Lok Sabha passed Amendment Bill last week with significant amendments that would be visible in the form of changes in taxation among other things. Let’s have a look at the key changes announced in the Finance bill.
Residency Provision – The latest amendment suggests that the non-resident who is an Indian citizen or of Indian origin will not come in the resident category if his stay is less than 120 days. The idea is not to tax the income of such individuals as foreign source of income, provided there income does not exceed INR 15 lakhs. Further, it has been decided that such an individual will be considered as Not Ordinary resident.
Those who come under this category will only be liable to pay taxes over the business or profession controlled in India, given that such income does not exceed 15 lakhs.
DDT Exemption to REITs and InvITs – Under the new finance bill, investors in infrastructure investment trusts and real estate investment trust are exempted from the dividend distribution tax. This exemption however is valid for only those companies who are still following the old tax regime rather than migrating to the new one. After the Budget this year, foreign funds were wary of their investment in REITs and InvITs making these investment a no go for them. Some of the proposed REITs include names like Brookfield, Prestige Estates, K Raheja, Blacklstone among others.
Tax Exemption to Sovereign Wealth fund – Yet another important amendment made in the finance bill was reducing the surcharge to 15% from 37% on taxable income. Government has taken a step back and resorted to older ways wherein the dividend would be taxed at individual level rather than at corporate level. For pension funds, the step proves out to be a beneficial one with dividend, interest and long term capital gains made from the investment before March 31, 2024 getting exempted.
The new Finance bill also talks about a reduced rate of 2% on technical services towards incorporating royalty provided royalty is in the nature of distribution or exhibition of cinematographic films, consideration for sale. Apart from this any other item mentioned under section 194J will incur a rate of 10%.
The new amendments in the finance bill also cover section 115BAC rectifying the provision wherein the benefits was taken only by the businessmen and professional were excluded. The section states that Hindu Undivided families and individual would not be eligible for the optional personal tax regime. However, that issue has been taken care of by the government under the new amendment.
In addition to the above amendments, the Government has also hiked the threshold for levying road and infrastructure cess to Rs 18 per compared to Rs 10 per litre. This could be one way of increasing Government revenue in the short run. It is worth noting that a rupee hike in the excise duty enables the government to increase its revenue and earn between Rs 13000-Rs 14000 crore on annual basis.