HIGHLIGHTS OF THE FINANCE BILL, 2022

Tax Rates Reckoner

The income-tax rates for Assessment Year 2023-24 are the same as applicable in Assessment Year 2022-23. However, the rate
of surcharge on long-term capital gain and AOP consisting of only company as member is capped at 15%. Further, rate of
surcharge in case of co-operative societies having income between 1 crore to 10 crore is reduced from 12% to 7%.
The comparative tax tables are provided in this chapter for ready reference.
1.1. Individual or HUF Opting for Normal Tax Regime*

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1.2. Individuals or HUF opting for Alternate Tax Regime 1.3. Tax rates for AOP/BOI
*(Section 115BAC)

* Rebate under section 87A is available to resident individuals whose

total income during the previous year does not exceed Rs. 5,00,000.
Rebate is available to the extent of Rs. 12,500 only and no rebate will
be available if total income exceeds Rs. 5,00,000.

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1.4. Tax rates for Company

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1.5. Tax rates for Co-operative Society 1.6. Tax rates for Other Entities

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Rates of Surcharge
2.1. Rate of Surcharge in the hands of the Individual, HUF, AOP, BOI or AJP

** From A.Y. 2023-24 onwards, the surcharge rates for AOP with all members as a company, cannot exceed 15%.

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2.2. Rate of Surcharge in case of any other assessee

*Health and Education Cess at the rate of 4% shall be charged on aggregate of income-tax and surcharge.

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Tax Rates
Tax Rates
Surcharge on long-term capital gain

The Finance Bill proposes that the rate of surcharge on long-term capital gain shall not exceed 15%.
Earlier, this benefit was available only in respect of long-term capital gain arising from the transfer
of listed equity shares, equity-oriented mutual funds and units of business trust. Now the
surcharge rate cannot exceed 15% in respect of long-term capital gain arising from the transfer of
any capital asset.

Surcharge rate in case of AOP

In case of an Association of Persons (AOP) consisting of only companies as its members, the
surcharge rate on the amount of Income-tax shall not exceed 15%. Thus, for AY 2023-24, the rate of
surcharge in case of such AOPs shall be as follows:

Range of Income
Nature of income
More than Rs. 50 lakh but
Up to Rs. 50 lakh Above Rs. 1 crore
up to Rs. 1 crore
Unexplained income
chargeable to tax under 25% 25% 25%
Section 115BBE

Any other income Nil 10% 15%

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Surcharge rate in case of co-operative societies

The rate of surcharge in case of co-operative societies which are not opting for section 115BAD is
reduced from 12% to 7% where the income exceeds Rs. 1 crore but does not exceed Rs. 10 crores.
The surcharge rate shall be 12% where income of co-operative societies exceeds Rs. 10 crores.

AMT rate reduced to 15% in case of co-operative societies

Rate of Alternate Minimum Tax (AMT) is reduced from 18.5% to 15% in case of co-operative societies.

No concession in tax rate on dividends received from foreign company

Currently, the dividend income received by an Indian company from a foreign company in which
the said Indian company holds 26% or more in nominal value of equity shares is taxed at a
concessional rate of 15%. The said concessional tax rate shall not apply from the Assessment year
2023-24 onwards.

Scope of Bonus Stripping and Dividend Stripping provisions widened

The anti-avoidance provisions of bonus stripping are proposed to be made applicable to securities
and units of business trusts such as Infrastructure Investment Trust (InvIT), Real Estate Investment
Trust (REIT) and Alternative Investment Funds (AIFs). Thus, the losses shall be now disallowed in
the hands of unitholders of InvIT, REIT or AIFs on account of such arrangements.

Section 115BAB

The last date for commencement of manufacturing or production under Section 115BAB has been
extended from 31-03-2023 to 31-03-2024.

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Tax on Virtual Digital Assets
Tax on Virtual Digital Assets
1. A new scheme has been proposed for taxation of virtual digital assets with effect from
Assessment Year 2023-24. All gains arising from the transfer of digital assets on or after 01-04-22
shall be governed by this scheme.

2. Virtual Digital Assets cover cryptocurrencies, NFTs, and any other digital asset notified by the
Central Govt. The Govt. has the power to exclude any digital asset from the definition of a virtual
digital asset.

3. A new Section 115BBH has been proposed to be inserted. It provides that the income from the
transfer of any virtual digital asset shall be taxed at the rate of 30%. However, no deduction in
respect of any expenditure (other than cost of acquisition) or allowance or set-off of any loss shall
be allowed to the assessee.

