Lok Sabha Passes Finance Bill 2023 With 64 Amendments; Marginal Relief Proposed Under New Tax Regime

New Delhi: Lok Sabha on Friday passed the Finance Bill 2023 with several offiical amendments amid din created by sloganeering by the Opposition parliamentarians who continued with their demand of a Joint Parliamentary Committee probe into the Adani-Hindenburg issue.Finance Minister Nirmala Sitharman tabled 64 official amendments to the Finance Bill which was tabled in Parliament on February 1 along with the Budget proposals.Among the amendments, it was proposed to tax the income from debt mutual fund at applicable rate since it is also of the nature of interest income.

In present form, an arbitrage is being created right now where interest income from debt mutual fund (where not more than 35 per cent invested in shares in domestic company) is not distributed and converted into long term capital gains of 20 per cent (with indexation). Thus many taxpayers were able to reduce their tax liability through this arbitrage, and this is now sought to be addressed through the amendment. Further, in another amendment, the government proposed to tweak income tax applicable for income up to Rs 7 lakh, which is intended to benefit a large set of taxpayers.

A marginal relief is proposed to be provided to the taxpayers. For example, if a taxpayer has income of Rs 7 lakh under new tax regime, he or she pays no tax but if he or she has income of lets say Rs 700,100 they pay tax of Rs 25,010 under relevant tax slab.Thus additional income of Rs 100 would lead to taxation of Rs 25,010. Hence, marginal relief is proposed to that the tax that what one pays should not be more than the income that exceeds Rs 7 lakh (additional Rs 100 income in this case).

Moreover, to bring parity in treatment it is proposed that tax collection of source shall now apply to all Liberalised Rremittance Scheme even if within India. At present there is TCS (tax collected at source) on remitance if it is remitted out of India. Hence, when money is remitted by resident to Gift City there is no TCS, and with the amendment it will be now charged at 20 per cent.

In the Budget for 2023-24, TCS for foreign remittances for purchase of overseas tour programme, it was proposed to increase the rates of TCS from 5 per cent to 20 per cent.The rate of TCS for foreign remittances for education and for medical treatment was proposed to continue to be 5 per cent for remittances in excess of Rs 7 lakh. Similarly, the rate of TCS on foreign remittances for the purpose of education through loan from financial institutions was proposed to continue to be 0.5 per cent in excess of Rs 7 lakh.

"It has been represented that payments for foreign tours through credit cards are not being captured, under the Liberalised Remittance Scheme (LRS) and such payments escape tax collection at source. The Reserve Bank is being requested to look into this with a view to bring credit card payments for foreign tours within the ambit of LRS and tax collection at source thereon," Sitharaman said today. Sitharaman also announced that a new committee will be set up under Finance Secretary to look into the National Pension System (NPS) for government employees. It is important to note that many opposition-ruled states are moving back to Old Pension Scheme, or are mulling to, facing demands from government employees and other pressure groups.

So far, Punjab, Rajasthan, Chhattisgarh, Himachal Pradesh, and Jharkhand went back to the Old Pension Scheme and quashed the new pension scheme. Under the old pension scheme, a government employee is entitled to a monthly pension after retirement. The monthly pension is typically half of the last drawn salary of the person.Under the new pension scheme, employees contribute a portion of their salaries to the pension fund. Based on that, they are entitled to a one-time lump sum amount on superannuation. For the record, the old pension scheme was discontinued in December 2003, and the new pension scheme came into effect on April 1, 2004. Speaking in the Lok Sabha during the consideration and passage of the Finance Bill, 2023, Sitharaman said the committee will set up for looking into the pension system in order to address the needs of employees, while also maintaining the fiscal prudence of the country.Meanwhile, With the bill now passed in Lok Sabha, it is will be now in Rajya Sabha for passage when the Parliament resumes on Monday.