previous year in relation to such exempt income.
Certain expenses Not Allowable under section 37
It is proposed to insert an Explanation to section 37(1) to clarify that the following expenditure shall be treated as expenditure incurred by an assessee which is an offence or which is prohibited by law and thus shall be disallowed as business expenditure-
a) Expenditure incurred for any purpose which is an offence or which is prohibited under any law in India or outside India; or
b) Expenditure incurred to provide any benefit or perquisite to a person in violation of any law or rule or regulation or guidelines governing the conduct of such person; or
c) Expenditure incurred to compound an offence under any law in India or outside India.
TDS on benefit or perquisite of a business or profession under section 194R
it is proposed to insert a new section 194R to the Act to provide for the deduction of tax for providing any benefit or perquisite to a resident person arising from carrying out of a business or exercising of a profession at the rate of 10% of the value or aggregate of the value of such benefit or perquisite and the value exceeds Rs. 20,000.
Withdrawal of concessional rate of taxation on dividend income under section 115BBD
The concessional rate of tax on dividend income as per section 115BBD shall cease to operate from the assessment year 2023-24.
Refund of TDS from non-resident: Amendment in section 248 and insertion of new section 239A
Effective from 1.4.2022, there is no need to file an appeal before CIT(A) for a declaration that no tax was deductible on sum paid to non-residents under section 195 of the Act. For this purpose, suitable amendment is made to section 248. Instead, an application for refund of such tax can be made before the Assessing Officeras per new section 239A proposed to be inserted in the Act.
The Assessing Officer’s order is appealable before CIT(A) under section 246A if the deductor is not satisfied with the order of the Assessing Officer.
Prosecution for second and subsequent offences for failure to pay TCS
Section 278A covers punishment with the prosecution against persons for failure to pay TDS to the credit of the Central Government for the second and subsequent offences.
Similarly, section 278AA provides for non-initiation of prosecution against persons for failure to pay TDS to the credit of the Central Government if there is a reasonable cause for such failure.
In both the sections, only failure to pay TDS is covered and not the failure to pay the TCS is covered. Now, it is proposed to cover TCS also in these two sections similar to that of TDS.
Rationalizing Penalty under section 271AAD - Penalty for false entry/ Omission, etc., in books of account
It is proposed to amend sections 271AAD to enable the Commissioner (Appeals) to levy penalty under this section along with Assessing Officer.
Amendment to section 272A - Penalty for failure to answer questions, sign statements, furnish information, returns or statements, allow inspections, etc
It is proposed to increase the amount of penalty for failures listed under section 272A to Rs. 500 from the existing sum of Rs. 100.
CIT’s Power of Revision under section 263 Amended to include TPO Order
It is proposed to amend the provisions of section 263 of the Act so as to provide that the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or Commissioner who is assigned the jurisdiction of transfer pricing may call for and examine the record of any proceeding under this Act, and if he considers that any order passed by the TPO, working under his jurisdiction, to be erroneous in so far as it is prejudicial to the interests of revenue, he may pass an order directing revision of the order of TPO.
Consequential changes are also be made in the provisions of section 153 of the Act inter alia to provide two months’ time to the Assessing Officer to give effect to the order of TPO consequent to the directions in the revision order.
Reduction of Goodwill from block of assets to be considered as ‘transfer
It is proposed to clarify that for the purposes of section 50 of the Act, reduction of the amount of goodwill of a business or profession, from the block of asset shall be deemed to be transfer retrospectively with effect from 1st April 2021 or AY 2021-22.
Source of Source for loans and borrowings under section 68
It is proposed to amend the provisions of section 68 of the Act so as to provide that the nature and source of any sum, whether in form of loan or borrowing, or any other liability credited in the books of an assessee shall be treated as explained only if the source of funds is also explained in the hands of the creditor.
However, this additional onus of proof of satisfactorily explaining the source in the hands of the creditor, would not apply if the creditor is a well regulated entity, i.e., it is a Venture Capital Fund, Venture Capital Company registered with SEBI.
Section 158AB Inserted to avoid repetitive appeals by the Department
It is proposed to provide that, if a question of law in the case of an assessee is identical to a question of law which is pending in appeal before the jurisdictional High Court or the Supreme Court in any case, the filing of further appeal in the case of this assessee by the department shall be deferred till such question of law is decided by the jurisdictional High Court or the Supreme Court.
No Set-off of Loss in search cases
It is proposed to insert a new section 79A to provide that no set off, of any loss shall be allowed against undisclosed income detected during search and survey operations.
Filing of Modifies Return by the successor entity subsequent to busniess reorganisation
it is proposed to insert a new section 170A to the Act to enable for the entities going through business reorganization, for filing of modified returns for the period between the date of effectivity of the order and the date of issuance of final order of the competent authority.
Other related articles on Budget 2022
Finance Minister Presents Finance Bill 2022 after Union Budget 2022 in Loksabha
Download Finance Bill, 2022 (PDF) as introduced in Loksabha
Download Memorandum Explaining the Provisions in the Financial Bill 2022
Income Tax announcements in Budget Speech: Union Budget 2022
New Income Tax Slab Rates after Union Budget 2022
Changes in Personal Taxation by Union Budget 2022
Section 139(8A): Filing of Updated Return - Budget 2022
Corporate Tax Proposals: Union Budget 2022
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