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Explanatory notes to the provisions of the Finance Act, 2022

Last updated : March 2nd, 2023 06:19 pm

Explanatory notes to the provisions of the Finance Act, 2022

Central Board of Direct Taxes recently vides circular no. 23/2022 dated 3^rd November 2022, came up with detailed explanatory notes to the provisions of the Finance Act, 2022. The important provisions are taken up and highlighted hereunder.

Rate structure of income tax applicable for the Financial Year 2022-2023 –

Individual (below 60 years age) or HUF –

Normal tax regime –

Income chargeable to tax	Normal tax rates
Up to INR 2,50,000	NIL
INR 2,50,000 to INR 5,00,000	5%
INR 5,00,000 to INR 10,00,000	20%
Above INR 10,00,000	30%

Alternative tax regime [section 115BAC] –

Income chargeable to tax	Normal tax rates
Up to INR 2,50,000	NIL
INR 2,50,000 to INR 5,00,000	5%
INR 5,00,000 to INR 7,50,000	10%
INR 7,50,001 to INR 10,00,000	15%
INR 10,00,001 to INR 12,50,000	20%
INR 12,50,001 to INR 15,00,000	25%
Above INR 15,00,000	30%

Individual (above 60 years age i.e. senior citizens and super senior citizens) –

Normal tax regime –

Income chargeable to tax	Normal tax rates applicable to senior citizens (age above 60 but below 80 years)	Normal tax rates applicable to super senior citizens (age above 80 years)
Up to INR 3,00,000	NIL	NIL
INR 3,00,000 to INR 5,00,000	5%	NIL
INR 5,00,000 to INR 10,00,000	20%	20%
Above INR 10,00,000	30%	30%

Association of Persons (AOP), Body of Individuals (BOI) or artificial juridical person –

Normal tax regime –

Income chargeable to tax	Normal tax rates
Up to INR 2,50,000	NIL
INR 2,50,000 to INR 5,00,000	5%
INR 5,00,000 to INR 10,00,000	20%
Above INR 10,00,000	30%

Co-operative Society –

Normal tax regime –

Income chargeable to tax	Normal tax rates
Up to INR 10,000	10%
INR 10,000 to INR 20,000	20%
Above INR 20,000	30%

Alternative tax regime [section 115BAD] –

Income will be taxable @ 22%.

Partnership firm and LLP –

Normal tax regime –

Income will be taxable @ 30%.

Local authority –

Normal tax regime –

Income will be taxable @ 30%.

Company –

Domestic company –

Particulars	Tax rates
If total turnover/ gross receipts of the company in previous year 2019-2020 doesn’t exceed INR 400 Crores	25%
Company opting under section 115BA of the Income Tax Act	25%
Company opting under section 115BAA of the Income Tax Act	22%
Company opting under section 115BAB of the Income Tax Act	15%
Any other company	30%

Any other company –

Income will be taxable @ 40%.

Surcharge –

Individual, HUF, AOP, BOI and Artificial Juridical Person –

Total Income	Surcharge rates based on nature of Income
	STCG covered u/s 111A or u/s 115AD	LTCG covered u/s 112A or u/s 115AD or u/s 112	Specified dividend income	Income chargeable u/s 115BBE	Any other income
Up to INR 50 Lakhs	NIL	NIL	NIL	25%	NIL
INR 50 Lakhs to INR 1 Crore	10%	10%	10%	25%	10%
INR 1 Crore to INR 2 Crores	15%	15%	15%	25%	15%
INR 2 Crores to INR 5 Crores	15%	15%	15%	25%	25%
More than INR 5 Crores	15%	15%	15%	25%	37%

Co-operative Societies –

Total Income	Surcharge rates
INR 50 Lakhs to INR 1 Crore	NIL
INR 1 Crore to INR INR 10 Crores	7%
Above INR 10 Crores	12%

Notably, in case co-operative society opts for alternative tax u/s 115BAD, then, surcharge will be levied @10%.

Firms and LLP –

Total Income	Surcharge rates
INR 50 Lakhs to INR 1 Crore	NIL
Above INR 1 Crore	12%

Local Authorities –

Total Income	Surcharge rates
INR 50 Lakhs to INR 1 Crore	NIL
Above INR 1 Crore	12%

Company –

Total Income	Surcharge rates based on nature of Income
	Domestic company opted for section 115BA	Domestic company opted for section 115BAA	Domestic company opted for section 115BAB	Any other domestic company	Foreign Company	Income chargeable u/s 115BBE
Up to INR 1 Crore	NIL	10%	10%	NIL	NIL	25%
INR 1 Crore to INR 10 Crores	7%	10%	10%	7%	2%	25%
Above INR 10 Crores	12%	10%	10%	12%	5%	25%

Health & Education Cess –

Every person will be liable to pay Health & Education Cess @4% on the amount of Income Tax + surcharge.

Taxation of virtual digital assets [section 115BBH] –

Any income from transfer of virtual digital assets will be taxed @ 30%. Following important points needs to be noted –

• Deduction of only cost of acquisition will be available. Any other deduction of any expenditure will not be available.
• Set off of loss incurred from transfer of virtual digital assets will not be allowed against any income.
• Carry forward of loss incurred from transfer of virtual digital assets will not be allowed to subsequent assessment years.

Notably, the said provisions will be effective from 1^st April 2023.

TDS in relation to virtual digital assets [section 194S] –

Particulars	Details
Relevant section under which TDS deductible	Section 194S of the Income Tax Act
Deductor	Any person
Deductee	Any resident
Amount on which TDS deductible	Amount paid as consideration for transfer of a virtual digital asset
Time of TDS deduction	Earlier of – ·        Credit of said sum to the account of the resident; or ·        At the time of payment of said sum by any mode.
Rate at which TDS deductible	1%
Exemption from deduction of TDS	Conditions for exemption 1.      Individual/ HUF whose turnover doesn’t exceed INR 1 Crores in case of business or INR 50 Lakhs in case of profession and 2.      Aggregate value of consideration to a resident is equal or less than INR 50,000 1.      Individual/ HUF doesn’t have income under the head ‘Profits and gains of business or profession’ and 2.      Aggregate value of consideration to a resident is equal or less than INR 50,000

Clarification relating to disallowance u/s 14A in absence of any exempt income –

Vide insertion of explanation to section 14A, it is clarified that provisions of section 14A will apply even in case there was no exempt income during the year, however, expenditure has been incurred in relation to such exempt income.

The said amendment is made application from 1^st April 2022.

TDS on benefit/ perquisite of a business/ profession [newly inserted section 194R] –

The gist of newly inserted section 194R of the Income Tax Act is summarized hereunder –

• Applicable section for deduction of TDS – Section 194R of the Income Tax Act
• Effective date – 1^st July 2022
• Payment on which TDS deductible u/s 194R – benefit or perquisite (whether convertible into money or not) arising from carrying out of business/ exercising of profession.
• Rate at which TDS deductible u/s 194R – 10% of the value of benefit/ perquisite.
• Exemption –
  1. If value/ aggregate value of benefit/ perquisite paid to a resident doesn’t exceed INR 20,000 during the relevant Financial Year; or
  2. Individual/ HUF having total sales/ gross receipts/ turnover not exceeding INR 1 Crore in case of business or INR 50 Lakhs in case of profession.