Budget 2023 Tax Expectations: The Association of National Exchanges Members of India (ANMI) on Monday (November 28) shared Budget 2023 expectations on behalf of its 900 Stock Brokers of national exchanges. The association presented its recommendations to Nitin Gupta, Chairperson of the Central Board of Direct Taxes (CBDT) for their consideration. ANMI has made the following six recommendations:
Tax Exemption up to Rs.1 Lakh in Short Term Capital Gains u/s.111A
At present, Short Term Capital Gains arising on equity shares (listed), which have suffered STT are charged to tax@15% plus surcharge, without any tax exemptions like in the case of LTCG. Since this STCG has also increased after paying STT, it is desirable that STCG be also allowed a tax exemption up to Rs.1 lakh, which will improve more participation in market and encourage investment, ANMI said.
TDS on Dividend U/s 194 of IT Act
TDS on dividend is currently not required to be deducted if dividend does not exceed Rs 5000. However, this is limited to individual recipient shareholders only. ANMI has recommended that for the sake of better management by investors, TDS provision should be applied to all Residents, irrespective of status. The association also recommended raising the threshold exemption limit from Rs. 5,000 to Rs.10,000 from payment of TDS.
Carry Forward Business Loss Existing Provision under Income Tax Act 1961 (The Act) Section 72
Presently, Carry Forward Loss from Normal Business can only be set off against Income from Business. Current Year business loss can be set off against any head except salary but in case of carry forward, business loss can be only adjusted against Business Income. ANMI said that taxpayers are not able to get the benefit from this provision in case of carry forward Business Loss where there is no Business Income in subsequent years.
ANMI has recommended allowing carried forward Business Loss to be adjusted against any head of income except salary in subsequent years. i.e maximum up to 8 years and stated that this will result in the rationalisation of income which is subject to payment of tax.
Reintroduction of rebate under erstwhile Section 88E for STT and CTT paid
ANMI said it believes there is a strong case for the complete abolition of Securities Transaction Tax (STT) and Commodities Transaction Tax (CTT). It suggested the reintroduction of rebate under section 88E, saying, “the revenue implication on the reintroduction of Section 88E will result in increased volumes and therefore a much larger collection of STT/CTT and in fact, revenue could double due to increased participation in markets.”
Reduction in the classification of income
The Income Tax Act has too many classifications of incomes arising out of Capital Market transactions, which creates fungibility problems with respect to profits or losses incurred in different types of trades. For example, intraday cash market trading is classified as speculative income but intraday derivative trade is classified as business income.
ANMI suggested that Budget 2023 should dispense with the treatment of speculative income/loss under section 45 of day trading in listed shares in which no delivery is taken or given and to treat income arising from purchase and sale of shares without delivery as business income. “Together with day trading not being treated as speculative (as proposed supra), this will give a fillip to investors and share brokers to engage wholeheartedly in share transactions,” the association said.
ANMI recommended that the concept of speculative income should be done away with and there should be limited categories of classification of income via. 1.) Business Income 2.) Long-Term Capital Gain and 3.) Short-Term Capital Gain. This will ease income classification from the point of view of the taxpayer.
Industry status for SEBI registered Market intermediaries
ANMI has also recommended that Budget 2023 should give industry status for SEBI registered market intermediaries. This will help remove unwarranted restrictions; cost of funding and raising capital requirements for market intermediaries and will help in creating financial services companies of global scale, the association said.