4. Further, no set-off of any loss arising from the transfer of virtual digital asset shall be allowed
against any income computed under any other provision of the Act and such loss shall not be
allowed to be carried forward to subsequent assessment years.

5. A new Section 194S has been proposed to be inserted. It provides for deduction of tax at the rate
of 1% from payment to a resident person on transfer of virtual digital asset.

6. The meaning of ‘property’ for Section 56(2)(x) shall now include virtual digital asset. Thus, where
such assets are received without consideration or inadequate consideration, it shall be taxable in
the hands of the recipient if it exceeds Rs. 50,000.

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Income under the
Head Salaries
Income under the Head Salaries
No tax on sum paid by employer for Covid-19 treatment

Section 17 is amended to provide that any sum paid by the employer towards the medical
treatment of an employee or his family member in respect of any illness relating to COVID-19 shall
not be taxable as perquisite.

Deduction for NPS in case of State Govt. Employees

The threshold limit for deduction in respect of employer’s contribution to NPS is increased to 14%
of salary in the case of State Government employees

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Income from Business or
Profession
Income from Business or
Profession
Conversion of outstanding Interest

Section 43B is amended to provide that conversion of the outstanding interest liability into
debentures is not an actual payment and, thus, cannot be claimed as a deduction.

Deduction under Section 37(1)

Section 37 is proposed to be amended that any expenditure incurred to provide any benefit or
perquisite to a person shall not be deductible if acceptance of such benefit or perquisite by such
person violates any law governing the conduct of such person in India or outside India. For instance,
medical practitioners are prohibited from taking any gifts from pharmaceutical companies. Thus, if a
pharmaceutical company gifts something to a medical practitioner, it shall not be allowed as
deduction.

No deduction of surcharge or cess

As per Section 40(a)(ii), no deduction is allowed for payment of any rate or tax while computing the
income from a business or profession. A new explanation is inserted to clarify that the term “tax”
includes and shall be deemed to have always included any surcharge or cess. Thus, no deduction shall
be allowed for surcharge and cess. It is a clarificatory amendment applicable retrospectively from 01-
04-2005.

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Charitable Trust
Charitable Trust
Application of income to be allowed on a payment basis

Trust or institution are required to apply 85% of their income for the specified purposes. Any sum
shall be considered an application of income in the previous year in which it is actually paid
irrespective of the year in which the liability to pay such sum was incurred by such trust according
to the method of accounting regularly employed.

Computation of income of trusts in certain situations

Provisions have been introduced for taxation of trusts having commercial receipts over 20% of the
annual receipts in violation of the provisions of the proviso to section 2(15) or who are not getting
the books of account audited or who are not filing the return of income. The taxable income in
such cases shall be computed after allowing a deduction for the expenditure (other than capital
expenditure) incurred in India, for the objects of the trust or institution.

Special tax rate

The following incomes of the trusts or institutions shall be chargeable to tax at the special rate of
30% under the newly proposed section 115BBI:
(a) Income accumulated or set apart in excess of 15%.
(b) Deemed income under Section 11(1B) or Section 11(3).
(c) Investment of funds in an unspecified manner.
(d) Benefit to the interested person.
(e) Income applied outside India.

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Accreted Income

Provisions of sections 115TD, 115TE and 115TF relating to taxation of Accreted Income are also made
applicable to trusts or institutions under Section 10(23C).

Institutions claiming exemptions under Section 10(23C)

(a) Restrictions have been imposed on institutions claiming exemption under Section 10(23C) to
pass on any unreasonable benefit to the trustee or any other specified person.

(b) Such institutions have been allowed to accumulate income for application in subsequent years.
They are required to furnish a statement stating the purpose for which the income is being
accumulated and the period for which the income is to be accumulated or set apart, which shall in
no case exceed 5 years. Money accumulated to be invested in the forms or modes specified in
Section 11(5).

(c) Filing of Return of income under Section 139(4C) is mandatory to claim the exemption under
Section 10(23C).

Maintenance of books of accounts

If the total income of a trust or institution, without giving effect to the provisions of Section 10(23C)
or Sections 11 and 12, exceeds the maximum amount which is not chargeable to tax, such trust or
institution shall keep and maintain prescribed books of account.

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Taxability of income accumulated under Section 11(2)

Any income accumulated in Section 11(2) which is not utilized for the purpose for which it is so
accumulated or set apart shall be deemed to be the income of such person.

