Retro amendment to prevent misuse of cess surcharge deduction claims under I-T provisions, says Nirmala Sitharaman

New Delhi: Finance Minister Nirmala Sitharaman on Friday said the retrospective amendments relating to claiming deduction for cess and surcharge is aimed at preventing misuse of the provision, especially by those who have treated it as exemptions or business expenditures. The Finance Bill had proposed retrospective disallowance of deduction for surcharge or cess with effect from Assessment Year 2005-06. As per the amendment passed by the Lok Sabha on Friday, any such deduction claimed would be treated as “under reported income” and will be subject to 50 per cent penalty. Replying to the debate on Finance Bill in the Lok Sabha, Sitharaman said surcharge and cess on tax have been over the years “misused” and people have treated it as their exemptions or business expenditures. “That has become a very, very confusing point on which people have gone to courts also. So that amendment with an retrospective effect has been brought for more clarity,” she said. Emphasising that there will be no burden on the taxpayers, she said that if taxpayers on their own approach the tax authority disclosing such amount claimed as deduction, there will be no penalty. The income of the taxpayer will be reassessed after which legitimate taxes can be paid. “There is no penalty if you come on your own,” Sitharaman added. The minister proposed 39 amendments to the Finance Bill, which was passed by the Lok Sabha by voice vote. The other important amendments relate to tightening the norms for taxation of cryptocurrencies by disallowing set off of any losses with gains from other virtual digital assets. The 2022-23 Budget has brought in clarity concerning the levy of income tax on crypto assets. From April 1, a 30 per cent I-T plus cess and surcharges, will be levied on such transactions in the same manner as it treats winnings from horse races or other speculative transactions. It has also proposed a 1 per cent TDS on payments towards virtual currencies beyond Rs 10,000 in a year and taxation of such gifts in the hands of the recipient. The threshold limit for TDS would be Rs 50,000 a year for specified persons, which include individuals/HUFs who are required to get their accounts audited under the I-T Act. The provisions related to 1 per cent TDS will come into effect from 1 July, 2022 while the gains will be taxed effective 1 April. Referring to the concerns raised on cryptocurrencies, Sitharaman said that consultation is going on over regulation of virtual digital assets. Meanwhile, the government has decided to tax gains from transactions in virtual digital assets at 30 per cent. As regards 1 per cent TDS, she said it is more for tracking such transactions and can be reconciled at the time of payment of taxes. The amendment also dilutes the penalty provision relating to publication of export-import data. The Finance Bill had proposed to insert a new Section 135AA in the Customs Act. It was proposed that if a person publishes any information relating to the value or classification or quantity of goods entered for export from or import into India, or the details of the exporter or importer of such goods under the Act, the person could face six-month imprisonment, a penalty of Rs 50,000 or both. Now, the government has done away with the six-month imprisonment period and the penalty while such actions could attract a certain period of imprisonment. Read all the Latest News , Trending News ,  Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.