Anjali Gupta

anjali@kcchheda.in

Chheda & Associates

www.kcchheda.in

The novel Coronavirus (COVID-19) pandemic has rattled the entire socio-economic landscape. The comparisons which were earlier between years are now being done between 'Pre-COVID-19' and 'Post-COVID-19' period. On similar lines, the data of Economic Survey 2021-2022 suggests that India has managed Covid Pandemic effectively and that the gross value added in Agriculture and Industry and the gross value added in service has reached pre pandemic level. The Pre-Budget 2022 expectation was also in the context of riding India out of the pandemic years.

The Finance Bill, 2022 has proposed amendments to some of the India TP Regulation in relation to assessment aspects and International tax.

1. Transfer pricing and international tax issues would be brought within the scope of “faceless audits”  

• Request for personal hearing to be mandatorily accepted and facilitated through video conference/ video telephony mode
• Failure to follow prescribed procedure under Faceless Assessment provisions not to make assessment invalid/ non est (effective retrospectively from April 1, 2021)
• Timeline for issuing notification for faceless assessment scheme for transfer pricing assessments and proceedings with Dispute Resolution Panel extended from March 31, 2022 to March 31, 2024.

2. Scope of revision extended to transfer pricing order

• Commissioner having jurisdiction of transfer pricing empowered to invoke revisionary powers in transfer pricing proceedings.
• AO to give effect to the revised order of Transfer Pricing Officer within two months from the end of the month in which order is received.

3. Concessional rate of 15% on foreign dividend income withdrawn

• Benefit of reduced rate of 15% on dividend received by an Indian company from its foreign subsidiary / associate (minimum 26% equity holding) is withdrawn.

1. Tax treatment for dividend received from foreign subsidiary/ associate now at par with domestic subsidiary/ associate
2. Benefit of deduction for onward distribution to shareholder continues to be available

4. Taxation of Virtual Digital Assets 

• Transfer of virtual digital assets viz. cryptocurrencies, non-fungible token, such other digital asset as may be notified, liable to tax at 30% without any deduction (except cost of acquisition) and set-off of losses.
• Loss from transfer of such assets shall not be allowed to be carried forward nor allowed to be set-off against other income.
• Gift of virtual digital asset shall be taxed in the hands of the recipient subject to available exemptions.
• Any payment made to a resident in relation to transfer of virtual digital asset shall be subject to withholding at the rate of 1% of such consideration above a monetary threshold limit.

5. Bonus / Dividend Stripping 

• Scope of provisions aimed at preventing tax evasion through bonus/dividend stripping expanded to include stocks, shares, units of REIT, InvIT and AIFs (earlier it was restricted only to mutual fund units for bonus stripping and shares, stock and mutual fund units for dividend stripping).

6. Incentives for start-ups and new manufacturing companies 

• Time limit for incorporation of eligible start-ups for claiming tax holiday is extended from March 31, 2022 to March 31, 2023.
• Time limit for commencing manufacturing or production for availing the concessional tax regime (under make in India) extended from March 31, 2023 to March 31, 2024.

7. Application for refund of TDS deposited on payment to non-residents 

• Existing process of claiming refund by filing an appeal (post deposit of tax) before CIT(A) is replaced.
• Now the application for refund must be moved to AO – after depositing taxes.
• The AO shall dispose- off such application within six months from the end of month in which the application is received, by an order in writing.
• Appeal can be preferred before CIT(A) against the said order of AO.

       8. Reducing the Time Provided for Furnishing TP Report-Budget 2023 

• As per Section 92D of the Income Tax Act, the Assessing Officer (AOs) or the Commissioner (Appeals) may during the course of any proceedings require such person to furnish any information or document, within 30 days from the date of receipt of notice issued in this regard which may be extended by an additional period of 30 days.
• This time is now being reduced in view of understanding that this information is already in possession of the Assessee. The initial time period is now reduced to 10 days which can be extended further by a period not exceeding 30 days.
• This amendment will be effective from 1^st April 2023.

XLNC TFG Newsflash| April 2023