Finance Minister Nirmala Sitharaman on Tuesday proposed to reduce the tax and surcharge levied on cooperative societies in India. She made this proposal while presenting the Union Budget 2022-23 in the Parliament on Tuesday.
In order to provide a level playing field between cooperative societies and companies, the minister proposed to reduce the Alternate Minimum Tax rate for cooperative societies to 15 percent from the current 18.5 percent.
The Minister added that the Government also proposes to reduce the surcharge on co-operative societies to 7 percent from 12 percent at present for those having a total income of more than Rs. 1 crore and up to Rs. 10 crores.
She said that this would help enhance the income of cooperative societies and their members who are mostly from rural and farming communities.
Budget highlights on Taxation
Some other highlights of her budget speech with respect to taxation include tax incentives for startups and manufacturing entities, rationalization of surcharge, and health and education cess.
Incentives to Start-ups
Stating that start-ups have emerged as drivers of growth for our economy, the Finance Minister, in order to assist them during the COVID-19 pandemic, proposed to extend the period for incorporation of the eligible start-up by one more year up to 31st March 2023 to provide them tax incentive for three consecutive years out of ten years from incorporation.
This incentive was earlier available to eligible start-ups established before 31st March 2022.
Incentives to Newly Incorporated Manufacturing Entities
Nirmala Sitharaman said that to establish a globally competitive business environment, a concessional tax regime of 15 percent tax was introduced by the Government for certain newly incorporated domestic manufacturing companies.
The Government proposes to extend the last date for commencement of manufacturing or production under section 115BAB by one year to 31st March 2024 from 31st March 2023.
Incentives to IFSC
The minister said that to promote the IFSC, the Government proposes to provide the income of a non-resident from offshore derivative instruments, or over the counter derivatives issued by an offshore banking unit, income from royalty and interest on account of lease of the ship, and income received from portfolio management services in IFSC shall be exempt from tax, subject to specified conditions.
Rationalisation of TDS Provisions
Noting that as a business promotion strategy, there is a tendency on businesses to pass on benefits to their agents, which are taxable in the hands of the agents, the Minister said that in order to track such transactions, the Government proposes to provide for a tax deduction by the person giving benefits, if the aggregate value of such benefits exceeds Rs. 20,000 during the financial year.
Rationalisation of Surcharge
The Finance Minister pointed out that several works contracts terms and conditions require the formation of a consortium mandatorily whose members are generally companies.
She said in such cases, the income of these AOPs has to suffer a graded surcharge up to 37 percent, which is a lot more than the surcharge on the individual companies. Therefore, she proposed to cap the surcharge of these AOP’s at 15 percent.
Further, she highlighted that the long-term capital gains on listed equity shares, units among others are liable to a maximum surcharge of 15 percent, while the other long-term capital gains are subjected to a graded surcharge which goes up to 37 percent.
The Government proposes to cap the surcharge on long-term capital gains arising on transfer of any type of assets at 15 percent.
The minister added that this proposal would “give a boost to the start-up community and along with my proposal on extending tax benefits to manufacturing companies and start-ups reaffirms our commitment to Atma Nirbhar Bharat”.
Clarification on Health and Education Cess
Stating that the ‘Health and Education Cess’ is imposed as an additional surcharge on the taxpayer for funding specific government welfare programs, the minister, to reiterate the legislative intent, proposed to clarify any surcharge or cess on income and profits is not allowable as business expenditure. She said that income tax also includes surcharge and observed that it is “not an allowable expenditure for computation of business income”.
Deterrence Against Tax Evasion
The Finance Minister also announced that the Government proposes to provide that no set-off, of any loss, shall be allowed against undisclosed income detected during search and survey operations.
She pointed out that It has been observed that in many cases where undisclosed income or suppression of sales among others is detected, payment of tax is avoided by setting off, of losses.
This proposal would bring certainty and would increase deterrence among tax evaders, stated the minister.
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