On Friday, the Lok Sabha approved The Finance Bill 2023 with 64 official amendments. The amendments include tax relief for some taxpayers who opt for the new tax regime, and the removal of long-term tax benefits for debt mutual funds to bring them in line with other interest-earning instruments. Under the new tax regime, if a taxpayer has an annual income of up to Rs 7 lakh, they pay no tax. However, if their income is Rs 7,00,100 or more, they pay tax of Rs 25,010. The amendment provides that tax payable should not be more than the income that exceeds Rs 7 lakh. This means an individual having an income of up to Rs 7,27,700 could benefit from this marginal relief.
Other amendments include raising the tax rate on royalty and fee for technical services from 10% to 20%. The Finance Bill, which includes tax proposals for the fiscal year beginning April 1, was passed without discussion as parliament continued to remain stalled over demands for a probe into allegations against the Adani group. The Lok Sabha passed the Finance Bill amid placards holding opposition MPs shouting slogans from the well of the House.
From April 1, investments in debt mutual funds will be taxed as short-term capital gains, stripping investors of the long-term tax benefits that made such investments popular. Currently, investors in debt funds pay income tax on capital gains according to the income tax slab for a holding period of three years. After three years, these funds pay either 20% with indexation benefits or 10% without indexation. After the amendment, such gains from transfer of units of specified mutual funds will be treated as short term and taxed at slab rates. This is in addition to taxation of market-linked debenture proposed in the original bill.
Also, credit card payments for foreign travel will be brought under the purview of the Liberalised Remittance Scheme (LRS) of the Reserve Bank to ensure that such expenses do not escape TCS (Tax Collection at Source). The Union Budget 2023 proposed a TCS for foreign outward remittance under LRS other than for education and medical purposes of 20% applicable from July 1, 2023.
Moving the Bill, Finance Minister Nirmala Sitharaman also announced a committee under the finance secretary to look into pension issues of government employees. “I propose to set up a committee under the finance secretary to look into the issue of pensions and evolve an approach which addresses the needs of employees while maintaining fiscal prudence to protect common citizens,” she said.
The amendments approved provide for setting up of the GST Tribunal, which is expected to help streamline pending litigations. As of December 31, 2022, assets under management for debt-oriented products stood at Rs 12.42 lakh crore.
