Unlocking Tax Planning Strategies: Insights from India’s Finance Act 2023

1. New Slab Rates for Individuals:
   • Introduction of a new tax scheme under Section 115BAC.
   • Rates vary from nil tax for income up to 3 lakhs to 30% for income above 15 lakhs.
   • Non-residents without business income can opt for the new scheme for potential tax benefits.
   • Deduction allowances are not allowed, but standard deduction under Section 16 is permitted.
   • Rebate for individuals opting for the new scheme is capped at Rs 25,000 or 100% of tax payable, whichever is lower.
2. Business Income and Capital Gains:
   • Presumptive scheme limits raised to 75 lakhs for professionals and 3 crores for businesses.
   • Amortization of preliminary expenses allowed over 5 years.
   • Market-linked debentures now subject to short-term capital gain tax.
   • Changes in Section 54 exemptions for capital gains, limiting investment in house property to 10 crores.
   • Section 43b(h) amended for MSME payments, allowing expenses after the time limit.
3. Trust Taxation:
   • Increased role of NGOs due to COVID, leading to changes in trust taxation under sections 11 and 12.
   • Separate presentations advised for comprehensive trust advisory.
   • Changes in GST regulations and filing requirements for trusts.
4. TDS/TCS Regulations:
   • Maximum withdrawal rate under Section 194A set at 10% for employees failing to furnish PAN.
   • Non-residents can apply for lower deduction based on DTAA or 20% under Section 193.
   • Introduction of new concepts like crypto taxation and tax on perquisites.
5. International Taxation:
   • Amendment under Section 94B extends thin capitalization provisions to NBFCs.
   • Rates for royalty fees and technical services set at 20% under Section 115A.
   • Increased potential for income tax cases due to DTAA applications.
6. Pillar 1 and Pillar 2 Concepts:
   • Introduction of Pillar 1 and Pillar 2 concepts under OCED regulations.
   • Pillar 1 for entities with revenue exceeding Euro 20 billion.
   • Pillar 2 imposes a minimum tax rate of 15% for entities with revenue exceeding Euro 750 million.

Conclusion:

The Finance Act 2023 brings significant changes to the taxation landscape, impacting individuals, businesses, trusts, and international transactions. Understanding these amendments is crucial for tax professionals and taxpayers to ensure compliance and maximize tax benefits. As the tax filing season approaches, staying informed about these changes is essential for effective tax planning and advisory services.

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