Amendments made by the Finance Act 2022 | Highlights

Table of Content

1. Finance Act 2022 amendment to the scheme of alternative tax regime under section 115BAB
2. Finance Act 2022 withdraws concessional tax incidence on dividend from foreign companies under section 115BBD
3. Amendment to the scheme of alternate minimum tax for co-operative societies [Secs. 115JC and 115JF]
4. Amendment to section 119

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1. Finance Act 2022 amendment to the scheme of alternative tax regime under section 115BAB

Finance Act 2022 made changes in the Section 115BAB that provides for an alternative concessional tax regime (tax rate : 15 per cent) for new domestic manufacturing companies provided the company is registered on or after October 1, 2019 and it commences manufacturing activity on or before March 31, 2023.

Amendment – In order to provide relief to the aforesaid companies, the scheme of section 115BAB has been amended so as to extend the date of commencement of manufacturing or production of an article or thing from March 31, 2023 to March 31, 2024.

2. Finance Act 2022 withdraws concessional tax incidence on dividend from foreign companies under section 115BBD

Finance Act 2022 amended section 115BBD that priovides for a concessional rate of tax of 15 per cent on dividend income received by an Indian company from a foreign company in which the said Indian company holds 26 per cent (or more) in nominal value of equity shares.

Amendment – The aforesaid provisions of section 115BBD will not be applicable from the assessment year 2023-24 onwards.

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4. Amendment to the scheme of alternate minimum tax for co-operative societies [Secs. 115JC and 115JF]

Sections 115JC to 115JF regulate alternate minimum tax for non-corporate assessees (including co-operative societies). Presently, alternate minimum tax is applicable at the rate of 18.5 per cent (+ SC + HEC). If, however, income is generated by a non-corporate assessee in a unit located in an International Financial Services Centre, alternate minimum tax is calculated at the rate of 9 per cent (+ SC + HEC).

Amendment – From the assessment year 2023-24, co-operative societies will be liable to pay alternate minimum tax at the rate of 15 per cent (+ SC + HEC). However, the current rate of 9 per cent (in case income is generated by a co-operative society in a unit in an International Financial Services Centre) will remain unaffected.

5. Amendment to section 119

Section 119(2)(a) empowers the Board to issue general or special orders in respect of any class of incomes or class of cases to be followed by other income-tax authorities by way of relaxation or otherwise relating to the provisions of certain sections (such as section 115P/115S/139/211/234A/234B/234C/234E/270A) specified therein, for the purpose of proper and efficient management of the work of assessment and collection of revenue.

Amendment – Section 234F provides that in case a person fails to furnish return of income within due date under section 139(1), he shall be liable to pay a fee of Rs. 5,000. Currently this section is not expressly mentioned in clause (a) of section 119(2). Applying section 234F may lead to an unintended consequence of levying fee on persons who face genuine difficulties in filing return of income within the specified time (like members of the armed forces stationed in remote regions with no access to the requisite infrastructure). Therefore, considering the genuine hardships faced by certain classes of persons in filing return of income and not to impose a fee for a default which is beyond their control, the reference of section 234F has been included (with effect from April 1, 2022) in the list of sections mentioned in section 119(2)(a) so as to enable the Board to issue such orders or instructions, as deemed fit.