CBDT has released the Explanatory Notes to the Provisions of the Finance Act, 2022 vide Circular No. 23/2022 dated 03.11.2022. These explanatory notes describe the substance of the provisions/amendments made by the Finance Act, 2022. The 94-page circular contains Explanatory notes to the provisions of the Finance Act, 2022 and is spread through 48 paras, issued after a lapse of around 7 months since the enactment of the Finance Act, 2022 on 31.03.2022. Further, after a gap of 3 (three) years, the Board has come up with explanatory notes since 2019. The last time the Board published such explanatory notes was for the Finance Act, 2018.
Every year after the enactment of the Finance Act, CBDT publishes an explanatory circular to explain the changes introduced in the Income-tax Act, 1961 (‘Act’) through the Finance Act with the aim to seek harmonious and contextual interpretation of the provisions of the Finance Act and to bring clarity.
Following the usual practice, now, the Board has published the explanatory circular to explain the provisions of the Finance Act, 2022. It also explains the provisions which were introduced by the Finance Act, 2022 but were not part of the Finance Bill, 2022 and thus were not discussed in the Memorandum explaining the Finance Bill, 2022. There were around 39 amendments to the Finance Bill, 2022 introduced by the government (known as government amendments) and all these find a place in this explanatory circular of 2022.
This explanatory circular of 2022 contains an extensive explanation of section-by-section amendments and the introduction of new provisions in the Income-tax Act/Rules that are generally relevant for Assessment Year 2023-24.
Furthermore, the circular has detailed the income tax rates for AY 2023-24 as well as the rates at which tax must be deducted at source (rates of TDS) and advance tax must be paid for the previous year 2022-23. Though the majority of these find a place in the ‘Memorandum Explaining the Provisions in the Finance Bill 2022′, however, these Explanatory Notes address the subsequent changes in the tax proposals. A conjoint reading of the Memorandum explaining the Finance Bill and the CBDT Circular on explanatory notes to provisions of the Finance Act are important aid of interpretation. However, one should note that this is only a Circular and not law or rule under the Act but it has a quasi legal status.
In this circular, various amendments to the Income-tax Act are discussed amply demonstrating as to which amendments are clarificatory/retrospective in operation and which amendments are prospective.
This circular or publication has a summary of all of the amendments to the Income-tax Act or Rules that the Finance Act of 2022 made, along with explanations from the CBDT, on the following issues:
As stated above, the Explanatory Notes to the Provisions of Finance Act, 2022 contained in this circular also finds place in the Memorandum explaining the Finance Bill, 2022 for those amendments which were in the Finance Bill, 2022 but do not contain explanatory notes for government amendments.
Hence, in order to avoid repetition, explanatory notes of certain important government amendments are discussed here.
Readers may refer to the full list of government amendments to the Finance Bill, 2022 here and their explanations here.
Definition of “books of account”
Para 4 of the Explanatory Circular of 2022 explains the amendment introduced by the government in section 2(12A) of the Income-tax Act, 1961 through the Finance Bill, 2022 which is related to the definition of “books of account” and is reproduced below-
4.1 Section 2 of the Act defines various terms used in the Act. Clause (12A) of section 2 defines “books or books of account” to include ledgers, day-books, cash books, account books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device.
4.2 With the advancement of technology and its widespread utility in daily conduct of business, books of account are maintained in electronic form by a significant section of the assessees in the current age.
4.3 Therefore, to align the definitions under the Act with the current practices, clause (12A) of section 2 of the Act has been amended so as to provide that the definition of books or books of account would include books or books of account kept in electronic or in digital form or as print outs of data stored in such electronic or in digital form.
4.4 Applicability: This amendment is effective from 1st April, 2022.
Corrigendum
CBDT issues Corrigendum to Circular No. 23 of 2022 Dated 03.11.2022 - Explanatory Notes to Finance Act, 2022 vide Circular No. 2/2023 dated 06.02.2023 to rectify the sub-point (iii) of point (1) of sub-paragraph (A) of paragraph 28.5. The circular reads-
In the said circular, in sub-point (iii) of the point (1) of sub-paragraph (A) of paragraph 28.5, the words "two assessment years preceding such assessment year" shall be read as "any assessment year preceding such assessment year"
More details will be published at a later stage.
Read the full text of CBDT Circular 23/2022 dated 03.11.2022 on Explanatory Notes to Provisions of Finance Act, 2022
CIRCULAR
INCOME-TAX ACT
Finance Act, 2022-Explanatory Notes to the Provisions of the Finance Act, 2022
CIRCULAR NO. - 23/2022, DATED 3rd NOVEMBER, 2022
AMENDMENTS AT A GLANCE
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Download CBDT Circular 23/2022 dated 03.11.2022 on Explanatory Notes to Provisions of Finance Act, 2022 in PDF format
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