Direct Taxes: Budget doesn't touch slabs, offers relief to co-ops, startups

FM reduces MAT for cooperative societies to 15% from 18.5%, bring them on par with companies; relief for state govt staff, differently-abled persons

On the direct tax front, there was nothing for the salaried classes in terms of revised tax slabs or deductions. However, Finance Minister Nirmala Sitharaman did likely endear herself to cooperative bodies.

The Finance Minister reduced the minimum alternate tax for cooperative societies to 15 per cent from 18.5 per cent. This move would bring the MAT for cooperatives in-line with companies

She also reduced the surcharge on co-operative societies from 12 per cent to 7 per cent for those having total income of between Rs 1-10 crore. “This would help in enhancing the income of cooperative societies and its members who are mostly from rural and farming communities,” Sitharaman said.

The budget did have something for income tax payers. “Some taxpayers may realise that they have committed omissions in correctly estimating their income for tax payment. To provide an opportunity to correct such errors, I am proposing a new provision permitting taxpayers to file updated return on payment of additional tax. This updated return can be filed within two years from the end of the relevant assessment year,” the Finance Minister said.

Sitharaman also said that tax deduction limit on employer’s contribution to National Pension Scheme, for state government employees, will be increased to 14 per cent from 10 per cent, at par with central government employees.

For differently-abled persons, Sitharaman said that as per the extant provisions, when parents or guardian take an insurance scheme for such person, the lump sum payment or annuity is available to the differently abled person only upon the death of parent or guardian.

“There could be situations where differently abled dependants may need payment of annuity or lump sum amount even during the lifetime of their parents/guardians. I propose to thus allow the payment of annuity and lump sum to such dependents during the lifetime of parents/guardians, i.e., on parents/ guardians attaining the age of sixty years,” she said.

The Finance Minister also extended the period of incorporation for startups by one year to 31 March 2023 for them to be eligible for tax incentives for three consecutive years out of ten years from incorporation. She also said that the last date for commencement of manufacturing or production under Section 115BAB will be extended by one year to 31 March 2024, for new manufacturing units to avail a concessional corporate tax of 15 percent.

“The practical problem of delays in implementing projects for new manufacturing companies and start-ups has been considered. The time limit for sunset is proposed to be extended. The Government has proposed to allow filing of updated tax returns for up to two years without attracting penalties, thereby reposing faith in taxpayers,” said Rahul Garg, Partner, Price Waterhouse Co LLP.

“Taking forward our efforts to further promote the IFSC, I hereby propose to provide that income of a non-resident from offshore derivative instruments, or over the counter derivatives issued by an offshore banking unit, income from royalty and interest on account of lease of ship and income received from portfolio management services in IFSC shall be exempt from tax, subject to specified conditions,” she said.

Sitharaman also said that surcharge on income of a consortium, and surcharge on long term capital gains arising on transfer of any type of assets, will be capped at 15 percent, compared to 37 percent earlier. She also clarified that any surcharge or cess on income and profits is not allowable as business expenditure.

"In line with previous budgets, Government has continued to provide a fillip to the start-up manufacturing sector and GIFT city. Additionally, capping surcharge rates for AOPs and long term capital gains to 15% should also support  the start-up ecosystem and foreign investments,"”said Gouri Puri, Partner, Shardul Amarchand Mangaldas.

“Presently, there is ambiguity regarding set off of brought forward loss against undisclosed income detected in search operations. It has been observed that in many cases where undisclosed income or suppression of sales is detected, payment of tax is avoided by setting off, of losses. In order to bring certainty and to increase deterrence among tax evaders, I propose to provide that no set off, of any loss shall be allowed against undisclosed income detected, she said.