Problem for Debt Fund Investors - Finance Bill 2023 Highlights

Tax on Debt Mutual Funds

LTCG won’t be applicable for any debt fund scheme where equity investment is less than 35%. This reduces debt funds tax efficiency and comes as a shock for investors relying on debt fund investments over FDs.

Withholding Tax Rate on Royalties Increased

The withholding tax rate on royalties and fees paid to non-residents has been increased from 10% to 20%. “This may increase the cost of import of technology in cases where Indian companies are grossing up withholding taxes and any bilateral tax treaty benefits are not available,” said Gouri Puri, partner at Shardul Amarchand Mangaldas & Co.

The Government is raising the Securities Transaction Tax (STT) on futures and options contracts in the stock market from April 1, 2023. Options contracts will now attract 0.021% STT from 0.017% earlier and futures will attract a levy of 0.0125%, up from 0.01%

Securities Transactions Tax Raised on F&O Contracts From 1st April

Additional Tax Benefits Announced for REITs and InvITs

In an effort to appease unit holders of REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts), the government has modified the Budget proposal to tax distributions from business trusts as income from other sources.

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