The Lok Sabha on Friday passed the Finance Bill 2023 with amendments suggested by Union Finance Minister Nirmala Sitharaman last month while presenting her budget proposals.
On February 1, during her budget proposals in parliament, the minister proposed several amendments to the document.
On Friday, while presenting the bill in the lower house, she said the government is considering several representations concerning pension, bringing tax collection at source under the ambit of the Liberalised Remittance Scheme (LRS) for credit card payments for foreign trips, etc.
The finance ministry will set up a committee headed by the secretary to address the employees’ issues in the pension system keeping in mind the fiscal prudence, ANI quoted her as saying.
The minister said her ministry has received several representations regarding the improvement of the national pension system for government employees.
Sitharaman also said the Reserve Bank of India (RBI) will examine the issues concerning bringing tax collection at source under LRS for credit card payments intended for foreign trips.
“RBI is being requested to look into this with a view to bringing credit card payments for foreign tours within the ambit of LRS and tax collection at the source there on,” she said.
Amendments in the Finance Bill 2023
As per the amendments in the Finance Bill 2023, there would be no indexation benefit for mutual funds with less than 35 per cent of asset under management (AUM) in domestic equity, and returns to be taxed as short-term capital gains. In addition, the offshore banking units that are operating in GIFT city will get 100 per cent deduction on income for 10 years.
The government has also increased the tax on royalty or technical fee earned by foreign companies from 10 per cent to 20 per cent. Also, there is no change in tax on non-par savings insurance products, capped at Rs 5 lakh. The taxation on REITS/InviTs also remained same.
In addition, the government has increased the securities transaction tax (STT) on options sale to Rs 2,100 from Rs 1,700 on a turnover of Rs 1 crore, up 23.5 per cent. On futures contracts sale, it was rose by 25 per cent to Rs 12,500 from Rs 10,000 on a Rs 1 crore turnover.
Commenting on the changes, Saurrav Sood, Practice Leader, International Taxation, at SW India, said: “The tax rate increase on royalties and fees earned by non-resident companies from 10 per cent to 20 per cent will lead to a higher rate of tax of withholding tax obligations on payments to be made to non-residents unless there is a tax treat benefit that reduces such rate.”
In an example, he said, payments made to US companies, the rate of withholding tax on royalty and fees for technical services under the tax treaty was 15 per cent; however, Indian companies while making such payments used to take benefit of a lower rate as per the domestic tax act.
“Now, where such rate under the domestic tax act has been increased to 20 per cent, such benefit shall not be available. Further, where even if tax treaty benefit is taken, when such non-resident will file its income tax return in India, the differential tax will be required to be paid at the time of filing of return of income,” Sood added.