The Lok Sabha has passed the Finance Bill 2023, and it’s time to take a closer look at the amendments that are set to affect the financial landscape in India. The Union Finance Minister, Nirmala Sitharaman, introduced 64 official amendments to the bill, presented in Parliament on February 1, 2023, along with the Budget proposals.
Here are the key changes that are sure to set the wheels of change in motion:
- Mutual Funds:
Mutual Funds to Be Taxed as Short-Term Capital Gains. The Finance Bill of 2023 has brought about a change that could revolutionize the mutual fund industry in India. Under the new amendments, mutual funds with less than 35% AUM (Asset Under Management) in domestic equity will lose indexation benefits and will be taxed as short-term capital gains. This move aims to encourage mutual fund investments in domestic equity and boost the stock market’s growth.
2. Offshore Banking Units:
The Finance Bill 2023 aims to provide improved tax benefits for offshore banking units in GIFT City, which could strengthen India’s position as a financial center. Offshore banking units will receive a 100% deduction on income for ten years, incentivising offshore banking and further boosting India’s position as a financial powerhouse.
3. Hike in Tax on Royalty or Technical Fee Earned by Foreign Companies:
The Finance Bill 2023 also aims to promote the use of domestic resources and prevent the outflow of foreign currency from India. To that end, the tax on royalty or technical fees earned by foreign (non-resident) companies has been hiked from 10% to 20%.
4. Taxation of Non-Par Savings Insurance Products:
Despite representations made to the government, there has been no change in the taxation of non-par savings insurance products, and the ₹5 lakh cap remains.
5. No Change in Taxation of REITS/InviTs:
Despite representations to the government, there has been no change in the taxation of Real Estate Investment Trusts (REITs) & Infrastructure Investment Trusts (InviTs). REIT income will be taxed as ‘income from other sources’ rather than capital gains.
6. Increase in Securities Transaction Tax (STT):
The Securities Transaction Tax (STT) on the sale of options and futures contracts has been raised, with the STT on options rising by 23.5% and futures contracts rising by 25%. On
STT charges on the sale of options have been hiked to Rs 2,100 on a turnover of Rs 1 crore against an earlier levy of Rs 1,700, an increase of 23.5 percent.
On the sale of futures contracts, STT has been hiked to Rs 12,500 on Rs 1 crore of turnover against Rs 10,000 earlier, indicating a 25 percent hike.
These amendments to the Finance Bill 2023 are set to bring about a significant change in India’s financial landscape. The government’s efforts to improve India’s fiscal prudence and encourage domestic investment are set to take shape, paving the way for a brighter financial future for India. Get ready for change and keep a close eye on how these amendments will impact the economy in the coming years!
Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.