Cancellation of registration of Trusts

A PCIT/CIT can cancel the trust registration if he notices one or more specified violations during
any previous year or has received a reference from the AO or case selected as per the board’s risk
management strategy. The PCIT/CIT can call for the documents to satisfy himself about the
occurrence or otherwise of any specified violation. The cancellation order shall be passed after
affording a reasonable opportunity of being heard.

Donation for renovation and repair of temples, mosques, gurudwaras, churches

If the property held under a trust or institution includes any temple, mosque, gurdwara, church or
other place notified under Section 80G(2)(b), any sum received by such trust or institution as a
voluntary contribution for renovation or repair of such temple, mosque, gurdwara, church or other
place, may, at its option, be treated by such trust or institution as forming part of the corpus of the
trust or the institution.

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Computation of Income
Computation of Income
Section 14A disallowance

Section 14A is proposed to be amended to clarify that disallowance shall be made for any
expenditure incurred in relation to an exempt income even if no exempt income has accrued or
arisen or has been received during the said previous year.

Tax relief for Covid related compensation

The Government had issued a Press Release, dated 25-06-2021 providing that taxpayers receiving
financial help from their employers and well-wishers for meeting the expenses incurred on
treatment of Covid-19 would get an income tax exemption. Thus, any amount received from the
employer or any other person for treatment of Covid-19 would be tax-free.

Further, if a taxpayer died due to COVID, then any financial assistance received by his family member
shall be exempt without any limit where the financial assistance is received from the employer of the
deceased. However, where the financial assistance is received from any other person, the exemption
amount shall be limited to Rs. 10 lakh in aggregate.To give effect to such press release, the
amendments have been made under section 17 and section 56 of the Income-tax Act.

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Relaxation in Section 80DD

Section 80DD allows a deduction to a resident individual or HUF who has incurred any expenditure
for the treatment of a dependent person with a disability. The deduction is also allowed for the
amount paid or deposited in a scheme of LIC or another insurer for maintenance of such a
dependent person. However, the following two conditions have to be satisfied to claim the
deduction:

(a) The scheme must provide for payment of the annuity or lump sum amount for the benefit of a
dependent only in the event of the death of such resident individual or member of HUF; and

(b) Assessee nominates either the dependent or any other person or a trust to receive the payment
on his behalf for the benefit of the dependent.

These conditions are harsh and illogical as a person cannot get the lump sum or annuity amount of
an insurance policy till he is alive. Even if he has paid all premiums and needs the money for the
benefit of a dependent person, he cannot get the maturity amount. The Finance Bill has addressed
this issue and made requisite amendments under Section 80DD.

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Withdrawal of exemption under sections 10(8), 10(8A), 10(8B) and 10(9)

Section 10(8) provides an exemption to the income of an individual assigned duties in India in
connection with any co-operative technical assistance programmes and projects. Such co-operative
technical assistance programmes and projects must be in accordance with an agreement entered
by the Central Government and the Government of a foreign state. Further, exemptions under
sections 10(8A), 10(8B) and 10(9) are allowed to a consultant, his employees and their family members

If under a tax treaty, India gets a right to tax a particular income, and the other country is expected to
relieve double taxation by exemption or credit method, providing exemption by India amounts to
surrender of the right of taxation by India in favour of the other country. Thus, it is proposed that the
above provisions shall not apply to remuneration, fee or income of the previous year relevant to the
assessment year beginning on or after the 1st day of April 2023.

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TDS/TCS
TDS/TCS
TDS to be deducted from benefit or perquisite

Tax is to be deducted at the rate of 10% by the person responsible for providing to a resident any
benefit or perquisites arising from carrying out a business or exercising a profession. No tax is to be
deducted if the value or aggregate value of the benefit or perquisite paid or likely to be paid to a
resident does not exceed Rs. 20,000 during the financial year.

Stamp duty value should be considered for TDS under Section 194-IA

Section 194-IA is amended to provide that in case of transfer of an immovable property (other than
agricultural land), tax shall be deducted at the rate of 1% on sum paid or credited to the seller or the
stamp duty value of such property, whichever is higher. Earlier, stamp duty value wasn’t considered
for TDS under this provision.

Higher rates in case of non-filers of return

Provisions of sections 206AB and 206CCA provide for deduction or collection of tax at higher rates.
The provisions apply to a specified person who has not filed the return of income for 2 assessment
years relevant to the previous years immediately before the previous year in which tax is required to
be deducted. It is proposed to reduce two years requirement to one year under sections 206AB and
206CCA.

