The Finance (No. 2) Bill, 2024 (the Bill) was introduced by the Hon’ble Finance Minister in the Lok Sabha on 23 July 2024. The amendments to the Bill have been tabled in the Lok Sabha by notice of amendments. The Bill so amended has been passed by Lok Sabha on 7 August 2024.
The key amendments proposed by the notice of amendments are summarised hereunder:

DIRECT TAX RELATED

Benefit of indexation allowed to compute long-term capital gains tax on the sale of land, building, or both

It is proposed that the taxpayer (being individual or HUF resident in India) can avail either:

1. The benefit of indexation and pay tax at 20%; or

2. Pay tax at 12.5% without claiming indexation.

For availing the indexation benefit, immovable property should have been acquired before 23 July 2024.

Exchange fluctuation benefit not available on long-term capital gains on transfer of unlisted shares and securities by non-resident

The amendment by the Bill resulted in a situation whereby exchange fluctuation benefit to non-resident taxpayers for sale of unlisted securities or shares of a closely held company could have been taken while computing capital gains. The proposed amendment to the Bill, now seeks to rectify the provision to clarify that exchange fluctuation benefit will not be available to non-resident taxpayers for sale of unlisted securities or shares of a closely held company.

Credit for TDS/ TCS to be considered by the employer even if it would result into lower TDS on Salaries

The Bill proposed to permit the employer to consider credit for TDS/ TCS on other income while computing TDS liability on employee’s salary income, subject to the employee providing information of such other income and it’s corresponding TDS/ TCS. However, it provided that such TDS/ TCS credit should not result into lower TDS on salary income if the other income wouldn’t have been considered. It is now proposed to remove this restriction and thereby after considering the TDS/ TCS, the TDS on salary income may be reduced.

INDIRECT TAX RELATED

The Bill proposes amendments to various provisions within the Customs Tariff Act, 1975 (CT Act) and various historical Finance Acts, under which various duties/ cesses/ surcharges are levied. These provisions currently incorporate references to some of the provisions of the Customs Act, 1962 (Customs Act) and the Central Excise Act, 1944 (Central Excise Act), as the case may be, for administration of such duties/ cesses/ surcharges. The Bill seeks to incorporate by reference all the provisions of the Customs Act and the Central Excise Act, as the case may be, and all the rules and regulations made under these Acts, which would encompass, but not be limited to, matters pertaining to duty determination, assessment, non-imposition, under-imposition, refunds, exemptions, interest, recovery, appeals, offenses and penalties.
The list of the provisions sought to be substituted as above, with the respective levy governed under it are set out hereunder:

• Section 3(12) of CT Act - Levy of additional duty equal to excise duty, sales tax, local taxes and other charges (covering levies of Countervailing Duty, Special Additional Duty, IGST and GST Compensation Cess)

• Section 8B(9) of CT Act - Power of Central Government to apply safeguard measures (covering levy of safeguard duty)

• Section 9(7A) of CT Act - Countervailing duty on subsidised articles

• Section 9A(8) of CT Act - Anti-dumping duty on dumped articles

• Section 136(3) of Finance Act, 2001 - National Calamity Contingent duty (on Excisable goods)

• Section 147(3) of Finance Act, 2002 - Special Additional Excise Duty

• Section 134(4) of Finance Act, 2003 - National Calamity Contingent Duty of Customs

• Section 85(3) of Finance Act, 2005 - Additional duty of excise on certain goods (covering Tobacco products)

• Section 110(5) of Finance Act, 2018 - Social Welfare Surcharge on imported goods

• Section 111(3) of Finance Act, 2018 - Road and Infrastructure Cess on imported goods

• Section 112(3) of Finance Act, 2018 - Road and Infrastructure Cess on excisable goods

• Section 141(5) of Finance Act, 2020 - Health Cess on imported medical devices

• Section 124(5) of Finance Act, 2021 - Agriculture Infrastructure and Development Cess on imported goods

• Section 125(4) of Finance Act, 2021 - Agriculture Infrastructure and Development Cess on excisable goods

BDO in India Comments:

DIRECT TAX RELATED

There were concerns raised by various forums and taxpayers on the proposed doing away of the indexation benefit for existing immovable properties. Granting indexation benefit on immovable property owned before 23 July 2024 by individuals and HUFs is a welcome step by the Hon’ble Finance Minister. However, it is worthwhile to note that this relaxation is available only to a resident individual and resident HUF. Further, should indexation result into a loss, such loss may not be allowed to be carried forward and/ or set-off.
Based on the wordings in the Bill it was unclear if the credit of TDS on other income/ TCS should be considered while computing TDS on salary income of the employees. The proposed amendments now permit adjustment of TDS/ TCS credit from TDS computed on salary. These amendments are to benefit salaried taxpayers who need not wait for the end of the year to get the refund of excess TDS/ TCS and thereby ensures they have more income at their disposal.

INDIRECT TAX RELATED

The additional amendments in Indirect tax appear to be introduced to address the Bombay High Court judgment in case of Mahindra and Mahindra Limited¹, holding that imposition of interest and/ or penalty on the portion of demand pertaining to surcharge or additional duty of customs or special additional duty of customs is unsustainable and without jurisdiction, due to the lack of incorporation of relevant provisions in the CT Act. The Supreme Court² had dismissed the Special Leave Petition (SLP) as well as the Review Petition challenging the Bombay High Court decision. However, the Kolkata bench of the CESTAT in Texmaco Rail and Engineering Limited³ had distinguished the Bombay High Court ruling, holding that as per Section 3 of the CT Act read with Section 12 of the Customs Act, the additional duty is to be construed as ‘Customs Duty’ and accordingly, all provisions of the Customs Act and rules/ regulations made thereunder are applicable in respect of duty leviable under Section 3 of the CT Act. The appeal against the CESTAT order has been admitted vide order dated 5 July 2024 [CUSTA/64/2024] and the matter is currently pending before the Calcutta High Court.

These insertions in the Bill seek to address the above issue by explicitly providing reference to various provisions inter alia including interest and penalties. Since the aforesaid amendments are made prospectively, it appears that the ratio laid down by the Bombay High Court in Mahindra and Mahindra Ltd. (affirmed by the Supreme Court) should hold the field for the past period.