Pre-Budget Memorandum, 2022 submitted by ICAI

1. The Institute of Chartered Accountants of India (ICAI) has submitted the  Pre-Budget Memorandum, 2022. The Institute has suggested that the provisions of Section 2(1B) of the Income Tax Act be amended to clarify that the shares are to be issued by the amalgamated company to the shareholders of amalgamating company as they exist on the effective date and not on the appointed date.

2. It is suggested that Life Insurance Policies (LIP) be treated as a capital asset falling within the definition of “property” under section 2(14) of the Act. Indexation benefit (for premiums paid) will take care of inflationary impact – resulting in parity with other capital assets. It is suggested that section 2(19AA) may be amended to include in the definition of demerger, the corporate divestiture in form of spin-off under which a parent company transfers its shareholding in a subsidiary to its shareholders. Further, to ensure that distribution by the holding company to its shareholders of the shares of the subsidiary is not taxable as a dividend, an exclusion also needs to be made for such distribution in case of Spin-off from the definition of dividend under section 2(22). Initially, such an inclusion would be made only in respect of the parent company being a listed company.

“A tax consolidation scheme may also be adopted in India. This would create a positive impact on business with significant reduction of compliance and litigation cost,” the ICAI added.

3. Commercial banks may be instructed by proper authority, not to deduct TDS on NRO account earning interest upto INR 10,000 per annum.

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