Further, to reduce the additional burden on individuals and HUF, it is proposed that the provisions of
section 206AB will not apply in relation to transactions on which tax is to be deducted under sections
194-IA, 194-IB, 194M and 194S.

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Refund of TDS

Section 248 provides that where a tax is deductible on any income (other than interest) under
Section 195, which is to be borne by the payer, and he claims that no tax was required to be
deducted, he can prefer an appeal to Commissioner (Appeals) under Section 248 for a declaration
that no tax was deductible. However, such an appeal can be filed only if such tax has been paid to the
credit of the Central Government.

A taxpayer has no recourse to approach the Assessing Officer to obtain a refund of such tax. The
Finance Bill 2022 has proposed to insert a new Section 239A. It provides that for the refund of such
tax, an application is required to be filed before the Assessing Officer. AO shall pass an order to allow
or reject the application. Further, if such person is not satisfied with the order of the AO, he can file an
appeal before the Commissioner (Appeals) under section 246A.It is also proposed to amend section
248 to provide that the provisions of section 248 will not apply in cases where the date of tax
payment, to the credit of Central Government is on or after 01-04-2022.

Interest for default

The provisions relating to TDS and TCS have been amended to provide that where any order is made
by the Assessing Officer for the default in deduction or deposit of TDS or TCS, the interest shall be
paid by the person in accordance with the said order

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Return of Income
Return of Income
Mandatory return filing by institutions

Filing of Return of income under Section 139(4C) is mandatory for the institutions to claim the
exemption under Section 10(23C).

Updated income-tax return

Sub-section (8A) has proposed to be inserted into Section 139 to provide an additional 2 years to a
taxpayer to update his return. Updated returns can be filed irrespective of the fact whether the
taxpayer has earlier filed the original, revised or belated return in respect of the relevant assessment
year.

However, an updated return cannot be filed if it is a return of a loss or has the effect of decreasing the
tax liability or increasing the refund. Further, an updated return cannot be filed in search and seizure
cases and other specified circumstances.

An amount equal to 25% or 50% as additional tax on the tax and interest due on the additional
income shown in the updated return would be required to be paid depending upon the time of filing
of the updated return. A new section 140B is inserted to provide the method for computation and
payment of self-tax assessment on income shown in the updated return.

Consequential amendments have also been made to Section 234A, Section 234B and Section 234C
to charge interest in such cases.

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Appeals and Assessment
Appeals and Assessment
Personal hearing is mandatory if requested by the assesse

The provisions of faceless assessment under section 144B has been proposed to be amended to
allow mandatory personal hearing if it is requested by the taxpayer. The Income-tax authority shall
allow personal hearing through video conferencing or video telephony.

Time-limit to issue re-assessment notices

No notice can be issued for re-assessment if 3 years have elapsed from the end of the relevant
assessment year. Amendment has been proposed that a notice under Section 148 shall be issued
only for the relevant assessment year after 3 years but prior to 10 years from the end of the relevant
assessment year where the Assessing Officer has in his possession books of account or other
documents or evidence which reveal that the income chargeable to tax, represented:

(a) in the form of an asset; or

(b) expenditure in respect of a transaction or in relation to an event or occasion; or
(c) an entry or entries in the books of account,

which has escaped assessment, amounts to or likely to amount to Rs. 50 lakh or more.

Scope of information suggesting that income has escaped assessment widened

In the following situations, the information shall be deemed to be suggesting that income has
escaped assessment:

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(a) Any information flagged in the case of the assessee for the relevant assessment year in
accordance with the risk management strategy formulated by the Board from time to time;

(b) Any audit objection to the effect that the assessment in the case of the assessee for the relevant
assessment year has not been made in accordance with the provisions of this Act;

(c) Any information received under an agreement referred to in section 90 or section 90A of the Act;

(d) Any information made available to the Assessing Officer under the scheme notified under section
135A;

(e) Any information which requires action in consequence of the order of a Tribunal or a Court.•

No appeal on identical issues

A new section 158AB is proposed to be inserted. It provides that where any question of law arising in
the case of an assessee is already raised in his case or in the case of any other assessee for an
assessment year, which is pending before the jurisdictional High Court or the Supreme Court, then
no appeal shall be filed until the decision on the question of law becomes final in the other case.

