The Central Board of Direct Taxes (CBDT) has recently issued Notification 43/2023, introducing crucial amendments to the Income-tax Rules, 1962. These amendments aim to provide clarity and guidelines pertaining to the taxation provisions outlined in section 115BAC of the Income-tax Act, 1961. The changes brought about by this notification have a significant impact on various aspects of taxation, including employee exemptions, depreciation allowances and the option exercise & withdrawal process.
CBDT Notification 43/2023: Income-tax (Tenth Amendment) Rules, 2023
The Central Board of Direct Taxes (CBDT) recently issued Notification 43/2023 on June 21, 2023. This notification introduces important amendments to the Income-tax Rules, 1962. The amendments aim to provide clarity and guidelines regarding the taxation provisions for employees and entities under section 115BAC of the Income-tax Act, 1961.
The Income-tax (Tenth Amendment) Rules, 2023, as stated in the CBDT Notification 43/2023, come into force from the date of their publication in the Official Gazette. These amendments impact various rules within the Income-tax Rules, 1962. Let’s delve into the key changes brought about by this notification.
CBDT Income Tax Notification 43/2023 dated 21/06/2023: IT Rules 2BB, 3, 5 Amended and New IT Rule 21AGA/ Form 10-IEA Inserted
Amendments to Rule 2BB: Employee Exemptions
The CBDT has amended Rule 2BB, which pertains to exemptions for employees. The new sub-rule (3) states that employees who have exercised an option under section 115BAC(5) or whose income is chargeable under section 115BAC(1A) will be entitled to exemption only for specific allowances mentioned in sub-clauses (a) to (c) of sub-rule (1) and at serial no. 11 of the Table below sub-rule (2). These exemptions are subject to specified conditions.
Amendments to Rule 3: Free Food and Non-Alcoholic Beverages
Rule 3 has also been amended in the CBDT notification. The revised sub-rule (7) clarifies that the provisions related to free food and non-alcoholic beverages provided by the employer through paid vouchers do not apply to employees who have exercised an option under section 115BAC(5) or whose income is chargeable under section 115BAC(1A).
Amendments to Rule 5: Depreciation Allowance
Rule 5 has undergone significant amendments concerning depreciation allowance. The first proviso is substituted to state that the allowance for the depreciation of any block of assets cannot exceed 40% of the written down value of the block of assets. This limitation applies to specific entities such as domestic companies, individuals, Hindu undivided families, associations of persons and co-operative societies, based on their options exercised under different sections of the Income-tax Act, 1961.
Additionally, the third proviso in Rule 5 is replaced to reflect the change made by the Finance Act, 2023. A new proviso is inserted after the third proviso, which specifies that if income is chargeable under section 115BAC(1A), the written down value of the block of assets as of April 1, 2023, should be increased by the depreciation attributable to clause (iia) of sub-section (1) of section 32. This depreciation should not have been fully set off under sub-clause (a) of clause (ii) of sub-section (2) of section 115BAC.
This provision applies if two conditions are met:
i) the assessee has not exercised the option under section 115BAC(5) for any previous year relevant to the assessment year beginning on or before April 1, 2023, and
ii) there is depreciation allowance pending for a block of assets that arises from clause (iia) of sub-section (1) of section 32.
Introduction of Rule 21AGA: Option Exercise and Withdrawal
The CBDT notification introduces a new rule, 21AGA, which specifies the procedure for exercising the option under section 115BAC(6) of the Income-tax Act, 1961. Individuals, Hindu undivided families, associations of persons and artificial juridical persons can exercise this option. The option must be submitted using Form 10-IEA on or before the due date for filing the income tax return. The same form is also used for withdrawing the option. Form 10-IEA should be furnished electronically under a digital signature or electronic verification code.
The CBDT Notification 43/2023 brings significant amendments to the Income-tax Rules, 1962, with the goal of providing clarity and guidelines regarding taxation provisions under section 115BAC of the Income-tax Act, 1961. These amendments affect IT Rules 2BB, 3 & 5. Also, new IT Rule 21AGA has been inserted along with Form 10-IEA.