Revisionary Power under Section 263

The provisions of section 263 has been proposed to be amended to allow the Principal Chief
Commissioner, Chief Commissioner, Principal Commissioner or Commissioner who is assigned the
jurisdiction of transfer pricing for exercising jurisdiction under section 263 on order passed by the
Transfer Pricing Officer (TPO).Consequential changes are also be made in the provisions of section
153 to provide two months to the Assessing Officer to give effect to the order of TPO consequent to
the directions in the revision order

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Order giving effect to order passed by the DRC
Section 245MA is amended to enable the Assessing Officer to pass an order giving effect to the
resolution of dispute by the DRC.
Extension in time-limit to issue directions for implementing faceless regime
The faceless regime was introduced under sections 92CA, 144C, 253 and 264A through the Taxation and
Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and under section 255
through Finance Act, 2021. To implement the faceless regime, the said sections provide that CBDT will
issue directions on or before 31-03-2022. In the case of the Appellate Tribunal, the said date is 31-03-
2023. It is proposed to extend the date for issuing directions under all the above provisions till 31st
March 2024.
No requirement to obtain approval for 148 notice
The requirement for approval to issue a notice under section 148 shall not be required if the Assessing
Officer has passed an order under 148A(d) with prior approval.
No approval is required for the procedure before issuing a notice
Section 148A provides that the Assessing Officer shall conduct inquiries, if required, and provide an
opportunity to be heard to the assessee with the prior approval of the specified authority. Now, the
requirement of approval of specified authority is omitted.
Prior Approval of higher Authority is required in certain cases
No order of assessment or reassessment or recomputation shall be passed by an Assessing Officer
below the rank of Joint Commissioner, in respect of an assessment year to which clause (i) or clause (ii)
or clause (iii) or clause (iv) of Explanation 2 to Section 148 apply except with the prior approval of the
Additional Commissioner or Additional Director or Joint Commissioner or Joint Director.

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Unexplained or Undisclosed
Income
Unexplained or Undisclosed
Income
Person giving loan or borrowing is required to explain source of income

The nature and source of any sum, whether in the form of a loan, borrowing or any other liability,
shall be treated as explained only if the source of funds is explained in the hands of the creditor.
However, this onus 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.

No set-off of loss against undisclosed income discovered during search

No set-off of any loss or unabsorbed depreciation shall be allowed against undisclosed income
discovered consequent to a search initiated under section 132, a requisition made under section 132A,
or a survey conducted under section 133A.

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Penalties
Penalties
Penalty for passing unreasonable benefits to trustee or specified persons

New Section 271AAE is proposed to be introduced for a penalty on trusts or institutions covered
under Section 12AB or Section 10(23C). The penalty shall be equal to the amount of income applied by
such trust or institution for the benefit of a specified person if the violation is noticed for the first time
during any previous year. The penalty shall be twice the amount of such income where the violation
is noticed again in any subsequent year.

Penalties under Sections 271AAB, 271AAC and 271AAD

The provisions of Sections 271AAB, 271AAC, and 271AAD give powers to the Assessing Officer to levy
penalties in cases related to undisclosed income, unexplained credits or expenditures, or deliberate
falsification or omission in books of accounts. To improve deterrence against non-compliance among
taxpayers, amendments have been proposed under these sections to enable the Commissioner
(Appeals) also to levy penalties.

Penalty under Section 272A

Section 272A levies a penalty of Rs. 100 per day for failure to answer questions, sign statements,
furnish information, returns or statements, allow inspections etc. The CAG, in a report, has
commented that the penalty of Rs 100 is too low. Further, it had not been increased since the section
was introduced in 1999. Thus, the Finance Bill has proposed increasing the penalty amount to Rs 500
from the existing sum of Rs 100.

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Miscellaneous
Miscellaneous
Recovery of tax due from private company

Section 179 enables the Income-tax authorities to recover the tax of a private company from its
directors if such tax cannot be recovered from the company itself. The section makes each director of
the company jointly and severally liable for the payment of such tax with certain conditions.

The section’s title inadvertently refers to the ‘liability of directors of a private company in liquidation.’
However, the provisions of the section are not conditional upon the company being in liquidation
and make no reference to liquidation.

Thus, to make the title of the section uniform with its provisions, it is proposed to amend the title of
the section to ‘Liability of directors of private company.’

Reporting by producers of cinematograph films

The producer of cinematographic films shall furnish within 30 days from the end of the financial year
or from the date of completion of the film, whichever is earlier, a statement containing particulars of
aggregate payments over Rs. 50,000 made by him or due from him to each person engaged by him.

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